Exhibit B: Ontario Deposit Return Program Agreement

AMENDED ONTARIO DEPOSIT RETURN PROGRAM AGREEMENT

THIS AGREEMENT, made in triplicate, for management of a province-wide deposit return program for Program Containers, is executed and amended as of the 1st day of October, 2015.

AMONG:

HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO,
as represented by the Minister of Finance

(referred to as “Ministry”)

AND:

BREWERS RETAIL INC.

(referred to as “BRI”)

AND:

LIQUOR CONTROL BOARD OF ONTARIO

(referred to as “LCBO”)

WHEREAS the Ministry recognizes that finding ways to reduce waste is one of the most important issues facing Ontario municipalities;

AND WHEREAS the Ministry is committed to reducing waste going to landfill, lowering recycling costs for municipalities, freeing up blue box space for expanded recycling programs and ensuring a healthier environment and stronger, more vibrant communities for Ontarians;

AND WHEREAS, to achieve these goals, the Government of Ontario initiated the Deposit System under which Ontario consumers pay a deposit on all Program Containers purchased in Ontario at the LCBO Stores, Agency Stores, Wine Stores and Winery, Distillery and Brewery Stores and New Outlets, and may then return the Program Containers to BRI Stores and other locations as specified herein for a full refund;

AND WHEREAS the Ministry is confident that this initiative enhances environmental protection in Ontario and improves the efficiency of the blue box program;

AND WHEREAS the Ministry desires to ultimately achieve the goal by December 31, 2018 of ensuring that 85 per cent of the Program Containers sold in Ontario will be returned to BRI for refunds of Deposits and the Ministry and BRI desire that a minimum of 90 per cent of glass Program Containers collected by BRI under the Contract will be recycled for Higher Order Recycling Uses, in order to reduce the number of containers that end up in landfill;

AND WHEREAS BRI wishes to assist the Ministry in achieving its environmental goals;

AND WHEREAS the Ministry and BRI recognize that meeting the stated environmental goals is also dependent on excellent customer service that makes the Deposit System convenient, efficient and accessible so Ontarians are encouraged to return their Program Containers for refunds of Deposits;

AND WHEREAS the Ministry, BRI and LCBO wish to enter into an agreement specifying the terms and conditions by which BRI would operate the Deposit System on behalf of the Ministry and the terms and conditions by which LCBO will be a party to this Contract for limited purposes;

AND WHEREAS the Ministry wishes to appoint BRI as the exclusive service provider in the Province of Ontario to provide those services in connection with the Deposit System as are described herein, subject to and on the terms of this Contract;

AND WHEREAS for greater certainty, each of the Ministry and BRI acknowledges that neither the Deposit System nor anything in this Contract applies to the deposit and collection arrangements between BRI and brewers regarding non-refillable beer containers and refillable beer containers nor to any existing business agreements, contracts or arrangements between the LCBO and BRI;

AND WHEREAS the Ministry and BRI have agreed that the Deposit System must be organized and operated pursuant to a number of key principles, including:

Performance Based with shared goals for financial, environmental, health and safety, and customer service performance;

Ensuring Value for Money with a handling fee structure that is competitive within the Canadian context; and

Ensuring Accountability for financial, environmental and other performance goals agreed to by the Ministry and BRI through an accountability framework that would include independent audits;

AND WHEREAS each of the Ministry and BRI acknowledges and agrees that the Deposit System established hereby achieves such key principles;

AND WHEREAS LCBO is a party to this Contract for the principal purpose of making payments to BRI and to participate in the Return Rate Committee;

AND WHEREAS the Ministry and BRI (and others) have entered into the Master Framework Agreement which, pursuant to the authority of the Province of Ontario to regulate the sale and distribution of beverage alcohol within Ontario, contemplates the amendment of this Contract to, among other things, extend the terms of this Contract;

NOW THEREFORE, in consideration of their respective agreements set out below, the

Parties covenant and agree as follows:

ARTICLE 1
INTERPRETATION AND GENERAL PROVISIONS

1.1 Defined Terms

When used in this Contract, capitalized words or expressions have the meanings set out in Schedule 1.

1.2 Entire Agreement

This Contract together with the Master Framework Agreement embodies the entire agreement between the Parties with regard to the provision of Deliverables and the subject matter of this Contract and supersedes any prior understanding or agreement, collateral, oral or otherwise with respect to the provision of the Deliverables and the subject matter of this Contract, in each case, from and after the Reference Date, existing between the Parties at September 1, 2011. For greater certainty, the Parties acknowledge that this Contract was amended with effect from October 1, 2015 and all obligations of the Parties arising under this Contract prior to such amendment shall continue under this Contract except to the extent specifically modified by such amendment.

1.3 Severability

If any term or condition of this Contract, or the application thereof to the Parties or to any Persons or circumstances, is to any extent invalid or unenforceable, the remainder of this Contract, and the application of such term or condition to the Parties, Persons or circumstances other than those to which it is held invalid or unenforceable, shall not be affected thereby. The Ministry and BRI shall engage in good faith negotiations to replace any provision which is declared invalid or unenforceable with a valid and enforceable provision, the economic and substantive effect of which shall come as close as possible to that of the invalid or unenforceable provision which it replaces.

1.4 Interpretive Value of Headings

The headings in this Contract are for convenience of reference only and in no manner modify, interpret or construe this Contract.

1.5 Notices by Prescribed Means

Notices shall be in writing and shall be delivered by postage-prepaid envelope, personal delivery or facsimile and shall be addressed to, respectively, the Ministry Address to the attention of the Ministry Representative, to the BRI Address to the attention of the BRI Representative, and to the LCBO Address to the attention of the LCBO Representative. Notices shall be deemed to have been given: (a) in the case of postage-prepaid envelope, five (5) Business Days after such notice is mailed; or (b) in the case of personal delivery or facsimile one (1) Business Day after such notice is received by the applicable Party or Parties. In the event of a postal disruption, notices must be given by personal delivery or by facsimile. Unless the Parties expressly agree in writing to additional methods of notice, notices may only be provided by the methods contemplated in this paragraph. Changes to any one or more of the BRI Address, BRI Representative, Ministry Address, Ministry Representative, LCBO Address and LCBO Representative shall be given by notice by the applicable Party to the other Parties.

1.6 Governing Law

This Contract shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.

ARTICLE 2
NATURE OF RELATIONSHIP

2.1 Appointment of BRI

The Ministry hereby appoints BRI as the exclusive service provider in the Province of Ontario to operate the Deposit System from and after the Reference Date, including for the purpose of dealing with Agency Stores, on and subject to the terms and conditions provided in this Contract.

2.2 Acceptance of Appointment

BRI hereby accepts its appointment in accordance with the terms of this Contract.

2.3 BRI’s Power to Contract

BRI represents and warrants that it has the full right and power to enter into this Contract and there is no agreement with any other Person to which BRI is a party or by which BRI is bound that would in any way interfere with the obligations of BRI under this Contract.

2.4 Representatives May Bind the Parties

The Parties represent and warrant that their respective representatives have the authority to legally bind them.

2.5 Contract Binding Against BRI

BRI represents and warrants that this Contract constitutes a valid and legally binding obligation of BRI enforceable against it in accordance with its terms subject to applicable bankruptcy, insolvency and other laws of general application limiting the enforceability of creditors’ rights and to the fact that equitable remedies are available only in the discretion of the court.

2.6 Contract Binding Against Ministry

The Ministry represents and warrants that the Ministry has all necessary capacity, power and authority to enter into and to carry out the provisions of this Contract and this Contract has been duly authorized, executed and delivered by the Ministry and constitutes a legal, valid and binding obligation enforceable against the Ministry in accordance with the terms of this Contract, subject to the availability of equitable remedies and the Proceedings Against the Crown Act (Ontario), including the qualifications that a court of Ontario may not against the Ministry grant an injunction, make an order for specific performance, make an order for recovery or delivery of real or personal property or issue execution or attachment or process in the nature thereof other than garnishment in limited circumstances.

2.7 BRI Not a Partner, Agent or Employee

BRI shall have no power or authority to bind the Ministry or LCBO or to assume or create any obligation or responsibility, express or implied, on behalf of the Ministry or LCBO. BRI shall not hold itself out as an agent, partner or employee of the Ministry or LCBO. Nothing in this Contract shall have the effect of creating an employment, partnership or agency relationship between the Ministry and BRI, or between LCBO and BRI, or with any of BRI’s directors, officers, employees, agents, partners, affiliates, volunteers or subcontractors, or constitute an appointment under the Public Service of Ontario Act, 2006, S.O. 2006, c.35, Sched. A.

2.8 Responsibility of BRI

BRI agrees that it is liable to the Ministry for the acts and omissions of its directors, officers, employees, agents, partners, affiliates, volunteers and, except as otherwise expressly limited by Schedule 1, subcontractors. This paragraph is in addition to any and all of BRI’s liabilities under this Contract and under the general application of law. BRI shall advise these individuals and entities of their obligations under this Contract. Notwithstanding the foregoing, the Ministry and LCBO acknowledge and agree that BRI shall have no liability hereunder or otherwise to LCBO in respect of this Contract. This paragraph shall survive the termination or expiry of this Contract.

2.9 Subcontracting, Assignment and Other Government Functions

For greater certainty, nothing in this Contract restricts any Party’s right to subcontract or in any way restricts any pre-existing rights of the Ministry or of the Government of Ontario or any of its Agencies to: (a) exercise any regulatory and statutory powers or functions; (b) procure or re-procure the same or similar services from any other Person, except as expressly limited by the provisions of this Contract; (c) set bottle and container deposit rates, subject to the express terms of this Contract; (d) subcontract or outsource the management of all or part of this Contract to any Person; (e) assign this Contract to any other Ministry, Agency or government body; provided that, in the case of (d) or (e), neither Her Majesty the Queen in right of Ontario nor LCBO shall in any way be released from any of their respective obligations hereunder. The Ministry agrees that it shall not subcontract or outsource the management of all or any part of this Contract, or assign the Contract, to a Person, Agency or government body who may have a conflict with BRI (for purposes of this sentence, a Person, Agency or government body who may have a conflict with BRI includes LCBO, a Person or an entity that is a competitor of BRI and an entity created pursuant to the Waste Diversion Act, 2002 (Ontario) and its successors).

2.10 Conflict of lnterest

BRI shall: (a) avoid any Conflict of Interest in the performance of its obligations under this Contract; (b) disclose to the Ministry without delay any Conflict of Interest of which it is aware, or ought reasonably be aware, that arises during the performance of its obligations under this Contract; and (c) comply with any reasonable requirements prescribed by the Ministry, to resolve any Conflict of Interest, subject to the Dispute Resolution procedures in Part H of Schedule 1 should BRI not agree, acting reasonably, with any such requirements. The Ministry may terminate this Contract pursuant to section 6.1 hereof upon giving notice to BRI where: (a) BRI fails to disclose a Conflict of Interest of which it is aware, or ought reasonably be aware; (b) BRI fails to comply with any reasonable requirements prescribed by the Ministry to resolve a Conflict of Interest following resolution of any disagreement in respect thereof pursuant to the Dispute Resolution procedures in Part H of Schedule 1; or (c) BRI’s Conflict of Interest cannot be resolved, in each case, subject to the rectification period set forth in section 6.1. Notwithstanding the foregoing, the Ministry hereby acknowledges and agrees that, for all purposes of this Contract, a Conflict of Interest shall not include any conflict of interest (including that which would be a Conflict of Interest but for this proviso) arising as a result of (i) the business conducted by BRI which is in direct competition to the business of the LCBO and the sale and distribution of liquor in the Province of Ontario, including the ownership and operation of a system for the sale and distribution of beer products in the Province of Ontario, through BRI Stores and otherwise, (ii) BRI’s operation of the BRI Beer Container Recovery System, and/or (iii) the competition between the shareholders of BRI and between such shareholders and the LCBO, nor shall the Conflict of Interest provisions of this Contract apply in any way to BRI’s shareholders or its affiliates. The Ministry further acknowledges and agrees, and the LCBO acknowledges and agrees, that nothing in this Contract shall in any way or at any time or from time to time preclude or in any way inhibit (i) BRI from engaging in business ventures or from having business interests which compete with the LCBO and the sale and distribution of liquor in the Province of Ontario, and/or (ii) BRI, its shareholders, their respective affiliates, or the industry in which they operate, from lobbying or otherwise advancing or advocating a position to any Agency or any governmental Authority, body or department, whether federal, provincial or municipal, on matters affecting any one or more of BRI, its shareholders, affiliates or such industry. BRI shall ensure adherence to commonly accepted norms of ethical business practices, which shall include BRI not providing or offering gifts or hospitality of greater than nominal value to any Person acting on behalf of or employed by Her Majesty the Queen in right of Ontario. This paragraph shall survive any termination or expiry of the Contract.

