Exhibit 99.3
Greenbrook TMS Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the three-month periods ended March 31,
2021 and 2020
May 14, 2021
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TABLE OF CONTENTS
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BASIS OF PRESENTATION
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3
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CAUTIONARY NOTE REGARDING NON-IFRS MEASURES AND INDUSTRY METRICS
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3
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
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4
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BUSINESS OVERVIEW
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5
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FACTORS AFFECTING OUR PERFORMANCE
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6
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COMPONENTS OF OUR RESULTS OF OPERATIONS AND TRENDS AFFECTING OUR BUSINESS
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7
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FACTORS AFFECTING THE COMPARABILITY OF OUR RESULTS
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KEY HIGHLIGHTS AND RECENT DEVELOPMENTS
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11
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RESULTS OF OPERATIONS
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13
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Analysis of Results for Q1 2021
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15
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QUARTERLY FINANCIAL INFORMATION
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19
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EBITDA AND ADJUSTED EBITDA
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20
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RECONCILIATION OF LOSS ATTRIBUTABLE TO THE COMMON SHAREHOLDERS OF GREENBROOK TO EBITDA AND ADJUSTED EBITDA
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21
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RECONCILIATION OF ACCOUNTS RECEIVABLE
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21
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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
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21
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INDEBTEDNESS
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22
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Off-Balance Sheet Arrangements
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25
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Share Information
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25
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Related Party Transactions
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25
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Risks and Uncertainties
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26
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DISCLOSURE CONTROLS & PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING
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29
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Critical Accounting Estimates and Judgments
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31
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RISK FACTORS
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32
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ADDITIONAL INFORMATION
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32
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s
Discussion and Analysis (“MD&A”) provides information concerning the financial condition and results of operations
of Greenbrook TMS Inc. (the “Company”, “Greenbrook”, “us” or “we”).
This MD&A should be read in conjunction with our unaudited condensed interim consolidated financial statements for the three-month
periods ended March 31, 2021 and 2020, including the related notes thereto, and our audited consolidated financial statements, including
the related notes thereto, for the fiscal years ended December 31, 2020 and 2019 and the related MD&A.
BASIS OF PRESENTATION
Our unaudited condensed interim
consolidated financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34
– Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). Our
fiscal year is the 12-month period ending December 31. The next fiscal year will occur in the 12-month period ending December 31,
2021 (“Fiscal 2021”).
All references in this MD&A
to “Q1 2021” are to our fiscal quarter for the three-month period ended March 31, 2021 and all references to “Q1
2020” are to our fiscal quarter for the three-month period ended March 31, 2020. All references in this MD&A to “Q4
2020” are to our fiscal quarter for the three-month period ended December 31, 2020, all references in this MD&A to
“Fiscal 2019” are to our fiscal year ended December 31, 2019 and all references in this MD&A to “Fiscal
2020” are to our fiscal year ended December 31, 2020.
On January 12, 2021,
at a special meeting of shareholders, our shareholders approved a special resolution authorizing our board of directors (the “Board”)
to amend our articles of incorporation (“Articles”) to effect a consolidation (the “Share Consolidation”)
of all of the issued and outstanding common shares of the Company (the “Common Shares”), such that the trading price
of the Common Shares following the Share Consolidation would permit us to qualify for listing on the Nasdaq Capital Market of The Nasdaq
Stock Market LLC (“Nasdaq”). On February 1, 2021, the Board effected the Share Consolidation on the basis of one
post-consolidation Common Share for every five pre-consolidation Common Shares and on February 4, 2021, the Common Shares began trading
on a post-consolidation basis on the Toronto Stock Exchange (“TSX”). The Shares began trading on Nasdaq on March 16,
2021 under the symbol “GBNH”. Unless otherwise indicated, all Common Share numbers in this MD&A have been adjusted to
give effect to the Share Consolidation.
Amounts stated in this MD&A
are in United States dollars, unless otherwise indicated.
CAUTIONARY NOTE REGARDING NON-IFRS MEASURES AND INDUSTRY METRICS
This MD&A makes reference
to certain non-IFRS (as defined below) measures including certain metrics specific to the industry in which we operate. These measures
are not recognized measures under International Financial Reporting Standards (“IFRS”), do not have a standardized
meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies. Rather, these measures
are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations
from management’s perspective. Accordingly, these measures are not intended to represent, and should not be considered as alternatives
to, loss attributable to the common shareholders of Greenbrook or other performance measures derived in accordance with IFRS as measures
of operating performance or operating cash flows or as a measure of liquidity. In addition to our results determined in accordance with
IFRS, we use non-IFRS measures including, “EBITDA” and “Adjusted EBITDA” (each as defined below). This MD&A
also refers to “Same-Region Sales Growth” (as defined below), which is an operating metric used in the industry in which we
operate but may be calculated differently by other companies. These non-IFRS measures and industry metrics are used to provide investors
with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent
when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use
non-IFRS measures and industry metrics in the evaluation of issuers. Our management also uses non-IFRS measures and industry metrics to
facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine
components of management compensation.
We define such non-IFRS measures
and industry metrics as follows:
“Adjusted EBITDA”
is defined as net income (loss) before amortization, depreciation, interest expenses, interest income and income taxes, adjusted for share-based
compensation expenses, center development costs and one-time expenses. We believe our Adjusted EBITDA metric is a meaningful financial
metric as it measures the ability of our current TMS Center (as defined below) operations to generate earnings while eliminating the impact
of one-time expenses and share-based compensation expenses, neither of which has an impact on the operating performance of our existing
TMS Center network.
“EBITDA”
is defined as net income (loss) before amortization, depreciation, interest expenses, interest income and income taxes.
“Same-Region Sales
Growth” is a metric that we calculate as the percentage change in sales derived from our established management regions in a
certain financial period as compared to the sales from the same management regions in the same period of the prior year. This metric reflects
growth achieved through marketing and operational focus to increase volumes at existing TMS Centers as well as growth achieved through
the opening of additional TMS Centers within established management regions. Our established management regions are defined as management
regions containing open TMS Centers that have performed billable TMS (as defined below) services for a period of at least one full year
prior to each of the comparable periods. Within a management region we focus on increasing patient volume in addition to assessing individual
TMS Center locations on a standalone basis. As a result, we will from time to time establish a TMS Center that may, over the short term,
negatively impact the patient volume at another TMS Center, but which is expected to add incremental patient volume to the management
region as a whole in an economically beneficial manner. For more information regarding how we define our management regions, see “Business
Overview”. We believe Same-Region Sales Growth is a useful metric to investors because it helps quantify our sales growth within
regional management areas and the growth achieved by adding TMS Center density within established management regions. Our Same-Region
Sales Growth is unique to our financial management strategy and may be calculated differently compared to other companies.
See “Reconciliation
of Loss Attributable to the Common Shareholders of Greenbrook to EBITDA and Adjusted EBITDA” for a reconciliation of certain of
the foregoing non-IFRS measures to their most directly comparable measures calculated in accordance with IFRS.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
Some of the information contained
in this MD&A, including with respect to the impact of the COVID-19 (coronavirus) pandemic (“COVID-19”) and the
Company’s response thereto, the Company’s expectations regarding the expansion of the Spravato® (esketamine nasal spray)
pilot program (the “Spravato® Pilot Program”), the anticipated Offering (as defined below), expansion opportunities,
our expectations of future results, performance, achievements, prospects or opportunities, constitutes “forward-looking information”
within the meaning of applicable securities laws in Canada and the United States, including the United States Private Securities Litigation
Reform Act of 1995. This information is based on management’s reasonable assumptions and beliefs in light of the information currently
available to us and is current as of the date of this MD&A. Actual results and the timing of events may differ materially from those
anticipated in the forward-looking information contained in this MD&A as a result of various factors.
Particularly, information
regarding our expectations of future results, performance, achievements, prospects or opportunities or the markets in which we operate
is forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology
such as “plans”, “targets”, “expects” or “does not expect”, “is expected”,
“an opportunity exists”, “budget”, “scheduled”, “estimates”, “outlook”, “forecasts”,
“projection”, “prospects”, “strategy”, “intends”, “anticipates”, “does
not anticipate”, “believes”, or variations of such words and phrases or statements that certain actions, events or results
“may”, “could”, “would”, “might”, “will”, “will be taken”, “occur”
or “be achieved”. In addition, any statements that refer to expectations, intentions, projections or other characterizations
of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not facts
but instead represent management’s expectations, estimates and projections regarding future events or circumstances.
Many factors could cause our
actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed
or implied by the forward-looking statements, including, without limitation, the factors discussed in the “Risks and Uncertainties”
section of this MD&A. Additional risks and uncertainties are discussed in the Company’s materials filed with the Canadian securities
regulatory authorities and the United States Securities and Exchange Commission (the “SEC”) from time to time, including
the Company’s annual information form dated March 30, 2021 in respect of the fiscal year ended December 31, 2020. These
factors are not intended to represent a complete list of the factors that could affect us; however, these factors should be considered
carefully.
The purpose of the forward-looking
information is to provide the reader with a description of management’s current expectations regarding the Company’s financial
performance and may not be appropriate for other purposes; readers should not place undue reliance on forward-looking information contained
herein. To the extent any forward-looking information in this MD&A constitutes future-oriented financial information or financial
outlook, within the meaning of applicable securities laws, such information is being provided to demonstrate the potential of the Company
and readers are cautioned that this information may not be appropriate for any other purpose. Future-oriented financial information and
financial outlook, as with forward-looking information generally, are based on current assumptions and are subject to risks, uncertainties
and other factors. Furthermore, unless otherwise stated, the forward-looking statements contained in this MD&A are made as of the
date of this MD&A and we have no intention and undertake no obligation to update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, except as required by applicable securities law. The forward-looking statements
contained in this MD&A are expressly qualified by this cautionary statement.
BUSINESS OVERVIEW
We are a leading provider
of Transcranial Magnetic Stimulation (“TMS”) therapy in the United States for the treatment of Major Depressive Disorder
(“MDD”) and other mental health disorders. Our predecessor, TMS NeuroHealth Centers, Inc. (“TMS US”)
was established in 2011 to take advantage of the opportunity created through the paradigm-shifting technology of TMS, an FDA-cleared,
non-invasive therapy for the treatment of MDD. In 2018, our TMS Centers (as defined below) began offering treatment for obsessive compulsive
disorder. Our business model takes advantage of the opportunity for a new, differentiated service channel for the delivery of TMS –
a patient-focused, centers-based service model to make treatment easily accessible to all patients while maintaining a high standard of
care.
After opening our first center
in 2011 in Tysons Corner in Northern Virginia, we have grown to control and operate a network of outpatient mental health service centers
that specialize in TMS treatment (each, a “TMS Center”) across the United States. We offer treatment facilities in
convenient locations to provide easy access to patients and physicians. As at March 31, 2021, the Company owned and operated 128
TMS Centers in the Commonwealth of Virginia, and the States of North Carolina, South Carolina, Maryland, Delaware, Missouri, Illinois,
Ohio, Connecticut, Florida, Texas, Michigan, Alaska, Oregon and California.
Our regional model seeks to
develop leading positions in key regional markets, leveraging operational efficiencies by combining smaller local treatment centers that
are strategically located within a single region for convenient patient and physician access, with regional management infrastructure
in place to support center operations. Management regions typically cover a specific metropolitan area that meets a requisite base population
threshold. The management region is typically defined by a manageable geographic area in terms of size, which facilitates the use of regional
staff working across the various TMS Center locations within the management region, and which resides within a marketing capture area
that allows for efficiencies in advertising cost. Management regions often have similar economic characteristics and are not necessarily
defined by state lines, other geographic borders, or differentiating methods of services delivery, but rather are defined by a functional
management area.
In Q1 2021, we implemented
the Spravato® Pilot Program at select TMS Centers to treat adults with treatment-resistant depression and depressive symptoms in adults
with MDD with suicidal thoughts or actions. See “Spravato® Pilot Program” below.
FACTORS AFFECTING OUR PERFORMANCE
We believe that our performance
and future success depend on a number of factors that present significant opportunities for us. These factors are also subject to a number
of inherent risks and challenges, some of which are discussed below. See also the “Risks and Uncertainties” section of this
MD&A.
Number of TMS Centers
We believe we have a meaningful
opportunity to continue to grow the number of our TMS Centers in the United States through organic in-region growth, establishing new
regions and potential future acquisitions. The opening and success of new TMS Centers is subject to numerous factors, including our ability
to locate the appropriate space, finance the operations, build relationships with physicians, negotiate suitable lease terms and local
payor arrangements, and other factors, some of which are beyond our control.
Competition
The
market for TMS is becoming increasingly competitive. We compete principally on the basis of our reputation and brand, the location of
our centers, the quality of our TMS services and the reputation of our partner physicians. In the markets in which we are operating, or
anticipate operating in the future, competition predominantly consists of individual psychiatrists that have a TMS device, an FDA-regulated
medical device specifically manufactured to transmit the magnetic pulses required to stimulate the cortical areas in the brain to effectively
treat MDD and other mental health disorders (each, a “TMS Device”), in their office and who can offer TMS therapy directly
to their patients. We also face competition from a limited number of multi-location psychiatric practices or behavioral health groups
that offer TMS therapy as part of their overall practice, as well as a few other specialist TMS providers.
We
also face indirect competition from pharmaceutical and other companies that develop competitive products, such as anti-depressant medications,
with certain competitive advantages such as widespread market acceptance, ease of patient use and well-established reimbursement. Our
commercial opportunity could be reduced or eliminated if these competitors develop and commercialize anti-depressant medications or other
treatments that are safer or more effective than TMS. At any time, these and other potential market entrants may develop treatment alternatives
that may render our products uncompetitive or less competitive.
We
are also subject to competition from providers of invasive neuromodulation therapies such as electroconvulsive therapy and vagus nerve
stimulation.
Capital Management
Our objective is to maintain
a capital structure that supports our long-term growth strategy, maintain creditor and customer confidence, and maximize shareholder value.
Our primary uses of capital are to finance operations, finance new center start-up costs, increase non-cash working capital and capital
expenditures. We have experienced losses since inception and we will require additional financing to fund our operating and investing
activities and such additional financing is required in order for us to repay our short-term obligations. See the “Financial Condition,
Liquidity and Capital Resources” section of this MD&A.
Industry Trends
Our revenue is impacted by
changes to United States healthcare laws, our clinical partners’ and contractors’ healthcare costs, the ability to secure
favorable pricing structures with device manufacturers and payors’ reimbursement criteria and associated rates.
Technology
Our revenues are affected
by the availability of, and reimbursement for, new TMS indications, new technology or other novel treatment modalities and our ability
to incorporate the new technology into our TMS Centers.
Segments
We evaluate our business and
report our results based on organizational units used by management to monitor performance and make operating decisions on the basis of
one operating and reportable segment: Outpatient Mental Health Service Centers. We currently measure this reportable operating segment’s
performance based on total revenues and entity-wide regional operating income.
COMPONENTS OF OUR RESULTS OF OPERATIONS AND
TRENDS AFFECTING OUR BUSINESS
In assessing our results of
operations and trends affecting our business, we consider a variety of financial and operating measures that affect our operating results.
Total Revenue
Total revenue consists of
service revenue attributable to the performance of treatments. In circumstances where the net patient fees have not yet been received,
the amount of revenue recognized is estimated based on an expected value approach. Due to the nature of the industry and complexity of
our revenue arrangements, where price lists are subject to the discretion of payors, variable consideration exists that may result in
price concessions and constraints to the transaction price for the services rendered.
In estimating this variable
consideration, we consider various factors including, but not limited to, the following:
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commercial payors and the administrators of federally-funded healthcare programs exercise discretion over
pricing and may establish a base fee schedule for TMS (which is subject to change prior to final settlement) or negotiate a specific reimbursement
rate with an individual TMS provider;
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average of previous net service fees received by the applicable payor and fees received by other patients
for similar services;
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management’s best estimate, leveraging industry knowledge and expectations of third-party payors’
fee schedules;
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factors that would influence the contractual rate and the related benefit coverage, such as obtaining
pre-authorization of services and determining whether the procedure is medically necessary;
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probability of failure in obtaining timely proper provider credentialing (including re-credentialling)
and documentation, in order to bill various payors which may result in enhanced price concessions; and
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variation in coverage for similar services among various payors and various payor benefit plans.
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We update the estimated transaction
price (including updating our assessment of whether an estimate of variable consideration is constrained) to represent faithfully the
circumstances present at the end of the reporting period and the changes in circumstances during the reporting period in which such variances
become known.
Third-party payors include
federal and state agencies (under the Medicare programs), managed care health plans and commercial insurance companies. Variable consideration
also exists in the form of settlements with these third-party payors as a result of retroactive adjustments due to audits and reviews.
We apply constraint to the transaction price, such that net revenues are recorded only to the extent that it is probable that a significant
reversal in the amount of the cumulative revenue recognized will not occur in the future.
Entity-Wide Regional Operating Income (Loss) and Direct Center
and Regional Costs
Regional operating income
presents regional operating income on an entity-wide basis and is calculated as total revenue less direct center and regional costs. Direct
center and regional costs consist of direct center and patient care costs, regional employee compensation, regional marketing expenses,
and depreciation. These costs encapsulate all costs (other than incentive compensation such as share-based compensation granted to senior
regional employees) associated with the center and regional management infrastructure, including the cost of the delivery of treatments
to patients and the cost of our regional patient acquisition strategy. Beginning in Q1 2020, the Company has excluded amortization from
entity-wide regional operating income (loss) based on the nature of the expense as it is not associated with center and regional infrastructure.
We have retrospectively updated our annual and quarterly financial information below to reflect this change (See “Results of Operations”
and “Quarterly Financial Information” below).
Center Development Costs, Capital Expenditure and Working Capital
Investment
Center development costs represent direct expenses associated
with developing new TMS Centers, including small furnishings and fittings, wiring and electrical and, in some cases, the cost of minor
space alterations. However, the main cash requirement for center development relates to working capital investment. This includes rental
deposits or other non-capital costs required to open TMS Centers and the cost of treatment delivery while collections initially lag until
payor contracting, credentialing and enrollment processes are completed.
Corporate Employee Compensation
Corporate employee compensation
represents compensation incurred to manage the centralized business infrastructure of the Company, including annual base salary, annual
cash bonuses and other non-equity incentives.
Corporate Marketing Expenses
Corporate marketing expenses
represent costs incurred that impact the Company on an overall basis including investments in website functionality and brand management
activities.
Other Corporate, General and Administrative Expenses
Other corporate, general and
administrative expenses represent expenses related to the corporate infrastructure required to support our ongoing business including
insurance costs, professional and legal costs and costs incurred related to our corporate offices.
We have invested in this area
to support the growing volume and complexity of our business and anticipate continuing to do so in the future. We have already started
to scale into our centralized business infrastructure and leverage these fixed costs as we continue to expand our TMS Center network.
Share-Based Compensation
Share-based compensation represents
stock options granted as consideration in exchange for employee and similar services to align personnel performance with the Company’s
long-term goals.
Amortization
Amortization relates to the
reduction in useful life of the Company’s intangible assets that were realized as part of the acquisition of Achieve TMS (as defined
below).
Interest
Interest expense relates to
interest incurred on loans and lease liabilities. Interest income relates to income realized as a result of investing excess funds into
investment accounts.
Adjusted EBITDA
Adjusted EBITDA is a non-IFRS
measure that deducts share-based compensation expenses and expenses that represent one-time costs incurred for purposes of enhancing the
performance of the business and to achieve our TMS Center growth. This measure is not a recognized financial measure under IFRS, does
not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies.
See also “Cautionary Note Regarding Non-IFRS Measures and Industry Metrics.” One-time costs include the recognition of a one-time
deferred payment cost with respect to the earn-out consideration in connection with the acquisition of Achieve TMS Centers, LLC and Achieve
TMS Alaska, LLC (collectively, “Achieve TMS”) and costs related to the listing of our Common Shares on the Nasdaq.
FACTORS AFFECTING THE COMPARABILITY OF OUR RESULTS
COVID-19
While all of our active TMS
Centers are open, and are expected to remain open going forward, we experienced a decline in both patient visits/treatments and new patient
starts in Fiscal 2020 as a result of the restrictions imposed in response to the COVID-19 pandemic. See “Key Highlights and Recent
Developments – COVID-19 Business Impact” and “Risks and Uncertainties” below.
Provision for Adjustment to Variable Consideration Estimate
In an effort to strengthen
our billing relationship and rate negotiation position with payors, as well as optimize billing processes, including credentialling as
we continue to scale our business, we decided to improve our collection practices by consolidating our billing structure to begin remitting
claims on a state-wide basis in Fiscal 2020. This process included multiple re-credentialling processes across our payor population. This
has caused a temporary disruption in collections as further described below in “Analysis of Results for Q1 2021 – Total revenue”.
The COVID-19 pandemic negatively
impacted payor processes through a lack of timely and accurate communication resulting in a greater chance of price concession. As a result,
the following factors involved in estimating variable consideration further constrained the transaction price for services rendered:
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management’s best estimate, leveraging industry knowledge and expectations of third-party payors’
fee schedules;
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probability of failure in obtaining timely and accurate benefits information;
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probability of failure in obtaining timely and accurate pre-authorization of services; and
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probability of failure in obtaining timely proper provider credentialing (including re-credentialling)
and documentation, in order to bill various payors.
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During the initial onset of
the COVID-19 pandemic, we expected a temporary impact to the payor processes, as described above, including the impact of our billing
enhancements. However, when operations began to normalize in Q4 2020, management determined that additional price concessions were necessary
based on the continued nature of the impact to payor processes at that time. These additional price concessions are expected to persist
during Fiscal 2021. See “Reconciliation of Accounts Receivable”.
Regional Development Activity
Our regional model seeks to
develop leading positions in key markets, and to leverage operational efficiencies by combining smaller local treatment centers within
a region under a single shared regional management infrastructure. Part of our core strategy is to continue to develop new TMS Centers
within our existing regions as well as in new management regions, in each case, organically or through acquisitions of existing centers
or businesses, which may affect comparability of results.
Seasonality
Typically, we experience seasonal
factors in the first quarter of each fiscal year that result in reduced revenues in those quarters as compared to the other three quarters
of the year. These seasonal factors include cold weather and the reset of deductibles during the first part of the year.
KEY HIGHLIGHTS AND RECENT DEVELOPMENTS
During Q1 2021, despite the
challenging operating environment imposed by the COVID-19 pandemic and unusual weather events that closed some of our TMS Centers during
Q1 2021, we have seen a near return in consolidated revenue to pre-COVID-19 levels. We showed resilient performance through the COVID-19
pandemic, as we recognized $11.3 million of consolidated revenue in Q1 2021, a 14% increase compared to Q4 2020 while remaining relatively
flat compared to what was a strong Q1 2020. We also experienced record monthly highs in new patient starts and treatment volumes at the
end of Q1 2021, which we anticipate will be a catalyst for accelerated future growth (see “Cautionary Note Regarding Forward-Looking
Information” above). The successful roll-out of the Spravato® Pilot Program further builds on our long-term business plan of
utilizing our TMS Centers as platforms for the delivery of innovative treatments to patients suffering from MDD and other mental health
disorders.
We added three new active
TMS Centers during the quarter, while an additional nine TMS Centers remain in development. As at March 31, 2021 and as of the date
of this MD&A, our current total TMS network is comprised of 128 TMS Centers. The Company is also in various stages of negotiations
and due diligence in respect of other potential TMS Center expansion opportunities. There can be no assurance that these negotiations
will result in TMS Center expansion for the Company or, if they do, what the final terms or timing of such opportunities would be. The
Company expects to continue current negotiations and discussions and actively pursue other TMS Center expansion opportunities, including
through in-region growth and development, development of new regions and merger and acquisition opportunities.
Growth in Total Revenue
Consolidated revenue increased
to $11.3 million in Q1 2021, a 14% increase compared to Q4 2020 (Q4 2020: $9.9 million) and a 1% decrease compared to Q1 2020 (Q1 2020:
$11.4 million). These results were achieved despite the continued impact of COVID-19 and an unusual series of weather events across our
network of TMS Centers resulting in closure of certain centers. Revenue was also depressed by additional price concessions and an increased
provision for adjustment to variable consideration estimate that persisted in Q1 2021 (see “Factors Affecting the Comparability
of our Results – Provision for Adjustment to Variable Consideration Estimate” and “Reconciliation of Accounts Receivable”).
New patient starts increased
to 1,583 in Q1 2021, an 11% increase compared to Q4 2020 (Q4 2020: 1,428) and a 19% increase compared to Q1 2021 (Q1 2020: 1,326). Treatment
volumes were 52,126, a decrease of 4% compared to Q4 2020 (Q4 2020: 54,408), due to the usual seasonal factors described above and a 9%
increase compared to Q1 2021 (Q1 2020: 47,970). Consultations were 3,591 in Q1 2021, remaining relatively flat compared to Q4 2020 (Q4
2020: 3,587) and increasing by 52% compared to Q1 2020 (Q1 2020: 2,360). The continued strong performance of these key operating metrics
demonstrates sound business fundamentals and positive forward momentum, positioning us well for continued future growth as operating conditions
normalize. We also believe that the COVID-19 pandemic has increased demand for mental health services (including TMS therapy), which we
believe will promote continued growth (see “Cautionary Note Regarding Forward-Looking Information” above).
Spravato® Pilot Program
During January 2021,
we implemented the Spravato® Pilot Program at select TMS Centers to treat adults with treatment-resistant depression and depressive
symptoms in adults with MDD with suicidal thoughts or actions.
Administration of
Spravato® to patients is determined by Greenbrook-affiliated physicians based on clinical appropriateness, while ensuring
regulatory compliance with FDA requirements. TMS therapy is not a requisite for Spravato® administration. We have not entered
into any formal agreement with Janssen Pharmaceuticals, Inc., the marketer of Spravato®. As part of the Spravato® Pilot
Program, we used the -“administer and observe” billing alternative whereby claims were submitted solely for the medical
services rendered in connection with the self-administration and subsequent observation and monitoring of patients by
Greenbrook-affiliated physicians. This is distinct from the “buy and bill” billing model whereby reimbursement could be
obtained for both the drug and the medical services rendered in connection with the administration of the drug.
As a result of our Spravato®
Pilot Program, Greenbrook-affiliated physicians found the treatment to be clinically useful, with some robust responses in patients who
were not responsive to other treatments, including TMS therapy. In addition, no adverse patient events were experienced during the Spravato®
Pilot Program. As of the date of this MD&A, we have collected as significant portion of the expected revenue from Spravato® treatments
performed during Q1 2021.
