Sleeman Breweries Ltd. - MRRS Decision

May 14, 2004

MRRS Decision

Headnote

Rule 61-501 -- Going private transactions -- Consulting, non-competition and employment agreements entered into with three selling security holders who are also senior officers or employees of target company. Target company permitted to count selling security holders' securities as part of minority vote required in connection with going private transaction. Value of net benefits payable to two shareholders is minimal in comparison to the value of consideration to be received by them for their securities. If other key shareholder exercised his options, would own less than one percent of target's shares. Benefits not conditional on support of transaction and reasonably consistent with customary industry practice.

Applicable Ontario Rules

Rule 61-501 -- Insider Bids, Issuer Bids, Going Private Transactions and Related Party Transactions, ss. 4.7, 4.8 and 9.1.

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO AND QUÉBEC

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

SLEEMAN BREWERIES LTD.

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of the provinces of Ontario and Québec (the "Jurisdictions") has received an application (the "Application") from Sleeman Breweries Ltd. ("Sleeman") for a decision under Ontario Securities Commission Rule 61-501 - Insider Bids, Issuer Bids, Going Private Transactions and Related Party Transactions and Policy Q-27 of the Agence nationale d'encadrement du secteur financier (collectively, the "Legislation") that the votes attached to multiple voting shares of Unibroue ("MVS") and subordinate voting shares of Unibroue ("SVS", and together with the MVS, the "Unibroue Shares") that may be tendered by André Dion, Sébastien Dion and Paul Arnott (the "Key Personnel") under the offer (the "Offer") to be made by Sleeman to acquire all of the Unibroue Shares may be included as votes in favour of a subsequent going private transaction in the determination of whether the requisite minority approval has been obtained, notwithstanding the entering into of the Agreements (as defined below) by the Key Personnel;

AND WHEREAS under the Mutual Reliance Review System for Exemptive Relief Applications (the "System"), the Ontario Securities Commission is the Principal Regulator for the Application;

AND WHEREAS unless otherwise defined, the terms herein have the meaning set out in National Instrument 14-101 - Definitions or in Agence nationale d'encadrement du secteur financier Notice 14-101;

AND WHEREAS Sleeman has represented to the Decision Makers as follows:

1. Sleeman is a corporation continued under the federal laws of Canada and has its head office in Guelph, Ontario.

2. Sleeman is a reporting issuer in all the jurisdictions of Canada and is not in default of any requirements under the securities legislation of such jurisdictions. Sleeman's common shares are listed on the Toronto Stock Exchange (the "TSX").

3. Unibroue is a corporation incorporated under the federal laws of Canada and has its head office in Chambly, Québec.

4. Unibroue is a reporting issuer in the Jurisdictions and is not in default of any requirements of the Jurisdictions. The SVS are listed on the TSX. The MVS are not listed on the TSX or any other market.

5. The authorized capital of Unibroue consists of an unlimited number of MVS, an unlimited number of SVS and an unlimited number of first-ranking preferred shares. Based on the public disclosure record of Unibroue, 4,143,254 MVS, 1,715,054 SVS and no first-ranking preferred shares were issued and outstanding as at March 12, 2004 and there were outstanding options to purchase 166,500 SVS under Unibroue's stock option plan as at December 31, 2003.

6. Sleeman or its wholly owned subsidiary (collectively, the "Offeror") proposes to make the Offer to acquire all of the Unibroue Shares at $5.25 per Unibroue Share.

7. The Offer will be made by way of a take-over bid circular mailed to all holders of Unibroue Shares and prepared in accordance with applicable securities legislation.

8. The Offer will be conditional on, among other things, there being validly deposited under the Offer and not withdrawn at the expiry time of the Offer, the greater of: (a) such number of Unibroue Shares as represents at least 66 2/3% of the issued and outstanding SVS (on a fully-diluted basis) after giving effect to the deemed conversion of all MVS; and (b) the number of Unibroue Shares required to ensure minority approval of a subsequent going private transaction involving Unibroue.

9. Sleeman and Unibroue have entered into a support agreement pursuant to which the Offeror has agreed to make the Offer and Unibroue has agreed to, among other things, recommend that its shareholders (the "Unibroue Shareholders") deposit their Unibroue Shares under the Offer.

10. Sleeman has also entered into a lock-up agreement with André Dion, Andrée Marcil Dion, Jean-François Dion, Sébastien Dion, Robert Charlebois, Laurence Charlebois, Jérôme Charlebois, Victor Charlebois, Serge Racine and their respective controlled entities (collectively, the "Sellers"), pursuant to which the Sellers have agreed to deposit or cause to be deposited all of their Unibroue Shares under the Offer.

11. As an integral part of the transaction: (i) André Dion, the founder, President and Chief Executive Officer of Unibroue, has entered into a consulting agreement (the "Consulting Agreement") with Unibroue and Sleeman and a non-competition and non-solicitation agreement (the "Non-Competition Agreement") with Sleeman; (ii) Sébastien Dion, Unibroue's Vice President, Finance and Administration, has entered into an employment agreement (the "SD Employment Agreement") with Unibroue; and (iii) Paul Arnott, Unibroue's master brewer, has entered into an employment agreement (the "PA Employment Agreement") with Unibroue (the four agreements are collectively referred to as the "Agreements").

12. Pursuant to the Consulting Agreement, André Dion has agreed to assist in the transition of the business to the new ownership for a period of one year for a total fee of $250,000. The fee is payable quarterly.