2.11 LCBO

LCBO represents and warrants that it has the full right, capacity, power and authority to enter into and carry out the provisions of this Contract and that this Contract has been duly authorized, executed and delivered by LCBO and constitutes a legal, valid and binding obligation of LCBO enforceable against it in accordance with its terms.

2.12 Contract Binding

This Contract shall enure to the benefit of and be binding upon the Parties and their successors, executors, administrators and their permitted assigns.

2.13 Notice of Changes in the Administration of the Ontario Deposit Return Program

BRI shall provide the Joint Management Committee overseeing the Ontario Deposit Return Program with reasonable advance notice with respect to any planned changes regarding the administration of the Ontario Deposit Return Program that BRI may make from time to time at its discretion, including any pilot initiatives BRI may launch from time to time.

ARTICLE 3
PERFORMANCE

3.1 Performance

BRI covenants and agrees to perform the services and functions to be performed by it hereunder in accordance with the terms of this Contract and in accordance with the Requirements of Law in all material respects. In providing the Deliverables, BRI shall exercise that degree of timeliness, care, diligence and skill that a competent Person who is experienced in performing like services and functions would exercise in comparable circumstances and shall provide the Deliverables through individuals who are competent, qualified and duly trained.

3.2 Notification

During the Term, (i) BRI shall advise the Ministry in writing and promptly of any omissions or other faults of which it is aware, the occurrence of which would give the Ministry the right to terminate this Contract pursuant to section 6.1; (ii) the Ministry shall advise BRI in writing and promptly of any omissions or other faults of which it is aware, the occurrence of which would give BRI the right to terminate this Contract pursuant to section 6.5; and (iii) LCBO shall advise the Ministry and BRI in writing and promptly of any omissions or other faults on the part of LCBO of which it is aware, the occurrence of which would give BRI the right to terminate this Contract pursuant to section 6.5.

3.3 Condonation Not a Waiver

Any failure by any Party to insist in one or more instances upon strict performance by any other Party of any of the terms or conditions of this Contract shall not be construed as a waiver by the performing Party of its right to subsequently require strict performance of any such terms or conditions, and the obligations of the non-performing Party with respect to such subsequent performance shall continue in full force and effect.

3.4 Changes and Further Appendices By Written Agreement Only

Any Party may, in writing, request changes to this Contract. For the avoidance of doubt, changes regarding altering, adding to, or deleting any of the Deliverables may only be requested by the Ministry or BRI. Any changes to this Contract shall be by written agreement signed by the Parties. No changes shall be effective unless formalized in writing and signed by the Parties. LCBO shall execute and deliver any written agreement reflecting changes to this Contract which have been agreed between the Ministry and BRI.

3.5 Limited Exclusivity, Work Volumes

BRI shall, subject to the Ministry’s Step in Rights, be the exclusive provider of the Deliverables for the duration of the Term. The Ministry makes no representation regarding the volume of goods and services required under this Contract or the Fees payable under this Contract. Beyond the Term, the Ministry reserves the right to contract with other Persons for the same or similar goods and services as those provided by BRI under this Contract.

3.6 Communications

The Parties will cooperate in communications relating to this Contract and shall each bear their own costs with respect to any such communications. BRI and LCBO agree to use, from and after the Reference Date, their respective means of communication to promote the Deposit System. The Ministry and LCBO will provide BRI, and BRI will provide the Ministry, with seven (7) days advance written notice of any public announcement pertaining to the Deposit System. The content of any such public announcement by BRI directly related to the Deposit System will require the Ministry’s prior written approval.

3.7 Rights and Remedies

The express rights and remedies of the Parties set out in this Contract are in addition to and shall not limit any other rights and remedies available to them at law or in equity.

ARTICLE 4
PAYMENT FOR PERFORMANCE

4.1 Payment According to Contract Fees

LCBO shall pay BRI for the Deliverables provided at the Fees established under this Contract and shall refund Deposits paid by BRI, plus in each case applicable taxes, all in accordance with the procedures established under Schedule l, including the adjustment protocols established pursuant to Part G of Schedule l.

4.2 Billing and Payment Process

The billing and payment process shall be in accordance with Schedule 1.

4.3 Performance Audit and Review

In accordance with Part G of Schedule 1, BRI shall maintain all necessary records to substantiate all charges and payments under this Contract and shall permit and assist the Ministry in conducting the audits and performance reviews specified under Part G of Schedule 1. BRI and the Ministry acknowledge and agree that the report and response and adjustment protocols established under Part G of Schedule 1 shall apply where such Ministry audits or performance reviews result in the finding of discrepancies in Fees charged or Deposits refunded, whether such discrepancies are in favour of BRI or in favour of the Ministry. BRI hereby agrees to establish and maintain (and regularly provide to the Ministry copies of) empty container return policies applicable to BRI Beer Containers and Program Containers accepted or collected by BRI pursuant to the Deposit System that include procedures for employees to identify and not accept the return of containers that are not Program Containers. The Ministry and LCBO acknowledge that any discrepancy as a result of BRI collecting or accepting the return of alcohol containers that were not purchased in the Province of Ontario, provided that BRI’s policies containing the above-referenced procedures are established and maintained, shall not be the subject of adjustment, nor shall it constitute a breach by BRI of its obligations hereunder. For the avoidance of doubt, LCBO shall have no audit rights hereunder.

4.4 No Expenses or Additional Charges

Except as expressly set out in this Contract and except for any remedies available to BRI at law or in equity, there shall be no funds payable under this Contract to BRI other than the Fees established and payable by LCBO and the Deposit refunds payable by LCBO pursuant to Schedule 1, plus in each case applicable taxes. Without derogating from any rights or remedies of BRI under this Contract, at law or in equity, there shall be no funds payable by the Ministry to BRI under this Contract for the Deliverables.

4.5 Payment of Taxes and Duties

Unless otherwise stated, BRI shall pay all applicable taxes incurred by or on BRI’s behalf, including harmonized sales tax, with respect to this Contract; provided, however, applicable harmonized sales tax shall be added to the Fees chargeable by BRI hereunder and paid by LCBO.

4.6 Withholding Tax

LCBO shall withhold any applicable withholding tax from amounts due and owing to BRI under this Contract and shall remit it to the appropriate government in accordance with applicable tax laws. This paragraph shall survive any termination or expiry of this Contract.

4.7 Interest on Late Payment

If a payment is in arrears through no fault of BRI, the interest (if any) charged by BRI to LCBO for any late payment shall not exceed the pre-judgment interest rate established under subsection 127(2) of the Courts of Justice Act, R.S.O. 1990, c. C45, in effect on the date that the payment went into arrears.

4.8 Additional Audit Rights

For the applicable period of time specified in Part G of Schedule 1, following the Expiry Date, BRI shall maintain all necessary records to substantiate all charges and payments under this Contract. During the applicable period of time specified in Part G of Schedule 1, following the Expiry Date, BRI shall permit and assist the Ministry in conducting audits of the operations of BRI to verify the above in accordance with, and limited to, the audit and review rights set forth in Part G of Schedule 1. The Ministry shall provide BRI with at least ten (10) Business Days prior notice of its requirement for such audit. BRI’s obligations under this paragraph shall survive any termination or expiry of this Contract. For the avoidance of doubt, LCBO shall have no audit rights hereunder.

ARTICLE 5
CONFIDENTIALITY AND FIPPA

5.1 OPS Confidential Information

During and following the Term, BRI shall: (a) keep all OPS Confidential Information confidential and secure; (b) limit the disclosure of OPS Confidential Information to only those of its directors, officers, employees, agents, partners, affiliates, volunteers or subcontractors who have a need to know it for the purpose of providing the Deliverables and who have been specifically authorized by BRI to have such disclosure; (c) not directly or indirectly disclose, destroy, exploit or use any OPS Confidential Information (except for the purpose of providing the Deliverables, or except if required by order of a court or tribunal), without first obtaining: (i) the written consent of the Ministry and (ii) in respect of any OPS Confidential Information about any third-party, the written consent of such third-party; (d) provide OPS Confidential Information to the Ministry with reasonable notice; and (e) return all OPS Confidential Information to the Ministry before or at the end of the Term, with no copy or portion kept by BRI except for that information required to satisfy the post-Term audit obligations set out under this Contract or for its other rights or obligations hereunder or at law or in equity.

5.2 Restrictions on Copying

BRI shall not copy any OPS Confidential Information, in whole or in part, unless copying is needed for the purposes of this Contract. On each copy made by BRI, BRI must reproduce all notices which appear on the original.

5.3 Injunctive and Other Relief

BRI acknowledges that the breach of any provisions of this Article may cause irreparable harm to the Ministry or to any third-party to whom the Ministry owes a duty of confidence, and that the injury to the Ministry or to any third-party may be difficult to calculate and be inadequately compensable in damages. BRI agrees that the Ministry is entitled to obtain injunctive relief (without proving any damage sustained by it or by any third-party) or any other remedy against any actual or potential breach of the provisions of this Article.

5.4 Ministry Notice and Protective Order

If BRI or any of its directors, officers, employees, agents, partners, affiliates, volunteers or subcontractors become legally compelled to disclose any OPS Confidential Information, BRI will, to the extent it is aware of same, provide the Ministry with prompt notice to that effect in order to allow the Ministry to seek one or more protective orders or other appropriate remedies to prevent or limit such disclosure, and it shall co-operate with the Ministry and its legal counsel to the extent reasonably required thereby. If such protective orders or other remedies are not obtained, BRI will disclose only that portion of OPS Confidential Information which BRI is legally compelled to disclose, only to such person or persons to which BRI is legally compelled to disclose, and BRI shall provide notice to each such recipient (in co-operation with legal counsel for the Ministry) that such OPS Confidential Information is confidential and subject to non-disclosure on terms and conditions equal to those contained in this Contract and, if possible, shall obtain each recipient’s written agreement to receive and use such OPS Confidential Information subject to those terms and conditions.

5.5 FIPPA Records and Compliance

The Parties acknowledge and agree that FIPPA applies to and governs all Records and may require the disclosure of such Records to third-parties. Furthermore, BRI agrees:

(a) to keep Records secure;

(b) to provide Records to the Ministry within seven (7) calendar days of being directed to do so by the Ministry for any reason including an access request or privacy issue;

(c) not to access any Personal Information unless provided by the Ministry or the Ministry determines, in its sole discretion, that access is permitted under FIPPA and is necessary in order to provide the Deliverables;

(d) not to directly or indirectly use, collect, disclose or destroy any Personal Information for any purposes that are not required to provide the Deliverables or are not authorized by the Ministry;

(e) to ensure the security and integrity of Personal Information and keep it in a physically secure and separate location safe from loss, alteration, destruction or intermingling with other records and databases and to implement, use and maintain appropriate products, tools, measures and procedures to do so;

(f) to restrict access to Personal Information to those of its directors, officers, employees, agents, partners, affiliates, volunteers or subcontractors who have a need to know it for the purpose of providing the Deliverables and who have been specifically authorized by the Ministry Representative to have such access for the purpose of providing the Deliverables;

(g) to implement other reasonable specific security measures that in the reasonable opinion of the Ministry would improve the adequacy and effectiveness of BRI’s measures to ensure the security and integrity of Personal Information and Records generally; and

(h) that any confidential information supplied to the Ministry may be disclosed by the Ministry where it is obligated to do so under FIPPA, by an order of a court or tribunal or pursuant to a legal Proceeding;

and the provisions of this paragraph shall prevail over any inconsistent provisions in this Contract.