Management believes that offering
Spravato® treatments resulted in the capture of a wider range of patients suffering from treatment-resistant depression.
The administration of Spravato®
complemented TMS therapy as an additional modality for treatment failures with some patients preferring to be referred to TMS therapy
once stabilized. Patients who previously did not respond to TMS therapy made up the largest portion of patients during the Spravato®
Pilot Program, illustrating the potential for previous TMS therapy patients to receive Spravato® therapy, and vice versa. Operationally,
the administration of Spravato® did not disrupt TMS operations and the observation period was extremely well tolerated.
Based on the above promising
findings, we expect to expand our offering of Spravato® to an additional 5-6 TMS Centers, bringing our total to 10-12 TMS Centers
offering Spravato®. We will also explore opportunities to: (i) utilize the “buy and bill” billing method where possible
from a regulatory perspective; and (ii) explore offering Spravato® using mid-level practitioners such as nurse practitioners or physician
assistants.
Participation in BrainsWay Smoking Cessation Trial
On April 29, 2021, our Richmond Heights, Missouri
TMS Center was named as one of the participating centers in BrainsWay Ltd.’s (“BrainsWay”) roll-out of its smoking
cessation TMS therapy. BrainsWay Ltd. recently received FDA clearance for the use of their H4-coil TMS Device in aiding short-term smoking
cessation.
COVID-19 Business Impact
Our
active TMS Centers are expected to remain open despite the COVID-19 pandemic to both current and new patients, including as “essential
businesses” under local health protocols.
Our
entire team continues to work tirelessly to deliver the highest quality of care at all of our TMS Centers, while at the same time taking
all possible steps to safeguard the health and well-being of our patients, employees and physician partners. We see these challenging
operating conditions as temporary and we are starting to see a positive change in sentiment.
The COVID-19 pandemic has
negatively impacted payor processes, causing a slowdown in collections and payors’ responsiveness to billing related communications
throughout Fiscal 2020 and Q1 2021. We also experienced further delays in both credentialling and re-credentialling processes completed
as part of our billing enhancements across our payor population. See “Factors Affecting the Comparability of our Results –
Provision for Adjustment to Variable Consideration Estimate” and “Reconciliation of Accounts Receivable”.
Entity-Wide Regional Operating Income (Loss)
Q1 2021 resulted in an entity-wide
regional operating loss of $1.5 million as compared to an entity-wide regional operating loss of $2.1 million in Q4 2020 and entity-wide
regional operating income of $0.7 million in Q1 2020.
The entity-wide regional operating
loss in Q1 2021 is primarily attributable to an increased provision for adjustment to variable consideration estimate due to the continued
impact of the COVID-19 pandemic on payor processes (see “Factors Affecting the Comparability of our Results – Provision for
Adjustment to Variable Consideration Estimate” and “Reconciliation of Accounts Receivable”) and increased marketing
spend, to lessen the impact of the COVID-19 pandemic on our operating metrics and increase momentum as market conditions began to normalize.
The inclusion of nine newly active TMS Centers as compared to Q1 2020 and nine TMS Centers in development during Q1 2021 will also take
time to generate positive entity-wide regional operating income.
Investment in the Centralized Business Infrastructure
and Rationalization of Aggregate Corporate Costs
Aggregate corporate costs
for Q1 2021, including corporate employee compensation, corporate marketing expenses and other corporate, general and administrative expenses
and excluding one-time expenses, increased by 8% to $4.2 million for Q1 2021 (Q1 2020: $3.9 million).
As anticipated by management,
the Q1 2021 aggregate corporate costs growth rate has decreased significantly as compared to the Fiscal 2020 growth rate of 14% as we
continue to scale into our centralized business infrastructure.
Continued Development of our TMS Center Network
We added three active TMS
Centers during Q1 2021 with an additional nine TMS Centers in development as at March 31, 2021. This brings our total network to
128 TMS Centers as at March 31, 2021, which is an increase of 3% from Q1 2020.As of the date of this MD&A, we own and operate
128 TMS Centers.
We believe our development
pipeline remains robust and primed for further expansion. See “Cautionary Note Regarding Forward-Looking Information”.
Share Consolidation
On January 12, 2021,
our shareholders approved a special resolution for an amendment to our Articles and authorized the Share Consolidation of our outstanding
Common Shares. On February 1, 2021, the Board effected the Share Consolidation on the basis of one post-consolidation Common Share
for every five pre-consolidation Common Shares and on February 4, 2021, the Common Shares began trading on a post-consolidation basis
on the TSX under its current trading symbol “GTMS”.
Nasdaq Listing
On March 15, 2021, our
Common Shares were approved for listing and trading in U.S. dollars on the Nasdaq. Trading on the Nasdaq commenced at the start of trading
on March 16, 2021 under the symbol “GBNH”. Our Common Shares will continue trading on the TSX in Canadian dollar currency
under the symbol “GTMS”.
RESULTS OF OPERATIONS
Selected Financial Information
The following table summarizes
our results of operations for the periods indicated. The selected consolidated financial information set out below have been derived from
our unaudited condensed interim consolidated financial statements and related notes.
|
(US$)
|
|
|
|
|
|
|
|
Total revenue
|
|
|
11,313,175
|
|
|
|
11,420,502
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct center and patient care costs
|
|
|
6,360,023
|
|
|
|
5,881,290
|
|
|
Regional employee compensation
|
|
|
2,986,315
|
|
|
|
2,526,190
|
|
|
Regional marketing expenses
|
|
|
1,984,621
|
|
|
|
867,102
|
|
|
Depreciation
|
|
|
1,474,334
|
|
|
|
1,406,124
|
|
|
Total direct center and regional costs
|
|
|
12,805,293
|
|
|
|
10,680,706
|
|
|
Regional operating income (loss)
|
|
|
(1,492,118
|
)
|
|
|
739,796
|
|
|
Center development costs
|
|
|
280,433
|
|
|
|
229,507
|
|
|
Corporate employee compensation
|
|
|
2,886,584
|
|
|
|
2,623,430
|
|
|
Corporate marketing expenses
|
|
|
161,034
|
|
|
|
305,448
|
|
|
Other corporate, general and administrative expenses
|
|
|
1,668,464
|
|
|
|
947,618
|
|
|
Share-based compensation
|
|
|
205,970
|
|
|
|
109,405
|
|
|
Amortization
|
|
|
115,833
|
|
|
|
115,833
|
|
|
Interest expense
|
|
|
1,027,912
|
|
|
|
657,834
|
|
|
Interest income
|
|
|
(2,182
|
)
|
|
|
(8,482
|
)
|
|
Loss before income taxes
|
|
|
(7,836,166
|
)
|
|
|
(4,240,797
|
)
|
|
Income tax expense
|
|
|
–
|
|
|
|
–
|
|
|
Loss for the period and comprehensive loss
|
|
|
(7,836,166
|
)
|
|
|
(4,240,797
|
)
|
|
Loss attributable to non-controlling interest
|
|
|
(209,612
|
)
|
|
|
(82,523
|
)
|
|
Loss attributable to the common shareholders of Greenbrook
|
|
|
(7,626,554
|
)
|
|
|
(4,158,274
|
)
|
|
Net loss per share (basic and diluted) (1)
|
|
|
(0.56
|
)
|
|
|
(0.39
|
)
|
Notes:
|
|
(1)
|
The Company has retrospectively
presented the net loss per share calculations reflecting the number of Common Shares outstanding following the Share Consolidation. See
“Basis of Presentation” above.
|
Selected Financial Position Data
The following table provides
selected financial position data for the years and periods indicated:
|
|
|
As at March 31,
|
|
|
As at December 31,
|
|
|
(US$)
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
5,933,799
|
|
|
|
3,212,676
|
|
|
|
18,806,742
|
|
|
Current assets (excluding cash)
|
|
|
12,633,364
|
|
|
|
12,922,535
|
|
|
|
11,858,737
|
|
|
Total assets
|
|
|
56,139,351
|
|
|
|
54,063,670
|
|
|
|
68,600,408
|
|
|
Current liabilities
|
|
|
20,784,539
|
|
|
|
13,752,847
|
|
|
|
27,674,144
|
|
|
Non-current liabilities
|
|
|
37,490,408
|
|
|
|
21,639,582
|
|
|
|
38,042,522
|
|
|
Total liabilities
|
|
|
58,274,947
|
|
|
|
35,392,429
|
|
|
|
65,716,666
|
|
|
Non-controlling interests
|
|
|
(1,110,172
|
)
|
|
|
218,382
|
|
|
|
(392,560
|
)
|
|
Shareholders’ equity
|
|
|
(2,135,596
|
)
|
|
|
18,671,241
|
|
|
|
2,883,742
|
|
Selected Operating Data
The following table provides
selected operating data for the years and periods indicated:
|
|
|
As at March 31,
|
|
|
As at December 31,
|
|
|
(unaudited)
|
|
2021
|
|
|
2020
|
|
|
2020
|
|
|
Number of active TMS Centers(1)
|
|
|
119
|
|
|
|
110
|
|
|
|
116
|
|
|
Number of TMS Centers-in-development(2)
|
|
|
9
|
|
|
|
14
|
|
|
|
9
|
|
|
Total TMS Centers
|
|
|
128
|
|
|
|
124
|
|
|
|
125
|
|
|
Number of management regions
|
|
|
13
|
|
|
|
13
|
|
|
|
13
|
|
|
Number of TMS Devices installed
|
|
|
201
|
|
|
|
189
|
|
|
|
198
|
|
|
Number of regional personnel
|
|
|
317
|
|
|
|
302
|
|
|
|
305
|
|
|
Number of shared-services / corporate personnel(3)
|
|
|
49
|
|
|
|
47
|
|
|
|
49
|
|
|
Number of TMS providers(4)
|
|
|
116
|
|
|
|
117
|
|
|
|
117
|
|
|
Number of consultations performed(5)
|
|
|
3,591
|
|
|
|
2,360
|
|
|
|
11,305
|
|
|
Number of patient starts(5)
|
|
|
1,583
|
|
|
|
1,326
|
|
|
|
5,445
|
|
|
Number of treatments performed(5)
|
|
|
52,126
|
|
|
|
47,970
|
|
|
|
195,992
|
|
|
Average revenue per treatment(5)
|
|
$
|
217
|
|
|
$
|
238
|
|
|
$
|
220
|
|
Notes:
|
|
(1)
|
Active TMS Centers represent TMS Centers that have performed billable TMS services.
|
|
|
(2)
|
TMS Centers-in-development represents TMS Centers that have committed to a space lease agreement and the
development process is substantially complete.
|
|
|
(3)
|
Shared-services / corporate personnel is disclosed on a full-time equivalent basis. The Company utilizes
part-time staff and consultants as a means of managing costs.
|
|
|
(4)
|
Represents physician partners that are involved in the provision of TMS therapy services from our TMS
Centers.
|
|
|
(5)
|
Figure calculated for the applicable year or period ended.
|
Analysis of Results for
Q1 2021
The following section provides
an overview of our financial performance during Q1 2021 compared to Q1 2020.
Total Revenue
Consolidated revenue decreased
slightly by 1% to $11.3 million in Q1 2021 (Q1 2020: $11.4 million). This was predominantly due an increased provision for adjustment
to the variable consideration estimates due to the continued impact of the COVID-19 pandemic on payor process, partially offset by an
increase in patient starts and treatments volumes. See “Factors Affecting the Comparability of our Results – Provision for
Adjustment to Variable Consideration Estimate” and “Reconciliation of Accounts Receivable”.
New patient starts increased
by 19% to 1,583 in Q1 2021 (Q1 2020: 1,326), treatment volumes increased by 9% to 52,126 in Q1 2021 (Q1 2020: 47,970) and consultations
increased by 52% in Q1 2021 at 3,591 (Q1 2020: 2,360). The continued strong performance of these key operating metrics, despite the impact
of the COVID-19 pandemic, demonstrates sound business fundamentals and positions us for continued future growth as operating conditions
normalize. We also believe that the COVID-19 pandemic has increased demand for mental health services (including TMS therapy), which we
believe will promote continued growth (see “Cautionary Note Regarding Forward-Looking Information” above).
Same-Region Sales Growth was
-6% in Q1 2021 as compared to 29% in Q1 2020. The decrease was primarily due to an increased provision for adjustment to the variable
consideration estimates due to the continued impact of the COVID-19 pandemic on payor processes. As operating conditions continue to normalize,
we believe this metric will revert back to pre-COVID-19 pandemic levels (see “Cautionary Note Regarding Forward-Looking Information”
and “Cautionary Note Regarding Non-IFRS Measures and Industry Metrics” above).
Average revenue per treatment
decreased by 9% to $217 in Q1 2021 (Q1 2020: $238) due to the impact of COVID-19 on payor processes through a lack of timely and accurate
communication which resulted in additional price concessions and an increased provision for adjustment to variable consideration estimate
that persisted into Q1 2021 (see “Factors Affecting the Comparability of our Results – Provision for Adjustment to Variable
Consideration Estimate” and “Reconciliation of Accounts Receivable”). Excluding the impact of the provision for adjustment
to variable consideration estimate, our average reimbursement rates would have remained stable.
Accounts Receivable
Accounts receivable decreased
by $0.3 million to $10.7 million as at the end of Q1 2021 (End of Q1 2020: $11.0 million) and remained consistent at $10.7 million compared
to the end of Q4 2020 (End of Q4 2020: $10.7 million). This is despite strong quarter-over-quarter revenue growth and the impact of COVID-19
on payor processes through a lack of timely and accurate communication, which resulted in additional price concessions and an increased
provision for adjustment to variable consideration estimate that persisted into Q1 2021 (see “Factors Affecting the Comparability
of our Results – Provision for Adjustment to Variable Consideration Estimate” above and “Reconciliation of Accounts
Receivable” below).
In an effort to strengthen
our billing relationship and rate negotiation position with payors, as well as optimize billing processes, including credentialling, we
decided to improve our collection practices by consolidating our billing structure to begin remitting claims on a state-wide basis in
Fiscal 2020. This process included multiple re-credentialling processes across our payor population. The impact of COVID-19 on payor processes
including the billing enhancements noted above, through a lack of timely and accurate communication, resulted in additional price concessions
and an increased provision for adjustment to variable consideration estimate that persisted in Q1 2021 (see “Factors Affecting the
Comparability of our Results – Provision for Adjustment to Variable Consideration Estimate” and “Reconciliation of Accounts
Receivable”).
As a result of our new billing
structure coupled with the transition to a scalable billing and reimbursement platform in Fiscal 2019, we set a monthly record in cash
collections in March 2021. We believe the changes to our billing processes will allow us to continue to significantly improve our
billing and collection capabilities in the future. See “Cautionary Note Regarding Forward-Looking Information” above.
We also continue to collect
on services rendered in excess of 24 months from the date such services were rendered.
Entity-Wide Regional Operating Income (Loss) and Direct Center
and Regional Costs
Direct center and regional
costs increased by 20% to $12.8 million during Q1 2021 (Q1 2020: $10.7 million). This increase is primarily due to an increase in treatments,
operating 119 active TMS Centers as at March 31, 2021 as compared to 110 active TMS Centers as at March 31, 2020 and increased
marketing spend, to increase momentum as market conditions started to normalize.
We incurred an entity-wide
regional operating loss of $1.5 million during Q1 2021 compared to entity wide regional operating income of $0.7 million in Q1 2020. This
was predominantly due an increased provision adjustment to the variable consideration estimates due to the continued impact of the COVID-19
pandemic on payor processes (see “Factors Affecting the Comparability of our Results – Provision for Adjustment to Variable
Consideration Estimate”, “Total Revenue” and “Reconciliation of Accounts Receivable”) and increased marketing
spend, to increase momentum as market conditions started to normalize. In addition, the inclusion of nine newly active TMS Centers and
nine TMS Centers in development which will take time to generate positive entity-wide regional operating income also contributed to the
loss position. The entity-wide regional operating income margin was -13% in Q1 2021 compared to 6.5% in Q1 2020.
Center Development Costs, Capital Expenditures and Working Capital
Investment
Center development costs increased
by 22% to $0.3 million during Q1 2021 (Q1 2020: $0.2 million) predominantly as a result of the resumption in development activity in Q1
2021 after a curtailment of spend late in Q1 2020 as a result of the COVID-19 pandemic. Average cash investment to establish new TMS Centers,
including center development costs, capital expenditures and working capital investment, remained consistent at $0.16 million in Q1 2021
(Q1 2020: $0.16 million).
Corporate Employee Compensation
Corporate employee compensation
incurred to manage the centralized business infrastructure of the Company increased by 10% to $2.9 million during Q1 2021 (Q1 2020: $2.6
million). The increase was primarily due to key senior hires, including the former Interim Chief Financial Officer (see “Related
Party Transactions” below) and the Senior Vice President of Operations.
As anticipated by management,
the Q1 2021 corporate employee compensation growth rate has decreased significantly as compared to the Fiscal 2020 corporate employee
compensation growth rate of 44% as we are starting to scale into our centralized business infrastructure and leverage these fixed costs
as we continue to expand our TMS Center network.
Corporate Marketing Expenses
Corporate marketing expenses
decreased by 47% to $0.2 million during Q1 2021 (Q1 2020: $0.3 million). The decrease was primarily a result of the timing of discretionary
spending.
Other Corporate, General and Administrative Expenses
Other corporate, general and
administrative expenses increased by 76% to $1.7 million during Q1 2021 (Q1 2020: $0.9 million). The increase was primarily a result of
the one-time deferred payment costs with respect to the earn-out consideration in connection with the acquisition of Achieve TMS and one-time
Nasdaq listing related professional and legal fees. See “Adjusted EBITDA and One-Time Expenses” below. Excluding one-time
expenses, other corporate, general and administrative expenses increased by 22% to $1.2 million during Q1 2021 (Q1 2020: $0.9 million).
As anticipated by management,
the other corporate, general and administrative expenses growth rate has decreased as compared to the Fiscal 2020 growth rate of 44% (after
excluding one-time expenses). We expect that the other corporate, general and administrative expenses growth rate will continue to normalize
throughout Fiscal 2021 and that we will be able to scale our investments and leverage fixed costs as we expand our TMS Center network
in the future. See “Cautionary Note Regarding Forward-Looking Information”.
Share-Based Compensation
Share-based compensation increased
by 88% to $0.2 million during Q1 2021 (Q1 2020: $0.1 million), predominantly due to the timing of stock options granted to key personnel
to ensure retention and long-term alignment with the goals of the Company.
Amortization
Amortization remained consistent
at $0.1 million during Q1 2021 (Q1 2020: $0.1 million). The amortization was a result of the intangible assets acquired by the Company
in connection with the acquisition of Achieve TMS.
Interest
Interest expense increased
by 56% to $1.0 million during Q1 2021 (Q1 2020: $0.7 million). The increase in interest expense is primarily due to the addition of new
lease liabilities in connection with the execution of our regional growth strategy and the credit and security agreement (the “Credit
Agreement”) entered into on December 31, 2020 for a secured $30 million credit facility (“Credit Facility”)
with Oxford Finance LLC (the “Lender”). See “Indebtedness”.
Interest income decreased
by 74% to $0.002 million during Q1 2021 (Q1 2020: $0.008 million) as a result of a decrease in the amount of excess funds invested.
Loss for the Period and Comprehensive Loss
and Loss for the Period Attributable to the Common Shareholders of Greenbrook
The loss for the period and
comprehensive loss increased by 85% to $7.8 million during Q1 2021 (Q1 2020: $4.2 million). This was predominantly due an increased provision
for adjustment to variable consideration estimate due to the continued impact of the COVID-19 pandemic on payor processes (see “Factors
Affecting the Comparability of our Results – Provision for Adjustment to Variable Consideration Estimate”, “Total Revenue”
and “Reconciliation of Accounts Receivable”) and increased marketing spend, to lessen the impact of the COVID-19 pandemic
on our operating metrics and increase momentum as market conditions started to normalize. In addition, the inclusion of nine newly active
TMS Centers and nine TMS Centers in development (which will take time to generate positive entity-wide regional operating income as described
above) also contributed to the loss position (see “Entity-Wide Regional Operating Income (Loss) and Direct Center and Regional Costs”,
and “Cautionary Note Regarding Non-IFRS Measures and Industry Metrics” above).
The loss attributable to the
common shareholders of Greenbrook increased by 83% to $7.6 million during Q1 2021 (Q1 2020: $4.2 million). This was predominantly due
an increased provision for adjustment to variable consideration estimate due to the continued impact of the COVID-19 pandemic on payor
processes (see “Factors Affecting the Comparability of our Results – Provision for Adjustment to Variable Consideration Estimate”,
“Total Revenue” and “Reconciliation of Accounts Receivable”) and increased marketing spend, to lessen the impact
of the COVID-19 pandemic on our operating metrics and increase momentum as market conditions started to normalize. In addition, the inclusion
of nine newly active TMS Centers and nine TMS Centers in development (which will take time to generate positive entity-wide regional operating
income as described above) also contributed to the loss position (see “Entity-Wide Regional Operating Income (Loss) and Direct Center
and Regional Costs”, and “Cautionary Note Regarding Non-IFRS Measures and Industry Metrics” above).
Adjusted EBITDA and One-Time Expenses
The Adjusted EBITDA loss position
increased by 144% to $4.0 million during Q1 2021 (Q1 2020: $1.6 million) predominately due to an increased provision for adjustment to
variable consideration estimate due to the continued impact of the COVID-19 pandemic on payor processes (see “Factors Affecting
the Comparability of our Results – Provision for Adjustment to Variable Consideration Estimate”, “Total Revenue”
and “Reconciliation of Accounts Receivable”) and increased marketing spend, to lessen the impact of the COVID-19 pandemic
on our operating metrics and increase momentum as market conditions started to normalize. In addition, the inclusion of nine newly-active
TMS Centers and nine TMS Centers in development (which will take time to generate positive entity-wide regional operating income as described
above) also contributed to the loss position. See “Cautionary Note Regarding Non-IFRS Measures and Industry Metrics”. Also
refer to “Corporate Employee Compensation”, “Other Corporate, General and Administrative Expenses”, “Entity-Wide
Regional Operating Income (Loss) and Direct Center and Regional Costs” in this MD&A.
Due to their nature, the deferred
payment costs with respect to the earn-out consideration in connection with the acquisition of Achieve TMS was a one-time expenses incurred
during Q1 2021 and was therefore excluded from Adjusted EBITDA. One-time professional and legal fees incurred in connection with the listing
of our Common Shares on the Nasdaq have also been excluded from Adjusted EBITDA.
QUARTERLY FINANCIAL INFORMATION
Selected Quarterly Financial
Information
The following table summarizes
the results of our operations for the eight most recently completed fiscal quarters:
|
(unaudited)
|
|
Q1 2021
|
|
|
Q4 2020
|
|
|
Q3 2020
|
|
|
Q2 2020
|
|
|
Q1 2020
|
|
|
Q4 2019
|
|
|
Q3 2019
|
|
|
Q2 2019
|
|
|
Revenue
|
|
|
11,313,175
|
|
|
|
9,913,552
|
|
|
|
12,006,570
|
|
|
|
9,788,555
|
|
|
|
11,420,502
|
|
|
|
12,536,671
|
|
|
|
8,459,103
|
|
|
|
8,082,559
|
|
|
Regional operating income (loss)(1)
|
|
|
(1,492,118
|
)
|
|
|
(2,050,168
|
)
|
|
|
967,584
|
|
|
|
(225,198
|
)
|
|
|
739,796
|
|
|
|
2,056,836
|
|
|
|
770,813
|
|
|
|
1,002,166
|
|
|
Net loss attributable to common shareholders of Greenbrook
|
|
|
(7,626,554
|
)
|
|
|
(8,391,630
|
)
|
|
|
(7,636,132
|
)
|
|
|
(9,477,505
|
)
|
|
|
(4,158,274
|
)
|
|
|
(7,034,356
|
)
|
|
|
(3,431,009
|
)
|
|
|
(2,874,092
|
)
|
|
Adjusted EBITDA
|
|
|
(4,013,910
|
)
|
|
|
(4,223,446
|
)
|
|
|
(937,073
|
)
|
|
|
(1,665,672
|
)
|
|
|
(1,648,053
|
)
|
|
|
(1,296,201
|
)
|
|
|
(1,033,876
|
)
|
|
|
(957,428
|
)
|
|
Net loss per share – Basic(2)
|
|
|
(0.56
|
)
|
|
|
(0.60
|
)
|
|
|
(0.57
|
)
|
|
|
(0.76
|
)
|
|
|
(0.39
|
)
|
|
|
(0.62
|
)
|
|
|
(0.31
|
)
|
|
|
(0.28
|
)
|
|
Net loss per share – Diluted(2)
|
|
|
(0.56
|
)
|
|
|
(0.60
|
)
|
|
|
(0.57
|
)
|
|
|
(0.76
|
)
|
|
|
(0.39
|
)
|
|
|
(0.62
|
)
|
|
|
(0.31
|
)
|
|
|
(0.28
|
)
|
|
|
(1)
|
Regional operating income (loss) for the fourth quarter ended
December 31, 2019 has been updated to exclude amortization. See “Components of Our Results of Our Operations and Trends Affecting
our Business” above.
|
|
|
(2)
|
The Company has retrospectively presented the number of Common
Shares and net loss per share calculations reflecting the number of Common Shares following the Share Consolidation. See “Basis
of Presentation” above.
|
Selected Quarterly Operating Data
The following table provides
selected operating data for the periods indicated:
|
(unaudited)
|
|
Q1 2021
|
|
|
Q4 2020
|
|
|
Q3 2020
|
|
|
Q2 2020
|
|
|
Q1 2020
|
|
|
Q4 2019
|
|
|
Q3 2019
|
|
|
Q2 2019
|
|
|
Number of active TMS Centers(1)
|
|
|
119
|
|
|
|
116
|
|
|
|
114
|
|
|
|
113
|
|
|
|
110
|
|
|
|
102
|
|
|
|
94
|
|
|
|
67
|
|
|
Number of TMS Centers-in-development(2)
|
|
|
9
|
|
|
|
9
|
|
|
|
11
|
|
|
|
12
|
|
|
|
14
|
|
|
|
17
|
|
|
|
12
|
|
|
|
10
|
|
|
Total TMS Centers
|
|
|
128
|
|
|
|
125
|
|
|
|
125
|
|
|
|
125
|
|
|
|
124
|
|
|
|
119
|
|
|
|
106
|
|
|
|
77
|
|
|
Number of management regions
|
|
|
13
|
|
|
|
13
|
|
|
|
13
|
|
|
|
13
|
|
|
|
13
|
|
|
|
13
|
|
|
|
13
|
|
|
|
10
|
|
|
Number of TMS Devices installed
|
|
|
201
|
|
|
|
198
|
|
|
|
191
|
|
|
|
189
|
|
|
|
189
|
|
|
|
178
|
|
|
|
164
|
|
|
|
127
|
|
|
Number of regional personnel
|
|
|
317
|
|
|
|
305
|
|
|
|
286
|
|
|
|
275
|
|
|
|
302
|
|
|
|
273
|
|
|
|
253
|
|
|
|
199
|
|
|
Number of shared-services / corporate personnel(3)
|
|
|
49
|
|
|
|
49
|
|
|
|
47
|
|
|
|
44
|
|
|
|
47
|
|
|
|
44
|
|
|
|
36
|
|
|
|
30
|
|
|
Number of TMS providers(4)
|
|
|
116
|
|
|
|
117
|
|
|
|
113
|
|
|
|
112
|
|
|
|
117
|
|
|
|
109
|
|
|
|
102
|
|
|
|
64
|
|
|
Number of consultations performed
|
|
|
3,591
|
|
|
|
3,587
|
|
|
|
3,283
|
|
|
|
2,075
|
|
|
|
2,360
|
|
|
|
2,479
|
|
|
|
2,177
|
|
|
|
1,942
|
|
|
Number of patient starts
|
|
|
1,583
|
|
|
|
1,428
|
|
|
|
1,473
|
|
|
|
1,218
|
|
|
|
1,326
|
|
|
|
1,192
|
|
|
|
1,049
|
|
|
|
999
|
|
|
Number of treatments performed
|
|
|
52,126
|
|
|
|
54,408
|
|
|
|
51,033
|
|
|
|
42,581
|
|
|
|
47,970
|
|
|
|
51,247
|
|
|
|
37,890
|
|
|
|
36,819
|
|
|
Average revenue per treatment
|
|
$
|
217
|
|
|
$
|
182
|
|
|
$
|
235
|
|
|
$
|
230
|
|
|
$
|
238
|
|
|
$
|
245
|
|
|
$
|
223
|
|
|
$
|
220
|
|
|
|
(1)
|
Active TMS Centers represent TMS Centers that have performed
billable TMS services.
|
|
|
(2)
|
TMS Centers-in-development represents TMS Centers that have
committed to a space lease agreement and the development process is substantially complete.
|
|
|
(3)
|
Shared-services / corporate personnel is disclosed on a full-time
equivalent basis. The Company utilizes part-time staff and consultants as a means of managing costs.
|
|
|
(4)
|
Represents physician partners that are involved in the provision
of TMS therapy services from our TMS Centers.
|
New patient starts were 1,583
in Q1 2021, representing a 11% quarter-over-quarter increase compared to Q4 2020 (Q4 2020: 1,428). Treatment volumes were 52,126 in Q1
2021, representing a 4% quarter-over-quarter decrease compared to Q4 2020 (Q4 2020: 54,408) due to the usual seasonal factors. Consultations
were 3,591 in Q1 2021, remaining relatively flat compared to Q4 2020 (Q4 2020: 3,587). The continued strong performance of these key operating
metrics, despite the impact of the COVID-19 pandemic, demonstrates sound business fundamentals and positions us for continued future growth
as operating conditions normalize. We also believe that the COVID-19 pandemic has increased demand for mental health services (including
TMS therapy), which we believe will promote continued growth (see “Cautionary Note Regarding Forward-Looking Information”).
