Neighbourly Pharmacy Inc.

Headnote

National Policy 11-206 Process for Cease to be a Reporting Issuer Applications -- application for an order that the issuer cease to be a reporting issuer under applicable securities laws -- issuer represents that it meets the criteria for the simplified procedure under NP 11-206 -- all issued and outstanding common shares of issuer acquired in going private transaction completed by way of court-approved plan of arrangement under section 192 of the Canada Business Corporations Act -- contingent value rights issued to former shareholders of the issuer as part of the consideration in connection with the arrangement -- CVRs are uncertificated, non-transferable (other than in limited circumstances as discussed below) contractual rights governed by a CVR Agreement -- CVRs are not listed on any market or exchange -- CVRs do not represent any equity or ownership interest in the issuer, the purchaser any affiliate thereof (or any other person) and are not evidenced by any certificates or other instruments -- CVRs do not have any voting or dividend rights, and no interest will accrue on any amounts payable on the CVRs to any holder thereof -- arrangement agreement includes various reporting obligations of the issuer and the purchaser and robust dispute resolution procedures with respect to determination of the payout under the CVRs -- relief granted based on the particular facts and circumstances of the application -- issuer deemed to have ceased to be a reporting issuer under applicable securities laws.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., s. 1(10)(a)(ii).

National Policy 11-206 Process for Cease to be a Reporting Issuer Applications.

July 23, 2024

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR CEASE TO BE A REPORTING ISSUER APPLICATIONS AND IN THE MATTER OF NEIGHBOURLY PHARMACY INC. (the Filer)

ORDER

Background

The principal regulator in the Jurisdiction has received an application from the Filer for an order under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) that the Filer has ceased to be a reporting issuer in all jurisdictions of Canada in which it is a reporting issuer (the Order Sought).

Under the Process for Cease to be a Reporting Issuer Applications (for a passport application):

(1) the Ontario Securities Commission (the Principal Regulator) is the principal regulator for this application, and

(2) the Filer has provided notice that subsection 4C.5(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in all of the provinces and territories of Canada (together with the Jurisdiction, the Reporting Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this order, unless otherwise defined.

Representations

This order is based on the following facts represented by the Filer.

1. The Filer is a corporation existing under the Canada Business Corporations Act (the CBCA).

2. The Filer's head office is located at 190 Attwell Drive, Unit 400, Toronto, Ontario, M9W 6H8.

3. The Filer is a reporting issuer under the laws of each of the Reporting Jurisdictions and is not in default of its obligations under the securities laws of any of the Reporting Jurisdictions.

4. On January 15, 2024, the Filer, following the unanimous recommendation of a committee of independent directors of the Filer, entered into an arrangement agreement (the Arrangement Agreement) with T.I.D. Acquisition Corp. (the Purchaser), a newly-formed entity controlled by Persistence Capital Partners (PCP), pursuant to which the Purchaser would acquire all of the issued and outstanding common shares (the Common Shares) of the Filer (other than those shares already owned or beneficially controlled by PCP or any of its affiliates and associates) by way of a court-approved plan of arrangement under section 192 of the CBCA (the Arrangement).

5. The Arrangement was approved at a special meeting of shareholders of the Filer held on March 8, 2024 (the Shareholder Meeting), and the Ontario Superior Court of Justice (Commercial List) issued on March 13, 2024 a final order approving the Arrangement. The Arrangement was completed on March 20, 2024.

6. Upon completion of the Arrangement, all of the issued and outstanding Common Shares of the Filer are beneficially owned, directly or indirectly, by the Purchaser and PCP and its affiliates.

7. The Common Shares were delisted from the Toronto Stock Exchange at the close of trading on March 21, 2024.

8. Pursuant to the Arrangement, former shareholders of the Filer were entitled to receive $18.50 in cash per Common Share, plus one contingent value right (each, a CVR) per Common Share. Each CVR entitles the holder thereof to an additional cash payment from the Purchaser equal to $0.61 (the CVR Amount) if the Filer's pro-forma adjusted EBITDA for the fiscal year ending on March 28, 2026 (Fiscal 2026) is at or above $128 million (the CVR EBITDA Target), all as more fully described in the management information circular of the Filer dated February 7, 2024 and sent in connection with the Shareholder Meeting (the Circular). If the Filer's pro-forma adjusted EBITDA for Fiscal 2026 is below the CVR EBITDA Target, no additional consideration will be payable to the holders of CVRs.

9. Prior to the closing of the Arrangement, the Purchaser entered into a contingent value right agreement (the CVR Agreement) with Computershare Trust Company of Canada, as CVR agent (the CVR Agent), and MNP LLP, as representative of the CVR holders (the CVR Representative). The CVRs are uncertificated, non-transferable (other than in limited circumstances) contractual rights governed by the CVR Agreement.