5.6 BRI Confidential Information

BRI shall identify any information supplied in confidence for which confidentiality is to be maintained by the Ministry and LCBO. FIPPA applies to BRI Confidential Information provided to the Ministry, the confidentiality of such information will be maintained by the Ministry or LCBO, as applicable, except as otherwise required by law or by order of a court or tribunal. BRI acknowledges that BRI Confidential Information will, as necessary, be disclosed on a confidential basis, to the Ministry’s external advisers who have a need to know it for purposes of this Contract, to whom said confidentiality obligations shall also apply. During and following the Term, the Ministry and LCBO shall: (a) keep all BRI Confidential Information confidential and secure; (b) limit the disclosure of BRI Confidential Information to only those of its directors, officers, employees, agents, partners, affiliates, volunteers or subcontractors who have a need to know it for the purpose of this Contract and who have been specifically authorized by the Ministry and LCBO to have such disclosure; (c) not directly or indirectly disclose, destroy, exploit or use any BRI Confidential Information (except for the purpose of this Contract, or except if required by order of a court or tribunal). For greater certainty regarding paragraph (b) above, the Ministry shall not disclose BRI Confidential Information to LCBO unless reasonably required by LCBO to fulfil its payment obligations under this Contract. The Ministry and LCBO shall not copy any BRI Confidential Information, in whole or in part, unless copying is needed for the purposes of this Contract.

5.7 BRI Notice and Protective Order

If the Ministry or any Agency or their respective employees, agents, volunteers or subcontractors become legally compelled to disclose any BRI Confidential Information, the Ministry or LCBO, as applicable, will, to the extent it is aware of same, provide BRI with prompt notice to that effect in order to allow BRI to seek one or more protective orders or other appropriate remedies to prevent or limit such disclosure (including pursuant to FIPPA), and it shall co-operate with BRI and its legal counsel to the extent reasonably required thereby. If such protective orders or other remedies are not obtained, the Ministry or LCBO, as applicable, will disclose only that portion of BRI Confidential Information which the Ministry or LCBO, as applicable, is legally compelled to disclose, only to such person or persons to which the Ministry or LCBO, as applicable, is legally compelled to disclose, and the Ministry or LCBO, as applicable, shall provide notice to each such recipient (in co-operation with legal counsel for BRI) that such BRI Confidential Information is confidential and subject to non-disclosure on terms and conditions equal to those contained in this Contract and, if possible, shall obtain each recipient’s written agreement to receive and use such BRI Confidential Information subject to those terms and conditions.

5.8 Survival

The provisions of this Article shall survive any termination or expiry of this Contract.

ARTICLE 6
TERMINATION, EXPIRY AND EXTENSION

6.1 Ministry Termination of Contract

The Ministry may immediately terminate this Contract upon giving notice to BRI where:

(a) an Event of Insolvency occurs;

(b) BRI breaches any of section 5.1, section 5.2, section 5.4 or section 5.5 of this Contract;

(c) BRI breaches the Conflict of Interest paragraph in Article 2 (Nature of Relationship) of this Contract and fails to rectify same within thirty (30) Business Days of receiving a rectification notice from the Ministry in accordance with the terms of such paragraph;

(d) BRI assigns this Contract without first obtaining the written approval of the Ministry; or

(e) BRI’s acts or omissions constitute a substantial failure of performance and BRI then fails to rectify such non-performance within thirty (30) Business Days of receiving a rectification notice from the Ministry; and the above rights of termination are in addition to all other rights of termination available at law, or events of termination by operation of law.

6.2 Dispute Resolution

The Dispute Resolution procedures in Part H of Schedule l shall apply to this Contract.

6.3 Obligations on Termination

On termination of this Contract for any reason (including, without limitation, termination by BRI pursuant to section 6.5), BRI shall, in addition to its other obligations under this Contract and at law, upon the Ministry’s request and in accordance with the terms of this Contract, for a period of up to two (2) years (or such other period as may then be agreed by the Ministry and BRI) (“Transition Period”) from the effective date of termination, continue to provide any Deliverables and all assistance reasonably requested by the Ministry to internalize the Deliverables, or to facilitate the retention by the Ministry of a third-party to provide all or some of the Deliverables, in an efficient and orderly manner and LCBO shall, during such Transition Period, pay to BRI the Fees and refund Deposits required pursuant to this Contract in accordance with the terms of this Contract. Upon any termination or expiry of the Term, BRI shall deliver a final invoice in accordance with Schedule 1 within ninety (90) days from the effective date of termination or expiry, setting out all Fees and refunded Deposits that remain owing, and BRI and LCBO shall make all required financial adjustments and payments required by this Contract within thirty (30) days following the receipt of such account.

This paragraph shall survive any termination or expiry of this Contract.

6.4 BRI’s Payment Upon Termination

On termination of this Contract, LCBO shall only be responsible for the payment for the Deliverables provided under this Contract up to and including the effective date of any termination (or the end of the Transition Period, if applicable). Termination shall not relieve BRI of its warranties and other responsibilities relating to the Deliverables performed or money paid.

6.5 BRI Termination of Contract

BRI may immediately terminate this Contract upon giving notice to the Ministry where:

(a) The Ministry or LCBO breaches any of section 5.6 or section 5.7 of this Contract;

(b) The Ministry, without BRI’s prior written consent (acting reasonably), outsources, subcontracts or assigns this Contract, as a result of, or following, which Her Majesty the Queen in right of Ontario is in any way released from any of its obligations hereunder;

(c) LCBO, without BRI’s prior written consent (acting reasonably), outsources, subcontracts or assigns this Contract;

(d) LCBO fails at any time during the Term to pay to BRI all monies payable to it under this Contract, if such failure is not remedied within ten (10) Business Days after receipt by the Ministry and LCBO of notice of such failure from BRI; or

(e) The Ministry’s acts or omissions constitute a substantial failure of performance and the Ministry then fails to rectify such non-performance within thirty (30) Business Days of receiving a rectification notice from BRI;

and the above rights of termination are in addition to all other rights of termination available at law, or events of termination by operation of law.

6.6 Termination in Addition to Other Rights

The express rights of termination in this Contract are in addition to and shall in no way limit any rights or remedies of the Ministry or BRI under this Contract, at law or in equity. For the avoidance of doubt, LCBO shall have no right to terminate this Contract, at law or in equity.

6.7 Expiry or Termination of Contract

Unless extended in accordance with its terms, including in respect of a Transition Period, this Contract shall expire or terminate at the earlier of the Expiry Date and the termination or expiration of the Master Framework Agreement.

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ARTICLE 7
FORCE MAJEURE

7.1 Force Majeure

No Party hereunder shall be responsible to the other for any delay or failure to fulfill the terms of this Contract if such failure or delay results from: (a) a strike, lockout, slow-down or other combined action of workmen; (b) an act of God; (c) an act of public enemy, an act of sabotage, riot, fire, flood, explosion, or other catastrophe, an accident, a freight embargo; or (d) any other cause beyond the reasonable control of the Party whose failure or delay is to be excused.

IN WITNESS WHEREOF the Parties have executed this Contract as of the date first
above written.

HER MAJESTY THE QUEEN IN RIGHT OF
ONTARIO, as represented by the Minister of
Finance

Signature:
Name:
Title:

BREWERS RETAIL INC.

Signature:
Name:
Title:
I have authority to bind the corporation.

LIQUOR CONTROL BOARD OF ONTARIO

Signature:
Name:
Title:
I have authority to bind LCBO.

SCHEDULE 1
SCHEDULE OF DEFINITIONS, DELIVERABLES, FEES AND SUPPLEMENTARY PROVISIONS

PART A: DEFINITIONS

When used in this Contract, in addition to the definitions set forth elsewhere in this Schedule 1, the following words or expressions have the following meanings:

“2000 Framework Agreement” means the agreement dated June 1, 2000 entitled “Serving Ontario Beer Consumers: A Framework for Improved Co-operation and Planning” that was entered into between BRI and the LCBO at the direction, authorization and agreement of the Province of Ontario;

“Agencies” means all advisory, adjudicative, regulatory (including those with governing boards), and operational service agencies of the Province of Ontario and includes LCBO;

“Agency Stores” means private businesses in communities not serviced by LCBO Stores and BRI Stores, and authorized by the LCBO to sell beverage alcohol to the public in the Province of Ontario but excludes Wine Stores and Winery, Distillery, Brewery Stores and New Outlets;

“Authority” means any government authority, Agency, body or department, whether federal, provincial or municipal, having or claiming jurisdiction over this Contract; and “Authorities” means all such authorities, agencies, bodies and departments;

“BRI Address” and “BRI Representative” mean:

Brewers Retail Inc.
5900 Explorer Drive
Mississauga, Ontario
L4W 5L2

Attention: President
Telephone: (905) 361-4204
Fax: (905) 361-4289

“BRI Beer Container Recovery System” means the deposit and collection arrangements between BRI and brewers regarding BRI Beer Containers and refillable beer containers;

“BRI Beer Containers” means the non-refillable beer containers subject to the BRI Beer Container Recovery System;

“BRI Confidential Information” means all information of BRI or a Processor that is of a confidential nature that is expressly identified as such by BRI which comes into the knowledge, possession or control of the Ministry or LCBO in connection with this Contract. For greater certainty, BRI Confidential Information shall not include information that: (i) is or becomes generally available to the public without fault or breach on the part of the Ministry or LCBO of any duty of confidentiality owed by the Ministry or LCBO to BRI or to any third-party; (ii) the Ministry or LCBO can demonstrate to have been rightfully obtained by the Ministry or LCBO, without any obligation of confidence, from a third-party who had the right to transfer or disclose it to the Ministry or LCBO free of any obligation of confidence; (iii) the Ministry or LCBO can demonstrate to have been rightfully known to or in the possession of the Ministry or LCBO at the time of disclosure, free of any obligation of confidence when disclosed; or (iv) is independently developed by the Ministry or LCBO; and BRI Confidential Information shall not include the terms of this Contract;

“BRI Distribution Centers” means distribution/warehouse centers designated from time to time in BRI’s discretion, owned and operated, directly or indirectly, by BRI in the Province of Ontario for the warehousing and distribution of beer products;

“BRI Return Locations” means collectively, BRI Stores, BRI Distribution Centers and any additional locations assigned by BRI in its discretion in accordance with section 1.1.1.3 of this Schedule 1;

“BRI Stores” means the retail outlets, from time to time in BRI’s discretion, owned and operated, directly or indirectly, by BRI in the Province of Ontario for the sale of beer products to the public;

“Bulk Return” means the return on one day by one Person of one hundred and twenty (120) empty Program Containers or more;

“Business Day” means any working day, Monday to Friday inclusive, but excluding statutory and other holidays, namely those days defined as a “holiday’’ in the Legislation Act, 2006, S.O. 2006, c. 2l, Sched. F;

“Conflict of Interest” means, subject to section 2.10, any situation or circumstance where in relation to the performance of its obligations in this Contract, BRI’s other commitments, relationships or financial interests (i) could reasonably be expected to cause BRI to exercise an improper influence over the objective, unbiased and impartial exercise of its independent judgement in a material respect; or (ii) could reasonably be expected to compromise, impair or be incompatible with the effective performance of BRI’s contractual obligations in a material respect;

“Contract” means the aggregate of: (a) this agreement, including Schedule 1; and (b) any amendments executed in accordance with the terms of this Contract;

“Deliverables” means the services to be provided by BRI to the Ministry under this Contract as described in section 1.1 of Part B of Schedule 1;

“Deposit Categories” means the categories of Program Containers as specified in O. Reg. 13/07 under the Liquor Control Act (Ontario), and “Deposit Category” means any one of them;

“Deposit System” means the deposit-refund system established pursuant to this Contract and pursuant to O. Reg. 13/07 under the Liquor Control Act (Ontario) for all Program Containers, and including import and domestic beer containers sold exclusively by the LCBO, its agents and New Outlets as applicable.