We generated consolidated
revenue of $11.3 million in Q1 2021, representing a 14% quarter-over-quarter increase compared to Q4 2020 (Q4 2020: $9.9 million). Average
revenue per treatment was $217 in Q1 2021, representing a 19% quarter-over-quarter increase compared to Q4 2020 (Q4 2020: $182). This
was primarily attributable to a reduction in the provision for adjustment to variable consideration estimate during Q1 2021 compared to
Q4 2020 (see “Factors Affecting the Comparability of our Results – Provision for Adjustment to Variable Consideration Estimate”
and “Reconciliation of Accounts Receivable”) partially offset by lower treatment volumes from adverse weather conditions (see
“Factors Affecting the Comparability of our Results – Seasonality”).
We experienced an entity-wide
regional operating loss of $1.5 million in Q1 2021, representing a 27% quarter-over-quarter decrease compared to Q4 2020 (Q4 2020: $2.1
million), primarily as a result of an increase in consolidated revenue in Q1 2021 as compared to Q4 2020.
The loss attributable to the
common shareholders of Greenbrook was $7.6 million in Q1 2021, representing a 9% quarter-over-quarter decrease compared to Q4 2020 (Q4
2020: $8.4 million). The decrease in the loss attributable to the common shareholders of Greenbrook was predominately due to additional
earn-out consideration in connection with the acquisition of Achieve TMS that was recognized in Q4 2020, partially offset by a reduction
in the provision for adjustment to variable consideration estimate during Q1 2021 as compared to Q4 2020 (see “Factors Affecting
the Comparability of our Results – Provision for Adjustment to Variable Consideration Estimate” and “Reconciliation
of Accounts Receivable”).
The Adjusted EBITDA loss position
increased to $4.0 million in Q1 2021, representing a 5% quarter-over-quarter decrease compared to Q4 2020 (Q4 2020: $4.2 million). This
was primarily attributable to a reduction in the provision for adjustment to variable consideration estimate during Q1 2021 compared to
Q4 2020 (see “Factors Affecting the Comparability of our Results – Provision for Adjustment to Variable Consideration Estimate”
and “Reconciliation of Accounts Receivable”), partially offset by lower treatment volumes from adverse weather conditions
(see “Factors Affecting the Comparability of our Results – Seasonality”).
EBITDA AND ADJUSTED EBITDA
The table below illustrates
our EBITDA and Adjusted EBITDA for the periods presented:
|
(US$)
|
|
|
|
|
|
|
|
EBITDA
|
|
|
(5,010,657
|
)
|
|
|
(1,986,965
|
)
|
|
Adjusted EBITDA
|
|
|
(4,013,910
|
)
|
|
|
(1,648,053
|
)
|
See “Cautionary Note
Regarding Non-IFRS Measures and Industry Metrics” and “Reconciliation of Loss Attributable to the Common Shareholders of Greenbrook
to EBITDA and Adjusted EBITDA” immediately below.
RECONCILIATION OF LOSS ATTRIBUTABLE TO THE COMMON SHAREHOLDERS OF
GREENBROOK TO EBITDA AND ADJUSTED EBITDA
The table below illustrates
a reconciliation of loss attributable to the common shareholders of Greenbrook to EBITDA and Adjusted EBITDA for the periods presented:
|
(US$)
|
|
|
|
|
|
|
|
Loss attributable to the common shareholders of Greenbrook
|
|
|
(7,626,554
|
)
|
|
|
(4,158,274
|
)
|
|
Add the impact of:
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
1,027,912
|
|
|
|
657,834
|
|
|
Amortization
|
|
|
115,833
|
|
|
|
115,833
|
|
|
Depreciation
|
|
|
1,474,334
|
|
|
|
1,406,124
|
|
|
Less the impact of:
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
(2,182
|
)
|
|
|
(8,482
|
)
|
|
EBITDA
|
|
|
(5,010,657
|
)
|
|
|
(1,986,965
|
)
|
|
Add the impact of:
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
205,970
|
|
|
|
109,405
|
|
|
TMS Center development costs
|
|
|
280,433
|
|
|
|
229,507
|
|
|
Add the impact of:
|
|
|
|
|
|
|
|
|
|
Deferral payment expense in relation to Achieve TMS cash earn-out consideration owed
|
|
|
300,000
|
|
|
|
–
|
|
|
Nasdaq listing related professional and legal fees
|
|
|
210,344
|
|
|
|
–
|
|
|
Adjusted EBITDA
|
|
|
(4,013,910
|
)
|
|
|
(1,648,053
|
)
|
RECONCILIATION OF ACCOUNTS RECEIVABLE
A quantitative reconciliation
of accounts receivable in respect of the three-month periods ended March 31, 2021 and 2020, and the year ended December 31,
2020 is provided below, which includes a quantification of the provision for the adjustment to variable consideration estimate resulting
from the additional price concessions which were deemed necessary:
|
(US$)
|
|
|
|
|
|
|
|
|
|
|
Opening accounts receivable balance as at January 1,
|
|
|
10,708,062
|
|
|
|
10,091,087
|
|
|
|
10,091,087
|
|
|
Revenue recognized based on expected value
|
|
|
12,482,512
|
|
|
|
11,420,502
|
|
|
|
46,284,419
|
|
|
Provision for adjustment to variable consideration estimate
|
|
|
(1,169,337
|
)
|
|
|
–
|
|
|
|
(3,155,240
|
)
|
|
Payments received
|
|
|
(11,285,025
|
)
|
|
|
(10,555,114
|
)
|
|
|
(42,512,204
|
)
|
|
Ending accounts receivable balance at the period end date
|
|
$
|
10,736,212
|
|
|
$
|
10,956,475
|
|
|
$
|
10,708,062
|
|
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Overview
The Company’s primary
uses of capital are to finance operations, finance new TMS Center development costs, increase non-cash working capital and fund investments
in its centralized business infrastructure. The Company’s objectives when managing capital are to ensure that the Company will continue
to have enough liquidity to provide services to its customers and provide returns to its shareholders.
The Company, as part of
its annual budgeting process, evaluates its estimated annual cash requirements to fund planned expansion activities and working
capital requirements of existing operations. Based on this budget and considering its anticipated cash flows from regional
operations and its holdings of cash, the Company believes that it has sufficient capital to meet its future operating expenses,
capital expenditures and future debt service requirements for approximately the next two months as of the date of this MD&A.
However, our ability to fund operating expenses, capital expenditures and future debt service requirements will depend on, among
other things, our ability to source external funding, our future operating performance, which will be affected by the velocity of
our regional development strategy and general economic, financial and other factors, including factors beyond our control such as
the COVID-19 pandemic. See “Cautionary Note Regarding Forward-Looking Information”, “Risks and
Uncertainties” and “Factors Affecting our Performance” in this MD&A.
As announced by the Company on May 4, 2021, the Company is currently pursuing an underwritten public offering of Common Shares in the
United States and Canada (the “Offering”). The Common Shares are being offered by a syndicate of underwriters led by Stifel,
Nicolaus & Company, Incorporated (the “Underwriters”). The actual number of Common Shares to be distributed, the price
of each Common Share and the size of the Offering will be determined by negotiation between the Company and the Underwriters in the context
of the market with final terms to be determined at the time of pricing. The Offering is subject to a number of customary conditions, including,
without limitation, receipt of all regulatory and stock exchange approvals. The Offering is also subject to market conditions, and there
can be no assurance as to whether or when the Offering may be completed, or as to the actual size or terms of the Offering.
Analysis of Cash Flows for Q1 2020
The following table presents
our cash flows for each of the periods presented:
|
(US$)
|
|
Q1 2021
|
|
|
Q1 2020
|
|
|
Net cash used in operating activities
|
|
|
(6,246,974
|
)
|
|
|
(2,554,425
|
)
|
|
Net cash used in financing activities
|
|
|
(2,797,561
|
)
|
|
|
(1,956,104
|
)
|
|
Net cash used in investing activities
|
|
|
(3,828,408
|
)
|
|
|
(224,402
|
)
|
|
Increase (decrease) in cash
|
|
|
(12,872,943
|
)
|
|
|
(4,734,931
|
)
|
Cash Flows used in Operating Activities
For Q1 2021, cash flows used
in operating activities (which includes the full cost of developing new TMS Centers) totaled $6.2 million, as compared to $2.6 million
in Q1 2020. The increase in cash flows used in operating activities is primarily attributable to increased loss during the period (see
“Loss for the Period and Comprehensive Loss and Loss for the Period Attributable to the Common Shareholders of Greenbrook”
above) and payment of transaction costs incurred with respect to the Credit Facility and the Nasdaq listing.
Cash Flows used in Financing Activities
For Q1 2021, cash flows used
in financing activities amounted to $2.8 million as compared to $2.0 million in Q1 2020. This change is largely driven by an increase
in distributions to non-controlling interests during Q1 2021 compared to Q1 2020 and interest payments made in connection with the Credit
Facility.
Cash Flows used in Investing Activities
For Q1 2021, cash flows used
in investing activities totaled $3.8 million as compared to $0.2 million in Q1 2020, which primarily relates to the release of the deferred
consideration held in an escrow account upon satisfying all escrow conditions and a portion of the earn-out consideration in relation
to the acquisition of Achieve TMS. See “Factors Affecting the Comparability of Our Results – Acquisition of Achieve TMS”.
The remaining earn-out consideration was deferred in exchange for a fee of $0.3 million and will be paid on June 30, 2021 concurrently
with the deferral fee.
INDEBTEDNESS
During Fiscal 2018, the Company
assumed loans from four separate banking institutions that were previously extended for the purchase of TMS Devices to non-controlling
interest holder partners. The device loans were assumed as part of partnerships with local physicians, behavioral health groups or other
investors, which own minority interests in certain TMS Center subsidiaries. These device loans bear an average interest rate of 10% with
average monthly blended interest and capital payments of $1,575 and mature or matured, as applicable, during the years ended December 31,
2019 to December 31, 2023. There are no significant financial covenants associated with these loans. The loans related to one of
the banking institutions were repaid during Fiscal 2019.
During Fiscal 2019, the Company
assumed loans from two separate banking institutions that were previously extended for the purchase of TMS Devices to non-controlling
interest holder partners. The device loans were assumed as part of partnerships with local physicians, behavioral health groups or other
investors, which own minority interests in certain TMS Center subsidiaries. These device loans bear an average interest rate of 13% with
average monthly blended interest and capital payments of $1,756 and mature during the year ended December 31, 2021. There are no
significant financial covenants associated with these loans.
During Fiscal 2020, the Company
was released from its obligations pertaining to one of the bank loans assumed during Fiscal 2019 in the amount of $45,680 as a result
of the disposal of the related TMS Device.
During Q1 2021, the Company
repaid TMS Device loans totalling $19,039 (Q1 2020: $26,158).
On April 21, 2020, Greenbrook
entered into a promissory note with the U.S. Bank National Association (the “PPP Lender”), evidencing an unsecured
loan in the amount of $3,080,760 (the “PPP Loan”) made to the Company under the United States Paycheck Protection Program
(the “PPP”). The PPP is a program organized by the U.S. Small Business Administration established under the Coronavirus
Aid, Relief and Economic Security Act (the “CARES Act”). The PPP Loan bears interest at a fixed rate of 1.0% per annum
with a maturity date of two years from the date of the Loan. Payments are deferred for the first 16 months under the PPP Loan, and the
PPP Loan may be forgiven, in whole or in part, subject to various factors including that the proceeds from the PPP Loan are used by Greenbrook
to cover payroll costs, rent and utilities.
As federal authorities continue
to update relevant policies and guidelines regarding the PPP, including some that have retroactive effect, we are monitoring these developments
and assessing any changes in our eligibility for the PPP or any other subsidies or support mechanics under the CARES Act. The Company
will be applying for forgiveness of the PPP Loan it received under the PPP, though there can be no assurances at this time that the PPP
Loan will be forgiven, whether in part or in whole.
On December 31, 2020,
we entered into the Credit Agreement for our $30 million Credit Facility with the Lender. The Credit Facility provided a $15 million term
loan that was funded at closing on December 31, 2020, with an option of drawing up to an additional $15 million in three $5 million
delayed-draw term loan tranches within the 24 months following closing, subject to achieving specific financial milestones. As of the
date of this MD&A, the Company does not currently meet these financial milestones and is, therefore, unable to draw down on any of
the delayed-draw term loan tranches under the Credit Facility at this time. All amounts borrowed under the Credit Facility will bear interest
at a rate equal to 30-day LIBOR plus 7.75%, subject to a minimum interest rate of 8.75%. The Credit Facility has a five-year term and
amortizes over the life of the Credit Facility with 1% of the principal amount outstanding amortized over years one to four with the remaining
outstanding principal repaid in installments over the fifth year. The Company has granted general security over all assets of the Company
in connection with the performance and prompt payment of all obligations of the Credit Facility.
The terms of the Credit Agreement
require us to satisfy various affirmative and negative covenants and to meet certain financial tests, including but not limited to, consolidated
minimum revenue and minimum qualified cash, each of which became effective on March 31, 2021. These covenants limit, among other
things, our ability to incur additional indebtedness outside of what is permitted under the Credit Agreement, create certain liens on
assets, declare dividends and engage in certain types of transactions. As of the end of Q1 2021, we were in compliance with such covenants.
The Credit Agreement includes customary events of default, including payment and covenant breaches, bankruptcy events and the occurrence
of a change of control.
As consideration for providing
the Credit Facility, we issued 51,307 common share purchase warrants (the “Lender Warrants”), each exercisable for
one Common Share at an exercise price of C$11.20 per Common Share, to the Lender. The Lender Warrants will expire on December 31,
2025.
On March 30,
2021, the Company and TMS US received a waiver from the Lender with respect to their obligation under the Credit Agreement to deliver
annual audited financial statements with respect to Fiscal 2020 that do not contain any “going concern” or similar qualification
or exception. As consideration for the waiver granted by the Lender, the Company, TMS US and each of the other parties to the Credit
Agreement covenanted that the Company would complete an equity and/or subordinated debt offering for proceeds of at least $12 million.
The failure to satisfy this covenant will constitute an immediate event of default under the Credit Agreement.
Contractual
Obligations
The following table summarizes
our significant contractual obligations as of March 31, 2021:
|
(unaudited)
|
|
|
|
|
Less than 1
year
|
|
|
|
|
|
|
|
|
More than 5 years
|
|
|
Loans Payable
|
|
|
24,110,434
|
|
|
|
2,890,157
|
|
|
|
4,635,992
|
|
|
|
16,584,285
|
|
|
|
-
|
|
|
Rental Leases
|
|
|
24,994,315
|
|
|
|
3,875,899
|
|
|
|
7,065,966
|
|
|
|
5,872,944
|
|
|
|
8,179,506
|
|
|
Device Leases
|
|
|
12,992,923
|
|
|
|
3,485,061
|
|
|
|
3,755,727
|
|
|
|
2,952,995
|
|
|
|
2,799,140
|
|
|
Total
|
|
|
62,097,672
|
|
|
|
10,251,117
|
|
|
|
15,457,685
|
|
|
|
25,410,224
|
|
|
|
10,978,646
|
|
The table above does not reflect
our obligation to pay certain of the vendors in connection with the acquisition of Achieve TMS of $7,223,630. $2,780,590 of this balance
was paid in cash on March 26, 2021 while certain vendors have agreed to defer $4,443,040 of the earn-out consideration due to them
until June 30, 2021 in exchange for additional cash consideration in the aggregate amount of $300,000, which payment will be made
concurrently with the deferred cash payment.
Off-Balance Sheet Arrangements
The Company has not engaged
in any off-balance sheet financing transactions.
Share Information
The Company is authorized
to issue an unlimited number of Common Shares and an unlimited number of preferred shares, issuable in series. As of March 31, 2021,
there were 13,735,288 Common Shares and nil preferred shares issued and outstanding. In addition, there were 866,333 stock options, 111,109
broker warrants and 51,307 Lender Warrants, each representing a right to acquire one Common Share, issued and outstanding. As of the date
of this MD&A, assuming exercise and exchange of all outstanding options, broker warrants and Lender Warrants, there are 14,764,037
equity securities of the Company issued and outstanding on a fully-diluted basis.
Related Party Transactions
Compensation of key management personnel
The Company transacts with
key individuals from management who have authority and responsibility to plan, direct, and control the activities of the Company. Key
management personnel are defined as the executive officers of the Company, including the President and Chief Executive Officer (“CEO”),
the Chief Financial Officer (“CFO”), the Interim Chief Financial Officer, the Chief Operating Officer, the Chief Marketing
Officer and the Chief Medical Officer.
On April 20, 2021, the
Interim Chief Financial Officer stepped down from his role which he held since November 2020. He will remain with the Company until
his responsibilities have been fully transitioned to the CFO, who has returned from his leave of absence.
Transactions with significant shareholder – Greybrook Health
Inc.
As at March 31, 2021,
$500 was included in accounts payable and accrued liabilities related to payables for management services and other overhead costs rendered
by Greybrook Health Inc. (“Greybrook Health”) to the Company in the ordinary course of business under the MSA (as defined
below) (March 31, 2020: $0.1 million).
On January 1, 2015, we
entered into a management and consulting services agreement (the “MSA”) with our significant shareholder, Greybrook
Health, pursuant to which Greybrook Health provided us and our subsidiaries with certain incidental services, including financial advisory
services, business development advisory services and business and operating consulting services (collectively, the “Services”).
More specifically, these Services included: (i) the provision of office space for our head office in Toronto, Ontario, and (ii) compensation
for our CFO, COO and twelve other employees consisting of our general counsel and, ten full-time employees and one part-time employee
that, together, provided customary administrative, finance and accounting services to us and one part-time employee that provided customary
IT infrastructure services to us. All of the Services provided by Greybrook Health were provided on a cost basis whereby we reimbursed
Greybrook Health for costs incurred in connection with the provision of such Services. There was no mark-up charged by Greybrook Health
for the provision of the Services. The aggregate amount paid by us to Greybrook Health under the MSA for each of Q1 2021 and Q1 2020 was
$0.1 million and $0.1 million, respectively. The MSA was terminated effective February 1, 2021.
Subsequent to September 30,
2019, compensation for all employees noted above, except for the Chief Operating Officer and the part time contractor that provides customary
IT infrastructure services to us, is no longer being provided by Greybrook Health and is being paid directly by us. Following the termination
of the MSA on February 1, 2021, the compensation for the COO and the part time contractor that provides customary IT infrastructure
services to the Company is being paid directly by the Company. Following termination of the MSA, we entered into a license agreement with
Greybrook Capital Inc. for the provision of office space for our head office in Toronto, Ontario, effective as of February 1, 2021.
Under the agreement, we are required to pay approximately C$10,000 per month. The initial term of the agreement expires on December 31,
2021, subject to the mutual agreement of the parties to extend the term. The license may be terminated by either party with 90 days’
written notice to the other party.
Risks and Uncertainties
We are exposed to a variety
of financial risks in the normal course of our business, including currency, interest rate, credit, and liquidity risks. Our overall risk
management program and business practices seek to minimize any potential adverse effects on our consolidated financial performance. Risk
management is carried out under practices approved by the Board. This includes identifying, evaluating and hedging financial risks based
on requirements of our organization. Our Board provides guidance for overall risk management, covering many areas of risk including interest
rate risk, credit risk, liquidity risk and currency risk.
COVID-19
On January 30,
2020, the World Health Organization declared a global emergency with respect to the outbreak of COVID-19 and then characterized it
as a pandemic on March 11, 2020. The outbreak has spread globally, causing companies and various international jurisdictions to
impose restrictions, such as quarantines, closures, cancellations and travel restrictions. While these effects are expected to be
temporary and may be relaxed or rolled back if and when the COVID-19 pandemic abates, the actions may be reinstated as the pandemic
continues to evolve and in response to actual or potential resurgences. The duration of the resulting business disruptions and
related financial impact cannot be reasonably estimated at this time. While all of our TMS Centers remain open, and are expected to
remain open, during the pandemic, we experienced a temporary decline in both patient visits/treatments and new patient treatment
starts during Fiscal 2020 as a result of the various “stay at home”, “shelter in place” and/or other
restrictions imposed in response to the COVID-19 pandemic. This decline negatively impacted our business, and in particular has
negatively impacted our cash flows during the year. As a result of our lower than expected cash flows during Fiscal 2020, we were
required to obtain additional financing under the Credit Facility, the first $15 million tranche of which closed on
December 31, 2020. However, it is possible that our consolidated results in future periods will be negatively impacted by the
COVID-19 pandemic. We currently expect to have available liquidity for up to two months as of the date of this MD&A. Although we
believe we will become cash flow positive in the future, we will require additional financing to fund our operating and investing
activities, and we can provide no assurance that such financing will be available on acceptable terms, or at all.
We rely on payors to make
timely payments to us for services provided to their beneficiaries. If payors are negatively impacted by a decline in the economy, including
as a result of the COVID-19 pandemic, we may experience slowdowns in collections and a reduction in the amounts we expect to collect.
We also rely on third-party
suppliers and manufacturers for our TMS Devices. This outbreak has resulted in the extended shutdown of certain businesses around the
globe, which may in turn result in disruptions or delays to our supply chain. These may include disruptions from the temporary closure
of third-party supplier and manufacturer facilities, interruptions in TMS Device supply or restrictions on the export or shipment of TMS
Devices. Any disruption to our suppliers and their contract manufacturers will likely impact our revenue and operating results. The outbreak
of the COVID-19 pandemic may also impact the availability of key TMS Device components, logistics flows and the availability of other
resources to support critical operations.
A local, regional, national
or international outbreak of a contagious disease, including, but not limited to, COVID-19, Middle East Respiratory Syndrome, Severe Acute
Respiratory Syndrome, H1N1 influenza virus, avian flu or any other similar illness, or a fear of any of the foregoing, could adversely
impact us by causing operating delays and disruptions, labor shortages and shutdowns (including as a result of government regulation and
prevention measures). If we are unable to mitigate the impacts of the COVID-19 pandemic on our operations, our costs may increase and
revenue could decrease. It is unknown how we may be affected if such an epidemic persists for an extended period of time. A widespread
health crisis could adversely affect the global economy, resulting in an economic downturn that could impact demand for the services we
provide.
The future impact of the outbreak
is highly uncertain and cannot be predicted, and there is no assurance that the outbreak will not have a material adverse impact on our
future results. The extent of the impact will depend on future developments, including actions taken to contain COVID-19.
Interest Rate Risk
Interest rate risk is the
risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. We
are exposed to changes in interest rates on our cash and long-term debt. The Credit Facility bears interest at a rate equal to 30-day
LIBOR plus 7.75%, subject to a minimum interest rate of 8.75%.
Credit Risk
Credit risk arises from the
potential that a counterparty will fail to perform its obligations. We are exposed to credit risk from patients and third-party payors
including federal and state agencies (under the Medicare programs), managed care health plans and commercial insurance companies. Our
exposure to credit risk is mitigated in large part by the fact that the majority of our accounts receivable balances are receivable from
large, creditworthy medical insurance companies and government-backed health plans.
