Lowe’s/RONA -- summary under Canadian Buyco

Overview. It is proposed that RONA will be acquired by Lowe’s Canada (the Nova Scotia ULC operating subsidiary of Lowe’s, a North Carolina public corporation) under a Quebec Plan of Arrangement. The Common Shareholders of RONA (other than dissenting shareholders) will receive $24.00 in cash for each Common Share and, subject to approval of the Arrangement by the Preferred Shareholders, the Preferred Shareholders (other than dissenting shareholders) will receive $20.00 in cash (together with accrued and unpaid dividends) for each Preferred Share. The acquisition requires regulatory approvals, and the Corporation and Lowe's currently anticipate that the Arrangement will be completed in the second half of 2016.

RONA. A Quebec corporation which is a major Canadian retailer and distributor of hardware, building materials and home renovation products. Both its Common Shares and Series 6 Class A Preferred Shares are listed and traded on the TSX. As of February 25, 2016, 106,904,501 Common Shares and 6,900,000 Series 6 Class A Preferred Shares were outstanding.

Lowe’s. A FORTUNE 50 home improvement corporation incorporated under the laws of North Carolina serving approximately 16 million customers a week in the United States, Canada and Mexico through its stores and online.

Lowe’s Canada. A Nova Scotia ULC which is a wholly-owned subsidiary of Lowe’s and which operates as a home improvement retailer in Canada.

Plan of Arrangement.

1. The Corporation’s Rights Plan will be terminated.
2. Each Option outstanding immediately prior to the Effective Time of the Arrangement will be transferred by its holder to the Corporation in exchange for a cash payment equal to the amount (if any) by which $24.00 exceeds the exercise price less applicable withholdings.
3. Each DSU, RSU or PSU will be transferred by its holder to the Corporation in exchange for a cash payment from the Corporation of $24.00, except that such consideration in respect of each PSU granted in calendar year 2013 will be multiplied by the applicable level of achievement percentage determined by the Corporation’s Human Resources and Compensation Committee.
4. Each of the Common Shares or Preferred Shares held by Dissenting Shareholders will be deemed to have been transferred to Lowe’s Canada for its fair value.
5. Each Common Share will be transferred by its holder to Lowe’s Canada in exchange for the applicable cash consideration (of $24.00 per share).
6. Simultaneously with 5 above, each Preferred Share will be transferred by its holder to Lowe’s Canada in exchange for the applicable cash consideration (of $20.00 per share).

Arrangement Agreement guarantee. Lowe’s unconditionally and irrevocably guaranteed the due and punctual performance by Lowe’s Canada of Lowe’s Canada’s obligations under the Arrangement Agreement and under the Plan of Arrangement.

Pre-Arrangement Lowe’s-requested reorganization. The Corporation agrees that, upon request of Lowe’s Canada, it will use its commercially reasonable efforts to (i) perform such reorganizations of its corporate structure, capital structure, business, operations and assets or such other transactions as Lowe’s Canada (each a “Pre-Acquisition Reorganization”). The Corporation will not be obligated to participate in any Pre-Acquisition Reorganization unless the Corporation determines in good faith that such Pre-Acquisition Reorganization: can be completed prior to the Effective Date, and can be reversed or unwound in the event the Arrangement does not become effective without adversely affecting the Corporation, any of its Subsidiaries, the Corporation Securityholders or holders of Debentures; is not prejudicial to the Corporation, any of its Subsidiaries, the Corporation Securityholders or holders of Debentures; and does not require the Corporation or its Subsidiaries to take any action that could reasonably be expected to result in Taxes being imposed on, or any adverse Tax or other consequences to, any Corporation Securityholders or holders of Debentures incrementally greater than the Taxes or other consequences to such party in connection with the completion of the Arrangement in the absence of such action being taken.

Tax reps of Corporation. Standard for an arm’s length share deal.

Canadian tax consequences. Exchange occurs on a taxable basis for non-exempt Canadian residents.