“Deposits” means deposits applied to Program Containers for each Deposit Category as specified in O. Reg. 13/07 under the Liquor Control Act (Ontario);

“EBDs” mean empty bottle dealers authorized from time to time by BRI in BRI’s discretion, to provide container return services to customers who have purchased products sold through BRI Stores, BRI Distribution Centers, Agency Stores, the LCBO and New Outlets;

“Event of Insolvency” means, in respect of BRI, the occurrence of any one of the following events: (a) if BRI: (i) other than in connection with a bona fide corporate reorganization which does not otherwise contravene this Contract, is wound up, dissolved, liquidated or has its existence terminated or has any resolution passed therefor, or makes a general assignment for the benefit of its creditors or a proposal under the Bankruptcy and Insolvency Act (Canada); (ii) makes an application to the applicable court for a compromise or arrangement under the Companies’ Creditors Arrangement Act (Canada); or (iii) files any written request, application, answer or other document seeking or consenting to any reorganization, arrangement, composition, readjustment, liquidation or similar relief for itself under any present or future law relating to bankruptcy, insolvency or other relief for or against debtors generally, including any notice of intention to make a proposal pursuant to the Bankruptcy and Insolvency Act (Canada); (b) if a court of competent jurisdiction enters an order, judgment or decree against BRI which approves or provides for any reorganization, arrangement, composition, readjustment, liquidation, dissolution, winding-up, termination of existence, declaration of bankruptcy or insolvency or similar relief with respect to BRI, under any present or future law relating to bankruptcy, insolvency or other relief for or against debtors generally and such order, judgment or decree remains unvacated and unstayed for an aggregate period of sixty (60) days (whether or not consecutive) from the date it is made; (c) if any trustee in bankruptcy, receiver, receiver and manager, liquidator or any other officer with similar powers is appointed for or with respect to BRI and that appointment remains in effect for an aggregate period of sixty (60) days (whether or not consecutive) from the date of the appointment; or (d) if an encumbrancer or anyone acting on behalf of an encumbrancer takes possession of all or substantially all of the property of BRI and remains in possession for an aggregate period of sixty (60) days (whether or not consecutive) from the first date of the taking of possession;

“Expiry Date” means September 30, 2025;

“Fees” means the applicable price set out in Part F of Schedule 1, in Canadian funds, to be charged for the applicable Deliverables, all as set out in Schedule l, but, for clarity, excluding Deposits to be refunded to BRI, representing, except as expressly set forth in this Contract, the full amount chargeable by BRI for the provision of the Deliverables, including but not limited to: (a) all applicable duties and, except as provided in the Contract, taxes, if any; (b) all labour and material costs; (c) all travel and carriage costs; (d) all insurance costs; and (e) all other overhead; “FIPPA” means the Freedom of Information and Protection of Privacy Act, R.S.O. 1990, c. F.31;

“Higher Order Recycling Uses” means any legal use other than landfill, incineration or road aggregate;

“Joint Management Committee” means the committee described in section 1.25 of Part J of Schedule l to this Contract;

“LCBO” means the Liquor Control Board of Ontario, a Government of Ontario Crown corporation continued under the Liquor Control Act (Ontario), and its successors;

“LCBO Address” and “LCBO Representative” mean:

Liquor Control Board of Ontario
55 Lake Shore Boulevard East
Toronto, ON
M5E 1A5

Attention: President and CEO
Telephone: 416-864-2478
Fax: 416-864-2476

“LCBO Stores” means government stores, warehouses and distribution centers established from time to time by the LCBO for the sale of liquor to the public in the Province of Ontario, but does not include Agency Stores;

“Licensees” mean bars, restaurants, taverns, special event locations and other establishments licensed to sell beverage alcohol to the public for consumption thereat by the Alcohol and Gaming Commission of Ontario, or other Agency, and to which BRI delivers full BRI Beer Containers and/or full refillable beer containers and collects empty BRI Beer Containers and/or empty refillable beer containers;

“Master Framework Agreement” means the master framework agreement between the Ministry, BRI, Labatt Brewing Company Limited, Molson Canada 2005 and Sleeman Breweries Ltd.;

“Ministry Address” and “Ministry Representative” mean:

Ministry of Finance
Frost Building North
95 Grosvenor Street, 2nd Floor
Toronto, ON
M7A 1Z1

Attention:
Director
Alcohol & Fees Policy Branch
Revenue Agencies Oversight Division
Ministry of Finance

Telephone: 416-314-4288
Fax: 416-325-7190

“New Outlets” has the meaning assigned to it in the Master Framework Agreement;

“Ontario Public Service” means the ministries and other administrative units of the Government of Ontario over which Ministers of the Crown preside, and for the purposes of this Contract includes the Agencies, and “OPS” has the same meaning;

“OPS Confidential Information” means all information of the Ontario Public Service that is of a confidential nature that is expressly identified as such by the Ministry which comes into the knowledge, possession or control of BRI in connection with this Contract. For greater certainty, OPS Confidential Information shall:

(a) include: (i) all new information derived at any time from any such information whether created by the OPS, BRI or any third-party; (ii) all information (including Personal Information) that the OPS is obliged, or has the discretion, not to disclose under provincial or federal legislation or otherwise at law; but

(b) not include information that: (i) is or becomes generally available to the public without fault or breach on the part of BRI of any duty of confidentiality owed by BRI to the OPS or to any third-party; (ii) BRI can demonstrate to have been rightfully obtained by BRI, without any obligation of confidence, from a third-party who had the right to transfer or disclose it to BRI free of any obligation of confidence; (iii) BRI can demonstrate to have been rightfully known to or in the possession of BRI at the time of disclosure, free of any obligation of confidence when disclosed; or (iv) is independently developed by BRI; but the exclusions in this subparagraph shall in no way limit the meaning of Personal Information or the obligations attaching thereto under this Contract or at law and OPS Confidential Information shall not include the terms of this Contract;

“Parties” means the Ministry, BRI and LCBO;

“Person” includes any individuals, persons, firms, partnerships, joint ventures, unincorporated associations, trusts, corporations, government or public institution, or any combination thereof;

“Personal Information” means recorded information about an identifiable individual or that may identify an individual;

“Proceeding” means any action, claim, demand, lawsuit, or other proceeding;

“Processor” means a third-party with which BRI contracts that receives and physically treats and/or processes recovered Program Containers and Secondary Packaging such that they can be reused (i.e. refilled), recycled (i.e. used as feedstock in a manufacturing process or otherwise directed for beneficial use) or disposed of (on land, by incineration or otherwise);

“Program Charges” means the charges defined in section 1.9 of Part E of Schedule 1;

“Program Containers” means all beverage alcohol (including beer) containers greater than one hundred (100) mL in size sold in the province of Ontario that are not subject to the BRI Beer Container Recovery System;

“Record”, for the purposes of this Contract, means any recorded information, including any Personal Information, in any form: (a) provided by the Ministry or LCBO to BRI, or provided by BRI to the Ministry or LCBO, for the purposes of this Contract; or (b) created by BRI in the performance of this Contract; and shall include or exclude any information specifically described in Schedule 1;

“Reference Date” means February 6, 2012;

“Requirements of Law” mean all applicable requirements, laws, statutes, codes, acts, ordinances, orders, decrees, injunctions, by-laws, rules, regulations, official plans, permits, licences, authorizations, directions, and agreements with all Authorities, in each case, having the force of law, and that now or at any time hereafter may be applicable to either this Contract or the Deliverables or any part of them;

“Responsible Stewardship Report” means the annual packaging report prepared by BRI pursuant to section 35 of the Waste Diversion Act, 2002 (Ontario);

“Return Rate” means the percentage equivalent of C/D, with C being the total number of Program Containers returned to BRI for refunds of Deposits during the applicable period, and with D being the total number of Program Containers sold in Ontario during the applicable period;

“Return Rate Committee” means the committee described in section 1.24 of Part J of Schedule 1 to this Contract;

“Reviewable Stores” means, collectively, (a) each LCBO Store having annual liquor (as defined in the Liquor Control Act (Ontario)) sales (excluding beer sales) to retail consumers calculated monthly on a trailing 12-month basis of more than 550,000 litres, where a BRI Return Location is in excess of 3.0 kilometres from such LCBO Store; and (b) each BRI Store where a BRI Return Location that accepts Bulk Returns from retail consumers is in excess of 15 kilometres from such BRI Store; provided, however, an LCBO Store shall not be a Reviewable Store if (i) such LCBO Store initially opened for business after September 1, 2011, or (ii) such LCBO Store was open for business on September 1, 2011 but moved to a location outside the applicable number of kilometers from a BRI Return Location as specified in clause (a) of this definition;

“Schedule 1” means Schedule l of this Contract (Schedule of Definitions, Deliverables, Fees and Supplementary Provisions);

“Secondary Packaging” means boxboard and corrugated cardboard cases, plastic and paper bags and hi-cone rings accompanying Program Containers;

“Step in Rights” means the right of the Ministry to operate one or more Deposit return facilities or retain a third-party to operate one or more Deposit return facilities, in each case, in specified geographic areas, all in accordance with, and limited to, the Ministry’s Step in Rights set forth in Part D of Schedule l;

“Term” means the period of time from the Reference Date up to and including the earlier of: (i) the Expiry Date or (ii) the date of termination of this Contract in accordance with its terms, subject to extension to the expiry of any Transition Period pursuant to section 6.3, and “Year of the Term” means each twelve (12) month period calculated from and including the Reference Date to the end of the Term;

“Transition Period” means the period of time pursuant to section 6.3; and

“Wine Stores and Winery, Distillery and Brewery Stores” means the retail outlets from time to time owned and operated, directly or indirectly, by wineries that manufacture Ontario wines, manufacturers of spirits or manufacturers of beer in the Province of Ontario for the sale of such wineries’ or manufacturers’ beverage alcohol to the public in the Province of Ontario.

PART B: DELIVERABLES (RESULTS BASED PERFORMANCE)

BRI agrees to provide the Deliverables, from and after the Reference Date, during the Term of this Contract, on and subject to the following terms and conditions:

1.1 Empty Program Container Deliverables

1.1.1 BRI Return Locations – Consumer Returns

1.1.1.1 Acceptances and Refunds – subject to section 1.1.6 of this Schedule 1, BRI agrees to accept at all BRI Stores that accept returns of empty BRI Beer Containers and/or empty refillable beer containers, during normal business hours of operation, returns of empty Program Containers and Secondary Packaging, except for Bulk Returns, and to refund in full Deposits in cash.

1.1.1.2 Bulk Returns – subject to section 1.1.6 of this Schedule 1, BRI agrees to accept at all BRI Distribution Centers and BRI Stores that accept Bulk Returns, during normal business hours of operation for returns of Bulk Returns, Bulk Returns of empty Program Containers and Secondary Packaging and to refund in full Deposits in cash, by cheque or by electronic funds transfer.

1.1.1.3 BRI Return Locations – BRI may, in consultation with the Ministry, assign any location, in addition to or instead of a BRI Store or BRI Distribution Center for the purpose of accepting returns of empty Program Containers and Secondary Packaging.

1.1.1.4 Comparable Treatment – subject to section 1.1.6 of this Schedule 1, in the provision of Deliverables at BRI Return Locations as contemplated in this section 1.1.1 of this Schedule 1, BRI agrees that consumers returning empty Program Containers will receive the same level of customer service BRI provides to consumers returning empty BRI Beer Containers at BRI Return Locations.

1.1.2 Collections – Licensee Returns

1.1.2.1 Acceptances and Refunds – subject to section 1.1.6 of this Schedule 1, BRI shall collect, at BRI’s cost, empty Program Containers and Secondary Packaging from Licensees and will refund to such Licensees the full Deposits, all in accordance with BRI’s usual and customary practices in effect with respect to the BRI Beer Container Recovery System.