Based on the Company’s
industry, none of the accounts receivable is considered “past due”. Furthermore, the payors have the ability and intent to
pay, but price lists for the Company’s services are subject to the discretion of payors. As such, the timing of collections is not
linked to increased credit risk. The Company continues to collect on services rendered in excess of 24 months from the date such services
were rendered.
Currency Risk
Currency risk is the risk
to our earnings that arises from fluctuations in foreign exchange rates and the degree of volatility of those rates. We have minimal exposure
to currency risk as substantially all of our revenue, expenses, assets and liabilities are denominated in U.S. dollars. We pay certain
vendors and payroll costs in Canadian dollars from time to time, but due to the limited size and nature of these payments they do not
expose us to significant currency risk.
Liquidity Risk
Liquidity risk is the risk
that we may encounter difficulty in raising funds to meet our financial commitments or can only do so at an excessive cost. We aim to
ensure there is sufficient liquidity to meet our short-term business requirements, taking into account our anticipated cash flows from
operations, our holdings of cash and our ability to raise capital from existing or new investors and/or lenders.
DISCLOSURE
CONTROLS & PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING
Disclosure Controls & Procedures
Management is responsible
for establishing and maintaining a system of disclosure controls and procedures to provide reasonable assurance that all material information
relating to the Company is gathered and reported to senior management, including the CEO and the CFO, on a timely basis so that appropriate
decisions can be made regarding public disclosure, including to ensure that information required to be disclosed by the Company in reports
that the Company files or submits under the U.S. Securities Exchange Act of 1934, as amended (the “U.S. Exchange Act”)
is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Management,
under the oversight of the CEO and CFO, has evaluated the design and effectiveness of the Company’s disclosure controls and procedures
as of March 31, 2021. Based on this evaluation, the CEO and the CFO concluded that, as of March 31, 2021, the Company’s
disclosure controls and procedures (as defined in National Instrument 52-109 – Certification of Disclosure in Issuers’
Annual and Interim Filings and in Rule 13a-15(e) and Rule 15d-15(e) under the U.S. Exchange Act) were ineffective
as a result of material weaknesses identified in the Company’s internal control over financial reporting, which is further described
below.
The Company’s disclosure
controls and procedures are designed to provide reasonable assurance of achieving their objectives, and the CEO and CFO do not expect
that the disclosure controls and procedures will prevent all errors and fraud. A control system, no matter how well conceived or operated,
can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
There has been no change in
the Company’s disclosure controls and procedures that occurred during the three months ended March 31, 2021 that has materially
affected, or is reasonably likely to materially affect, the Company’s disclosure controls and procedures.
Internal Controls over Financial Reporting
Management is also responsible
for establishing and maintaining adequate internal controls over financial reporting (“ICFR”) which is a process designed
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial reports for external
purposes in accordance with IFRS. In designing such controls, it should be recognized that, due to inherent limitations, any controls,
no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and may not
prevent or detect misstatements. Additionally, management is required to use judgment in evaluating controls and procedures.
An evaluation of the design
and effectiveness of the Company’s internal controls over financial reporting was carried out by management, under the supervision
of the CEO and CFO. In making this evaluation, the CEO and CFO used the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) Internal Control – Integrated Framework (2013). Based on this evaluation, the CEO and CFO concluded
that, as of March 31, 2021, the Company’s internal control over financial reporting was ineffective as a result of identified
material weaknesses.
In connection with the audit
of our consolidated financial statements that were prepared in accordance with IFRS, and audited in accordance with the standards of the
Public Company Accounting Oversight Board (United States), our management identified material weaknesses in our internal control over
financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting
such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented
or detected on a timely basis.
The Company discovered that,
as an emerging growth company, it did not have the formalized internal control environment necessary to satisfy the accounting and financial
reporting requirements, including a lack of documentation of its existing internal control environment. The control breakdown that gave
rise to the material audit adjustment to revenue for the estimate for variable consideration identified by the external auditors was inadequate
review and scrutiny of judgement involved in the application of IFRS 15, Revenue from Contracts with Customers to changes to variable
consideration estimates at December 31, 2020. The material weaknesses that our management identified related to the following:
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the Company did not have an effective risk assessment process that successfully identified and assessed
risks of misstatement to ensure controls were designed and implemented to respond to those risks;
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the Company did not have an effective monitoring process to assess the consistent operation of internal
control over financial reporting and to remediate known control deficiencies; and
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the Company did not effectively design and maintain appropriate segregation of duties and controls over
the effective preparation, review and approval, and associated documentation of journal entries.
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These control deficiencies
are pervasive in impact and resulted in certain material misstatements to the Company’s financial statements identified through
the audit, and which were corrected by management. Identified errors resulted in certain adjustments to the amounts or disclosures included
revenue, share-based compensation, contributed surplus, cash, accounts receivable, accounts payable and accrued liabilities, loans payable,
Lender Warrants, and professional and legal fees. These errors were corrected prior to the release of our annual financial statements
for the financial year ended December 31, 2020.
The existence of these material
weaknesses creates a reasonable possibility that an error may not be prevented or detected in the Company’s annual or interim financial
statements on a timely basis.
We have established a remediation
plan which includes the following specific remedial actions undertaken by management:
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implementing a system to manage and automate our internal control over financial reporting processes and
procedures;
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hiring additional accounting and finance resources and personnel with expertise in internal control over
financial reporting;
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implementing processes and controls to better identify and manage the consistent operation of internal
control over financial reporting and remediate known control deficiencies, including maintaining appropriate segregation of duties;
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implementing journal entry approval workflow within our key
financial system; and
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retaining an international accounting firm to conduct a comprehensive assessment of our internal control
over financial reporting processes and procedures and make recommendations for additional improvements to such processes and procedures.
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We will take all measures
necessary to address and cure the underlying causes of the material weaknesses. Once implemented, our remediation plan may take significant
time and expense to be fully implemented and may require significant management attention, and our efforts may not prove to be successful
in remediating the material weakness and do not guarantee that we will not suffer additional material weaknesses and/or significant deficiencies
in the future. Management has and will continue to take actions to implement these remedial measures throughout Fiscal 2021. At this time,
management estimates that it will have remediated the material weaknesses described above by the end of Fiscal 2021.
Despite the material weaknesses,
and based on management’s assessment, management has concluded that the Company’s control environment continued to result
in financial statements in prior periods that presented fairly, in all material respects, the Company’s financial position, results
of operations, changes in equity (deficit) and cash flows in accordance with IFRS. As a result, no changes to the required conclusions
made by the Company’s certifying officers were necessary. Furthermore, management has concluded that the annual financial statements
for the financial year ended December 31, 2020 and the unaudited condensed interim consolidated financial statements for the three
months ended March 31, 2021 present fairly, in all material respects, the Company’s financial position, results of operations,
changes in equity (deficit) and cash flows in accordance with IFRS.
If our management is unable
to certify the effectiveness of our internal controls or if additional material weaknesses in our internal controls are identified, we
could be subject to regulatory scrutiny and a loss of public confidence, which could harm our business and cause a decline in the price
of the Common Shares. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not
be able to accurately report our financial performance on a timely basis, which could cause a decline in the market price of the Common
Shares and harm our ability to raise capital.
We do not expect that our
disclosure controls and procedures and internal controls over financial reporting will prevent all error or fraud. A control system, no
matter how well-designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives
will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls
must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues within an organization are detected. The inherent limitations include the realities that judgments
in decision making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented
by individual acts of certain persons, by collusion of two or more people or by management override of the controls. Due to the inherent
limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected in a timely manner
or at all. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results could be materially
adversely affected, which could also cause investors to lose confidence in our reported financial information, which in turn could result
in a reduction in the trading price of the Common Shares.
As a result of our Nasdaq
listing, we are now subject to the requirements of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”). Section 404
of Sarbanes-Oxley (“Section 404”) requires companies subject to the reporting requirements of the U.S. securities
laws to complete a comprehensive evaluation of our internal controls over financial reporting. To comply with this statute, we will be
required to document and test our internal control procedures and our management will be required to assess and issue a report concerning
our internal controls over financial reporting. Pursuant to the Jumpstart Our Business Startups Act (“JOBS Act”), we
are classified as an “emerging growth company”. Under the JOBS Act, emerging growth companies are exempt from certain reporting
requirements, including the independent auditor attestation requirements of Section 404(b) of Sarbanes-Oxley. Under this exemption,
our independent auditor will not be required to attest to and report on management’s assessment of our internal control over financial
reporting during a transition period of up to five years from our initial registration in the United States. We will need to prepare for
compliance with Section 404 by strengthening, assessing and testing our system of internal controls to provide the basis for our
report. However, the continuous process of strengthening our internal controls and complying with Section 404 is complicated and
time-consuming. Furthermore, we believe that our business will grow in the United States, in which case our internal controls will become
more complex and will require significantly more resources and attention to ensure our internal controls remain effective overall. During
the course of our testing, our management may identify additional material weaknesses or significant deficiencies, which may not be remedied
in a timely manner. If our management cannot favorably assess the effectiveness of our internal controls over financial reporting, or
our independent registered public accounting firm identifies additional material weaknesses in our internal controls, investor confidence
in our financial results may weaken, and the market price of our securities may suffer.
There has been no change in
the Company’s ICFR that occurred during the three months ended March 31, 2021 that has materially affected, or is reasonable
likely to materially affect, the Company’s ICFR.
Critical Accounting Estimates
and Judgments
There have been no changes to the Company’s
critical accounting estimates and judgments since the fiscal year ended December 31, 2020, except for the following additional disclosures
noted below.
Revenue recognition:
Due to the nature of the industry
and complexity of the Company’s revenue arrangements, where price lists are subject to the discretion of payors, variable consideration
exists that may result in price concessions and constraints to the transaction price for the services rendered.
In estimating this variable
consideration, the Company uses significant judgement and considers various factors including, but not limited to, the following:
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commercial payors and the administrators of federally-funded healthcare programs exercise discretion over
pricing and may establish a base fee schedule for TMS (which is subject to change prior to final settlement) or negotiate a specific reimbursement
rate with an individual TMS provider;
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average of previous net service fees received by the applicable payor and fees received by other patients
for similar services;
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management’s best estimate, leveraging industry knowledge and expectations of third-party payors’
fee schedules;
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factors that would influence the contractual rate and the related benefit coverage, such as obtaining
pre-authorization of services and determining whether the procedure is medically necessary;
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probability of failure in obtaining timely proper provider credentialing (including re-credentialling)
and documentation, in order to bill various payors which may result in enhanced price concessions; and
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variation in coverage for similar services among various payors and various payor benefit plans.
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The Company updates the estimated
transaction price (including updating its assessment of whether an estimate of variable consideration is constrained) to represent faithfully
the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period in which such
variances become known.
The above factors are not
related to the creditworthiness of the large medical insurance companies and government-backed health plans encompassing the significant
majority of the Company’s payors. The payors (large insurers and government agencies) have the ability and intent to pay, but price
lists for the Company’s services are subject to the discretion of payors. As a result, the adjustment to reduce the transaction
price and constrain the variable consideration is a price concession and not indicative of credit risk on the payors (i.e. not a bad debt
expense).
Accounts receivable:
The Company considers a default
to be a change in circumstances that results in the payor no longer having the ability and intent to pay. In these circumstances, a write-off
of the related accounts receivable balance to bad debt would be recognized.
In estimating the collectability
of its accounts receivable, the Company considers macroeconomic factors in assessing accounts receivable. Such factors would need to be
significant to affect the ability and intent of the Company’s payors given their size and stature. No such factors were identified
as at March 31, 2021, or the comparative period, and therefore no bad debt was recognized.
COVID-19:
The uncertainties around the
outbreak of COVID-19 required the use of judgements and estimates which resulted in no material impacts for the period ended March 31,
2021. The future impact of COVID-19 uncertainties could generate, in future reporting periods, a significant risk of material adjustment
to the carrying amounts of the following: goodwill and intangible assets impairment, leases, business combinations, provisions, litigations
and claims.
The Company has experienced
losses since inception and has negative cash flow from operating activities of $6.3 million for the three months ended March 31,
2021 ($2.6 million – three months ended March 31, 2020). Given the impact that the COVID-19 pandemic, including the related
government-imposed social distancing and “shelter-in-place” measures, has had on the overall volumes of patient treatments,
the overall cash flows of the Company have been negatively impacted. Although the Company anticipates that it will have positive cash
flow from operating activities in the future, the Company anticipates that its overall cash flows may continue to be negatively impacted
until the global economic impact of COVID-19 subsides. The Company expects it will require additional financing to fund its operating
and investing activities and such additional financing is required in order for the Company to repay its short-term obligations. These
conditions indicate the existence of a material uncertainty that may cast significant doubt as to the Company’s ability to continue
as a going concern. The Company also has strong supportive shareholders and a proven track record of successfully raising capital when
required. The failure to raise such capital when required could result in the delay or indefinite postponement of current business objectives
and additional financing may not be available on favorable terms or at all.
The condensed interim consolidated
financial statements do not reflect adjustments that would be necessary if the going concern assumptions were not appropriate. If the
going concern basis was not appropriate for the condensed interim consolidated financial statements, then adjustments would be necessary
to the carrying value of assets and liabilities, the reported expenses, and the condensed interim consolidated statements of financial
position classification used.
Changes
in Significant Accounting Policies
Other than as described herein,
there are no recent accounting pronouncements that are applicable to the Company or that are expected to have a significant impact on
the Company.
RISK FACTORS
For a detailed description
of risk factors associated with the Company, refer to the “Risk Factors” section of the Company’s annual information
form dated March 30, 2021 for its fiscal year ended December 31, 2020, which is available on SEDAR at www.sedar.com
and on EDGAR at www.sec.gov, and the “Risks and Uncertainties” section in this MD&A.
ADDITIONAL INFORMATION
Additional information relating
to the Company, including the Company’s annual information form, is available on SEDAR at www.sedar.com and on EDGAR at
www.sec.gov. The Company’s Common Shares are listed for trading on the Nasdaq under the symbol “GBNH” and on the TSX
under the symbol “GTMS”.
Exhibit 99.6
MANAGEMENT INFORMATION CIRCULAR
GREENBROOK TMS INC.
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
May 7, 2021
NOTICE
OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that an Annual and Special
Meeting of the Shareholders (the “Meeting”) of Greenbrook TMS Inc. (“Greenbrook” or the “Company”)
will be held on Monday, June 14, 2021 at 10:00 a.m. (Toronto time) by way of virtual-only meeting via live webcast.
Meeting Business
The Meeting will be held for the following purposes:
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to receive the annual consolidated financial statements of Greenbrook for the fiscal year ended December 31,
2020, and the auditors’ report thereon;
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to elect members of the Board of Directors of Greenbrook (see “Business to be Transacted at the
Meeting – Election of the Board of Directors”);
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to appoint Greenbrook’s auditors and to authorize the directors to fix the auditors’ remuneration
(see “Business to be Transacted at the Meeting – Appointment of the Auditors”);
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to consider and, if deemed advisable, pass an ordinary resolution, the full text of which is attached
as Appendix B to the Management Information Circular which accompanies this Notice of Annual and Special Meeting, approving certain
amendments to the Company’s Stock Option Plan, as more particularly described in the accompanying Management Information Circular
(see “Business to be Transacted at the Meeting – Amendments to Stock Option Plan”);
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to consider and, if deemed advisable, pass an ordinary resolution, the full text of which is attached
as Appendix D to the Management Information Circular which accompanies this Notice of Annual and Special Meeting, approving all
unallocated Options and Share-Based Awards under the Company’s Equity Incentive Plan (as each term is defined in the accompanying
Management Information Circular) (see “Business to be Transacted at the Meeting – Approval of Unallocated Options and Share-Based
Awards”); and
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to transact such other business as may properly be brought before the Meeting or any adjournment or postponement
thereof.
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Record Date
You have the right to receive notice of and vote
at the Meeting as set out in the accompanying Management Information Circular if you are a Greenbrook shareholder as of the close of business
on May 5, 2021.
Meeting Format
Greenbrook will hold its Meeting exclusively by
electronic means via live webcast. The decision to hold the Meeting by electronic means has been made in light of the recommendations
and restrictions by authorities to address proactively the public health impact of COVID-19 (coronavirus) and to mitigate risks to the
health and safety of our shareholders and the broader community. As a result of these recommendations and restrictions, it will not be
possible to attend the Meeting in person. Shareholders will be able to listen to, participate in and vote at the Meeting in real time
through a web-based platform instead of attending the Meeting in person. The health and safety of our shareholders and other interested
stakeholders is our top priority.
You can attend the Meeting by joining the live
webcast online at www.virtualshareholdermeeting.com/GTMS2021AGM. See “Voting Information” in the accompanying Management
Information Circular for detailed instructions on how to attend and vote at the Meeting.
Given the extraordinary circumstances, management
currently intends on only proceeding with the formal items of business of the Meeting without any opening remarks or subsequent management
presentations. However, shareholders will still have the opportunity to submit questions during the Meeting through the live webcast.
Your Vote is Important
As a Greenbrook shareholder, it
is important that you read the accompanying Management Information Circular carefully.
You are entitled to vote either
by proxy or at the Meeting by online ballot through the live webcast platform. If you are unable to attend the Meeting, you are requested
to vote your shares online or by using the enclosed form of proxy or voting instruction form.
Registered shareholders (whose
Greenbrook shares are registered in their name) should vote online at www.proxyvote.com or complete and sign the enclosed form
of proxy and return it in the envelope provided. Proxies must be received by Broadridge Investor Communications Corporation at Data Processing
Centre, P.O. Box 3700 STN Industrial Park, Markham, ON, L3R 9Z9, by no later than 5:00 p.m. (Toronto time) on June 10,
2021.
Non-registered beneficial shareholders
(whose Greenbrook shares are held indirectly through an intermediary such as a bank, trust company, securities broker or other intermediary)
should review the voting instruction form provided by their intermediary, which sets out the procedures to be followed for voting shares
held through intermediaries.
If you wish to appoint a proxyholder
other than Elias Vamvakas or Bill Leonard, each of whom is a director of Greenbrook, you must create an appointee name and an eight-character
appointee identification number, either online at www.proxyvote.com or in your form of proxy or voting instruction form. This
applies to both registered and non-registered shareholders. If you do not provide your proxyholder with the exact appointee name
and eight-character appointee identification number you created, your proxyholder will not be able to vote at the Meeting.
Greenbrook believes that the ability
to participate in the Meeting in a meaningful way remains important despite the decision to hold this Meeting through electronic means.
Shareholders will have substantially the same opportunity to vote and submit questions on matters of business at the Meeting as in past
years when shareholders meetings were held in person.
For those that plan on accessing
the live webcast, please allow ample time prior to the Meeting. The Meeting will begin promptly at 10:00 a.m. (Toronto time) on Monday,
June 14, 2021, unless otherwise adjourned or postponed. Once logged in to the webcast, it is important to remain connected to the
internet for the duration of the Meeting.
By Order of the Board of Directors,
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Toronto, Ontario
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Bill Leonard
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May 7, 2021
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President and Chief Executive Officer
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MANAGEMENT
INFORMATION CIRCULAR
All information in this Management Information
Circular (the “Circular”) is as of May 7, 2021, unless otherwise indicated.
In this Circular, “we”, “us”,
“our”, “Greenbrook” and “the Company” refer to Greenbrook TMS Inc. and its subsidiaries, where applicable.
“You” and “your” refer to holders (“Shareholders”) of common shares of Greenbrook (“Shares”).
Unless otherwise indicated, all references to “$” or “dollars” in this Circular refer to United States dollars.
This Circular is provided in connection with our
Annual and Special Meeting of Shareholders to be held on Monday, June 14, 2021 (the “Meeting”). Your proxy is
being solicited by management of Greenbrook for the items described in the Notice of Meeting on the previous page. We pay for all costs
associated with soliciting your proxy. We usually make our request by mail, but we may also solicit your proxy by telephone.
As a Shareholder,
you have the right to electronically attend and vote at the Meeting as set out in this Circular. Please read this Circular, as it gives
you information that you will need to know in order to cast your vote. We also encourage you to read Greenbrook’s management’s
discussion and analysis and annual consolidated financial statements for the fiscal year ended December 31, 2020 (“Fiscal
2020”). A copy of the management’s discussion and analysis and annual consolidated financial statements will be sent to
all registered and beneficial Shareholders who have requested that these materials be sent to them. These documents are also available
on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com, on the Electronic Data Gathering,
Analysis, and Retrieval system (“EDGAR”) at www.sec.gov (as an exhibit to our Annual Report on Form 40-F),
and on Greenbrook’s website at www.greenbrooktms.com.
On January 12, 2021, at a special meeting
of Shareholders, our Shareholders approved a special resolution authorizing our board of directors (the “Board”) to
amend our articles of incorporation (the “Articles”) to effect a consolidation (the “Share Consolidation”)
of all of the issued and outstanding Shares, such that the trading price of the Shares following the Share Consolidation would permit
us to qualify for listing on the Nasdaq Capital Market of The Nasdaq Stock Market LLC (“Nasdaq”). On February 1,
2021, the Board effected the Share Consolidation on the basis of one post-consolidation Share for every five pre-consolidation Shares
and on February 4, 2021 the Shares began trading on a post-consolidation basis on the Toronto Stock Exchange (“TSX”).
The Shares began trading on Nasdaq on March 16, 2021.
Unless otherwise indicated, all Share numbers
in this Circular have been adjusted to give effect to such Share Consolidation.
Table
of Contents
Page
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BUSINESS TO BE TRANSACTED AT THE MEETING
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1
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VOTING INFORMATION
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2
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ABOUT GREENBROOK
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6
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ELECTION OF DIRECTORS
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6
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General
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6
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Advance Notice Provisions
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7
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Individual and Majority Voting Policy
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7
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Director Nominee Biographies
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8
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Board and Committee Attendance
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12
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OUR APPROACH TO CORPORATE GOVERNANCE
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13
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General
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13
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The Role of the Board
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13
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Corporate Governance Policies and Practices
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13
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Composition of our Board and Board Committees
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14
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Director Independence
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14
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Meetings of Independent Directors and Conflicts of Interest
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14
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Committees of our Board
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15
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Governance and Nominating Committee
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16
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Compensation Committee
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17
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Role of the Compensation Consultant
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18
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Director Term Limits and Other Mechanisms of Board Renewal
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18
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Orientation and Continuing Education
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19
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Ethical Business Conduct
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19
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Diversity
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19
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Disclosure Policy
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19
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DIRECTOR COMPENSATION
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20
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General
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20
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Director Fees
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20
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Directors’ Hedging Policy
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20
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Director Compensation Table
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21
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Outstanding Option-Based Awards
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21
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Incentive Plan Awards – Value Vested or Earned During the Year
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22
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Changes to Director Compensation for Fiscal 2021
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22
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EXECUTIVE COMPENSATION
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23
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Introduction
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23
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Compensation Discussion and Analysis
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23
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Securities Authorized for Issuance Under Equity Compensation Plans
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32
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Summary Compensation Table
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32
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Outstanding Share-Based Awards and Option-Based Awards
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33
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Incentive Plan Awards – Value Vested or Earned During the Year
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34
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Changes to Executive Compensation for Fiscal 2021
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34
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OTHER INFORMATION
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35
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Indebtedness of Directors and Executive Officers
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35
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Interests of Certain Persons or Companies in Matters to be Acted Upon
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35
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Interests of Informed Persons in Material Transactions
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35
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Shareholder Proposals
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35
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Additional Information
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35
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Contacting the Board of Directors
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36
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Board Approval
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36
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Table
of Contents
(continued)
Page
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Appendix
A MANDATE OF THE BOARD OF DIRECTORS
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A-1
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Appendix B Option Plan
Amendment Resolution
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B-1
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Appendix C Amended and
Restated Omnibus Equity Incentive Plan
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C-1
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Appendix D Unallocated
Awards Resolution
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D-1
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BUSINESS
TO BE TRANSACTED AT THE MEETING
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The following business will be transacted at the
Meeting:
Receiving the Annual Financial
Statements
● Management
will present the annual financial results at the Meeting.
Election of the Board of Directors
● Eight
director nominees are proposed for election to the Board. Shareholders may vote on the election of the directors.
Appointment of the Auditors
● The
Board recommends the re-appointment of KPMG LLP as Greenbrook’s auditors. Shareholders may vote on the re-appointment of the auditors
and the authorization of the Board to fix such auditors’ remuneration.
Amendments
to the Stock Option Plan
● Shareholders
are asked to consider, and if thought appropriate, to pass an ordinary resolution approving certain amendments to Greenbrook’s amended
and restated stock option plan.
Approval
of Unallocated Options and Share-Based Awards
● Shareholders
are asked to consider, and if thought appropriate, to pass an ordinary resolution approving all unallocated Options and Share-Based Awards
(as defined herein) under Greenbrook’s amended and restated omnibus equity incentive plan.
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Receiving
the Annual Financial Statements
Our audited consolidated
financial statements for the fiscal year ended December 31, 2020, including the auditors’ report thereon, have been prepared
and will be sent to registered and beneficial Shareholders who have requested that these materials be sent to them. Our audited consolidated
financial statements are also available on SEDAR at www.sedar.com, on EDGAR at www.sec.gov (as an exhibit to our Annual
Report on Form 40-F) and on our website at www.greenbrooktms.com.
Election
of the Board of Directors
The Board has determined that eight directors
will be elected at the Meeting. See “Election of Directors” on page 6 for more information.
The Board recommends that you vote FOR
the election of each of the following persons who have been proposed by the Board for election as directors by the Shareholders:
Directors appointed at the Meeting will serve,
subject to our Articles and the Business Corporations Act (Ontario) (the “OBCA”), until the end of the next
annual shareholders meeting or until their successors are elected or appointed. All of the proposed directors are currently directors
of Greenbrook.
Appointment
of the Auditors
If you are a Shareholder, you can vote on the
appointment of the auditors and authorizing the Board to set the auditors’ remuneration. The Board recommends that you vote FOR
the re-appointment of our current auditors, KPMG LLP, Chartered Professional Accountants, Licensed Public Accountants, as our auditors,
and authorizing the Board to set KPMG LLP’s remuneration.
The auditors will serve until the end of the next
annual shareholders meeting or until a successor is appointed. KPMG LLP has been our auditors since 2017.
Amendments
to the Stock Option Plan
We are asking Shareholders to consider and, if
deemed advisable, pass an ordinary resolution (the “Option Plan Amendment Resolution”, the full text of which is set
forth in Appendix B to this Circular, approving the Amendment Provision Updates (as defined below under the heading “Executive
Compensation – Long-Term Incentive Plans”). If the Option Plan Amendment Resolution is not approved, the Amendment Provision
Updates will not be incorporated into the Amended and Restated Omnibus Equity Incentive Plan (formerly the Amended and Restated Stock
Option Plan). To be effective, the Option Plan Amendment Resolution must be approved by at least 50% of the votes cast in person or by
proxy by the Shareholders at the Meeting.
