6.1 Customer Experience

(a) The Corporation shall improve the customer experience across its retail network, including by converting stores to more modern retailing formats such as self-serve, open concept formats, and shall ensure that all newly built stores shall have self-serve, open concept formats.

(b) The Corporation shall spend at least $100,000,000 from 2015 through 2018 on capital expenditures (not less than $80,000,000 of which shall be in respect of retail stores), which may be funded through the sale of existing assets of the Corporation.

6.2 Other Channels

The Corporation shall not impose any restrictions on the retail, distribution or marketing channels that Brewers may use and shall not penalize Brewers who use such channels outside the Corporation. For clarity, this would not apply to policies that the Corporation may adopt from time to time with respect to the use of its keg pool and similar owned assets.

6.3 Sale of Beer in Ontario

The Province shall ensure that, during the Term, Beer is not authorized for sale or distribution within the Province of Ontario except by or through the Corporation, the other stores referred to in clauses (i) through (v) of paragraph (b) of Schedule 6.5 and New Outlets, as contemplated by the New Beer Agreements.

6.4 LCBO

(a) The Province shall direct the LCBO not to, at any time during the Term: (A) sell Beer in its stores, other than in Combination Stores, in formats larger than Six-Packs (with the exception of the one 8-unit SKU currently carried by LCBO stores that are not Combination Stores) or (B) provide Pack-up Pricing in LCBO stores that are not Combination Stores, subject to the Pilot Program outlined in Schedule 6.4. However, the LCBO shall not be prohibited from providing customers with the means to carry more than six Single Containers together.

(b) Notwithstanding Section 6.4(a), if paragraph (e)(i) of Schedule 6.4 applies, then the Province shall direct the LCBO not at any time during the Term to carry Twelve-Packs in more than 60 retail stores (excluding Combination Stores) and, with respect to such 60 retail stores, to prioritize stores that are at least two kilometers from the Corporation’s stores.

6.5 New Private Retail Outlets

(a) Subject to Section 6.5(b), the Province may authorize new private retail outlets (in addition to the second onsite stores referred to in Section 6.8) to sell beverage alcohol to retail consumers. For greater clarity, these new private retail outlets will not be authorized to sell beverage alcohol to a Licensee.

(b) These new retail channels shall be limited to 450 new retail outlets operating in Grocery Stores or as Standalone Outlets (“New Outlets”). No more than 150 New Outlets shall be in operation before May 1, 2017. The New Outlets shall be subject to the provisions set out in Schedule 6.5.

6.6 LCBO Cost of Service Charges

The Province shall direct the LCBO that, during the Term, (i) LCBO in-store and out-of-store cost of service charges on Beer shall be at current 2015 rates, indexed to inflation in subsequent years, (ii) the LCBO mark-up shall be equal to the taxes for domestic Beer under AGRPPA and (iii) all LCBO cost of service charges shall be the same for all Brewers for the same service.

6.7 Other LCBO Matters

With effect from and after the Effective Date, the Province shall direct the LCBO to follow the procedures set out below during the Term:

(a) If the LCBO wishes to open a new LCBO owned and operated retail outlet selling Beer in a community where the Corporation does not operate its own retail outlet (including a community in which the LCBO has an agency store that the LCBO is considering replacing with its own retail outlet), then the LCBO will provide the Corporation with prior notice in writing (an “LCBO Notice”) of such intention. The Corporation will have 90 days from the date of any LCBO Notice to advise the LCBO by notice in writing (a “New LCBO Outlet Notice”) that it intends to open a retail outlet of the Corporation in the same community. If the Corporation does not provide a New LCBO Outlet Notice in response to an LCBO Notice, or it provides such a New LCBO Outlet Notice but fails to begin construction of the Corporation’s retail outlet within 1 year of the date on which such New LCBO Outlet Notice was provided to the LCBO or such construction is not completed diligently and the new retail outlet of the Corporation opened within a reasonable period, the LCBO may construct or acquire and operate the retail outlet that was the subject of such LCBO Notice and such new LCBO retail outlet may sell the full range of Beer pack formats at the full range of price points (i.e., it will be and remain a Combination Store) whether or not the Corporation subsequently opens a retail outlet in the same community. If the Corporation provides a New LCBO Outlet Notice in response to an LCBO Notice, begins construction of the Corporation’s retail outlet within 1 year of the date on which such New LCBO Outlet Notice was provided to the LCBO and such construction is completed diligently and the new retail outlet of the Corporation opened within a reasonable period, any LCBO store established in that community shall be subject to Section 6.4(a).

(b) Any existing LCBO Combination Stores (i.e., the 167 Combination Stores in operation as of April 1, 2015) may continue to sell the full range of Beer pack formats at the full range of price points (i.e., remain a Combination Store) whether or not the Corporation subsequently opens a retail outlet in the same community.

(c) The LCBO will not sell to Licensees any Beer product listed for sale through the Corporation, including products that are sold through both the Corporation and the LCBO.

(d) The Province acknowledges and agrees that the following will continue to apply with respect to agency relationships (provided that this will not limit any new agency relationships entered into in connection with the New Outlets contemplated in Section 6.5):

(i) The Corporation will retain the right to enter into commercial contracts with agents in southern Ontario regarding the sale of domestic Beer listed for sale through the Corporation, including the setting of commissions on Beer sales and handling fees for the return of empty containers (including in relation to the ODRP Agreement).

(ii) The financial arrangements applicable to agents in northern Ontario will remain unchanged (i.e., the LCBO will continue to apply its cost of service charge to such agents and fund the discount paid to such agents) and the Corporation will continue to act as the delivery agent for such agents, with the cost of freight shared with the LCBO.

(iii) The geographic boundary between northern Ontario and southern Ontario specified in the 2000 Framework Agreement will continue to apply.

6.8 Second On-Site Stores

The Regulator will eliminate the production threshold for Brewers to open a second on-site retail store, provided, however, that the second on-site retail store shall be required to operate in accordance with the Regulator’s policies in place from time to time (e.g., at least 50% of sales at an on-site retail store must be produced on site). The Province will not permit Brewers to crosssell other Brewers’ products in on-site stores.