1.1.2.2 Comparable Treatment – subject to section 1.1.6 of this Schedule 1, in the provision of Deliverables to Licensees as contemplated in this section 1.1.2 of this Schedule 1, BRI agrees that Licensees returning empty Program Containers will receive the same level of customer service BRI provides to Licensees returning empty BRI Beer Containers, including that BRI will adopt its dispute resolution process that exists with respect to the BRI Beer Container Recovery System regarding Licensees to address any complaints that affect such Licensees in connection with BRI’s obligations under this Contract.

1.1.2.3 Idem – subject to section 1.1.6 of this Schedule 1, nothing in section 1.1.2.1 of this Schedule 1 shall prevent a Licensee from entering into any arrangement with a third-party to collect empty Program Containers and Secondary Packaging and return the same to a BRI Return Location for a refund in full of Deposits in cash or cash equivalents; however BRI shall have no responsibility for such arrangements and shall refund any Deposits in full to the Person who returns such Program Containers and Secondary Packaging at such location and not to the Licensee. BRI hereby agrees that the policies to be established and maintained by it pursuant to section 1.1.6 of this Schedule 1 will require all such third-party commercial haulers to be registered with BRI such that they will be required to acknowledge and agree to BRI’s policies as a condition to such registration.

1.1.3 EBDs

1.1.3.1 Acceptances and Refunds – subject to section 1.1.6 of this Schedule 1, BRI shall cause EBDs to accept returns of empty Program Containers and Secondary Packaging, during their respective normal hours of operation and refund in full Deposits in cash.

1.1.3.2 Compensation – BRI shall pay EBDs reasonable compensation, as determined by BRI in its discretion, for the services provided thereby described in section

1.1.3.1 of this Schedule 1 and section 1 .1.5 of this Schedule 1.

1.1.3.3 BRI Collection and Refund – subject to section 1.1.6 of this Schedule 1, BRI will collect, at BRI’s cost, all empty Program Containers and Secondary Packaging from EBDs and will refund to EBDs the full Deposits, in accordance with BRI’s usual and customary practice.

1.1.3.4 Comparable Treatment – subject to section 1.1.6 of this Schedule 1, in the provision of Deliverables to EBDs as contemplated in this section 1.1.3 of this Schedule 1, BRI agrees that EBDs returning empty Program Containers will receive the same level of customer service BRI provides to EBDs returning empty BRI Beer Containers, including that BRI will adopt its dispute resolution process that exists with respect to the BRI Beer Container Recovery System regarding EBDs to address any complaints that affect such EBDs in connection with BRI’s obligations under this Contract.

1.1.3.5 LCBO Stores acting as EBDs – BRI will use its commercially reasonable efforts to establish new EBDs in locations where none exist in order to replace LCBO Stores acting as EBDs in such locations.

1.1.4 Agency Stores

1.1.4.1 Acceptances and Refunds – the Ministry shall cause Agency Stores to accept returns of empty Program Containers and Secondary Packaging, during their respective normal hours of operation, and refund in full Deposits in cash and to deal with BRI as is necessary for BRI to perform its obligations hereunder.

1.1.4.2 Compensation – BRI shall pay Agency Stores reasonable compensation, as determined by BRI in its discretion, for the services provided thereby as described in section 1.1.4.1 of this Schedule 1 and section 1.1.5 of this Schedule 1; such compensation to be determined in a manner similar to EBDs.

1.1.4.3 BRI Collection and Refund – subject to section 1.1.6 of this Schedule l, BRI will collect, at BRI’s cost, all empty Program Containers and Secondary Packaging from Agency Stores and will refund to Agency Stores the full Deposits, in accordance with BRI’s usual and customary practice.

1.1.4.4 Comparable Treatment – subject to section 1.1.6 of this Schedule l, in the provision of Deliverables to Agency Stores as contemplated in this section 1.1.4 of this Schedule 1, BRI agrees that Agency Stores returning empty Program Containers will receive the same level of customer service BRI provides to Agency Stores returning empty BRI Beer Containers, including that BRI will adopt its dispute resolution process that exists with respect to the BRI Beer Container Recovery System regarding Agency Stores to address any complaints that affect such Agency Stores in connection with BRI’s obligations under this Contract.

1.1.5 Program Container and Secondary Packaging Sorting

1.1.5.1 BRI Return Locations – BRI will sort all Program Containers and Secondary Packaging accepted by it in a manner such that it can recover, consolidate and process for reuse and recycling consistent in all material respects with the performance of its obligations hereunder, including the environmental performance requirements in Part C of this Schedule 1.

1.1.5.2 EBDs – BRI shall cause EBDs to sort Program Containers and Secondary Packaging accepted by them in a manner determined by BRI, acting reasonably, such that BRI can recover, consolidate and process for reuse and recycling consistent in all material respects with the performance of its obligations hereunder, including the environmental performance requirements in Part C of this Schedule 1.

1.1.5.3 Agency Stores – the Ministry shall cause Agency Stores to sort Program Containers and Secondary Packaging accepted by them in a manner determined by BRI, acting reasonably, such that BRI can recover, consolidate and process for reuse and recycling consistent in all material respects with the performance of its obligations hereunder, including the environmental performance requirements in Part C of this Schedule 1.

1.1.6 Policies

1.1.6.1 Policies – BRI may in its discretion impose policies, from time to time, governing the return and sorting of Program Containers and Secondary Packaging, and the verification by BRI thereof, that it considers reasonable or necessary in the circumstances.

1.1.6.2 Non-Acceptance – without limiting section 1.1.6.1 of this Schedule 1, BRI need not accept a Program Container or Secondary Packaging, nor refund a Deposit, if: (a) the Program Container or Secondary Packaging is broken or contaminated (or inextricably mixed with contaminated material) or otherwise deemed unsuitable for processing or recycling; (b) the container can reasonably be identified by BRI as not being a Program Container; or (c) the policies in effect from time to time are not complied with in all material respects by the applicable consumer, Licensee, EBD and/or Agency Store.

1.1.6.3 Additional BRI Fees/Reduction in Compensation – BRI may, if it determines, in its discretion, to accept Program Containers and Secondary Packaging from Licensees, EBDs and/or Agency Stores that are not handled, sorted or otherwise prepared for collection in accordance with BRI’s policies then in effect: (a) charge the applicable Licensee, EBD or Agency Store reasonable handling, sorting or other fees; or (b) reduce the compensation otherwise payable by BRI to such EBD or Agency Store in section 1.1.3.2 of this Schedule 1 and section 1.1.4.2 of this Schedule 1, respectively, determined by BRI in its discretion as consideration for additional services required to be provided by BRI in order for BRI to meet its obligations hereunder, including the environmental performance requirements in Part C of this Schedule 1.

1.1.6.4 Decision Final – all decisions with respect to accepting containers, refunding Deposits or charging additional fees or reducing compensation in accordance with section 1.1.6.3 of this Schedule 1 shall be made by BRI in its discretion and shall be final, subject to BRI’s dispute resolution process then in effect to address complaints affecting returns of Program Containers and BRI Beer Containers by Licensees, EBDs and/or Agency Stores.

1.1.7 Communication of Policies – BRI will provide copies of any policies (or amendments thereto), or otherwise communicate such policies, to the Ministry, LCBO, Licensees, EBDs and Agency Stores and will ensure that such policies are not unduly onerous so as to materially impair the effectiveness of the Deposit System.

1.1.8 EBDs and Agency Stores – BRI and the Ministry shall cause EBDs and Agency Stores, respectively, to comply with such policies to the extent each is obligated to accept and sort empty Program Containers and Secondary Packaging and refund Deposits.

1.1.9 Recycling Administration

1.1.9.1 Administration – BRI shall arrange for, and administer the reuse, recycling or disposition of all Program Containers and Secondary Packaging accepted or collected by BRI pursuant to this Contract, by one or more Processors, including transportation of such materials to Processors, in the manner described in the environmental performance requirements in Part C of this Schedule 1.

1.1.9.2 Selection of Processor(s) – Processor(s) shall be chosen by BRI in its sole discretion. Processors chosen by BRI shall process both BRI Cans and Program Cans and may process other BRI Beer Containers (and related secondary packaging) and Program Containers and Secondary Packaging.

1.2 Processing Costs and Processing Revenue Each of BRI and the Ministry hereby acknowledge and agree that:

1.2.1 Processing Costs – all processing costs, charges, expenses and other amounts charged by Processors to BRI for the processing, recycling or disposal of BRI Beer Containers, related secondary packaging, Program Containers and Secondary Packaging shall be for the sole account of BRI.

1.2.2 Processing Revenue – all revenues generated by or on behalf of BRI from recycling or otherwise processing BRI Beer Containers, related secondary packaging, Program Containers and Secondary Packaging (including any waste diversion incentives) shall be for the sole account of BRI.

1.3 BRI Beer Container System, etc.

For greater certainty, the Deliverables provided under this Contract do not include any services provided by BRI: (a) pursuant to, or in connection with, the BRI Beer Container Recovery System; (b) under the 2000 Framework Agreement or the “New Beer Agreements” (other than this Contract) contemplated by the Master Framework Agreement; or (c) any other contracts between BRI and the LCBO existing as at September 1, 2011 or at the Reference Date. Notwithstanding the foregoing, the Ministry acknowledges and agrees that, in the performance of the Deliverables hereunder and the performance of BRI’s obligations under the BRI Beer Container Recovery System, Program Containers (and Secondary Packaging) and BRI Beer Containers (and related secondary packaging) will be commingled by BRI, EBDs, Licensees, Agency Stores and Processors; provided, however, such commingling shall not in any way limit BRI’s obligations herein with respect to separate counts (by unit by Deposit Category) for Program Containers other than Program Cans.

1.4 Outsourcing

BRI may retain third-party providers, as it considers necessary or desirable to assist in connection with the Deliverables provided under this Contract; provided BRI will remain primarily responsible for any such outsourcing; provided, however, BRI shall only be responsible for the Processors retained by it to the extent expressly set forth herein.

PART C: ENVIRONMENTAL PERFORMANCE REQUIREMENTS

The Ministry and BRI acknowledge and agree that environmental performance of the Deposit System is one of the principal indicators of the success of the Deposit System established hereby. Furthermore, the Ministry has indicated its desire to ultimately achieve the goals of (i) ensuring that a significant percentage of glass Program Containers collected by BRI under this Contract will be recycled for Higher End Recycling Uses, (ii) ensuring that recycling of Program Containers and Secondary Packaging are only recycled for uses other than Higher End Recycling Uses as a last resort, (iii) significantly reducing the number of Program Containers that end up in landfill or are incinerated, including that 0% of glass Program Containers collected by BRI under this Contract will be disposed of through landfill, by incineration or otherwise, (iv) ensuring that BRI and its Processors actively promote the recycling of Program Containers and Secondary Packaging collected by BRI under this Contract, and (v) an overall Program Container Return Rate target of 85% by December 31, 2018 (the “Environmental Performance Goals”), and BRI has indicated its desire to assist the Ministry in achieving such Environmental Performance Goals. In recognition of the challenges of the Deposit System, the Ministry and BRI agree as fo1lows:

(a) BRI agrees that all Program Containers and Secondary Packaging collected by BRI under this Contract will be sent to Processors and that no such Program Containers or Secondary Packaging will be sent directly by BRI for disposal through landfill, by incineration or otherwise;

(b) BRI agrees that no glass Program Containers collected by BRI under this Contract will be disposed of either by BRI or Processors through landfill, by incineration or otherwise;

(c) BRI agrees, and shall require Processors to agree, to (i) actively promote the recycling of Program Containers and Secondary Packaging collected by BRI under this Contract; (ii) explore existing recycling markets for all Program Containers and Secondary Packaging collected by BRI under this Contract; (iii) explore innovative or new recycling markets for Program Containers and Secondary Packaging collected by BRI under this Contract given BRI’s and the Processors’ respective experience in dealing with recyclable materials and the potential for influence by them by virtue of the quantity and types of materials collected by BRI pursuant to this Contract; and (iv) should the Waste Diversion Act, 2002 or its successor statute lead to an increased focus on refillable beverage containers, examine and identify ways that manufacturers can recapture their Program Containers for refilling.