13. Pursuant to the Non-Competition Agreement, André Dion has agreed to certain non-competition and non-solicitation covenants in favour of Sleeman for a period of three years following termination of the Consulting Agreement and, in consideration therefore, Sleeman will pay to André Dion the sum of $250,000 for, and payable at the beginning of, each such year.

14. Pursuant to the SD Employment Agreement, Sébastien Dion has agreed to continue his employment with Unibroue for a period of two years at a salary of $100,000 per year. In addition, Sébastien Dion will be entitled to receive a bonus of $15,000 on July 1, 2005 for his assistance in the transition of the business to new ownership and to participate in Sleeman's group health benefit plan and annual incentive plan which may entitle him to receive an additional annual bonus of $20,000 provided all performance targets are met.

15. Pursuant to the PA Employment Agreement, Paul Arnott has agreed to continue his employment with Unibroue until September 1, 2006 at a salary of $105,000 per year. In addition, Paul Arnott will be entitled to receive the same bonus and participate in the same benefit and incentive plans as Sébastien Dion.

16. André Dion was paid a salary and bonus in the aggregate amount of $175,776 in 2003 in his capacity as President and Chief Executive Officer of Unibroue. Sébastien Dion was paid a salary and bonus in the aggregate amount of $86,665 in 2003 in his capacity as Vice President, Finance and Administration, of Unibroue. Paul Arnott was paid a salary and bonus in the aggregate amount of $101,000 in 2003 in his capacity as master brewer at Unibroue.

17. Over the four year term of the Consulting Agreement and the Non-Competition Agreement, André Dion will receive an aggregate amount of $296,896 in excess of his 2003 compensation. Over the two year term of the SD Employment Agreement, Sébastien Dion will receive an aggregate amount of $81,670 in excess of his 2003 compensation. Under the PA Employment Agreement, Paul Arnott will receive an annual aggregate amount of less than $4,000 in excess of his 2003 compensation.

18. André Dion personally owns 39,500 SVS and controls the 2,862,176 MVS held by Gestion André Dion Ltée. ("Holdco") through his holding of a 60% voting and equity interest in Holdco. Sébastien Dion personally owns 1,000 SVS and holds a 20% voting and equity interest in Holdco. Paul Arnott does not beneficially own or control any of the outstanding Unibroue Shares, but holds options to acquire 15,000 Unibroue Shares.

19. The value of the collateral benefit to each of the Key Personnel pursuant to their respective agreements is minimal in comparison to the value that each is entitled to receive under the Offer.

20. Based on his personal SVS ownership, and attributing 60% of the consideration payable to Holdco under the Offer to him, André Dion will receive approximately $9.2 million as consideration under the Offer. Based on his personal SVS ownership and attributing 20% of the consideration payable to Holdco under the Offer to him, Sébastien Dion will receive approximately $3.0 million as consideration under the Offer. If Paul Arnott were to exercise his options, he would own less than one percent of the Unibroue Shares and would receive $80,000 as consideration if he tendered the shares under the Offer.

21. André Dion has agreed to the Consulting Agreement, and Sébastien Dion has agreed to the SD Employment Agreement, to ensure the integration of Unibroue into Sleeman's Québec operations and that the continuation of the combined Québec operations will be as successful as possible following completion of the Offer.

22. The Non-Competition Agreement with André Dion is of significant value to Sleeman. Sleeman believes that it is important to the success and growth of its Québec business that André Dion does not compete with Sleeman for the term of the Non-Competition Agreement. It is currently expected that the payments under the Non-Competition Agreement would represent a significant portion of André Dion's employment income for the term of the Non-Competition Agreement.

23. The purpose of entering into the Agreements is to provide incentives to certain Unibroue employees to continue their involvement with the business of Unibroue and thereby improve the performance of the Unibroue business after its acquisition by the Offeror and assist in managing and expanding the Sleeman business in Québec, which business includes Unibroue following the acquisition.

24. Sleeman required the Key Personnel to enter into the Agreements as a precondition to the making of the Offer because each of them has been critical to the successful operation of the business of Unibroue to date and will be critical in the transition of the business to its new ownership.

25. The terms of the Agreements have been negotiated with the applicable parties at arm's length and are on terms and conditions that are commercially reasonable.

26. Each of the payments under the Agreements is commensurate with the total annual compensation of employees of Sleeman with similar level of seniority and/or responsibility.

27. Sleeman believes that it was a prudent and commercially reasonable business decision on its part to insist on a non-competition agreement with André Dion. In other transactions in which Sleeman has acquired businesses, it has been Sleeman's practice to obtain non-competition covenants from the vendors of the business, and Sleeman believes that other purchasers of businesses in this industry would similarly require such non-competition covenants from sellers.

28. The Agreements have been made for valid business reasons unrelated to the Key Personnel's holdings of Unibroue Shares or options and not for the purpose of conferring an economic or collateral benefit that the other Unibroue Shareholders do not enjoy or to increase the value of the consideration to be paid to such employees for their Unibroue Shares tendered under the Offer.

29. The receipt by the Key Personnel of compensation pursuant to the terms of the Agreements is not conditional upon their support of the Offer.

30. Full particulars of the material terms of the Agreements will be disclosed in the take-over bid circular of Sleeman and the directors' circular of Unibroue.

AND WHEREAS under the System, this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the "Decision");

AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;

THE DECISION of the Decision Makers in the Jurisdictions under the Legislation is that the votes attached to the Unibroue Shares tendered by Key Personnel under the Offer may be included as votes in favour of a subsequent going private transaction in the determination of whether the requisite minority approval has been obtained, provided that Sleeman complies with the other applicable provisions of the Legislation.

May 14, 2004.

"Ralph Shay"