A summary of the principal terms of the Amended
and Restated Omnibus Equity Incentive Plan can be found on page 25.
The Board recommends that you vote FOR
the approval of the adoption of the Amendment Provision Updates.
Approval
of Unallocated Options and Share-Based Awards
We are asking Shareholders to consider and, if
deemed advisable, pass an ordinary resolution (the “Unallocated Awards Resolution”), the full text of which is set
forth in Appendix D to this Circular, approving the unallocated Options and Share-Based Awards (as defined below) under the Amended
and Restated Omnibus Equity Incentive Plan.
This approval will be effective for three years
from the date of the Meeting. If approval is not obtained at the Meeting, all outstanding Options will remain unaffected but no new awards
may be exercised or redeemed for Shares issued from treasury under the Amended and Restated Omnibus Equity Incentive Plan (formerly the
Amended and Restated Stock Option Plan) until Shareholder approval is received. To be effective, the Unallocated Awards Resolution must
be approved by at least 50% of the votes cast in person or by proxy by the Shareholders at the Meeting.
The Board recommends that you vote FOR
the approval of the unallocated Options and Share-Based Awards.
Considering
Other Business
We will consider any other business that may properly
come before the Meeting. As of the date of this Circular, we are not aware of any changes to the items above or any other business to
be considered at the Meeting. If there are changes or new items, you or your proxyholder can vote your Shares on these items as you or
your proxyholder sees fit. If any other matters properly come before the Meeting, it is the intention of the persons named in the form
of proxy to vote in respect of those matters in accordance with their judgment.
VOTING
INFORMATION
Who
Can Vote
We are authorized to issue an unlimited number
of Shares. As of May 5, 2021, there were 13,735,788 issued and outstanding Shares.
Each Share you own as of the close of business
on May 5, 2021, the record date for the Meeting, entitles you to one vote on each of the matters to be acted upon at the Meeting,
or any adjournment or postponement thereof, either by proxy or at the Meeting by online ballot through the live webcast platform. The
right to vote at the Meeting is limited to Shareholders who own Shares as of the above record date for the Meeting.
The directors and officers of Greenbrook are not
aware of any person or company that beneficially owns, directly or indirectly, or exercises control or direction over more than 10% of
the total outstanding Shares, other than (i) Greybrook Health Inc. (“Greybrook Health”), which beneficially owns,
directly and indirectly, or exercises control or direction over 4,327,697 Shares, which represents approximately 31.5% of our issued and
outstanding Shares, and (ii) 1315 Capital, LLC (“1315 Capital”), which beneficially owns, directly and indirectly,
or exercises control or direction over 1,771,171 Shares, which represents approximately 12.9% of our issued and outstanding Shares.
Each of Greybrook
Health and 1315 Capital has advised Greenbrook that it intends to vote FOR the election of directors to the Board, the appointment
of the auditors and authorizing the directors to set the auditors’ remuneration, the Option Plan Amendment Resolution and the Unallocated
Awards Resolution.
How
to Vote
Registered Shareholder Voting
You are a registered shareholder (“Registered
Shareholder”) if your name appears on your Share certificate or on the register maintained by our transfer agent, Computershare
Investor Services Inc. Your proxy form indicates if you are a registered shareholder. If you are a Registered Shareholder, you may vote
at the Meeting by online ballot through the live webcast platform or by proxy in advance of the Meeting. See below for details on each
voting option.
Voting at the Meeting
If you are a Registered Shareholder and you wish
to vote your Shares at the Meeting, you do not need to complete and return the form of proxy. Your vote will be taken by electronic ballot
and counted at the virtual Meeting. See “How to Attend and Participate at the Virtual Meeting” below.
Voting by Proxy
Registered Shareholders have three options to
vote by proxy:
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On the Internet in advance of the Meeting
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Visit www.proxyvote.com or scan
the QR code on the form of proxy to access the website and follow the instructions on screen. You will need your 16-digit control number
(located on both sides of the form of proxy) to identify yourself to the system. If you are voting through the internet, all required
information must be entered by 5:00 p.m. (Toronto time) on June 10,
2021.
Complete, date and sign the enclosed
form of proxy and return it to Broadridge Investor Communications Corporation (“Broadridge”) at: Data Processing Centre,
P.O. Box 3700 STN Industrial Park, Markham, ON L3R 9Z9, in the envelope provided so that it arrives no later than 5:00 p.m. (Toronto
time) on June 10, 2021. This will ensure your vote is recorded.
Call 1-800-474-7493 (English) or 1-800-474-7501
(French) and follow the instructions. You will need your 16-digit control number (located on the front of the form of proxy) to identify
yourself to the system. If you are voting by telephone, all required information must be entered by 5:00 p.m. (Toronto time)
on June 10, 2021. If you vote by telephone, you cannot appoint anyone other than the directors named on your proxy form as your proxyholder.
Signing the enclosed form of proxy gives authority
to Elias Vamvakas or Bill Leonard, each of whom is a director of Greenbrook, to vote your Shares at the Meeting. You may appoint someone
other than the above-named directors to vote your Shares by writing the name of the person that you wish to appoint, who need not be a
Shareholder, in the blank space provided on the form of proxy. It is important to ensure that any other person you appoint is attending
the Meeting and is aware that he or she has been appointed to vote your Shares.
If you appoint someone other than the above-named
directors as your proxyholder, you must create an appointee name and an eight-character appointee identification number,
either online at www.proxyvote.com or on your form of proxy. If you do not provide your proxyholder with the exact appointee
name and eight-character appointee identification number you created, your proxyholder will not be able to vote at the Meeting.
The persons named on the form of proxy must vote
or withhold from voting your Shares in accordance with your directions. In the absence of such directions, proxies received by management
will be voted in favor of the election of directors to the Board, the appointment of the auditors and authorizing the directors to set
the auditors’ remuneration, the Option Plan Amendment Resolution and the Unallocated Awards Resolution.
The persons named in the form of proxy will have
discretionary authority with respect to amendments or variations to matters identified in the Notice of Annual and Special Meeting of
Shareholders and with respect to other matters which may properly come before the Meeting.
As of the date of this Circular, management of
Greenbrook knows of no such amendment, variation or other matter expected to come before the Meeting. If any other matters properly come
before the Meeting, the person named in your form of proxy will vote on them in accordance with their best judgment.
Revoking Your Proxy
If you are a Registered Shareholder and wish to
revoke your proxy, you may revoke a vote you made by proxy by:
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voting again online at www.proxyvote.com
or by completing and signing a proxy bearing a later date and depositing it in accordance with the instructions on the form of proxy,
which will revoke any proxy you previously submitted;
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voting at the virtual Meeting by submitting an
online ballot through the live webcast platform, which will revoke any proxy you previously submitted; or
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making a request in writing stating that you
wish to revoke your proxy, before any vote in respect of which the proxy has been given or taken. The written request can be from you
or your authorized attorney or by electronic signature to the extent permitted by applicable law. This statement must be deposited at
the registered office of Broadridge at the address listed below no later than 5:00 p.m. (Toronto time) on June 10, 2021, or
two business days immediately preceding any adjournment or postponement of the Meeting, or delivered in any other manner provided by law.
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Broadridge Investor Communications
Corporation
Data Processing Centre,
P.O. Box 3700 STN Industrial Park,
Markham, ON
L3R 9Z9
Non-Registered or Beneficial Shareholder Voting
Information in this section is very important
to non-registered or beneficial owners of Shares. You are a non-registered or beneficial owner if your Shares are held in the name of
an intermediary such as a bank, trust company, securities broker, depository (such as CDS Clearing and Depository Services Inc. or
The Depository Trust Company) or other intermediary (“Beneficial Shareholder”). Applicable Canadian securities laws
require intermediaries to seek voting instructions from Beneficial Shareholders. Accordingly, you will have received from your intermediary
a voting instruction form for the number of Shares you hold.
Voting at the Meeting
A Beneficial
Shareholder who receives a voting instruction form from their intermediary cannot use that voting instruction form to vote Shares directly
at the virtual Meeting. To vote your Shares at the Meeting by online ballot through the live webcast platform, your intermediary
must appoint you as proxyholder. In order to be appointed as proxyholder, insert your name in the space provided on the voting instruction
form and follow the return instructions provided by your intermediary. In addition, you must create an appointee name and an eight-character
appointee identification number, either online at www.proxyvote.com or on your voting instruction form. If you do not create
an appointee name and eight-character appointee identification number, you will not be able to vote at the Meeting. You
do not need to fill in the voting directions as your vote will be taken at the Meeting. The voting instruction form must be returned
to your intermediary well in advance of the Meeting in order to appoint your proxyholder.
If you are a Beneficial
Shareholder holding your Shares through a U.S. bank, broker or dealer, you must also obtain a valid legal proxy from your broker, bank,
dealer or other agent and then register in advance to attend the virtual Meeting. Follow the instructions from your broker, bank, dealer
or other agent included with these proxy materials, or contact your broker, bank, dealer or other agent to request a legal proxy form.
Voting Instruction
Beneficial Shareholders
who do not wish to vote at the Meeting by online ballot through the live webcast platform are still encouraged to vote their Shares.
You can do so by following the instructions on the voting instruction form provided by your intermediary. The voting instruction form
must be returned to your intermediary well in advance of the Meeting in order to have the Shares votes.
Each intermediary
has its own procedures, which should be carefully followed to ensure that your Shares are voted at the Meeting. The persons named on
the voting instruction form must vote or withhold from voting your Shares in accordance with your directions. In the absence of such
directions, voting instruction forms received will be voted in favor of the election of directors to the Board, the appointment of the
auditors and authorizing the directors to set the auditors’ remuneration, the Option Plan Amendment Resolution and the Unallocated
Awards Resolution.
The persons named
in the voting instruction form you receive will have discretionary authority with respect to amendments or variations to matters identified
in the Notice of Annual and Special Meeting of Shareholders and with respect to other matters which may properly come before the Meeting.
If you are a Beneficial
Shareholder and have not received a package containing a voting instruction form or form of proxy, please contact your intermediary.
As of the date
of this Circular, management of Greenbrook knows of no such amendment, variation or other matter expected to come before the Meeting.
If any other matters properly come before the Meeting, the persons named in the voting instruction form will vote on them in accordance
with their best judgment.
Revoking
Your Voting Instruction
If you are a Beneficial
Shareholder and wish to revoke your voting instructions, please contact your intermediary well in advance of the Meeting.
Delivery
of Proxy-Related Materials
Proxy-related materials
will be sent by Greenbrook to the intermediaries and not directly to Beneficial Shareholders. Greenbrook intends to pay for intermediaries
to deliver proxy-related materials and Form 54-101F7 (request for voting instructions) to “objecting beneficial owners”.
Additional Voting
Information
Broadridge counts
and tabulates the votes.
For general Shareholder
enquiries, you can contact our transfer agent, Computershare Investor Services Inc.:
Computershare
Investor Services Inc.
100 University Avenue
8th Floor, North Tower
Toronto, Ontario M5J 2Y1
Canada
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by
telephone - within Canada and the United States at 1-800-564-6253, and from all other countries
at 1-416-263-9200;
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by
fax at 1-888-453-0330; or
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by
e-mail at service@computershare.com.
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How to Attend
and Participate at the Virtual Meeting
In
order to attend the Meeting, Registered Shareholders, Beneficial Shareholders who have not duly appointed themselves as proxyholder,
duly appointed proxyholders (including Beneficial Shareholders who have duly appointed themselves as proxyholder) and guests must log
in online as set out below.
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Step
1: Log in online at www.virtualshareholdermeeting.com/GTMS2021AGM.
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Step
2: Follow the instructions below:
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Registered
Shareholders and Beneficial Shareholders who have not appointed themselves as proxyholders: Click “Login” and then enter
your control number. The 16-digit control number located on both sides of your form of proxy or voting instruction form is your control
number. For Registered Shareholders, if you use your control number to log in to the Meeting, any vote you cast at the Meeting will revoke
any proxy you previously submitted. If you do not wish to revoke a previously submitted proxy, you should not vote at the Meeting. If
you are a Beneficial Shareholder who has not appointed yourself as a proxyholder, you will not be able to vote at the Meeting, but you
will be able to ask questions.
Duly
appointed proxyholders (including Beneficial Shareholders who have appointed themselves as proxyholders): Click “Login”
and then enter the appointee name and the eight-character appointee identification number provided to you by the Shareholder who appointed
you.
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Guests:
Click “Guest” and then complete the online form.
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Registered Shareholders
and duly appointed proxyholders may ask questions at the Meeting and vote by completing a ballot online during the Meeting. If you plan
to vote at the Meeting, it is important that you are connected to the internet at all times during the Meeting in order to vote when
balloting commences. It is your responsibility to ensure internet connectivity for the duration of the Meeting. The Meeting will begin
promptly at 10:00 a.m. (Toronto time) on Monday, June 14, 2021, unless otherwise adjourned or postponed. For those that plan
on attending the Meeting via the live webcast platform, you should allow ample time to log in to the Meeting online and complete the
check-in procedures.
Beneficial Shareholders
who have not duly appointed themselves as proxyholders may listen to the Meeting and ask questions but may not vote. Guests will not
be permitted to vote or ask questions during the Meeting.
For any technical
difficulties experienced during the check-in process or during the Meeting, please call the technical support number that will be posted
on the Virtual Shareholder Meeting log in page for assistance.
Greenbrook
believes that the ability to participate in the Meeting in a meaningful way remains important despite the decision to hold this year’s
Meeting through electronic means. Shareholders will have substantially the same opportunity to vote and submit questions on matters of
business at the Meeting as in past years when the annual shareholders meetings were held in person.
ABOUT
GREENBROOK
Operating through
128 Company-operated treatment centers, Greenbrook is a leading provider of Transcranial Magnetic Stimulation (“TMS”)
therapy, an FDA-cleared, non-invasive therapy for the treatment of Major Depressive Disorder and other mental health disorders, in the
United States. TMS therapy provides local electromagnetic stimulation to specific brain regions known to be directly associated with
mood regulation. Greenbrook has provided more than 620,000 TMS treatments to over 17,000 patients struggling with depression.
ELECTION
OF DIRECTORS
General
The Articles provide
that the Board shall consist of a minimum of three (3) and a maximum of fifteen (15) directors. The Board determines the
number of directors to be elected at a meeting of Shareholders. The Board has determined that, at the present time, there will be eight
(8) directors, each of whom is to be elected at this Meeting and who will hold office until the end of the next annual meeting of
Shareholders or until their successors are elected or appointed.
The director biographies
on pages 8 to 12 of this Circular describe the directors who are proposed for election, along with their ownership of securities
of the Company.
All nominees have
established their eligibility and willingness to serve as directors. Five of the eight nominees are independent within the meaning of
applicable securities laws and stock exchange rules. All nominees are currently directors of Greenbrook. Management does not believe
that any of the nominees will be unable to serve as a director, but if that should occur for any reason prior to the Meeting, the persons
named in the accompanying form of proxy (or voting instruction form) may vote for another nominee at their discretion. Each director
shall hold office until the next annual meeting of Shareholders or until the director resigns or a successor is elected or appointed.
Advance
Notice Provisions
We have included
certain advance notice provisions with respect to the election of our directors in our by-laws (the “Advance Notice Provisions”).
The Advance Notice Provisions are intended to: (a) facilitate orderly and efficient annual general meetings or, where the need arises,
special meetings of our Shareholders; (b) ensure that all Shareholders receive adequate notice of Board nominations and sufficient
information with respect to all nominees; and (c) allow Shareholders to register an informed vote. Only persons who are nominated
by Shareholders in accordance with the Advance Notice Provisions will be eligible for election as directors at any annual meeting of
Shareholders, or at any special meeting of Shareholders if one of the purposes for which the special meeting was called was the election
of directors.
Under the Advance
Notice Provisions, a Shareholder wishing to nominate a director would be required to provide us notice, in the prescribed form, within
the prescribed time periods. These time periods include (a) in the case of an annual meeting of Shareholders (including annual and
special meetings), not less than 30 days prior to the date of the annual meeting of Shareholders; provided that, if the first public
announcement of the date of the annual meeting of Shareholders (the “Notice Date”) is less than 50 days before
the meeting date, not later than the close of business on the 10th day following the Notice Date and (b) in the
case of a special meeting (which is not also an annual meeting) of Shareholders called for any purpose which includes electing directors,
not later than the close of business on the 15th day following the Notice Date, provided that, in either instance, if
notice-and-access (as defined in National Instrument 54-101 – Communication with Beneficial Owners of Securities of a Reporting
Issuer) is used for delivery of proxy related materials in respect of a meeting described above, and the Notice Date in respect of
the meeting is not less than 50 days prior to the date of the applicable meeting, the notice must be received not later than the
close of business on the 40th day before the applicable meeting.
A copy of our by-laws
are available under the Company’s profile on SEDAR at www.sedar.com.
Individual
and Majority Voting Policy
The Board believes
that each of its members should carry the confidence and support of our Shareholders. To this end, the Board has adopted an individual
and majority voting policy that requires that Shareholders be able to vote in favor of, or withhold from voting, separately for each
nominee for director and that, in an uncontested election of directors, any nominee for director who receives a greater number of votes
“withheld” from his or her election than votes “for” such election must immediately tender his or her resignation
to the Chair of the Board following the applicable meeting or, if the affected director is the Chair, to each member of the GN Committee
(as defined herein). Any resignation received by the Chair of the Board will be promptly referred to the GN Committee for consideration.
An “uncontested election” means an election where the number of nominees for directors is equal to the number of directors
to be elected.
The GN Committee
will, promptly following the resignation but in any event within 30 days of the applicable Shareholders’ meeting, consider
the offer of resignation and will recommend to the Board whether or not to accept it. The GN Committee will recommend that the Board
accept the resignation absent exceptional circumstances that would warrant the applicable director to continue to serve on the Board.
The Board will
act on the GN Committee’s recommendation promptly following its receipt thereof and, in any event, within 90 days of the applicable
Shareholders’ meeting. The Board will accept the GN Committee’s recommendation absent exceptional circumstances. If a resignation
is accepted, the Board may, subject to applicable law and our Articles, appoint a new director to fill any vacancy created by the resignation,
reduce the size of the Board or call a meeting of Shareholders to appoint a replacement. A resignation will be effective upon its acceptance
by the Board. We will promptly issue a news release with the Board’s decision. If the Board determines not to accept a resignation,
the news release will fully state the reasons for that decision.
Director
Nominee Biographies
|
BRIAN
P. BURKE(1)
|
Independent
|
|
Pennsylvania,
USA
|
Principal
Occupation:
Mr. Burke
is currently the president of the Pittsburgh Penguins of the National Hockey League, a position he has held since February 2021.
Other Activities:
Prior to joining
the Pittsburgh Penguins, Mr. Burke was a studio analyst at Rogers Sportsnet, a Canadian television sports network, from May 2018
to February 2021. Following graduation from Harvard Law School in 1981, Mr. Burke practiced corporate and securities law,
with a focus on professional athletes and teams. Mr. Burke has been the president and/or general manager of several hockey organizations,
including the Calgary Flames, Toronto Maple Leafs, Anaheim Ducks, Vancouver Canucks and the Hartford Whalers during the period from
1992 to 2018. Mr. Burke previously served as a member of the boards of directors of the Sports Lawyers Association, Canuck Place
Children’s Hospice Foundation and Rugby Canada. Mr. Burke is also a member, and served on the selection committee of,
the Hockey Hall of Fame. Mr. Burke received a Juris Doctor from Harvard Law School and a bachelor’s degree in history
from Providence College.
|
|
Director since:
October 2018
|
Public Board
Memberships During Last Five Years:
None
|
|
Age:
65
|
Public Board
Interlocks:
None
|
|
|
|
Committees:
Compensation Committee
(Chair)
GN Committee
|
Meetings
Attended in Fiscal 2020:
Board Meetings
- 5 of 6 (83%)
GCN Committee Meetings(2) - 1 of 1 (100%)
|
|
Share
Ownership
|
|
Shares
Owned or Controlled
|
Options(6)
|
|
Nil
|
12,000
|
|
COLLEEN
CAMPBELL(1)
|
|
Lead
Independent Director
|
|
Ontario, Canada
|
Principal
Occupation:
Ms. Campbell
is currently the vice-chair of BMO Capital Markets, the investment and corporate banking arm of the Bank of Montreal (“BMO”),
a position she has held since 2012.
Other Activities:
Ms. Campbell
has over 38 years of experience in the investment banking industry serving in various roles since joining in 1997, including 15 years
in debt capital markets and ultimately as global head of BMO’s debt capital markets group. Ms. Campbell is currently chair
of BMO Capital Markets Real Estate Inc., chair of the Investment Committee for the Merchant Bank Real Estate Private Equity Fund,
chair of the Investment Committee of the BMO Real Estate Fund and co-chair of the Investment Bank’s Diversity and Inclusion
Steering Committee. Ms. Campbell holds an Honors Business Administration degree from Richard Ivey School of Business.
|
|
Director since:
September 2018
|
Public Board
Memberships During Last Five Years:
None
|
|
Age:
63
|
Public Board
Interlocks:
None
|
|
|
|
Committees:
Audit Committee
(Chair)
|
Meetings
Attended in Fiscal 2020:
Board Meetings
- 6 of 6 (100%)
Audit Committee Meetings - 4 of 4 (100%)
|
|
Share
Ownership
|
|
Shares
Owned or Controlled
|
Options(6)
|
|
5,000
|
12,000
|
|
|
|
|
|
|
|
|
SASHA
CUCUZ(1)
|
|
Not
Independent(3)
|
|
Ontario, Canada
|
Principal
Occupation:
Mr. Cucuz
is currently the chief executive officer of Greybrook Securities Inc. (“Greybrook Securities”), a Toronto-based
corporate finance and investment banking firm, a position he has held since 2005.
Other Activities:
As the CEO of
Greybrook Securities, Mr. Cucuz is responsible for co-managing the firm’s operation and investment strategy. Together
with his partners, Mr. Cucuz has played a significant role in growing Greybrook Securities’ real estate investment portfolio
to include over 80 multi-family and residential development projects throughout North America, representing over $17 billion worth
of estimated completion value. Under Mr. Cucuz’s leadership, the firm currently manages over $1.2 billion of equity on
behalf of more than 6,800 high net worth individual and institutional clients located in over 30 countries. Mr. Cucuz also serves
as the Co-chair of Greybrook Securities’ Investment and Project Advisory Committees where he is part of the team responsible
for approving new acquisitions and overseeing existing limited partnerships. As the former CEO of Greybrook Health, Mr. Cucuz
has been involved in several key transactions throughout the Greybrook Health portfolio including the acquisition of MacuHealth,
LLC and Bruder Healthcare Inc. and financings for portfolio companies including TearLab Inc. In addition to being a member of the
Board of Directors of Greenbrook, Mr. Cucuz is also a Director of Neupath Health Inc., Canada’s largest provider of Chronic
Pain services. Charitably, Mr. Cucuz serves on the boards of the Greybrook Foundation and the Blu Genes Foundation. Mr. Cucuz
holds a bachelor of arts degree in economics from York University.
|
|
Director since:
September 2018
|
Public
Board Memberships During Last Five Years:
|
|
Neupath Health Inc.
|
(2020
to Present)
|
|
Age:
43
|
Public Board
Interlocks:
None
|
|
|
|
Committees:
None
|
Meetings
Attended in Fiscal 2020:
Board Meetings
- 6 of 6 (100%)
|
|
Share
Ownership
|
|
Shares
Owned or Controlled
|
Options(6)
|
|
Nil
|
10,000
|
|
ADRIENNE
GRAVES, Ph.D.(1)
|
|
Independent
|
|
North Carolina,
USA
Director since:
October 2018
|
Principal
Occupation:
Dr. Graves
is currently a corporate director.
Other Activities:
Dr. Graves
is a neuroscientist by training and a global leader in the pharmaceutical and medical device industries. Dr. Graves held multiple
positions at Santen Inc., the U.S. subsidiary of a 130 year old Japanese pharmaceutical company, over a 15 year period, including
as the president and chief executive officer from 2002 to 2010. In this role, Dr. Graves successfully established Santen Inc.’s
strong global presence, brought multiple products through preclinical and clinical development to approval and commercialization,
gained global clinical development and regulatory experience and led global teams through successful acquisitions and partnerships.
Prior to joining Santen Inc., Dr. Graves spent 9 years at Alcon Laboratories, Inc., beginning in 1986 as a Senior Scientist,
where she progressed through various roles including director of international ophthalmology. Dr. Graves currently serves as
an independent director on the boards of IVERIC bio, Inc., Nicox S.A., Oxurion NV, Qlaris Bio, Inc., TherOptix, Inc.
and Surface Ophthalmics. Dr. Graves also serves on the boards of the following foundations: ASCRS (American Society for Cataract
and Refractive Surgery), FFB (Foundation Fighting Blindness), GRF (Glaucoma Research Foundation), HCP (Himalayan Cataract Project),
and Retina Global. Dr. Graves holds a bachelor of arts degree in psychology with honors from Brown University, a Ph.D. in psychobiology
from the University of Michigan, and completed a postdoctoral fellowship in visual neuroscience at the University of Paris.
|
|
|
Public
Board Memberships During Last Five Years:
|
|
Age:
67
|
Akorn, Inc.
IVERIC bio, Inc.
Nicox S.A.
Oxurion NV
TearLab Corporation
|
(2012 to 2020)
(2018 to Present)
(2014 to Present)
(2018 to Present)
(2005 to 2018)
|
|
|
Public Board
Interlocks:
None
|
|
|
|
Committees:
Audit Committee
GN Committee (Chair)
|
Meetings
Attended in Fiscal 2020:
Board Meetings
- 5 of 6 (83%)
Audit Committee Meetings - 3 of 4 (75%)
GCN Committee Meetings(2) – 1 of 1 (100%)
|
|
Share
Ownership
|
|
Shares
Owned or Controlled
|
Options(6)
|
|
Nil
|
10,000
|
|
|
|
|
|
|
|
|
|
|
BILL
LEONARD(1)
|
|
Not
Independent(4)
|
|
Maryland,
USA
|
Principal
Occupation:
Mr. Leonard
is currently the President and Chief Executive Officer of the Company and its predecessor, TMS NeuroHealth Centers Inc., a position
he has held since 2011.