(d) BRI shall require Processors with which it contracts pursuant to BRI’s obligations under this Contract to commit to the environmental performance requirements set out in this Part C of this Schedule 1 and shall also require them to acknowledge and support the Environmental Performance Goals;

(e) the Ministry agrees that, subject to compliance with BRI’s obligations in paragraph (a) of this Part C of this Schedule 1, a breach by any such Processor of the environmental performance requirements set forth herein in any material respect shall not constitute a breach by BRI of its obligations under this Contract provided BRI is diligently enforcing its contractual rights against such Processor for any such breach;

(f) BRI agrees that, in addition to the termination rights in favour of the Ministry set forth in section 6.1(e) of this Contract, should BRI breach in any material respect its obligations set forth in paragraph (a) of this Part C of this Schedule 1, BRI shall not be entitled to receive the Fees otherwise chargeable under the terms of this Contract for such Program Containers not so sent to Processors (or, if such Fee had previously been charged, such Fees shall be credited against one or more of BRI’s subsequent invoices). For greater certainty, Deposits shall, notwithstanding such event, be refunded by LCBO to BRI in accordance with this Contract in respect of such Program Containers;

(g) BRI agrees that Processors of glass Program Containers and Secondary Packaging collected by BRI under this Contract will be required to give priority to Higher Order Recycling Use markets for the receipts of such glass such that demand from all such Higher Order Recycling Use accessible markets is explored and, to the extent economically accessible, exhausted, before any such glass is used in lower order applications (i.e. the use of glass as aggregate replacement);

(h) BRI agrees that Processors of non-glass Program Containers and Secondary Packaging collected by BRI under this Contract will:

(i) Identify markets for such non-glass Program Containers and Secondary Packaging as a condition of service to BRI and make arrangements for the receipt of such non-glass Program Containers and Secondary Packaging by those markets; and

(ii) Identify instances where markets for such non-glass Program Containers and Secondary Packaging are, in consultation with BRI, either unavailable or economically inaccessible;

(i) The Ministry agrees it will notify BRI of any proposed or pending introduction of new types of Program Containers and/or Secondary Packaging that are not in the Deposit System as of September 1, 2011 (or changes to then existing Program Containers and/or Secondary Packaging such that they contain materials or are comprised of materials not then in the Deposit System (or the relative composition of materials changes) (“New Program Containers and Secondary Packaging”) so as to enable Processors to identify recycling markets for these New Program Containers and Secondary Packaging;

(j) BRI agrees that Processors of New Program Containers and Secondary Packaging collected by BRI under this Contract will:

(i) Identify markets for such New Program Containers and Secondary Packaging as a condition of service to BRI and make arrangements for the receipt of such New Program Containers and Secondary Packaging by those markets; and

(ii) Identify instances where markets for such New Program Containers and Secondary Packaging are, in consultation with BRI, either unavailable or economically inaccessible;

(k) Only in the event BRI determines that recycling markets for non-glass Program Containers and Secondary Packaging referenced in paragraph (h) of this Part C of Schedule 1 and/or for New Program Containers and Secondary Packaging referenced in paragraph (i) of this Part C of this Schedule 1 are either unavailable or economically inaccessible will, following prior written notice to the Ministry (which shall include written documentation supporting BRI’s analysis of economic accessibility or economic inaccessibility, as applicable), it permit Processors to dispose of such containers and packaging through landfill, by incineration or otherwise;

(l) The Ministry agrees that nothing in this Contract, including the Environmental Performance Goals, will preclude the disposal by Processors through landfill, by incineration or otherwise of:

(i) The residual by-products obtained from the processing of Program Containers, Secondary Packaging and/or New Program Containers and Secondary Packaging collected by BRI under this Contract for reuse or recycling; and

(ii) A nominal amount (by weight and/or unit) of Program Containers, Secondary Packaging and/or New Program Containers and Secondary Packaging from time to time as a result of accidents or one or more unforeseen incidents or circumstances provided such accidents, incidents or circumstances (x) were not caused by the willful act or omission of either BRI or the applicable Processor, and (y) do not occur as part of the routine practice of either BRI or the Processor; and

(m) i. Return Rates for Program Containers
In each Responsible Stewardship Report, BRI shall include the Return Rates and will report on the performance of the Deposit System in relation thereto.

ii. General Materials Handling
BRI agrees that, in the performance of its obligations under the Contract, to the extent applicable to BRI in respect of such performance, it will comply with the following statutes, or successor statutes (and the regulations thereunder) as in effect from time to time (collectively, “Applicable Laws”):

(i) Environmental Protection Act (Ontario);

(ii) Workplace Safety and Insurance Act, 1997 (Ontario);

(iii) Occupational Health and Safety Act (Ontario); and

(iv) Waste Diversion Act, 2002 (Ontario).

BRI further agrees that it shall require all Processors with which it contracts in respect of BRI’s obligations under the Contract to agree, in the performance of such Processor’s obligations under such contract, to comply with Applicable Laws to the extent applicable to the Processor in respect of its performance under such contract. For purposes hereof, Applicable Laws shall, if and to the extent the performance of obligations referenced herein is performed in a jurisdiction other than Ontario, refer to applicable statutes and regulations in effect in the applicable jurisdiction(s) having similar purposes as the above-referenced statutes and related regulations.

PART D: MINISTRY’S STEP IN RIGHTS

1.5 Ministry Step-in Rights

1.5.1 Each of BRI and the Ministry agrees that the Ministry shall monitor the communities serviced by each Reviewable Store as may from time to time exist after the Reference Date and that the Ministry may at any time and from time to time provide BRI with written notice of its intent to establish an additional return location within the applicable vicinity of each Reviewable Store (such vicinity being the applicable number of kilometres specified in the definition of Reviewable Stores).

1.5.2 Within sixty (60) days following receipt of any notice from the Ministry referenced in section 1.5.1 of this Schedule 1, BRI shall provide notice to the Ministry indicating whether it is willing to establish additional locations such that all or some of such Reviewable Stores will cease to be such by virtue of a BRI Return Location (or a BRI Return Location that accepts Bulk Returns in the case of a Reviewable Store referenced in paragraph (b) of the definition thereof) being located within the applicable vicinity (such vicinity being the applicable number of kilometres specified in the definition of Reviewable Stores). If BRI indicates in such notice that it is willing to establish all or some of such locations, BRI shall establish such locations as soon as practicable and in any event within one hundred and eighty days (180) of such notice and such location or locations shall be a BRI Return Location for all purposes hereof. If BRI fails to provide such notice within such time frame, or if such notice indicates that BRI is not willing to establish all such additional locations, the Ministry shall have the right in its sole discretion to (a) refer the matter to Dispute Resolution under Part H of this Schedule 1, or (b) establish and operate, or appoint a third-party to do either or both, such additional locations that BRI did not indicate it is willing to establish (or those that BRI fails to establish within the one hundred and eighty (180) day period referenced in this section 1.5.2 of this Schedule 1) to accept and collect empty Program Containers (or, if applicable, Bulk Returns) from retail consumers and Secondary Packaging and refund Deposits, all at the Ministry’s cost and expense and, in such a case, BRI agrees to accept returns of empty Program Containers and Secondary Packaging from such locations, and refund Deposits paid thereby, all subject to section 1.1.6 of this Schedule 1. BRI shall be entitled to receive Fees and refunds of Deposits from the Ministry in accordance with the terms of this Contract for the Deliverables provided in respect of each additional return location established by BRI, the Ministry or such third-party as contemplated in this section 1.5.2 of this Schedule 1.

1.6 Notice of Retail Consumer Complaints

The Ministry and BRI shall keep each other reasonably well informed as to the retail consumer complaints received by them in respect of Reviewable Stores, including, where practicable, by providing copies of such complaints received in writing (or summaries of complaints received orally), as well as by providing Information regarding the resolution thereof, if any.

1.7 Changes in BRI Return Locations

Nothing in section 1.5 of this Schedule l, or anything else herein contained, shall preclude BRI from opening, closing, or relocating one or more BRI Return Locations (including BRI Return Locations that accept Bulk Returns) from time to time or at any time in its discretion. The Parties acknowledge, however, that should BRI open or relocate one or more BRI Return Locations within the applicable vicinity of a Reviewable Store (such vicinity being the applicable number of kilometres specified in the definition thereof), then the applicable LCBO Store or BRI Store, as the case may be, shall, following such opening or relocation, cease to be a Reviewable Store for all purposes hereof. The Parties also acknowledge that, should BRI permanently close one or more BRI Return Locations within the applicable vicinity of a Reviewable Store (such vicinity being the number of kilometres specified in the definition thereof), then the applicable LCBO Store or BRI Store, as the case may be, shall, following such closure, be a Reviewable Store for all purposes hereof.

1.8 Co-location

The Parties acknowledge that nothing in this Schedule l or this Contract shall be construed as an obligation on the LCBO to co-locate stores with BRI or as an obligation on BRI to co-locate stores with the LCBO.

PART E: MANNER, CALCULATION AND TIMING OF PAYMENTS

1.9 Invoices

Unless otherwise agreed to by the Parties, BRI shall deliver an invoice to the Ministry on Friday of every second week following the Reference Date, in respect of all Fees payable by the LCBO to BRI under this Contract and all Deposits refunded by BRI, in the preceding two week period (being the period commencing on Monday and ending on the second Sunday) (collectively, “Program Charges”). Each such invoice shall set out (i) the number of Program Non-Cans collected or accepted by BRI in such two week period, segregated by Deposit Category by BRI Return Location, (ii) the Aggregate DC Sold, the Aggregate DC Returned and the Return Rate DC for Program Cans and BRI Cans sold, collected or accepted by BRI in such two week period, as applicable, segregated by Deposit Category (including by deposit category for BRI Cans) by BRI Return Location, (iii) the number of Program DC Returns, (iv) the product of item (i) in this section 1.9 of this Schedule 1 multiplied by the applicable Fee and by the applicable Deposit, and (v) the product of item (iii) in this section 1.9 of this Schedule 1 multiplied by the applicable Fee and by the applicable Deposit.

1.10 Calculation of Program Charges

The Program Charges in respect of any invoice shall be equal to the sum of the Fees and Deposits for every Deposit Category, and shall be calculated according to the following methodology:

1.10.1 Program Containers – Non-Cans

The Program Charges in an applicable two week period with respect to Program Containers excluding any cans (“Program Non-Cans”) for every Deposit Category, shall be equal to the product of the number of units of Program Non-Cans accepted or collected by BRI, as reported in BRI’s Point of Sale system (or its successor system), multiplied by the applicable Fee and by the applicable Deposit payable or earned, as the case may be, in that two week period (“Program Non-Can Charge”).

1.10.2 Program Containers – Cans

1.10.2.1 The Program Charges in an applicable two week period with respect to Program Containers that are cans (“Program Cans”) shall be based on (a) the relative share of Program Cans and BRI Beer Containers which are cans (“BRI Cans”) sold in any two week period, and (b) the average aggregate rate of return of Program Cans and BRI Cans for every Deposit Category, and shall be calculated according to the following methodology:

1.10.2.1.1 BRI shall calculate the aggregate total number of Program Cans and BRI Cans sold by Deposit Category (including by deposit category for BRI Cans) in an applicable two week period (the “Aggregate DC Sold”), based in part on information provided under section 1.11 of this Schedule 1.

1.10.2.1.2 BRI shall calculate the aggregate total number of Program Cans and BRI Cans returned by Deposit Category (including by deposit category for BRI Cans) in an applicable two week period (the “Aggregate DC Returned”), as reported in BRI’s Point of Sale system (or its successor system). The quotient of the Aggregate DC Returned divided by the Aggregate DC Sold constitutes the deemed rate of return for Program Cans in each such Deposit Category (“Return Rate DC”).

1.10.2.1.3 The number of Program Cans by Deposit Category returned in a two week period (the “Program DC Returns”) shall be deemed to be the product of Return Rate DC for the applicable Deposit Category for the applicable two week period multiplied by the number of Program Cans sold by such Deposit Category in such two week period, regardless of the actual number of returns.

