Loblaw/Shoppers -- summary under Shares for Shares and Nominal Cash, or Cash

Overview

All the shares of TSX-listed Shoppers Drug Mart are to be acquired under a CBCA plan of arrangement by Loblaw, which is a CBCA company listed on the TSX, in consideration (subject to dissenter share adjustments) for 119.9M Loblaw shares and $6.67B cash (with the overall consideration of $12.4B representing a 29.4% premium). Shoppers Drug Mart shareholders are given a choice of $61.54 per share cash (the "Cash Consideration"), or 1.29417 of a Loblaw share plus $0.01 of cash (the "Share Consideration"), subject to the overall cash/share proportion being fixed. Following the Arrangement, former Shoppers Drug Mart shareholders, George Weston Limited and the current public Loblaw shareholders will hold 29%, 46% (reduced from 63%) and 25%, respectively, of the common shares of Loblaw.

U.S. Securities law

The Loblaw shares will be issued in reliance on the s. 3(a)(10) exemption.

Break fee

$300M in some circumstances.

Plan of Arrangement

Under the Plan of Arrangement:

• the Shoppers Drug Mart shareholder rights plan will be cancelled

• Shoppers Drug Mart shares of dissenters will be transferred to Loblaw, with an entitlement to be paid their fair value

• vested RSUs will be surrendered for cash payments; and other RSUs or DSUs will be continued so as to apply to Loblaw shares, subject to adjustments for the exchange ratio

• all outstanding options to acquire Shoppers Drug Mart shares will be exchanged for replacement options on Loblaw shares, with adjustments for the exchange ratio in accordance with s. 7(1.4)(c)

• each outstanding Shoppers Drug Mart share will be transferred to Loblaw for the Cash Consideration or Share Consideration, subject to pro-ration

Canadian tax consequences

In the absence of an s. 85 election, the exchange will occur on a non-rollover basis (with ACB averaging not occurring re Loblaw shares acquired before 1972). The deadline for providing an. s. 85(1) or (2) election form to Loblaw is 90 days after the Effective Date of the plan of arrangement – with Loblaw to return within 90 days. "Eligible Shareholders" for purposes of being permitted to make the election are non-exempt Canadian residents and partnerships with any such member. Capital gains/loss treatment will apply to dissenters except re interest. Non-residents who do not hold their shares as taxable Canadian property will not be subject to tax on disposing of their shares.