Other Activities:
For more than
20 years, Mr. Leonard has provided operational and strategic leadership in the development of medical devices, pharmaceuticals
and healthcare services. Mr. Leonard previously served as president of Leonard Consulting LLC from 2008 to 2011, and president
of the Bio-Pharmaceutical Division of Euclid Vision Corporation from November 2007 to December 2010 where he developed
FDA strategy for an ophthalmic drop that was successfully approved to undergo clinical trials. Mr. Leonard also served as president
of the Refractive Surgery Division of TLC from July 2004 to March 2007, where he piloted a comprehensive business strategy
and leadership generating over $200 million in revenue with 900 employees and a client base of 13,000 eye care professionals. Mr. Leonard
holds a business administration degree from Towson University.
|
|
Director since:
February 2018
|
Public Board
Memberships During Last Five Years:
None
|
|
Age:
56
|
Public Board
Interlocks:
None
|
|
|
|
Committees:
None
|
Meetings
Attended in Fiscal 2020:
Board Meetings
- 6 of 6 (100%)
|
|
Share
Ownership
|
|
Shares
Owned or Controlled
|
Options(6)
|
|
832,500
|
10,000
|
|
ADELE
C. OLIVA(1)
|
|
Independent
|
|
Pennsylvania,
USA
|
Principal
Occupation:
Ms. Oliva
is currently the Founding Partner of 1315 Capital LLC (“1315 Capital”), a Philadelphia-based firm that manages
over $500 million and provides expansion and growth capital to commercial-stage medical technology, healthcare service, and specialty
therapeutic companies, a position she has held since 2014. She was recruited to Quaker Partners in 2007 to expand their growth stage
investing practice.
Other Activities:
Ms. Oliva
has been a healthcare investor for over 20 years and focuses on commercial stage medical technology, healthcare service, and specialty
therapeutic investments. Ms. Oliva co-founded 1315 Capital in 2014 to establish a firm focused on healthcare growth investing
and the firm has since raised two funds. Prior to 1315 Capital and Quaker Partners, Ms. Oliva was Co-Head of US Healthcare at
Apax Partners, where she started in 1997. Ms. Oliva was also in business development and marketing at Baxter International.
Ms. Oliva received a bachelor of science degree from St. Joseph’s University and a master of business administration degree
from Cornell University.
|
|
Director since:
June 2019
|
Public Board
Memberships During Last Five Years:
TELA Bio Inc.
(2019 to Present)
|
|
Age:
55
|
Public Board
Interlocks:
None
|
|
|
|
Committees:
Compensation Committee
GN Committee
|
Meetings
Attended in Fiscal 2020:
Board Meetings
- 6 of 6 (100%)
GCN Committee
Meetings(2) - 1 of 1 (100%)
|
|
Share
Ownership
|
|
Shares
Owned or Controlled
|
Options(6)
|
|
1,771,171(8)
|
5,000
|
|
|
|
|
|
|
|
FRANK
TWORECKE(1)
|
|
Independent
|
|
Maryland,
USA
|
Principal
Occupation:
Mr. Tworecke
is currently a corporate director.
Other Activities:
Mr. Tworecke
has more than 35 years of experience in leading major retail and apparel companies. Prior to his retirement in December 2012,
Mr. Tworecke acted as group president of Sportswear of Warnaco Group Inc. from 2004 to 2012 where he served as the head of the
Calvin Klein jeans brand worldwide and Chaps® units. Prior to this role, Mr. Tworecke served as the president of Cignal
Division at Merry-Go-Round Enterprises, Inc., president and chief executive officer of Bon-Ton Stores Inc. and chief operating
officer of Jos. A. Bank Clothiers. Mr. Tworecke also served on the boards of directors of Cherokee Inc., Hampshire Group Limited,
Grafton-Fraser Inc. and Sinai Hospital of Baltimore. Mr. Tworecke holds a bachelor of science degree from Cornell University
and a master of business administration degree from Syracuse University. Mr. Tworecke was also a member of the Business Advisory
Council of the Department of Applied Economics and Management at Cornell University.
|
|
Director since:
October 2018
|
Public Board
Memberships During Last Five Years:
None
|
|
Age:
74
|
Public Board
Interlocks:
None
|
|
|
|
Committees:
Audit Committee
Compensation Committee
|
Meetings
Attended in Fiscal 2020:
Board Meetings
- 6 of 6 (100%)
Audit Committee Meetings - 4 of 4 (100%)
GCN Committee Meetings(2) - 1 of 1 (100%)
|
|
Share
Ownership
|
|
Shares
Owned or Controlled
|
Options(6)
|
|
40,000
|
10,000
|
|
ELIAS
VAMVAKAS(1)
|
|
Not
Independent(5)
|
|
Ontario, Canada
|
Principal
Occupation:
Mr. Vamvakas
is the Chairman of the Board, a position he has held since February 2018. Mr. Vamvakas is currently the founder, chairman
and CEO of Greybrook Capital Inc. (“Greybrook Capital”), a private equity firm focused on healthcare and real
estate, a position he has held since 2007, and the Chairman of The Caldwell Partners International Inc., a position he has held since
July 2019.
Other Activities:
Mr. Vamvakas
was previously the chairman of TearLab Corporation, a position he held until July 2020. Prior to founding Greybrook Capital,
Mr. Vamvakas co-founded TLC Vision Corporation (“TLC”) where he served as president and chief executive officer
from 1994 to 2004. During this period, Mr. Vamvakas built TLC into the largest eye care service provider organization in North
America with revenues of more than $300 million as TLC opened or acquired more than 100 laser eye clinics, over 200 mobile laser
sites, more than 250 mobile cataract stations and several ambulatory surgery centres. Through TLC’s subsidiary, Vision Source
Inc., TLC also developed the largest independent optometric franchise with more than 2,000 locations. Mr. Vamvakas holds a bachelor
of science degree from the University of Toronto.
|
|
Chairman
since:
|
Public
Board Memberships During Last Five Years:
|
|
February 2018
|
TearLab
Corporation
|
(1996
to 2020)
|
|
|
|
The Caldwell Partners International Inc.
|
(2019
to Present)
|
|
|
Age:
62
|
Public Board
Interlocks:
None
|
|
|
|
Committees:
None
|
Meetings
Attended in Fiscal 2020:
Board Meetings
- 6 of 6 (100%)
|
|
Share
Ownership
|
|
Shares
Owned or Controlled
|
Options(6)
|
|
Nil(7)
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
(1)
|
Except as hereinafter
described, none of the director nominees of Greenbrook, as at the date of this Circular,
is or has been within the 10 years before the date of this Circular, (a) a director,
chief executive officer or chief financial officer of any company that was subject to an
order (as defined below) that was issued while the existing or proposed director or executive
officer was acting in the capacity as director, chief executive officer or chief financial
officer, (b) was subject to an order that was issued after the existing or proposed
director or executive officer ceased to be a director, chief executive officer or chief financial
officer and which resulted from an event that occurred while that person was acting in the
capacity as director, chief executive officer or chief financial officer, or (c) a director
or executive officer of any company that, while that person was acting in that capacity,
or within a year of that person ceasing to act in that capacity, became bankrupt, made a
proposal under any legislation relating to bankruptcy or insolvency or was subject to or
instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver
manager or trustee appointed to hold its assets. For the purposes of this paragraph, “order”
means a cease trade order, an order similar to a cease trade order or an order that denied
the relevant company access to any exemption under securities legislation, in each case,
that was in effect for a period of more than 30 consecutive days.
|
No director
nominee has, within 10 years before the date of this Circular, become bankrupt, made a proposal under any legislation relating to
bankruptcy or insolvency or has been subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver,
receiver manager or trustee appointed to hold the assets of the director, executive officer or shareholder.
No director
nominee has been subject to: (i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities
regulatory authority, or has entered into a settlement agreement with a securities regulatory authority; or (ii) any other penalties
or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable investor in deciding
whether to vote for a nominee.
Ms. Oliva
was a member of the board of directors of NovaSom, Inc. (“NovaSom”) from September 15, 2009 to September 26,
2019. In August 2019, NovaSom filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in the United
States. The directors and officers of NovaSom remained involved with the company during the Chapter 11 proceedings in order to facilitate
the sale of the company. NovaSom’s assets were sold on September 27, 2019 and the Chapter 11 bankruptcy proceedings were dismissed
on October 31, 2019.
Dr. Graves
was a member of the board of directors of Akorn, Inc. (“Akorn”) from March 2012 to September 2020.
In May 2020, Akorn filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in the United States. The
directors and officers of Akorn remained involved with the company during the Chapter 11 proceedings in order to facilitate the sale
of the company. Akorn’s assets were sold on October 1, 2020.
|
(2)
|
On April 22,
2021, the Board divided the responsibilities of the Governance, Compensation and Nominating
Committee (the “GCN Committee”) into a separate and distinct Governance
and Nominating Committee (the “GN Committee”) and a separate and distinct
Compensation Committee (the “Compensation Committee”). See “Our
Approach to Corporate Governance – Committees of our Board”).
|
|
|
|
|
(3)
|
Mr. Cucuz
is considered a non-independent director as a result of the fact that he serves on the board
of directors of Greybrook Health, a significant shareholder of the Company, and is an employee
of Greybrook Securities.
|
|
|
|
|
(4)
|
Mr. Leonard
is considered a non-independent director as he is the President and Chief Executive Officer
of Greenbrook.
|
|
|
|
|
(5)
|
Mr. Vamvakas
is considered a non-independent director by reason of the fact that he serves as the chairman
of Greybrook Capital, the controlling shareholder of Greybrook Health.
|
|
|
|
|
(6)
|
For additional
information regarding stock option (“Options”) held by directors, see
“Director Compensation” below.
|
|
|
|
|
(7)
|
Mr. Vamvakas,
chairman of the Company, is the chairman and founder of Greybrook Capital, the parent company
of Greybrook Health. Mr. Vamvakas disclaims beneficial ownership of the 4,327,697 Shares
held by Greybrook Health.
|
|
|
|
|
(8)
|
Represents
Shares directly held by an affiliate of 1315 Capital.
|
Board
and Committee Attendance
The following table
provides a summary of each director’s attendance at Board and Committee meetings in Fiscal 2020:
|
Name(1)
|
|
Board
|
|
|
Audit
Committee
|
|
|
GCN
Committee(2)
|
|
|
Overall
Attendance
|
|
|
Brian P.
Burke
|
|
|
5
of 6 (83
|
%)
|
|
|
–
|
|
|
|
1
of 1 (100
|
%)
|
|
|
6
of 7
|
|
|
|
86
|
%
|
|
Colleen Campbell
|
|
|
6
of 6 (100
|
%)
|
|
|
4
of 4 (100
|
%)
|
|
|
–
|
|
|
|
10
of 10
|
|
|
|
100
|
%
|
|
Sasha Cucuz
|
|
|
6
of 6 (100
|
%)
|
|
|
–
|
|
|
|
–
|
|
|
|
6
of 6
|
|
|
|
100
|
%
|
|
Adrienne Graves
|
|
|
5
of 6 (83
|
%)
|
|
|
3
of 4 (75
|
%)
|
|
|
1
of 1 (100
|
%)
|
|
|
9
of 11
|
|
|
|
82
|
%
|
|
Bill Leonard
|
|
|
6
of 6 (100
|
%)
|
|
|
–
|
|
|
|
–
|
|
|
|
6
of 6
|
|
|
|
100
|
%
|
|
Adele C. Oliva
|
|
|
6
of 6 (100
|
%)
|
|
|
–
|
|
|
|
1
of 1 (100
|
%)
|
|
|
7
of 7
|
|
|
|
100
|
%
|
|
Frank Tworecke
|
|
|
6
of 6 (100
|
%)
|
|
|
4
of 4 (100
|
%)
|
|
|
1
of 1 (100
|
%)
|
|
|
11
of 11
|
|
|
|
100
|
%
|
|
Elias Vamvakas
|
|
|
6
of 6 (100
|
%)
|
|
|
–
|
|
|
|
–
|
|
|
|
6
of 6
|
|
|
|
100
|
%
|
|
TOTAL
|
|
|
96
|
%
|
|
|
92
|
%
|
|
|
100
|
%
|
|
|
–
|
|
|
|
97
|
%
|
Note:
|
|
(1)
|
Mr. Stephan
Roker served on the Board from January 12, 2021 to January 15, 2021. During this
time, Mr. Roker did not attend any Board or Committee meetings.
|
|
|
(2)
|
On April 22,
2021, the Board divided the responsibilities of the GCN into a separate and distinct GN Committee
and a Compensation Committee. See “Our Approach to Corporate Governance – Committees
of our Board”).
|
OUR
APPROACH TO CORPORATE GOVERNANCE
General
We recognize that
good corporate governance plays an important role in our overall success and in enhancing shareholder value. The disclosure set out below
describes our approach to corporate governance.
The
Role of the Board
Our Board is responsible
for supervising the management of our business and affairs, including providing guidance and strategic oversight to management. Our Board
has adopted a formal mandate in the form set forth in Appendix A that includes the following:
|
|
·
|
appointing
the President and Chief Executive Officer;
|
|
|
·
|
appointment,
evaluation and development of senior management and succession planning;
|
|
|
·
|
approving
the corporate goals and objectives that the President and Chief Executive Officer is responsible
for meeting and reviewing the performance of the President and Chief Executive Officer against
such corporate goals and objectives;
|
|
|
·
|
taking
steps to satisfy itself as to the integrity of the President and Chief Executive Officer
and other senior executive officers and that the President and Chief Executive Officer and
other senior executive officers create a culture of integrity throughout the organization;
and
|
|
|
·
|
reviewing
and approving management’s strategic and business plans.
|
Our Board has adopted
a written position description for the Chair of the Board, which sets out the Chair’s key responsibilities, including, among others,
duties relating to setting Board meeting agendas, chairing Board and Shareholder meetings, director development and communicating with
Shareholders and regulators. Our Board has also adopted a written position description for our lead director. See “– Meetings
of Independent Directors and Conflicts of Interest”.
Our Board has adopted
a written position description for each of our committee chairs which sets out each of the committee chair’s key responsibilities,
including, among others, duties relating to setting committee meeting agendas, chairing committee meetings and working with the respective
committee and management to ensure, to the greatest extent possible, the effective functioning of the committee.
Our Board has adopted
a written position description for our President and Chief Executive Officer which sets out the key responsibilities of our President
and Chief Executive Officer, including, among other duties in relation to providing overall leadership, ensuring the development of a
strategic plan and recommending such plan to our Board for consideration, ensuring the development of an annual corporate plan and budget
that supports the strategic plan and recommending such plan to our Board for consideration, supervising day-to-day management and communicating
with Shareholders and regulators.
Corporate
Governance Policies and Practices
Greenbrook is committed
to strong corporate governance policies and practices. Our policies and practices continue to be developed having regard to the external
environment and externally cited best practices to ensure that our governance practices are comprehensive, relevant, effective and transparent.
We have adopted the following corporate governance policies to date, certain of which are available on our website at www.greenbrooktms.com:
|
|
·
|
Corporate
Governance Guidelines;
|
|
|
·
|
Insider
Trading Policy;
|
|
|
·
|
Majority
Voting Policy;
|
Composition
of our Board and Board Committees
Under our Articles,
our Board is to consist of a minimum of three (3) and a maximum of fifteen (15) directors as determined from time to time
by the directors. Our Board currently consists of eight (8) directors, the majority of whom are considered to be independent under
Canadian securities laws and stock exchange rules, and all but five of whom are resident Canadians. Under the OBCA, a director may be
removed with or without cause by a resolution passed by an ordinary majority of the votes cast by our Shareholders present in person
or by proxy at a meeting of our Shareholders and who are entitled to vote. The directors will be elected by our Shareholders at each
annual meeting of our Shareholders, and all directors will hold office for a term expiring at the close of the next annual meeting or
until their respective successors are elected or appointed.
The nominees for
election by our Shareholders as directors will be determined by the GN Committee in accordance with the provisions of applicable
corporate law and the charter of the GN Committee. See also “– Committees of our Board – Governance and Nominating
Committee”.
Director
Independence
Under National
Instrument 58-101 – Disclosure of Corporate Governance Practices, a director is considered to be independent if he
or she is independent within the meaning of National Instrument 52-110 – Audit Committees (“NI 52-110”).
Pursuant to NI 52-110, an independent director is a director who is free from any direct or indirect relationship which could, in
the view of our Board, be reasonably expected to interfere with a director’s independent judgment. Under Nasdaq Rule 5605(a)(2),
an independent director is a person other than an executive officer or employee of the company or any other individual having a relationship
which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director. Based on information provided by each director concerning his or her background, employment and
affiliations, our Board has determined that, of the eight directors nominated for election to our Board, Bill Leonard, Sasha Cucuz and
Elias Vamvakas are not considered to be “independent” within the meaning of applicable securities laws and stock exchange
rules. Mr. Leonard is considered not independent by reason of the fact that he is our President and Chief Executive Officer. Mr. Cucuz
is considered not independent as a result of the fact that he serves on the board of directors of Greybrook Health, a significant shareholder
of the Company, and is an employee of Greybrook Securities. Mr. Vamvakas is considered not independent by reason of the fact that
he serves as the chairman of Greybrook Capital, the controlling shareholder of Greybrook Health. Certain members of our Board are also
members of the board of directors of other public companies (see “Election of Directors – Director Nominee Biographies”).
Our Board has not adopted a director interlock policy, but is keeping informed of other public directorships held by its members.
Meetings
of Independent Directors and Conflicts of Interest
Our Board believes
that given its size and structure, including the fact that a majority of our directors are independent, it is able to facilitate independent
judgment in carrying out its responsibilities. To enhance such independent judgment, the independent members of the Board hold in-camera
meetings with members of management and the non-independent directors not in attendance, as part of regularly scheduled Board meetings.
Open and candid discussion among the independent directors is facilitated by the relatively small size of the Board and great weight
is attributed to the views and opinions of the independent directors. Our Board has not appointed an independent Chair; however, Colleen
Campbell has been appointed as lead director by our Board and is responsible for ensuring that the directors who are independent of management
have opportunities to meet without management present, as required. The lead director shall be appointed and replaced from time to time
by the Board. Discussions are led by the lead director who provides feedback subsequently to the Chair.
A director who
has a material interest in a matter before our Board or any committee on which he or she serves is required to disclose such interest
as soon as the director becomes aware of it. In situations where a director has a material interest in a matter to be considered by our
Board or any committee on which he or she serves, such director may be required to absent himself or herself from the meeting while discussions
and voting with respect to the matter are taking place. Directors are also required to comply with the relevant provisions of the OBCA
regarding conflicts of interest.
As at the date
hereof, no existing or potential material conflicts of interest exist between the Company or a subsidiary of the Company and a director
or officer of the Company or a subsidiary of the Company.
Committees
of our Board
Prior to April 22, 2021, the Board had established
two committees: the Audit Committee and the GCN Committee. On April 22, 2021, the Board determined that it was in the best interests
of the Company to split the responsibilities of the GCN Committee into a separate and distinct Governance and Nominating Committee and
a separate and distinct Compensation Committee. Accordingly, as at the date hereof, our Board has established three committees: the Audit
Committee, the GN Committee and the Compensation Committee. All members of the Audit Committee, the GN Committee and the Compensation
Committee are persons determined by our Board to be independent directors.
Audit Committee
Our Audit Committee consists of three (3) directors,
each of whom are persons determined by our Board to be both independent directors and financially literate or sophisticated, each within
the meaning of applicable U.S. and Canadian securities laws and/or stock exchange rules. Our Audit Committee is currently comprised of:
|
|
·
|
Colleen Campbell (Chair);
|
Each of our Audit Committee members has an understanding
of the accounting principles used to prepare financial statements and varied experience as to the general application of such accounting
principles, as well as an understanding of the internal controls and procedures necessary for financial reporting. For additional details
regarding the relevant education and experience of each member of our Audit Committee, see “Election of Directors – Director
Nominee Biographies”.
Our Board has adopted a written charter for the
Audit Committee that sets out the purpose, composition, authority and responsibility of our Audit Committee, consistent with applicable
Canadian securities laws and/or stock exchange rules. In connection with our listing on Nasdaq, we amended the charter of our Audit Committee
to ensure compliance with all applicable U.S. securities laws and Nasdaq listing rules. A copy of the amended charter has been posted
on our website at www.greenbrooktms.com. The Audit Committee assists our Board in discharging its oversight of:
|
|
·
|
the quality and integrity of our financial statements
and related information;
|
|
|
·
|
the independence, qualifications and appointment
of our external auditor;
|
|
|
·
|
our disclosure controls and procedures, internal
control over financial reporting and management’s responsibility for assessing and reporting on the effectiveness of such controls;
|
|
|
·
|
our risk management processes;
|
|
|
·
|
monitoring and periodically reviewing our whistleblower
policy; and
|
|
|
·
|
transactions with our related parties.
|
Our Audit Committee has access to all of our books,
records, facilities and personnel and may request any information about us as it may deem appropriate. It also has the authority, in its
sole discretion and at our expense, to retain and set the compensation of outside legal, accounting or other advisors as necessary to
assist in the performance of its duties and responsibilities. Our Audit Committee also has direct communication channels with the Chief
Financial Officer and our external auditors to discuss and review such issues as our Audit Committee may deem appropriate.
Additional information
about our Audit Committee, as required by NI 52-110, is in our annual information form, which is available on SEDAR at www.sedar.com,
and on EDGAR at www.sec.gov (as an exhibit to our Annual Report on Form 40-F).
External Auditor Service Fee
We incurred the following fees by our external
auditor, KPMG LLP, during the periods provided below:
|
|
|
Year Ended
December 31, 2020
|
|
|
Year Ended
December 31, 2019
|
|
|
Audit
fees(1)
|
|
$
|
879,220
|
|
|
$
|
286,142
|
|
|
Audit-related
fees(2)
|
|
$
|
–
|
|
|
$
|
444,860
|
|
|
Tax
fees(3)
|
|
$
|
220,146
|
|
|
$
|
165,850
|
|
|
All other fees
|
|
$
|
–
|
|
|
$
|
–
|
|
|
Total fees paid
|
|
$
|
1,099,366
|
|
|
$
|
896,852
|
|
Notes:
|
|
(1)
|
Fees related to audits of annual financial statements, involvement with registration statements and other
filings with various regulatory authorities, quarterly reviews of interim financial statements and consultations related to accounting
matters impacting the consolidated financial statements.
|
|
|
(2)
|
Fees related to the acquisition of Achieve TMS Centers, LLC and Achieve TMS Alaska, LLC and implementation
of revised policies as a result of new accounting standards.
|
|
|
(3)
|
Tax fees are comprised of tax compliance fees associated with the filing of tax returns.
|
The Audit Committee charter provides that the
Audit Committee must pre-approve the retaining of the auditors for any audit or non-audit service. The pre-approval process involves management
presenting the Audit Committee with a description of any proposed non-audit services. The Audit Committee considers the appropriateness
of such services and whether the provision of those services would impact the auditor’s independence. The Audit Committee may delegate
to one or more members the authority to pre-approve the retaining of the auditors for any non-audit service to the extent permitted by
law, but pre-approval by such member or members so delegated must be presented to the full Audit Committee at its first scheduled meeting
following such pre-approval.
Governance and Nominating Committee
Our GN Committee is comprised of three (3) directors,
each of whom has been determined by our Board to be an independent director, and is charged with reviewing, overseeing and evaluating
our corporate governance, compensation and nominating policies. Our GN Committee is currently comprised of:
|
|
·
|
Adrienne Graves (Chair);
|
No member of our GN Committee is an officer
of Greenbrook, and as such, our Board believes that the GN Committee is able to conduct its activities in an objective manner.
Our Board believes that the members of the GN Committee
individually and collectively possess the requisite knowledge, skill and experience in governance matters, including human resource management
and general business leadership, to fulfill the GN Committee’s mandate. All members of the GN Committee have substantial knowledge
and experience as current and former senior executives of large and complex organizations. For additional details regarding the relevant
education and experience of each member of the GN Committee, see “Election of Directors – Director Nominee Biographies”.
Our Board has adopted a written charter for the
GN Committee that sets forth the purpose, composition, authority and responsibility of our GN Committee. A copy of the charter
has been posted on our website at www.greenbrooktms.com. Our GN Committee’s purpose is to assist our Board in:
|
|
·
|
the recruitment, development and retention of
our senior executives;
|
|
|
·
|
maintaining talent management and succession
planning systems and processes relating to our senior management;
|
|
|
·
|
developing our corporate governance guidelines
and principles and providing us with governance leadership;
|
|
|
·
|
identifying and overseeing the recruitment of
candidates qualified to be nominated as members of our Board;
|
|
|
·
|
reviewing the structure, composition and mandate
of Board committees; and
|
|
|
·
|
evaluating the performance and effectiveness
of our Board and of our Board committees.
|
Our GN Committee is responsible for establishing
and implementing procedures to evaluate the performance and effectiveness of our Board, committees of our Board and the contributions
of individual Board members. Our GN Committee also takes reasonable steps to evaluate and assess, on an annual basis, directors’
performance and effectiveness of our Board, committees of our Board, individual Board members, our chair and committee chairs. The assessment
addresses, among other things, individual director independence, individual director and overall Board skills, and individual director
financial literacy. Our Board receives and considers the recommendations from our GN Committee regarding the results of the evaluation
of the performance and effectiveness of our Board, committees of our Board, individual Board members, our chair and committee chairs.
In identifying new candidates for our Board, the GN Committee will consider what competencies and skills our Board, as a whole, should
possess and assess what competencies and skills each existing director possesses, considering our Board as a group, and the personality
and other qualities of each director, as these may ultimately determine the boardroom dynamic. Our GN Committee is also responsible
for orientation and continuing education programs for our directors. See also “– Orientation and Continuing Education”.
Compensation Committee
Our Compensation Committee is comprised of
three (3) directors, each of whom has been determined by our Board to be an independent director, and is charged with reviewing,
overseeing and evaluating our compensation policies. Our Compensation Committee is currently comprised of:
|
|
·
|
Brian P. Burke (Chair);
|
No member of our Compensation Committee is
an officer of Greenbrook, and as such, our Board believes that the Compensation Committee is able to conduct its activities in an objective
manner.
Our Board believes that the members of the Compensation
Committee individually and collectively possess the requisite knowledge, skill and experience in compensation matters, including human
resource management, executive compensation matters and general business leadership, to fulfill the Compensation Committee’s mandate.