1.10.2.1.4 Based on the Program DC Returns, the amount payable to BRI in respect of the Fees and Deposits for a Deposit Category for Program Cans shall be calculated by multiplying the applicable Program DC Return by the applicable Fee and by the applicable Deposit (“DC Charge”).

1.10.2.1.5 The applicable Program Charge in respect of Program Cans is then calculated by adding, for every Deposit Category, all DC Charges payable or earned, as the case may be, in that two week period (“Program DC Can Charge”).

1.10.3 Program Charge – the applicable Program Charge is then calculated by adding the Program Non-Can Charge to the Program DC Can Charge payable or earned, as the case may be, in that two week period.

1.10.4 Reconciliation – reconciliation of container counts, shares and charges in this section 1.10 of this Schedule 1 is subject to the adjustment protocols described in Part G of this Schedule 1.

1.11 Information

The Ministry shall provide, or cause to be provided, to BRI all information reasonably required by BRI to calculate the Program Charges on a bi-weekly basis, to comply with any reporting obligations required under the Requirements of Law, including section 35 of the Waste Diversion Act, 2002 (Ontario) and to otherwise perform its obligations and Deliverables as contemplated under this Contract. Without limiting the generality of the forgoing, such information shall include the number of Program Containers sold in each two week period, segregated by Program Non-Cans and Program Cans, each segregated by Deposit Category, and a monthly list of LCBO Stores, showing sales (excluding beer), by litre volume, at each such store to retail consumers, calculated on a trailing 12-month basis.

1.12 Timing

Unless otherwise agreed to between the Parties, LCBO shall pay the amounts owing to BRI shown on a complete invoice on or before the thirtieth (30th) day (or, if such day is not a Business Day, the immediately preceding Business Day) after delivery of the invoice for Program Charges set forth in the applicable invoice. All payments required to be made hereunder to BRI shall be paid to or to the order of BRI by electronic funds transfer in immediately available funds to such accounts at such banks in the Province of Ontario as BRI shall have notified LCBO, or by such other method as BRI and the Ministry, on behalf of LCBO, may from time to time agree.

PART F: DEPOSITS AND FEES

1.13 Deposits

1.13.1 Refunds and Unredeemed Deposits

LCBO shall pay to BRI the Deposits that BRI refunds through or to BRI Return Locations, EBDs, Agency Stores and Licensees calculated as set forth in Part E of this Schedule 1.

The Ministry and LCBO acknowledge that the rate of Deposit refunds may exceed actual sales of Program Containers. Any unredeemed Deposits shall be for the sole account of the Province of Ontario.

1.13.2 Change in Deposits and Deposit Categories

The Ministry acknowledges that the Fees agreed upon by the Ministry and BRI are predicated on the Deposits and Deposit Categories in effect on September 1, 2011. Unless otherwise agreed to by BRI acting reasonably, and subject to Ontario prebudget secrecy requirements, any proposed decrease in the Deposits and/or any changes to Deposit Categories shall require the Ministry to:

1.13.2.1 provide, or cause to be provided, to BRI at least one hundred and eighty (180) days prior notice (or such shorter period as the Ministry and BRI may agree) for any proposed change to Deposits and/or Deposit Categories;

1.13.2.2 enter into good faith negotiations with BRI to adjust the Fees to reflect the proposed change and implications on BRI’s operations and provision of Deliverables hereunder, with the aim to making a consensus on adjustments, if any, to the Fees prior to the effective date of the proposed change; and

1.13.2.3 if, after such one hundred and eighty (180) day period, BRI and the Ministry are unable to agree on adjustments, if any, to the Fees, the then current Fees shall remain in effect until such disagreement is resolved pursuant to the Dispute Resolution procedures in Part H of this Schedule 1, with adjustment, if any, made to the Fees upon such resolution, with retroactive effect from the time of implementation of the change to Deposits and/or Deposit Categories; provided, however, there will be no change to the Fee where Program Containers of a type are introduced into the Deposit System after September 1, 2011 (or changes to existing Program Containers such that they contain materials or are comprised of materials not in the Deposit System as of such date (or the relative composition of materials changes following such date)) are added to the existing Deposit Categories of either “Tetra Pak (polycoat) and Bag-in-a-Box less than or equal to 630mL” or ‘‘Tetra Pak (polycoat) and Bag-in-a-Box over 630mL”.

1.14 Fees

LCBO shall pay to BRI the Fees earned by BRI in respect of Program Containers accepted or collected pursuant to the Deposit System in the following amounts throughout the Term calculated as set forth in Part E of this Schedule 1. The Ministry acknowledges that the number of Program Containers accepted or collected may exceed actual sales of Program Containers in a given invoice period. Fees shall be $0.1081 per Program Container during the Term. BRI shall provide a rebate to the LCBO in the amount of $1,000,000 as a deduction from BRI’s first July bi-weekly invoice each Year of the Term with the exception that such rebate will be on a pro-rated basis in respect of 2015 and 2025 based upon the number of days in each of those years falling within the Term. For greater certainty, the 2015 rebate will be calculated based on the period from October 1, 2015 to December 31, 2015. In respect of the 2015 pro-rated payment, the rebate will be made as a deduction from BRI’s first bi-weekly invoice following November 15, 2015. In the event that BRI’s Fees in the first July bi-weekly invoice in any Year of the Term are less than $1,000,000, LCBO shall pay BRI nothing in respect of such invoice and BRI shall reduce its next bi-weekly invoice or invoices by an amount equal to the amount by which its first July bi-weekly invoice is less than $1,000,000.

PART G: VERIFICATION PROTOCOLS (COMPLIANCE)

1.15 Auditor

BRI and the Ministry acknowledge that the Ministry may appoint, at its sole expense and discretion, an independent auditor (which may be the Provincial Auditor or an internal auditor of OPS, each of which shall be deemed to be independent for purposes hereof, but which may not be LCBO) to prepare an auditor’s report and undertake such verification activities as may be required by the Ministry in respect of this Contract and the Deposit System (including attestation of material flows and the auditing of recycled materials); provided, however, such auditor shall not undertake any audit of BRI and such auditor shall be limited in scope and access to that expressly set forth in this Part G of this Schedule l. The Ministry agrees that it shall not appoint as its auditor or reviewer a Person or Agency who may have a conflict with BRI (including LCBO). The Ministry may also appoint, at its sole expense and discretion, an independent external reviewer to undertake the non-audit activities set forth in this Part G of this Schedule 1, with such review being limited in scope and access to that expressly set forth in this Part G of this Schedule 1.

1.16 Review and Verification

In order to ensure the accuracy of Program Container counts and material recycled, BRI and the Ministry agree as follows:

1.16.1 Container returns and redemption of Deposits on Containers:

1.16.1.1 At BRI Return Locations where Deposits are redeemed, BRI agrees to retain for audit purposes and make available to the Ministry and/or its appointee appointed pursuant to section 1.15 of this Schedule l:

• daily cash register tapes or bin count sheets, as applicable, listing number of Program Containers returned by Deposit Category;
• daily reconciliations of cash to all containers (i.e., BRI Beer Containers, refillable BRI beer containers and Program Containers) received at BRI Stores;
• weekly reconciliations of cash to all containers (i.e., BRI Beer Containers, refillable BRI beer containers and Program Containers) received at BRI Return Locations (other than BRI Stores);
• complete audit trail of the number of Program Containers returned by Deposit Category; and
• BRI policies and internal control procedures relating to the segregation of all containers (i.e., BRI Beer Containers, refillable beer containers and Program Containers) for recording purposes.

1.16.1.2 BRI agrees that all BRI Return Locations will be equipped with empty till registers capable of recording Program Container returns from retail consumers.

1.16.1.3 The Ministry and BRI agree that the Ministry and/or its appointee appointed pursuant to section 1.15 of this Schedule 1 may conduct the audits and other verifications as set out below:

• preparation of an auditor’s report on the accuracy of the number of Program Containers redeemed for each reporting period of this Contract (such report to be prepared in accordance with the standards for assurance engagements established by the Canadian Institute of Chartered Accountants (the “Assurance Engagement Standards”));
• perform analytical review of key performance indicators by BRI;
• conduct surprise store visits during non-peak hours of operation;
• implementation of an independent and impartial mystery shopper program performed periodically at the Ministry’s sole cost; and
• spot checks of returned Program Containers at BRI Return Locations during non-peak hours of operation.

1.16.2 Recycled Material

1.16.2.1 In its contracts with Processors entered into after September 1, 2011, BRI agrees to use its commercially reasonable efforts to require Processors to retain records for audit purposes by, and make such records available to, the Ministry and/or its appointee appointed pursuant to section 1.15 of this Schedule 1 to conduct audits of recycled materials.

1.16.2.2 BRI agrees to retain for audit purposes and make available to the Ministry and/or its appointee appointed pursuant to section 1.15 of this Schedule 1:

• calculations by BRI Return Locations showing the conversion of Program Containers redeemed to weight using standard average weight by Deposit Category;
• monthly calculations to determine standard Deposit Category weights;
• complete audit trail of recycled material (e.g. retail/depot shipping bills of lading indicated by recycling category and by carrier);
• Processor receipts by Deposit Category;
• verifiable written semi-monthly assurance from Processors that Processors are complying with environmental performance requirements set forth in Part C of this Schedule 1;
• a semi-annual written outline of the processing, by weight, of the following Program Containers and Secondary Packaging collected by BRI under the Contract during such period through to the point of final processing and disposition (that is, to the point of sale to an end user of such processed Program Containers and Secondary Packaging, but excluding such end user itself), that includes a general description, by weight, of how the materials were processed by each Processor (and each sub-processor thereof) during such period, shall be provided to the Ministry on or before the end of the fourth month following each semiannual period ending April 30 and October 30 in each year: (i) glass Program Containers, (ii) Program Cans, (iii) PET Program Containers, and (iv) Secondary Packaging; and
• a semi-annual written report from each Processor of the amount, by weight, of the following Program Containers and Secondary Packaging collected by BRI under the Contract during such period sent by such Processor to landfill or incinerated due to contamination or for other reasons specified in paragraph (l)(ii) of Part C Environmental Performance Requirements of Schedule 1 during such period shall be provided to the Ministry on or before the end of the fourth month following each semiannual period ending April 30 and October 30 in each year: (i) glass Program Containers, (ii) Program Cans, (iii) PET Program Containers, and (iv) Secondary Packaging.

The Ministry and BRI acknowledge that BRI’s processing of Tetra Pak Program Containers and the component parts of Bag-in-Box Program Containers (that is, the bladders (bags) and boxes) are blended by BRI with the applicable Secondary Packaging, and that there is no separate weighing of such Program Containers (nor the component parts thereof). The Ministry and BRI further acknowledge that it is therefore not possible for BRI or Processors to separately report on either such Program Containers and that such Program Containers will be included, although not separately identified, within the report on Secondary Packaging. BRI may, at its option, separately report in the foregoing semi-annual reports in respect of Tetra Pak Program Containers and/or Bag-in-Box Program Containers.

For purposes of the above-referenced semi-annual reports, the amounts determined by BRI and Processors will be estimates only, and will be based on the amount, by weight, of such materials provided by BRI to a Processor in relation to the amount, by weight, of such materials processed by such Processor (which will likely include non-Program Containers, including containers and packaging from the BRI Beer Container Recovery System, all of which will likely be commingled). If the Responsible Stewardship Report prepared by BRI in any year includes the information, on an annual (as opposed to semi-annual) basis, required to be included in the above-referenced semi-annual reports for the annual period ended April 30 in that year, then the reports for the semi-annual period ended April 30 in such year (which would otherwise be due to be provided by BRI or a Processor on or before August 31) do not need to be provided by BRI or a Processor.

