Ms. Marina Davies reports

NEIGHBOURLY ENTERS INTO LETTER OF INTENT TO GO PRIVATE WITH ITS CONTROLLING SHAREHOLDER PERSISTENCE CAPITAL PARTNERS

Based on the unanimous recommendation of a committee of independent directors (the transaction committee) of its board of directors, Neighbourly Pharmacy Inc. has entered into a letter of intent with an affiliate of Persistence Capital Partners (collectively, and together with its affiliated funds, PCP), in respect of a transaction whereby a newly formed entity controlled by PCP (the purchaser) would acquire all of the common shares in the capital of the company, other than those common shares already owned by PCP or its affiliates, at a purchase price of $20.50 per share, payable in cash. The company has granted the purchaser exclusivity through Nov. 13, 2023, to complete negotiations of definitive agreements between the company and the purchaser.

The offer price represents approximately a 69-per-cent premium to the closing price of $12.12 on the Toronto Stock Exchange on Oct. 2, 2023, and an approximately 47-per-cent premium to the 20-day volume-weighted average price per share on the TSX of $13.96, respectively, as of the end of trading on Oct. 2, 2023. The offer price also represents a premium of approximately 21 per cent to the company's May, 2021, initial public offering price of $17 per common share.

The board, having received the unanimous recommendation of the transaction committee, determined (with Stuart M. Elman, chair of the board and managing partner of PCP, recusing himself from the meeting) that pursuing the proposed transaction is in the best interests of the company and, subject to negotiating a definitive agreement, receiving an updated fairness opinion (as defined below) from TD (as defined below) at the time the definitive agreement is entered into and such other conditions described below being satisfied, the board intends to recommend that the company's shareholders vote in favour of the proposed transaction at a special meeting of shareholders to be held to approve the proposed transaction.

"PCP believes that taking Neighbourly private is the best way to unlock its full potential and create long-term value for all stakeholders," said Mr. Elman, managing partner of PCP. "As a private company, Neighbourly will have more flexibility and resources to pursue its strategic vision to advance the role that independent pharmacies can play in Canada. We are confident that this proposed transaction will benefit Neighbourly's customers, patients, employees and partners, as well as provide a fair and attractive return to its public shareholders."

In connection with its review of the proposed transaction, the transaction committee retained TD Securities Inc. to provide financial advice and prepare a formal valuation of the common shares as required under Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions. TD delivered an oral opinion to the transaction committee that, as of Oct. 2, 2023, and based on TD's analysis and subject to the assumptions, limitations and qualifications to be set forth in the formal valuation, the fair market value of the common shares of the company is in the range of $20.50 to $25.50 per common share. TD has also delivered an oral opinion to the transaction committee that, as of Oct. 2, 2023, and subject to the assumptions, limitations and qualifications to be set forth in TD's written fairness opinion, the consideration to be received by the holders of common shares (other than the purchaser or its affiliates) pursuant to the proposed transaction is fair, from a financial point of view, to the holders of common shares (other than the purchaser or its affiliates).

PCP, which owns as of the date hereof, directly or indirectly, an aggregate of approximately 22.4 million common shares of the company, representing approximately 50.2 per cent of the company's issued and outstanding common shares, expressed to the board and the transaction committee that it does not have any interest in selling the common shares that it owns to any third party and that it would not support any alternative transaction involving the company and a third party. The company has agreed to negotiate definitive agreements exclusively with PCP in connection with the proposed transaction.

Transaction details

Pursuant to the terms of the proposed transaction, the purchaser will acquire all of the common shares, other than those common shares owned by PCP or its affiliates, for a purchase price of $20.50 per common share, payable in cash. The proposed transaction would be financed via equity and debt financing, both of which are in advanced stages of negotiations.