All members of the Compensation Committee have substantial knowledge and experience as current and former senior executives of large and
complex organizations. For additional details regarding the relevant education and experience of each member of our Compensation Committee,
including the direct experience that is relevant to each committee member’s responsibilities in executive compensation, see “Election
of Directors – Director Nominee Biographies”.
Our Board has adopted a written charter for the
Compensation Committee that sets forth the purpose, composition, authority and responsibility of our Compensation Committee. A copy of
the charter has been posted on our website at www.greenbrooktms.com. Our Compensation Committee’s purpose is to assist our
Board in:
|
|
·
|
the appointment, performance, evaluation and
compensation of our senior executives;
|
|
|
·
|
developing a compensation structure for our senior
executives including salaries, annual and long-term incentive plans including plans involving share issuances and other share-based awards;
|
|
|
·
|
establishing policies and procedures designed
to identify and mitigate risks associated with our compensation policies and practices;
|
|
|
·
|
assessing the compensation of our directors;
and
|
|
|
·
|
developing benefit, retirement and savings plans.
|
For information on the process
by which the Compensation Committee and the Board determine the compensation of our directors and executive officers, see “Director
Compensation” and “Executive Compensation” below.
Role
of the Compensation Consultant
As part of the Compensation
Committee’s annual review of the Company’s compensation program, the Compensation Committee may engage an independent compensation
consultant to evaluate the Company’s director and/or executive compensation program against market practice. In 2020, the Company
retained Mercer (Canada) Inc. (“Mercer”), an independent compensation consultant, to assist with the development
of a director and executive compensation framework for fiscal 2021 and beyond. Mercer’s mandate was to provide independent advice
to the Compensation Committee (formerly the GCN Committee) on director and executive compensation matters, including identifying an applicable
compensation peer group, benchmarking director and executive compensation, reviewing short-term and long-term incentive plan design vehicles
and metrics, including compensation risks and governance matters Mercer provided periodic advice to the Compensation Committee with respect
to such compensation matters and in response to other Compensation Committee requests, culminating in the adoption by the Company of a
new executive and director compensation framework that is effective for fiscal 2021 (see “Director Compensation – Changes
to Director Compensation for Fiscal 2021” and “Executive Compensation – Changes to Executive Compensation for Fiscal
2021”). Mercer did not provide any other services to the Company, our directors or management and the Company did not retain any
other compensation consultants in 2019 or 2020.
The Compensation Committee is of the view that
prescriptive formulas and weightings applied to forward-looking objectives cannot capture all aspects of business circumstances and can
lead to unintended consequences and potentially foster “narrow-minded” thinking and behaviors. For these reasons, all benchmarking
data is used only for informational purposes and the Compensation Committee deliberately avoids the use of a mechanical approach to its
compensation analysis. Instead, the Compensation Committee focuses on applying sound judgment in combination with reviewing several sources
of information in arriving at compensation decisions
The fees billed by Mercer during the financial
year ended December 31, 2020 is provided in the table below:
|
|
|
|
Year
Ended
December 31, 2020
|
|
|
|
Year
Ended
December 31, 2020
|
|
|
Executive Compensation-Related
Fees(1)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
All other fees(2)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Total fees paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Notes:
|
|
(1)
|
All fees billed by Mercer in respect of services provided to the Company relating to determining compensation
for the Company’s directors and executive officers in 2020 were billed by Mercer in 2021 (totaling approximately C$61,000 as of
the date of this Circular).
|
|
|
(2)
|
Represents the aggregate fees billed for all other services provided by Mercer that are not reported under
“Executive Compensation-Related Fees”.
|
Director
Term Limits and Other Mechanisms of Board Renewal
Directors are to be elected at each annual meeting
of Shareholders to hold office for a term expiring at the close of the next annual meeting, or until a successor is appointed or elected,
and will be eligible for re-election. Nominees will be nominated by the GN Committee, in each case for election by Shareholders as
directors in accordance with the provisions of our constating documents and applicable corporate and securities laws. All nominees who
are nominated by the GN Committee will be included in the proxy-related materials to be sent to Shareholders prior to each annual
meeting of Shareholders.
Our Board has not adopted director term limits
or other automatic mechanisms of board renewal. The Company believes such limits and automatic mechanisms would discount the value of
experience and unnecessarily deprive the Company of the contribution by directors who have developed a deep knowledge of the Company over
time. Rather than adopting formal term limits, mandatory age-related retirement policies and other mechanisms of board renewal, the GN Committee
will seek to maintain the composition of our Board in a way that provides, in the judgment of our Board, the best mix of skills and experience
to provide for our overall stewardship. Our GN Committee is also expected to conduct a process for the assessment of our Board, each
committee and each director regarding his, her or its effectiveness and performance, and to report evaluation results to our Board. See
also “– Diversity”.
Orientation
and Continuing Education
To maintain reasonable assurance that every new
director engages in a comprehensive orientation process and that all directors are provided with continuing education opportunities, the
GN Committee has implemented an orientation program for new directors under which a new director will meet with the chair, the lead
director, members of senior management and our corporate secretary. New directors will be provided with comprehensive orientation and
education as to the nature and operation of the Company and our business, the role of our Board and its committees, and the contribution
that an individual director is expected to make. The GN Committee is responsible for overseeing director continuing education designed
to maintain or enhance the skills and abilities of the directors and to ensure that their knowledge and understanding of our business
remains current. The chair of each committee is responsible for coordinating orientation and continuing director development programs
relating to the GN Committee’s mandate.
Ethical
Business Conduct
We have adopted a written code of conduct (the
“Code of Conduct”) that applies to all of our directors, officers and employees. The objective of the Code of Conduct
is to provide guidelines for maintaining our and our subsidiaries’ integrity, reputation, honesty, objectivity and impartiality.
The Code of Conduct addresses conflicts of interest, protection of our assets, confidentiality, fair dealing with our Shareholders, competitors
and employees, insider trading, compliance with laws and reporting any illegal or unethical behavior. As part of the Code of Conduct,
any person subject to the Code of Conduct is required to avoid or fully disclose interests or relationships that are harmful or detrimental
to our best interests or that may give rise to real, potential or the appearance of conflicts of interest. Our Board has ultimate responsibility
for the stewardship of the Code of Conduct and it monitors compliance through the GN Committee. Directors, officers and employees
are required to annually certify that they have not violated the Code of Conduct.
The Code of Conduct is available on our website
at www.greenbrooktms.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Diversity
We believe that having a diverse Board can offer
a breadth and depth of perspectives that enhance our Board’s performance. We value diversity of abilities, experience, perspective,
education, gender, background, race and national origin. Recommendations concerning director nominees are expected to be based on merit
and past performance as well as expected contribution to our Board’s performance and, accordingly, diversity is taken into consideration.
As of the date of this Circular, three of eight members on our Board, or approximately 38%, are women.
We have recruited and selected management candidates
that represent a diversity of business understanding, personal attributes, abilities and experience. Currently, 11 of 21 members
of our management team, or approximately 52%, are female.
We do not currently have a formal policy for the
representation and nomination of women on our Board or our management, as we have been successful in recruiting and retaining qualified
female directors and management under our existing recruitment policies and processes. We have not adopted formal targets for gender or
other diversity representation in part due to the need to consider a balance of criteria for each individual appointment.
The composition of our Board and management is
shaped by the selection criteria established by the GN Committee. This is achieved by, among other things, ensuring that diversity
considerations are taken into account in Board vacancies and management, monitoring the level of female representation on our Board and
in management positions, continuing to broaden recruiting efforts to attract and interview qualified female candidates, and committing
to retention and training to ensure that our most talented employees are promoted from within our organization.
Disclosure
Policy
The Board has adopted a Disclosure Policy to deal
with the timely dissemination of all material information. The Disclosure Policy, which will be reviewed annually, establishes consistent
guidance for determining what information is material and how it is to be disclosed to avoid selective disclosure and to ensure wide dissemination.
The Board, directly and through its committees, reviews and approves the contents of major disclosure documents, including annual and
interim consolidated financial statements, prospectuses, the annual information form, management’s discussion and analysis and the
management information circular. We seek to communicate to our Shareholders through these documents as well as by means of news releases,
our website and investor relations calls and meetings.
Disclosure Committee
A Disclosure Committee comprised of senior management
of the Company oversees the Company’s disclosure process as outlined in the Disclosure Policy. The Disclosure Committee’s
mandate includes ensuring that effective controls and procedures are in place to allow the Company to satisfy all of its continuous disclosure
obligations, including certification requirements. The Disclosure Committee is also responsible for ensuring that the policies and procedures
contained in the Disclosure Policy are in compliance with regulatory requirements. Our Audit Committee is responsible for reviewing our
disclosure relating to our financial reporting.
DIRECTOR
COMPENSATION
General
The following discussion describes the significant
elements of the compensation program for members of the Board and its committees. The compensation of our directors is designed to attract
and retain committed and qualified directors and to align their compensation with the long-term interests of our Shareholders. Directors
who are employees of the Company (each, an “Excluded Director”) are not entitled to receive any compensation for his
or her service as a member of our Board.
Director
Fees
Our Board, on the recommendation of the Compensation Committee,
is responsible for reviewing and approving any changes to the directors’ compensation arrangements. In consideration for serving
on our Board, each director (other than Excluded Directors) was entitled to be compensated during Fiscal 2020 as indicated below:
|
Type of Fee
|
|
|
|
Amount
|
|
|
Annual Board Retainer
|
|
Chair
|
|
$
|
50,000
|
|
|
|
|
Board Member
|
|
$
|
25,000
|
|
|
Annual Committee Retainer
|
|
Audit Committee Chair
|
|
$
|
5,000
|
|
|
|
|
GCN Committee Chair
|
|
$
|
5,000
|
|
|
|
|
Audit Committee Membership
|
|
|
Nil
|
|
|
|
|
GCN Committee Membership
|
|
|
Nil
|
|
|
Meeting Fees
|
|
Board / Committee Meeting
|
|
|
Nil
|
|
Prior to fiscal
2021, in lieu of receiving a higher annual cash retainer, each director (other than Excluded Directors) was granted Options under the
Stock Option Plan (as defined below) each year as follows: 10,000 Options were granted to the Chair; 5,000 Options were granted
to each director; and an additional 1,000 Options were granted to each director who was also a Board committee chair. These
options generally vest in three instalments and will generally expire on the tenth anniversary of the grant date.
See “– Changes to Director Compensation
for Fiscal 2021” below.
All directors are also entitled to be reimbursed
for their reasonable out-of-pocket expenses incurred while serving as directors.
Directors’
Hedging Policy
Our insider trading policy prohibits all of our
directors from selling “short” or selling “call options” on any of our securities and from purchasing financial
instruments, such as prepaid variable forward contracts, equity swaps, collars or units of exchange funds that are designed to hedge or
offset a decrease in the market value of equity securities granted to such directors as compensation or of any other securities of Greenbrook
held directly or indirectly by such person.
Director
Compensation Table
The following table sets out the compensation
that was earned by, paid to, or awarded to directors (other than Excluded Directors) during Fiscal 2020 under the compensation arrangements
described above. Mr. Leonard does not receive any compensation for serving as a director of Greenbrook.
|
Name(1)
|
|
Fees
Earned
|
|
|
Share-Based
Awards
|
|
|
Option-
Based
Awards
|
|
|
Non-Equity
Incentive Plan
Compensation
|
|
|
All Other
Compensation
|
|
|
Total
|
|
|
Brian P. Burke
|
|
$
|
30,000
|
|
|
|
—
|
|
|
$
|
33,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
63,000
|
|
|
Colleen Campbell
|
|
$
|
30,000
|
|
|
|
—
|
|
|
$
|
33,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
63,000
|
|
|
Sasha Cucuz
|
|
$
|
25,000
|
|
|
|
—
|
|
|
$
|
27,500
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
52,500
|
|
|
Adrienne Graves
|
|
$
|
25,000
|
|
|
|
—
|
|
|
$
|
27,500
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
52,500
|
|
|
Adele C. Oliva
|
|
$
|
25,000
|
|
|
|
—
|
|
|
$
|
27,500
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
52,500
|
|
|
Frank Tworecke
|
|
$
|
25,000
|
|
|
|
—
|
|
|
$
|
27,500
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
52,500
|
|
|
Elias Vamvakas
|
|
$
|
50,000
|
|
|
|
—
|
|
|
$
|
55,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
105,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
$
|
441,000
|
|
Notes:
|
|
(1)
|
Mr. Stephan Roker served on the Board from January 12, 2021 to January 15, 2021. Mr. Roker
did not earn or receive any compensation in respect thereof.
|
Outstanding
Option-Based Awards
The following table sets out information on the
outstanding Options held by each of our directors (other than Excluded Directors) as of December 31, 2020.
|
|
|
Option-Based
Awards
|
|
|
NAME
|
|
Number
of Securities
Underlying
Unexercised Options
|
|
|
Option
Exercise
Price(1)
|
|
|
Option
Expiration
Date
|
|
Value
of Unexercised
In-The-Money Options(2)
|
|
|
Brian
P. Burke
|
|
|
6,000
|
|
|
$
|
10.00
|
|
|
October 3,
2028
|
|
$
|
-
|
|
|
|
|
|
6,000
|
|
|
$
|
10.52
|
|
|
February 3,
2030
|
|
$
|
-
|
|
|
Colleen
Campbell
|
|
|
6,000
|
|
|
$
|
10.00
|
|
|
October 3,
2028
|
|
$
|
-
|
|
|
|
|
|
6,000
|
|
|
$
|
10.52
|
|
|
February 3,
2030
|
|
$
|
-
|
|
|
Sasha
Cucuz
|
|
|
5,000
|
|
|
$
|
10.00
|
|
|
October 3,
2028
|
|
$
|
-
|
|
|
|
|
|
5,000
|
|
|
$
|
10.52
|
|
|
February 3,
2030
|
|
$
|
-
|
|
|
Adrienne
Graves
|
|
|
5,000
|
|
|
$
|
10.00
|
|
|
October 3,
2028
|
|
$
|
-
|
|
|
|
|
|
5,000
|
|
|
$
|
10.52
|
|
|
February 3,
2030
|
|
$
|
-
|
|
|
Adele
C. Oliva
|
|
|
5,000
|
|
|
$
|
10.52
|
|
|
February 3,
2030
|
|
$
|
-
|
|
|
Frank
Tworecke
|
|
|
5,000
|
|
|
$
|
10.00
|
|
|
October 3,
2028
|
|
$
|
-
|
|
|
|
|
|
5,000
|
|
|
$
|
10.52
|
|
|
February 3,
2030
|
|
$
|
-
|
|
|
Elias
Vamvakas
|
|
|
10,000
|
|
|
$
|
10.00
|
|
|
October 3,
2028
|
|
$
|
-
|
|
|
|
|
|
10,000
|
|
|
$
|
10.52
|
|
|
February 3,
2030
|
|
$
|
-
|
|
Notes:
|
|
(1)
|
The exercise price of the options granted on February 3, 2020 was C$13.40. All remaining options
grants in the table above have an exercise price in U.S dollars.
|
|
|
(2)
|
The value of unexercised in-the-money Options is calculated based on the closing price per Share of C$12.70
on December 31, 2020, the last trading day of Fiscal 2020 (on a post-Share Consolidation basis). The exchange rate used was the rate
at December 31, 2020 of C$1.00 = $0.7854.
|
Incentive
Plan Awards – Value Vested or Earned During the Year
The following table indicates, for each of our
directors (other than Excluded Directors), the value of the Option-based awards vested in accordance with their terms during Fiscal 2020:
|
Name
|
|
|
Option-Based Awards –
Value Vested or Earned During the
Year(1)
|
|
|
|
Non-Equity Incentive Plan
Compensation – Value
Earned During the Year
|
|
|
Brian P. Burke
|
|
|
—
|
|
|
|
—
|
|
|
Colleen Campbell
|
|
|
—
|
|
|
|
—
|
|
|
Sasha Cucuz
|
|
|
—
|
|
|
|
—
|
|
|
Adrienne Graves
|
|
|
—
|
|
|
|
—
|
|
|
Adele C. Oliva
|
|
|
—
|
|
|
|
—
|
|
|
Frank Tworecke
|
|
|
—
|
|
|
|
—
|
|
|
Elias Vamvakas
|
|
|
—
|
|
|
|
—
|
|
Notes:
|
|
(1)
|
Includes time vesting Options that vested during the fiscal year. The value of time vesting Options vested
during the fiscal year is calculated based on the closing price of the Shares on the TSX on the applicable vesting date.
|
Changes
to Director Compensation for Fiscal 2021
Working with Mercer, the Compensation Committee
adopted changes to our director compensation framework effective commencing in fiscal 2021. In particular, Mercer worked with the Compensation
Committee to assist it in establishing a framework for director compensation that was in-line with market comparables and with a total
director compensation package at target in the range of median compensation for a selected peer group. See “Executive Compensation
– Changes to Executive Compensation for Fiscal 2021” for a description of the selected peer group used by Mercer for this
purpose. The changes to the director compensation framework, effective commencing in fiscal 2021 includes the adoption of a DSU Plan (as
defined below) for non-employee directors, as well as changes to the directors’ annual board and committee retainers, each as described
below.
Deferred Share Unit Plan for Non-Employee Directors
On May 6, 2021 on the recommendation of Mercer,
the Company adopted a deferred share unit plan for non-employee Directors (the “DSU Plan”). Each director (other than
Excluded Directors) will be required to take at least 50% of their annual retainer (other than annual committee Chair retainers) in deferred
share units (“DSUs”) and may elect to take additional amounts in the form of DSUs. Discretionary DSUs may also be granted
to non-employee Directors under the DSU Plan. Each director wishing to make an election for additional DSUs will be required to elect
no later than the end of the calendar year preceding the year in which such election is to apply (and, in the case of a new director,
within 30 days after the director’s appointment).
A DSU is a unit, equivalent in value to a Share,
credited by means of a bookkeeping entry in the books of the Company, to an account in the name of the director. If and when cash dividends
are paid on Shares, additional DSUs will automatically be granted to each director who holds DSUs on the record date for such dividends.
Following an eligible director ceasing to hold all positions with the Company, the director will receive a payment in cash at the fair
market value of the Shares represented by his or her DSUs generally within ten days of the director’s elected redemption date. Each
director’s elected redemption date will not be earlier than the date the director ceases to hold all positions with the Company
and will not be later than December 31 of the year following the year in which the director ceases to hold all positions with the
Company.
Director Fees
Effective January 1, 2021, the annual director
fees (other than in respect of Excluded Directors) with be as follows:
|
Type of Fee
|
|
|
|
Cash
|
|
|
DSUs(1)
|
|
|
Annual Board Retainer
|
|
Chair
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
|
|
Board Member
|
|
$
|
40,000
|
|
|
$
|
40,000
|
|
|
Annual Committee Retainer
|
|
Audit Committee Chair
|
|
$
|
15,000
|
|
|
|
Nil
|
|
|
|
|
GN Committee Chair
|
|
$
|
10,000
|
|
|
|
Nil
|
|
|
|
|
Compensation Committee Chair
|
|
$
|
10,000
|
|
|
|
Nil
|
|
|
|
|
Audit Committee Membership
|
|
|
Nil
|
|
|
|
Nil
|
|
|
|
|
GN Committee Membership
|
|
|
Nil
|
|
|
|
Nil
|
|
|
|
|
Compensation Committee Membership
|
|
|
Nil
|
|
|
|
Nil
|
|
|
Meeting Fees
|
|
Board / Committee Meeting
|
|
|
Nil
|
|
|
|
Nil
|
|
Note:
|
|
(1)
|
Directors may elect to receive a higher proportion of their annual board retainer in the form of DSUs,
which would result in a decrease to the cash component and a corresponding increase to the DSU component of the applicable directors’
annual board retainer. See “Deferred Share Unit Plan for Non-Employee Directors” above.
|
EXECUTIVE
COMPENSATION
Introduction
The following discussion describes the significant
elements of the compensation program for the named executive officers (“named executive officers” or “NEOs”)
of the Company, namely:
|
|
·
|
Bill Leonard, President and Chief Executive
Officer;
|
|
|
·
|
Erns Loubser, Chief Financial Officer and
Treasurer;
|
|
|
·
|
Ed Cordell, Interim Chief Financial Officer
|
|
|
·
|
Roberto Drassinower, Chief Operating Officer;
|
|
|
·
|
Geoffrey Grammer, Chief Medical Officer;
and
|
|
|
·
|
Euphia Smith, Chief Marketing Officer.
|
Mr. Erns Loubser took a medical leave of
absence in early November 2020. Mr. Ed Cordell was immediately appointed as Interim Chief Financial Officer. Mr. Loubser
returned to his role as Chief Financial Officer and Treasurer effective April 20, 2021.
Compensation
Discussion and Analysis
Overview
We operate in a highly competitive and evolving
market. To succeed in this market and achieve our strategic business and financial objectives, we need to attract, retain and motivate
a highly talented executive team. Our executive compensation program is designed to achieve the following objectives:
|
|
·
|
provide compensation opportunities in order to
attract and retain talented, high-performing and experienced executive officers, whose knowledge, skills and performance are critical
to our success;
|
|
|
·
|
motivate our executive team to achieve our strategic
business and financial objectives;
|
|
|
·
|
align the interests of our executive officers
with those of our Shareholders; and
|
|
|
·
|
provide incentives that encourage appropriate
levels of risk-taking by our executive team.
|
We offer our executive officers cash compensation
in the form of base salary and a discretionary annual bonus, and occasionally equity-based compensation in the form of Options under the
Stock Option Plan. We believe that executives who have significant equity investment in the Company, whether in the form of Shares or
equity-based compensation awards, will be motivated to achieve our strategic business and financial objectives, and it also aligns their
interests with the long-term interests of our Shareholders. See “Executive Compensation – Changes to Executive Compensation
for Fiscal 2021”.
While we have determined that our current executive
officer compensation program is effective at attracting and maintaining executive officer talent, we evaluate our compensation philosophy
and compensation program on an ongoing basis and plan to continue to review the compensation of our executive team on an annual basis
to ensure that we are providing competitive compensation opportunities for our executive team and that the interests of our executives
are in line with the long-term interests of our Shareholders. See “Executive Compensation – Changes to Executive Compensation
for Fiscal 2021”. As part of this review process, we expect to be guided by the philosophy and objectives outlined above, as well
as other factors which may become relevant.
Compensation-Setting Process
The Compensation Committee is responsible
for assisting our Board in fulfilling its governance and supervisory responsibilities, and overseeing our human resources, succession
planning, and compensation policies, processes and practices. The Compensation Committee is also responsible for ensuring that our
compensation policies and practices provide an appropriate balance of risk and reward consistent with our risk profile.
Our Board has adopted a written charter for the
Compensation Committee setting out its responsibilities for administering our compensation programs and reviewing and making recommendations
to our Board concerning the level and nature of the compensation payable to our directors and executive officers. The Compensation Committee’s
oversight includes reviewing objectives, evaluating performance and ensuring that total compensation paid to our executive officers, personnel
who report directly to our President and Chief Executive Officer and various other key employees is fair, reasonable and consistent with
the objectives and philosophy of our compensation program. See also “Our Approach to Corporate Governance – Committees of
our Board – Compensation Committee”.
Our President and Chief Executive Officer makes
recommendations to the Compensation Committee each year with respect to the compensation for the other NEOs.
The Compensation Committee generally meets
annually to review the compensation program and make recommendations for any changes to the Board, as appropriate. As part of this annual
review, the Compensation Committee may engage an independent compensation consultant to evaluate the Company’s executive compensation
program against market practice. See “Our Approach to Corporate Governance – Role of the Compensation Consultant”.
Risk and Executive Compensation
In reviewing our compensation policies and practices
each year, the Compensation Committee seeks to ensure the executive compensation program provides an appropriate balance of risk
and reward consistent with the risk profile of the Company. The Compensation Committee also seeks to ensure the Company’s compensation
practices do not encourage excessive risk-taking behavior by the executive team.
Governance Policies
Trading Restrictions
All of our executive officers (including the NEOs),
directors and employees are subject to our insider trading policy, which prohibits trading in our securities while in possession of material
undisclosed information about the Company. Under this policy, such individuals are also prohibited from entering into certain types of
hedging transactions involving the securities of the Company, such as short sales, puts and calls. Furthermore, we permit our executive
officers, including the NEOs, to trade in the Company’s securities, including the exercise of Options, only during prescribed trading
windows.
Clawback Policy
We have a clawback policy which applies to annual
bonus payments and other incentive compensation provided to current and former executive officers, including the NEOs.
The Board has defined a number of reasons for
which it may pursue a clawback of an executive officer’s annual bonuses and other incentive awards. Under our clawback policy, a
clawback may be triggered if an executive officer:
|
|
·
|
engages in misconduct that results in the need
to restate our financial statements, where the individual received an award calculated on the achievement of those financial statements
and the award received would have been lower had the financial statements been properly reported;
|
|
|
·
|
commits a material breach of our Code of Conduct;
|
|
|
·
|
engages in gross negligence, fraud, theft, dishonesty
or willful misconduct; or
|
|
|
·
|
is convicted of or pleads guilty or nolo contendere
to a criminal offence or a statutory offence involving moral turpitude.
|
The clawback policy provides that the Board may
require an executive officer to repay all or a portion of the annual bonus payments and other incentive compensation received over a specified
period preceding the triggering event, among other remedies available to the Board. The GN Committee will continue to keep this policy
under review as part of its regular risk review.
Components of Compensation
The compensation of our executive officers includes
two major elements: (i) base salary, and (ii) a discretionary annual bonus. Additionally, from time to time, the Board has granted
awards to executives who have taken on additional responsibilities and/or as a way to periodically recognize executives who have consistently
performed at an exceptional level. These awards are in the form of Options under the Stock Option Plan, which assist the Company in retaining
key employees who have the potential to add value to the Company over the longer term. Perquisites and benefits are not a significant
element of compensation of our executive officers. See “Executive Compensation – Changes to Executive Compensation for Fiscal
2021”.
Base Salaries
Base salary is provided as a fixed source of compensation
for our executive officers. Base salaries are determined on an individual basis taking into account the scope of the executive officer’s
responsibilities and their prior experience. Base salaries are reviewed annually by the Board and may be increased based on the executive
officer’s success in meeting or exceeding individual objectives, as well as to maintain market competitiveness. In addition, base
salaries can be adjusted as warranted throughout the year to reflect promotions or other changes in the scope or breadth of an executive
officer’s role or responsibilities.