1.16.2.3 The Ministry and BRI agree that the Ministry and/or its appointee appointed pursuant to section 1.15 of this Schedule 1 may conduct audit verifications as set out below:

• Conduct surprise visits and perform substantive spot checks of Program Containers returned; and
• Audit BRI and, provided the contracts between BRI and the applicable Processor so permit, Processors, to verify material flows and disposition of Program Containers and Secondary Packaging, including conducting a “follow the waste” review that enables the Ministry to understand and report on how Processors handle the Program Containers and Secondary Packaging collected through the Deposit System. The findings from Ministry audits of Processors and any statements or attestations provided by Processors to the Ministry and/or its appointee will be held as confidential among BRI, the Ministry/appointee and the Processor.

1.16.2.4 Prior to finalization of each Responsible Stewardship Report, BRI agrees to provide a draft copy of the latest version of the Responsible Stewardship Report to the Ministry no later than three (3) weeks in advance of providing it to Waste Diversion Ontario. The Ministry shall review and may, acting reasonably, require changes to all content specifically related to the Deposit System and all content referencing the Deposit System. For greater certainty, the Ministry’s right of approval shall not pertain to content in the Responsible Stewardship Report that pertains to the BRI Beer Container Recovery System.

1.16.3 Billings

1.16.3.1 BRI agrees to retain for audit purposes and make available to the Ministry and/or the appointee appointed pursuant to section 1.15 of this Schedule 1, the sales split (Program Cans and BRI Cans) and redemption adjustment for Deposit Categories based on sales.

1.16.3.2 BRI agrees to retain for audit purposes and make available to the Ministry and/or the appointee appointed pursuant to section 1.15 of this Schedule 1, the full audit trail and details for the invoices for Fees and Deposit refunds under this Contract.

1.16.3.3 The Ministry and BRI agree that the Ministry or its appointee appointed pursuant to section 1.15 of this Schedule 1 may conduct the audit verifications set out below:

• perform analytical review of key performance indicators by BRI;
• preparation of an auditor’s report on the accuracy of BRI’s billings recovered for each reporting period of this Contract (such report to be prepared in accordance with the Assurance Engagement Standards);
• redemption split for Program Cans and BRI Cans by Deposit Category;
• perform substantive testing; and
• perform compliance testing on sales splits by Program Cans and BRI Cans by Deposit Category.

1.17 Report and Response

The Ministry or its appointee appointed pursuant to section 1.15 of this Schedule l shall provide BRI with a written report (the “Report”) that outlines any deficiencies of BRI identified by the Ministry or its appointee as a result of any audit or review permitted under the verification protocols established pursuant to section 1.16 of this Schedule 1, and BRI shall, within thirty (30) days of receipt of such Report, develop and present to the Ministry a written response (“Response”) outlining:

1.17.1 timely corrective action with respect to such deficiencies, in which case BRI shall make all reasonable changes to address such deficiencies; or

1.17.2 disagreements with respect to the conclusions or recommendations in any Report, in which case the dispute shall be resolved in accordance with the Dispute Resolution procedures of Part H of this Schedule 1.

1.18 Reasonable Access and Assistance

In connection with, and limited to, the verification protocols established pursuant to section 1.16 of this Schedule 1, BRI shall:

1.18.1 Reasonable Access – subject to compliance by the Ministry, auditor and/or appointee, as applicable, permit the Ministry, auditor and/or appointee, as applicable, to have reasonable access to its premises and facilities and BRI Return Locations (collectively, “BRI Premises”) as necessary with respect to the Deliverables described in this Contract, and will instruct its employees and advisors to cooperate with such Persons in connection with such access. The Ministry shall ensure that such Persons who access BRI Premises comply with any and all policies and guidelines of BRI related to the conduct of Persons on BRI Premises provided or communicated by BRI to the Ministry from time to time, or of which the Ministry otherwise has actual notice.

1.18.2 Reasonable Assistance – make available to the Ministry, auditor and/or appointee, as applicable, at reasonable times to be agreed between the applicable Persons and BRI, those employees who have the necessary knowledge, experience and expertise to provide reasonable assistance to such Persons in their examination of information and material, in accordance with, and limited to, the protocols described in section 1.16 of this Schedule 1.

1.19 Adjustment

The Ministry may make adjustments (up or down) to subsequent invoices for Program Charges where any audit or verification performed under this Contract reveals discrepancies in past payments. If an adjustment is made after the final invoice then payment shall be made by LCBO or by BRI as applicable. This section 1.19 shall be subject to section 4.3 of this Contract and subject to the Dispute Resolution procedures in Part H of this Schedule 1 in the event of any disagreement in relation to such adjustment.

1.20 Retention of Records

BRI shall retain all written or electronic records generated by or on behalf of BRI in respect of the Deliverables and any invoices for the following periods:

1.20.1 BRI Return Locations – a rolling period of twelve (12) months for written records and a rolling period of nine (9) months for electronic records, in each case, from the date such record was created; and

1.20.2 BRI Corporate Records –-a rolling period of seven (7) years for written and electronic records maintained at BRI’s corporate offices (including summary records for all BRI Return Locations) from the date that such record was created.

PART H: DISPUTE RESOLUTION

1.21 Internal Escalation

Any disputes related to performance of the obligations outlined in this Contract that the Ministry Representative and the BRI Representative are otherwise unable to resolve will be addressed through the following process (and, for clarity, neither BRI nor the Ministry shall be entitled to exercise a termination right pursuant to section 6.1(b), section 6.1(c), section 6.1(e), section 6.5(a), section 6.5(d) or section 6.5(e) of the Contract in respect of a default in respect of which either BRI or the Ministry initiates the following escalation process unless such default continues following completion or other abandonment of such process or failure to complete the process in accordance with the terms herein specified):

1. The Ministry or BRI, as applicable, initiates escalation process (the “Initiator”) by providing written notice to their counterpart (i.e. Ministry Representative informs BRI Representative) that the Initiator intends to pursue this dispute resolution process.
2. Within three (3) Business Days of providing notice to their counterpart, the Initiator drafts a complete description of the issue including the preferred solution (the “Issue”) and circulates it to their counterpart.
3. Within three (3) Business Days of the counterpart having received the Issue, the Ministry Representative and the BRI Representative must meet for an Issue resolution conference (the “Escalation Meeting”).
4. If the Ministry Representative and the BRI Representative come to an agreement on the resolution of the Issue, they jointly document the corrective action.
5. If the Ministry Representative and the BRI Representative are unable to come to agreement on the resolution of the Issue within five (5) Business Days of the counterpart originally receiving the Issue, then they must forward the Issue including the minutes from the Escalation Meeting (which should clearly document the Issue, proposed corrective action, reason for inability to agree and other relevant information) to the Deputy Minister of the Ministry and the Chair of the Board of BRI.
6. The Deputy Minister of the Ministry and the Chair of the Board of BRI must have a meeting within twelve (12) Business Days, or such other time period as agreed to by the Ministry and BRI, to discuss the Issue, seek to define the resolution, and, if applicable, issue a joint resolution document; provided, however, if a joint resolution is not reached within the applicable time period, the provisions of section 1.22 of this Schedule 1 shall apply.

1.22 Arbitration

If any Issue is not resolved by way of a joint resolution document issued pursuant to the internal escalation procedures of section 1.22 of this Schedule 1, then either BRI or the Ministry may refer the Issue to arbitration conducted in accordance with the Arbitration Act, 1991, S.O. 1991, c. 17, as amended provided notice of arbitration is provided within ten (10) Business Days of the expiry of the applicable time period referenced in clause 6 of section 1.21 of this Schedule 1. The party commencing the arbitration shall do so by notice of arbitration delivered in writing to the other party identifying the Issue, the relevant facts, the remedy sought, and a proposed arbitrator. The party responding to the notice of arbitration shall deliver a response to the notice of arbitration in writing, setting out the responding party’s defences, the relevant facts, and the requested resolution of the issues in dispute within ten (10) Business Days. If the Ministry and BRI cannot agree on a single arbitrator within ten (10) Business Days after delivery of the notice of arbitration, then, unless otherwise agreed, the Ministry and BRI shall each appoint an arbitrator within five (5) Business Days thereafter, and the two arbitrators so designated will select a third arbitrator within ten (10) Business Days thereafter, all of whom must be experienced in commercial transactions. The arbitration shall be conducted in Toronto and shall be completed within thirty (30) Business Days of the appointment of the arbitrator(s), unless otherwise agreed by the parties or the arbitrator(s) otherwise order(s) because special circumstances warrant an extension of time. The arbitrator(s) shall determine the procedures to be followed in the arbitration, with the nature, cost, time and burden of these procedures to be proportionate to the importance of the issues in dispute, the dollar amounts at issue and the complexity of the dispute. The arbitrator(s) shall have the power to award any remedy that, under Ontario Law, is within the power of an arbitrator to award. All decisions of such arbitrator or the majority decisions of such arbitrators will be final and binding upon the Ministry and BRI, with no right of appeal on any question of fact, law or mixed fact and law. Each of BRI and the Ministry shall bear their own costs in the arbitration, and the costs of the arbitration and of the arbitrator or arbitrators shall be borne equally by BRI and the Ministry.

1.23 LCBO

For the purpose of sections 1.21 and 1.22, any dispute relating to the performance of LCBO under this Contract shall be handled by the Ministry Representative on behalf of LCBO.

PART I: FREEDOM OF INFORMATION AND PROTECTION OF PRIVACY ACT RECORDS

The following chart lists recorded information that is to be included and excluded from the definition of “Record” contained in this Contract:

FIPPA Included and Excluded Records:

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PART J: COMMITTEES

1.24 Return Rate Committee

1.24.1 Mandate and Goal

From and after the Reference Date, the Parties will establish and participate in a Return Rate Committee. The mandate of the Return Rate Committee is to explore and develop, for execution by the Parties, a strategic plan for awareness, promotion and communications to promote and sustain the Return Rate for Program Containers. The goal of the Return Rate Committee is to achieve an overall Program Container Return Rate of 85 percent by December 31, 2018.

1.24.2 Composition

The Return Rate Committee shall be composed of representatives from each of the Parties. Members of the Return Rate Committee will have experience with the Deposit System and/or relevant experience and background in a relevant discipline such as marketing, public affairs, communications and sales.

1.24.3 Duties

The duties of the Return Rate Committee shall be to:

1. Conduct and/or commission research, studies, surveys or other such investigations, to determine the behavioural and other drivers that determine the Return Rate for Program Containers.
2. Develop a multi-year marketing and branding strategy and supporting tactics to promote and increase awareness of the Deposit System with beverage alcohol consumers.
3. Conduct timely assessments of the effectiveness of the strategy and material tactics to improve the efficacy of the Return Rate Committee’s efforts, with an emphasis on areas identified as having a sub-optimal Return Rate.
4. Jointly explore communication vehicles to promote the Deposit System.

1.24.4 Meetings and Decision-Making

The Return Rate Committee will meet on a quarterly basis following the Reference Date and will hold an annual strategic planning session. All decisions of the Return Rate Committee will be made on consensus based on the available Deposit System data and information. This decision-making approach shall in no way abrogate or otherwise affect the rights and responsibilities of the Parties under the Contract unless an amendment signed by the Parties is entered into.

1.25 Joint Management Committee

From and after the Reference Date, the Ministry and BRI shall each appoint representatives to form a Joint Management Committee. The Joint Management Committee will hold semi-annual and ad hoc meetings for on-going review of the performance of the Deposit System and will make recommendations to the Ministry and BRI to address issues pertaining to key performance indicators, efforts to increase and maintain Return Rates, audit findings, communications and other matters relating to the operation of the Deposit System relative to the obligations of the Parties under the Contract. The Joint Management Committee shall in no way abrogate or otherwise affect the rights and responsibilities of the Parties under the Contract unless an amendment signed by the Parties is entered into.

1.26 Social Employment Opportunities

As a part of the Joint Management Committee, the Ministry and BRI agree to use their commercially reasonable efforts to pilot and, if feasible, establish one or more partnerships with community organizations involved in creating employment opportunities for disadvantaged individuals in a manner that will also assist in improving Return Rates. Final design of, and decision to proceed with, any initiative in this area will require the approval of both the Ministry and BRI in their respective sole discretions. The Ministry and BRI will use commercially reasonable efforts to accomplish this by December 31, 2018.