The entering into of a definitive agreement concerning the proposed transaction will be subject to, among other things, as at the time the definitive agreement is entered into: (i) PCP having secured fully committed debt and equity financing; (ii) the negotiation and execution of a definitive agreement for the proposed transaction on terms satisfactory to PCP and Neighbourly; (iii) receipt from TD of an updated Formal Valuation; and (iv) receipt from TD of an updated fairness opinion, containing a fairness conclusion consistent with the fairness opinion. The consummation of the proposed transaction will be subject to various conditions customary for transactions of this nature, including, among others: (i) receipt by the company and PCP of any required regulatory, court and/or stock exchange approvals; and (ii) the approval of the proposed transaction at a special meeting of the shareholders of the company entitled to vote on the proposed transaction (including a majority of the minority vote of the shareholders excluding for this purpose the votes of shares held or controlled by PCP and any other persons described in items (a) through (d) of Section 8.1(2) of MI 61-101).

Neighbourly expects to hold a special meeting of the company's shareholders to approve the proposed transaction following execution of definitive agreements with respect to the proposed transaction. The proposed transaction is expected to close in the last calendar quarter of 2023 or early in the first calendar quarter of 2024, subject to the above listed conditions and other customary closing conditions. The terms and conditions of the proposed transaction will be disclosed in greater detail in a management information circular for the special meeting that is expected to be mailed to the company's shareholders following the execution of the definitive agreement for the proposed transaction. Copies of the definitive agreements and of the management information circular for the special meeting will be filed with Canadian securities regulators and will be available on the SEDAR+ profile of Neighbourly. Neighbourly's shareholders are urged to read those and other relevant materials when they become available.

While the board, after having received the unanimous recommendation of the transaction committee, has determined to pursue the proposed transaction, neither the transaction committee nor the board has approved the proposed transaction. There can be no assurance that Neighbourly and PCP will enter into a definitive agreement for the proposed transaction or that the proposed transaction will occur as proposed or at all. Neither the company nor the transaction committee expects to make further public comment regarding the matters contemplated herein until a definitive agreement for the proposed transaction is reached or the proposed transaction is abandoned.

PCP early warning disclosure

PCP currently beneficially owns or has control or direction over, directly or indirectly, 22,420,922 common shares, representing approximately 50.2 per cent of the currently issued and outstanding common shares.

PCP is expected to take actions in furtherance of the proposed transaction. Accordingly, the proposed transaction could result in one or more of the actions set forth in clauses (a) through (k) of Item 5 of PCP's updated early warning report to be filed on SEDAR+, including a plan of arrangement or other corporate transaction involving the company, the delisting of the common shares from the Toronto Stock Exchange and the company ceasing to be a reporting issuer in Canada. Other than as described above, PCP does not have any future intentions of the type referred to in clauses (a) through (k) of Item 5 of PCP's updated early warning report to be filed on SEDAR+, although it reserves the right to do so in the future.

PCP has its principal office located in Toronto at 60 Bloor St. West, suite 404, Toronto, Ont., M4W 3B8. The company's head office is located in Toronto at 190 Attwell Dr., unit 400, Toronto, Ont., M9W 6H8. For further information and/or a copy of the related early warning report to be filed on SEDAR+ under the company's profile, please contact the general counsel and secretary of PCP by e=mail at: zzelman@persistencecapital.com.

About Neighbourly Pharmacy Inc.

Neighbourly is Canada's largest and fastest-growing network of community pharmacies. United by their patient first focus and their role as essential and trusted health care hubs within their communities, Neighbourly's pharmacies strive to provide accessible health care with a personal touch. Since 2015, Neighbourly has expanded its diversified national footprint to include 291 locations, reinforcing the company's reputation as the industry's acquirer of choice.

Advisers

TD Securities is acting as financial adviser and independent valuator to the transaction committee, and McCarthy Tetrault LLP is acting as independent legal adviser to the transaction committee.

Scotiabank and RBC Capital Markets are acting as financial advisers to PCP, and Stikeman Elliott LLP is acting as legal adviser to PCP on the proposed transaction. Devon Park Advisors is providing strategic advisory and capital raising services to PCP.

We seek Safe Harbor.