10. The Filer is not required under any of the terms of CVRs to remain a reporting issuer in any Canadian jurisdiction. The CVR Agreement does not require the Filer to maintain any ongoing public reporting obligations. The Circular disclosed that the Filer was expected to cease to be a reporting issuer in each of the Reporting Jurisdictions and would not be required to prepare and file continuous disclosure documents.

11. The principal characteristics of the CVRs are as follows, all of which are set out in the Arrangement Agreement and the CVR Agreement and were disclosed in the Circular delivered to former shareholders of the Filer:

(a) Each CVR is a direct obligation of the Purchaser and will entitle a CVR holder to a cash payment from the Purchaser equal to the CVR Amount if the Filer's pro-forma adjusted EBITDA for Fiscal 2026 is at or above the CVR EBITDA Target. If the CVR EBITDA Target is not achieved, no payment shall be due under the CVR.

(b) The CVRs are not listed on any market or exchange, and may not be sold, assigned, transferred, pledged or encumbered or in any other manner transferred or disposed of, in whole or in part, other than in the limited circumstances set out in the Arrangement Agreement and the CVR Agreement, which are summarized in the Circular.

(c) The CVRs do not represent any equity or ownership interest in the Filer, the Purchaser or any affiliate thereof (or any other person) and are not evidenced by any certificates or other instruments.

(d) The CVRs represent the right to receive the CVR Amount at a future date contingent solely upon achievement of the CVR EBITDA Target, if and to the extent payable pursuant to the terms of the CVR Agreement. Any entitlement to receive a payment pursuant to the CVRs will be evidenced by a position on a register held by the CVR Agent for the purpose of registering the CVRs and permitted transfers of the CVRs.

(e) The CVRs do not have any voting or dividend rights, and no interest will accrue on any amounts payable on the CVRs to any holder thereof. The CVR Holders do not have any information or reporting rights from the Filer or the Purchaser resulting from the CVRs.

(f) The contingent additional payment in respect of the CVRs is approximately $13.7 million in total, while the aggregate cash consideration paid to former shareholders of the Filer upon closing of the Arrangement was approximately $415 million. Therefore, although the CVRs are an integral part of the consideration payable under the Arrangement, the CVRs represent a small fraction of the aggregate consideration.

(g) The CVRs do not track the value of the Filer or the Purchaser, as payment under the CVR is fixed at $0.61 per CVR if the CVR EBITDA Target is achieved by the Filer.

(h) The CVR Representative is a nationally recognized accounting firm which deals at arm's length with the Filer, the Purchaser and PCP, and which has the authority pursuant to the CVR Agreement to monitor compliance with, and enforce, on behalf of CVR holders, the obligations of the Purchaser and its affiliates under the Arrangement Agreement relating to the CVRs. The Arrangement Agreement and the CVR Agreement include various reporting obligations of the Filer and the Purchaser in favor of the CVR Representative, including the provision of the Filer's audited consolidated financial statements for Fiscal 2026. The Arrangement Agreement and the CVR Agreement also set out a dispute resolution mechanism with respect to determination of the Filer's pro-forma adjusted EBITDA for Fiscal 2026 and achievement of the CVR EBITDA Target. In certain circumstances, a third-party public accounting firm with national standing may be engaged to consider any unresolved disputed items as to which the CVR Representative objects or disagrees.

(i) Any decision, action or instruction of the CVR Representative with respect to the matters set forth in the Arrangement Agreement relating to the CVRs shall be final, binding and conclusive on all CVR Holders.

12. The Filer is not an OTC reporting issuer under Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets.

13. The outstanding securities of the Filer, including debt securities, are beneficially owned, directly or indirectly, by fewer than 15 securityholders in each of the jurisdictions of Canada and fewer than 51 securityholders in total worldwide.

14. No securities of the Filer, including debt securities, are traded in Canada or another country on a marketplace as defined in National Instrument 21-101 Marketplace Operation or any other facility for bringing together buyers and sellers of securities where trading data is publicly reported.

15. The Filer has no intention to seek public financing by way of an offering of securities.

16. The Filer is applying for an order that the Filer has ceased to be a reporting issuer in all of the Reporting Jurisdictions.

17. The Filer is not in default of securities legislation in any jurisdiction.

18. Upon granting of the Order Sought, the Filer will no longer be a reporting issuer or the equivalent thereof in any jurisdiction of Canada.

Order

The Principal Regulator is satisfied that the order meets the test set out in the Legislation for the Principal Regulator to make the order.

The decision of the Principal Regulator under the Legislation is that the Order Sought is granted.

DATED at Toronto on this 23rd day of July, 2024.

OSC File #: 2024/0117