Discretionary Annual Bonuses
The Board believes that its ability to exercise
discretion and judgment is critical to ensuring that annual bonuses reflect the assessment of risk in the decisions and actions taken
by our executive team and consider unexpected circumstances or events that have occurred during the year. In determining annual bonus
amounts, the Board reviews each NEO’s performance over the year, including how their decisions and actions align with the Company’s
long-term strategy and how they considered the risks associated with such decisions, along with the Company’s performance over the
year. The discretionary annual bonus, if any, typically represents less than 50% of an NEO’s total compensation. No NEOs have a
contractual right to a bonus. The annual bonuses awarded to each NEO in Fiscal 2020 are set forth below under “— Summary Compensation
Table”.
Long-Term Incentive Plans
Amended and Restated Omnibus Equity Incentive
Plan
In 2018, we established the stock option plan
of the Company, which was amended and restated by our Board on May 24, 2019 (and approved by Shareholders on June 28, 2019)
(the “Stock Option Plan”).
The Stock Option
Plan was further amended and restated by our Board on May 6, 2021 and is now referred to as the Amended and Restated Omnibus Equity
Incentive Plan (the “Equity Incentive Plan”). The recent amendments made by our Board were to (a) permit the grant
of restricted share units (“RSUs”) and performance share units (“PSUs” and, collectively with RSUs,
“Share-Based Awards”) under the Equity Incentive Plan, (b) set limitations on employee post-employment entitlements
that might arise pursuant to statute or the common law, (c) update the non-employee director participation limits to account for
RSUs and PSUs, (d) update the amendment provisions that do not require Shareholder approval to account for RSUs and PSUs,
(e) update the amendment provisions that do require Shareholder approval to account for RSUs and PSUs and to meet the requirements
of the TSX, (f) include a clawback provision (as described below), (g) to qualify for favorable treatment under applicable tax
laws, and (h) to make other changes of a housekeeping nature. For purposes of this Circular, the amendments described in subsections
(d) and (e) above are collectively referred to as the “Amendment Provision Updates”. Pursuant to the terms
of the Stock Option Plan, the inclusion of the Amendment Provision Updates in the Equity Incentive Plan requires Shareholder approval,
which is being sought at the Meeting.
The Equity Incentive
Plan provides eligible participants with compensation opportunities that enhance our ability to attract and retain our executive officers,
other key employees, directors and consultants and ensure that their interests are aligned with the success of the Company and its affiliates.
The material features of the Equity Incentive Plan are summarized below, which is qualified in its entirety by the complete text
of the Equity Incentive Plan set out in Appendix C to this Circular.
Administration and Eligibility
The Equity Incentive Plan is administered by our
Board, provided that the Board may, in its discretion, delegate its administrative powers under the Equity Incentive Plan to the Compensation Committee.
Pursuant to the terms of the Equity Incentive Plan, the Board is empowered to (a) interpret and administer the plan from time to
time, (b) adopt, amend and rescind rules and regulations for carrying out the Equity Incentive Plan, (c) grant Options
and Share-Based Awards (collectively, “Awards”), (d) determine the exercise price, performance period, performance
vesting conditions, vesting schedule, term, limitations, restrictions and conditions applicable to Awards, (e) waive or amend the
performance vesting conditions, any other vesting conditions or vesting schedule, and (f) make any other determinations that the
Board deems necessary or desirable for the administration of the Equity Incentive Plan.
Employees, directors and consultants of the Company
and its affiliates are eligible to participate in the Equity Incentive Plan; however, directors are not entitled to receive grants of
PSUs.
Shares Subject to the Equity Incentive
Plan and Participation Limits
The maximum number
of Shares that are available for issuance under the Equity Incentive Plan (including upon the exercise of the replacement options that
were granted by the Company in exchange for options granted under our predecessor’s amended and restated stock option plan) is 10%
of the issued and outstanding Shares from time to time; provided that, the maximum number of Shares that may be issued pursuant
to RSUs and PSUs shall not exceed 5% of the number of issued and outstanding Shares from time to time. Shares underlying Options and replacement
options that have been exercised or that have expired or terminated for any reason and Shares underlying Share-Based Awards that have
been settled or disposed of or that have expired or been terminated for any reason will become available for subsequent issuance under
the Equity Incentive Plan. As a result, the Equity Incentive Plan is considered an evergreen plan pursuant to the rules of the TSX.
The TSX requires that the approval of all unallocated Awards under the Equity Incentive Plan be sought by the Company every three years
from a majority of the votes cast by shareholders. The Stock Option Plan was most recently approved by Shareholders on June 28,
2019. Notwithstanding Shareholder approval of the unallocated Awards being required by June 28, 2022, Shareholders are being asked
to approve all unallocated Awards under the Equity Incentive Plan at the Meeting, in conjunction with the Amendment Provision Updates.
As at December 31, 2020, 736,500 Options
and no Share-Based Awards had been granted under the Equity Incentive Plan, representing approximately 5.5% of the issued and outstanding
Shares as of that date. As of December 31, 2020, 613,747 Awards remain available for future issuance under the Equity Incentive Plan,
representing approximately 4.5% of the issued and outstanding Shares as of that date.
The number of Shares that may be (i) issued
to insiders of the Company within any one-year period, or (ii) issuable to insiders of the Company at any time, in each case, under
the Equity Incentive Plan alone, or when combined with all of the Company’s other security-based compensation arrangements, cannot
exceed 10% of the outstanding Shares. Additionally, the aggregate value of all Awards granted to any one director in any one year period
under all security-based compensation arrangements of the Company may not exceed C$150,000 (with no more than C$100,000 attributable to
Options) based on the grant date fair value of the Awards, other than Awards granted in lieu of cash fees payable for serving as a director.
Options
The terms and conditions of grants of Options,
including the quantity, grant date, exercise price, vesting conditions and other terms and conditions will be set out in the participant’s
grant agreement. The exercise price for Options will be determined by our Board, which may not be less than the fair market value of a
Share (being the closing price of a Share on the TSX for Canadian resident participants or on the Nasdaq for U.S. resident participants
on the applicable date (the “Fair Market Value”)) on the date the Option is granted. Options will vest in accordance
with the vesting schedule established on the grant date, which historically has been as to one-third on each of the first three anniversaries
of the grant date.
Options must be exercised within a period fixed
by our Board that may not exceed ten years from the date of grant, provided that if the expiry date falls during a blackout period,
the expiry date will be automatically extended until ten business days after the end of the blackout period. The Equity Incentive
Plan also provides for earlier expiration of Options upon the occurrence of certain events, including the termination of a participant’s
employment.
In order to facilitate the payment of the exercise
price of the Options, the Equity Incentive Plan contains a cashless exercise feature and a net settlement feature. Additionally, vested
Options can be exercised by payment in full of the applicable exercise price in cash or by certified check, bank draft or money order
payable to the Company or by such other means as might be specified from time to time by the Board. Pursuant to the net settlement feature,
to the extent permitted by the Board and as permitted by applicable law, a participant may elect to have the Company retain such number
of Shares otherwise issuable in connection with the exercise of the Option as will have a Fair Market Value on the date of such exercise
equal to the aggregate exercise price. Pursuant to the cashless exercise feature, to the extent permitted by the Board and as permitted
by applicable law, a participant may elect to receive (i) an amount in cash equal to the cash proceeds realized upon the sale of
the Shares underlying the Options by a securities dealer in the capital markets, minus the aggregate exercise price, any applicable withholding
taxes and any transfer costs charged by the securities dealer, (ii) an aggregate number of Shares that is equal to the number of
Shares underlying the unexercised Options, minus the number of Shares sold by a securities dealer in the capital markets as required to
realize cash proceeds equal to the aggregate exercise price, any applicable withholding taxes and any transfer costs charged by the securities
dealer, or (iii) a combination of clauses (i) and (ii).
RSUs and PSUs
The terms and conditions of grants of RSUs and
PSUs, including the quantity, type of award, grant date, vesting conditions, vesting periods, settlement date and other terms and conditions
with respect to the awards, will be set out in the participant’s grant agreement.
In the case of PSUs, the performance-related vesting
conditions may include financial or operational performance of the Company, total shareholder return (either absolute or relative or both),
individual performance criteria or other criteria as determined by our Board, which will be measured over a specified period, generally
until the end of the third calendar year from the date of the grant.
Subject to the achievement of the applicable vesting
and performance-related (if applicable) conditions, on the settlement date of an RSU or PSU, the Company will either, in its sole
discretion (i) issue from treasury the number of Shares covered by the RSUs or PSUs and related Dividend Share Units (as defined
below), or (ii) deliver to the participant an amount in cash (net of applicable withholding taxes) equal to the number of Shares
covered by the RSUs or PSUs and related Dividend Share Units multiplied by the Fair Market Value as at the settlement date, or (iii) a
combination of (i) and (ii). Notwithstanding the ability for the Company to settle vested RSUs (and related Dividend Share Units)
in Shares pursuant to subsection (i) or through a cash payment pursuant to subsection (ii) above, vested RSUs held by directors
who are Canadian taxpayers will be settled in Shares pursuant to subsection (i); provided that, the Company may, in its sole discretion,
permit such a director to elect to receive a cash payment pursuant to subsection (ii).
Dividend Share Units
When dividends (other than stock dividends) are
paid on Shares, additional share units (“Dividend Share Units”) will be automatically credited to each participant
who holds RSUs or PSUs on the record date for such dividends. The number of Dividend Share Units to be credited to a participant is equal
to the aggregate number of RSUs and PSUs held by the participant on the relevant record date multiplied by the amount of the dividend
paid by the Company on each Share, and then divided by the Fair Market Value of the Shares on the dividend payment date. Dividend Share
Units shall be in the form of RSUs or PSUs, as applicable. Dividend Share Units credited to a participant will be subject to the same
vesting conditions applicable to the related RSUs or PSUs.
Cessation of Employment or Services
Unless otherwise determined by our Board or if
a participant’s employment agreement or consulting agreement or arrangement expressly provides more favorable rights with respect
to the Awards, in the event of a cessation of employment or services, the following rights apply.
In the event a participant ceases to be an employee,
director or consultant of the Company or a designated affiliate, all outstanding Awards granted to the participant under the Equity Incentive
Plan that are unvested on the cessation date will be forfeited. All outstanding Options that have vested as of the cessation date will
be exercisable as follows, after which time such vested Options will automatically terminate: (i) if the participant ceases to be
an employee, director or an individual consultant by reason of death or disability, the participant’s Options must be exercised
within 9 months of the date of death or disability; (ii) if the participant ceases to be an employee, director or consultant
(whether an individual or entity) by reason of termination without cause, the participant’s Options must be exercised within 3 months
of the cessation date; (iii) if the participant ceases to be an employee, director or consultant (whether an individual or entity)
by reason of voluntary resignation or termination, the participant’s Options must be exercised within 30 days of the cessation
date; and (iv) if the participant ceases to be an employee, director or consultant (whether an individual or entity) by reason of
termination for cause, the participant’s Options will automatically terminate on the cessation date and may no longer be exercised.
In no event may Options be exercised later than the applicable expiry date of the Options, after which time all remaining Options will
terminate. Any vested Share-Based Awards held by the participant will be settled as soon as practicable following the cessation date.
In the event a participant ceases to be an employee,
director or consultant of the Company or a designated affiliate due to a termination for cause, all Awards (whether vested or unvested)
will be forfeited on the cessation date.
Change of Control
In the event of a change in control, except as
otherwise provided in a grant agreement, the Board will provide for the treatment of each outstanding Award, which treatment need not
be uniform for all participants and/or Awards and which may include, without limitation, one or more of the following: (i) (a) continuation
of such Award, or (b) conversion of such Award into, or substitution or replacement of such Award with, an award with respect to
equity interests of the successor (or a parent or subsidiary thereof) with substantially equivalent terms and value as such Award; (ii) acceleration
of the vesting and/or exercisability of Awards; (iii) upon written notice, providing that outstanding Options must be exercised,
to the extent then exercisable, during a specified period of time preceding the change in control as determined by the Board, and further
providing for the right to exercise an Option as of immediately, or during a specified period, prior to such change in control, and the
termination and forfeiture of any such Option without payment of any consideration therefor to the extent such Option is not timely exercised;
(iv) if vesting of such Award is subject to performance criteria, the level of attainment of such criteria shall be determined by
the Board in its discretion, including, without limitation, by deeming such criteria attained at the applicable target or maximum level
regardless of actual performance, or measuring the attainment of such criteria based on actual performance through such change in control
or a specified date prior thereto; (v) other than for participants who are Canadian taxpayers in respect of their Options, automatic
cancellation or voluntary surrender of all or any portion of outstanding Awards for payment of their fair value (in the form of cash,
securities, rights and/or other property) as determined in the sole discretion of the Board; (vi) permitting an Option to be surrendered
to the Company in consideration for a payment, in cash, securities, rights and/or other property, in an amount equal to the intrinsic
value of such Option as of immediately prior to such change in control; and/or (vii) cancellation of all or any portion of outstanding
unvested and/or unexercisable Awards for no consideration.
Adjustments
In the event that there is any change in the Shares
or in the capital structure of the Company by reason of any stock or extraordinary cash dividend, stock split, reverse stock split, an
extraordinary corporate transaction such as any recapitalization, reorganization, merger, consolidation, combination, exchange or other
relevant change in capitalization (each an “Adjustment Event”), then the Board, to prevent inappropriate dilution or
enlargement of participants’ rights under the Equity Incentive Plan, will substitute or adjust, in its sole discretion: (i) the
number and kind of shares or other securities that may be granted pursuant to Awards; (ii) the number and kind of shares or other
securities subject to outstanding Awards; (iii) the exercise price applicable to outstanding Options; (iv) the number of Share-Based
Awards held by the participants; (v) the vesting of PSUs; and/or (vi) other value determinations (including performance conditions)
applicable to the Equity Incentive Plan or outstanding Awards; provided, however, that no adjustment will obligate the Company
to issue or sell fractional securities.
Clawback
The Equity Incentive Plan provides that any Award
which is subject to recovery or recoupment under applicable laws, stock exchange listing requirements or policies adopted by the Company,
as may be adopted and amended from time to time, will be subject to such deductions and clawbacks as may be required pursuant to such
laws, stock exchange listing requirements or policies.
Amendment or Termination
Our Board may amend or suspend any provision of
the Equity Incentive Plan or any Award, or terminate the Equity Incentive Plan, at any time without approval of shareholders, subject
to those provisions of applicable law and the rules, regulations and policies of the TSX and the Nasdaq, if any, that require the approval
of shareholders or any governmental or regulatory body. However, except as set forth in the Equity Incentive Plan or as required pursuant
to applicable law or to qualify for any intended tax treatment, no action of the Board or shareholders may materially adversely alter
or impair the rights of a participant under any Award previously granted to the participant without the consent of the affected participant.
Our Board is permitted to make certain amendments
to the Equity Incentive Plan or to any Award outstanding thereunder without seeking shareholder approval, including but not limited to,
housekeeping amendments or amendments of an administrative nature, amendments to comply with applicable law or stock exchange rules, amendments
necessary for Awards to qualify for favorable treatment under applicable tax laws, amendments to the vesting provisions of the plan or
any Award, amendments to include or modify a cashless exercise feature, amendments to the termination or early termination provisions
of the Equity Incentive Plan or any Award, and amendments necessary to suspend or terminate the Equity Incentive Plan. However, only the
following types of amendments will not be able to be made without obtaining shareholder approval:
|
|
·
|
increasing the number of Shares reserved for
issuance under the Equity Incentive Plan;
|
|
|
·
|
increasing the length of the period after a blackout
period during which Options may be exercised;
|
|
|
·
|
any amendment that would result in the exercise
price for any Option being lower than the Fair Market Value on the applicable date of grant;
|
|
|
·
|
permitting the introduction or reintroduction
of non-employee directors as eligible recipients of Awards on a discretionary basis or increasing the limits previously imposed on non-employee
director participation;
|
|
|
·
|
removing or exceeding the insider participation
limit;
|
|
|
·
|
reducing the exercise price of an Option or allowing
for the cancellation and reissuance of an Option, which would be considered a repricing under the rules of the TSX, in each case,
except pursuant to a change of control or an Adjustment Event;
|
|
|
·
|
extending the expiry date of an Option, except
for an automatic extension of an Option that expires during a blackout period;
|
|
|
·
|
permitting awards to be transferred or assigned
other than for normal estate settlement purposes;
|
|
|
·
|
amending the amendment provision under the Equity
Incentive Plan which has the effect of deleting or reducing the range of amendments which required shareholder approval; or
|
|
|
·
|
amendments required to be approved by shareholders
under applicable law or the rules, regulations and policies of the TSX and the Nasdaq, as applicable.
|
Assignment
Except as required by law or in the event of death
or disability of the participant, the rights of a participant under the Equity Incentive Plan are not transferable or assignable.
Burn Rate
The following table provides the number of Options
granted under the Equity Incentive Plan for Fiscal 2020, Fiscal 2019 and Fiscal 2018, expressed as a percentage of the weighted average
number of Shares outstanding during the applicable fiscal year (“Burn Rate”). All figures in the below table are shown
on a pre-Share Consolidation basis.
|
Fiscal Year
|
|
Number of Options Granted
|
|
|
Weighted Average Number of
Shares Outstanding
|
|
|
Burn Rate
|
|
|
Fiscal 2020
|
|
|
797,500
|
|
|
|
63,999,382
|
|
|
|
1.25
|
%
|
|
Fiscal 2019
|
|
|
385,000
|
|
|
|
53,828,597
|
|
|
|
0.72
|
%
|
|
Fiscal 2018
|
|
|
450,500
|
|
|
|
40,209,697
|
|
|
|
1.12
|
%
|
Benefit Plans
We provide some of our executive officers with
disability, health and dental insurance programs on a comparable basis as other employees of the Company. We offer these benefits consistent
with local market practice.
Perquisites
We do not offer significant perquisites as part
of our compensation program.
Pension Plan Benefits
Dr. Grammer and Ms. Smith participate
in the Company’s 401(k) plan made available to its U.S. employees. The Company provides an employer safe harbor matching contribution
equal to 100% of a participant’s salary deferrals under the plan up to the first 1% of plan eligible compensation, plus 50% of a
participant’s salary deferrals under the plan up to the next 5% of plan eligible compensation, subject to the limits imposed by
the Internal Revenue Service. Other than the 401(k) plan, the Company does not have any pension plans that provide for payments of
benefits at, following or in connection with, retirement or provide for retirement or deferred compensation plans for the NEOs or directors.
Defined Contribution Plan Table
|
Name and Principal Position
|
|
Accumulated Value At
Start of Year
|
|
|
Compensatory
|
|
|
Accumulated Value At
Year-End(1)
|
|
Geoffrey Grammer
Chief Medical Officer
|
|
$
|
7,401
|
|
|
$
|
8,313
|
|
|
$
|
15,714
|
|
Euphia Smith
Chief Marketing Officer
|
|
$
|
-
|
|
|
$
|
3,981
|
|
|
$
|
3,981
|
|
Notes:
|
|
(1)
|
As at December 31, 2020.
|
Termination and Change of Control Benefits
For a summary of the termination and change of
control benefits provided under the Equity Incentive Plan, please refer to “– Components of Compensation – Long-Term
Incentives”. Except as described below, the Company has not entered into contractual termination, post-termination or change of
control arrangements with any of its NEOs.
The Company has entered into an employment agreement
with Ms. Smith that provides for contractual termination entitlements. In connection with Ms. Smith’s termination by the
Company on a without cause basis, Ms. Smith is entitled to her accrued base salary and vacation through the termination date, and
subject to her execution of a general release of claims in favor of the Company: (i) in the event that the termination occurs prior
to May 1, 2020, a severance payment equal to 2 months of Ms. Smith’s base salary; (ii) in the event that the termination
occurs after May 1, 2020, a severance payment equal to 2 months of Ms. Smith’s base salary, plus, one additional month
of base salary for each additional full year of employment, up to a maximum of six months of her base salary. If Ms. Smith was terminated
on a without cause basis on December 31, 2020, she would be entitled to her accrued base salary and vacation and a severance payment
equal to $35,000. Ms. Smith would not have received any incremental payments in respect of her 16,000 Options granted under the Option
Plan in connection with such event.
Ms. Smith is subject to a customary confidentiality
covenant and certain restrictive covenants that will continue to apply following the termination of her employment, including non-competition
and non-solicitation provisions which are in effect during Ms. Smith’s employment and for two years thereafter.
Performance Graph
The following graph compares the Company’s
cumulative total shareholder return to the S&P/TSX Composite Total Return Index and the S&P/TSX Capped Healthcare Total Return
Index, assuming reinvestment of any dividends and considering a $100 investment on October 3, 2018, being the date the Company’s
Shares began trading on the TSX. The S&P/TSX Composite Total Return Index tracks the share prices of the largest companies on the
TSX measured by market capitalization. Stocks included in this index cover all sectors of the economy and are not significantly weighted
in the any comparable industry to the Company and are therefore not directly comparable to Greenbrook.
Cumulative Total Shareholder Return
October 3, 2018 to December 31, 2021
During the period covered by the performance graph,
our common shares have both outperformed and underperformed the S&P/TSX Composite Total Return Index and the S&P/TSX Capped Healthcare
Total Return Index. However, throughout Fiscal 2020, our common shares largely underperformed the S&P/TSX Composite Total Return Index
and largely outperformed the S&P/TSX Capped Healthcare Total Return Index.
Executive officer
compensation is not strongly correlated to Shareholder returns in the short term, in part because equity-based incentives are calculated
at the time of grant using grant date fair values, which do not reflect the actual value of compensation received when such incentives
vest or are settled. In the longer term, executive officer compensation is directly impacted by the Company’s Share price performance.
Fiscal 2020 represented our second full fiscal
year as a public company. As such, there is limited history of our common shares trading on the TSX, and it may not be possible to draw
conclusions from the existing trends. Aside from base salaries, our compensation program is designed to include short-term incentives
that align with the near-term targets of the business as well as long-term incentives that are tied to successful execution against our
long-term growth strategy.
Securities
Authorized for Issuance Under Equity Compensation Plans
|
Plan Category
|
|
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights(1)
|
|
|
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and
Rights(1)
|
|
|
Number of Securities
Remaining Available for
Future Issuance(1)
|
|
|
Equity compensation plans previously approved by Shareholders
|
|
|
735,167
|
|
|
$
|
7.60
|
|
|
|
615,080
|
|
|
Equity compensation plans not previously approved by Shareholders
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
Total
|
|
|
735,167
|
|
|
$
|
7.60
|
|
|
|
615,080
|
|
Notes:
|
|
(1)
|
As at February 1, 2021 after giving effect to the Share Consolidation.
|
Summary
Compensation Table
The table below shows the compensation paid to
the NEOs in respect of the Company’s three most recently completed financial years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-
|
|
|
|
Option-
|
|
|
|
Annual
|
|
|
|
Long-Term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal
|
|
|
|
|
|
|
|
|
|
|
Based
|
|
|
|
Based
|
|
|
|
Incentive
|
|
|
|
Incentive
|
|
|
|
Pension
|
|
|
|
All Other
|
|
|
|
Total
|
|
|
Position
|
|
|
Year
|
|
|
|
Salary
|
|
|
|
Awards
|
|
|
|
Awards(1)
|
|
|
|
Plans(2)
|
|
|
|
Plans
|
|
|
|
Value(3)
|
|
|
|
Compensation(4)
|
|
|
|
Compensation
|
|
|
Bill Leonard
|
|
|
2020
|
|
|
$
|
375,000
|
|
|
|
—
|
|
|
$
|
55,000
|
|
|
$
|
275,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
705,000
|
|
|
President& Chief Executive Officer
|
|
|
2019
|
|
|
$
|
350,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
150,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
500,000
|
|
|
|
|
|
2018
|
|
|
$
|
304,167
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
125,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
429,167
|
|
|
Erns Loubser(5)
|
|
|
2020
|
|
|
$
|
290,000
|
|
|
|
—
|
|
|
$
|
82,500
|
|
|
$
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
472,500
|
|
|
Chief Financial Officer and Treasurer
|
|
|
2019
|
|
|
$
|
275,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
375,000
|
|
|
|
|
|
2018
|
|
|
$
|
181,173
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
281,173
|
|
|
Ed Cordell(6)
|
|
|
2020
|
|
|
$
|
38,250
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
38,250
|
|
|
Interim Chief Financial Officer
|
|
|
2019
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
2018
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Roberto Drassinower(7)
|
|
|
2020
|
|
|
$
|
232,500
|
|
|
|
—
|
|
|
$
|
55,000
|
|
|
$
|
125,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
412,500
|
|
|
Chief Operating Officer
|
|
|
2019
|
|
|
$
|
232,500
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
75,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
307,500
|
|
|
|
|
|
2018
|
|
|
$
|
212,491
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
75,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
287,491
|
|
|
Geoffrey Grammer
|
|
|
2020
|
|
|
$
|
237,500
|
|
|
|
—
|
|
|
$
|
110,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
8,313
|
|
|
|
—
|
|
|
$
|
355,813
|
|
|
Chief Medical Officer
|
|
|
2019
|
|
|
$
|
225,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
7,401
|
|
|
|
—
|
|
|
$
|
232,401
|
|
|
|
|
|
2018
|
|
|
$
|
175,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
31,240
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
206,240
|
|
|
Euphia Smith(8)
|
|
|
2020
|
|
|
$
|
210,000
|
|
|
|
—
|
|
|
$
|
22,000
|
|
|
$
|
90,000
|
|
|
|
—
|
|
|
$
|
3,981
|
|
|
|
—
|
|
|
$
|
325,981
|
|
|
Chief Marketing Officer
|
|
|
2019
|
|
|
$
|
140,000
|
|
|
|
—
|
|
|
$
|
87,600
|
|
|
$
|
75,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
302,600
|
|
|
|
|
|
2018
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Notes:
|
|
(1)
|
Reflects the grant date fair value of Options that were granted in Fiscal 2018, Fiscal 2019 and Fiscal
2020, as applicable, determined in accordance with the Black-Scholes valuation model, using the following key assumptions:
|
|
Grant Date
|
|
Expected Life
(Years)
|
|
|
Expected Volatility
|
|
|
Risk Free Interest
Rate
|
|
|
Expected Dividend
Yield
|
|
|
May 9, 2019
|
|
|
10
|
|
|
|
46.48
|
%
|
|
|
1.68
|
%
|
|
|
0.00
|
%
|
|
February 3, 2020
|
|
|
10
|
|
|
|
46.12
|
%
|
|
|
2.02
|
%
|
|
|
0.00
|
%
|
|
|
(2)
|
Amounts reflect annual bonuses that were paid to NEOs in respect of Fiscal 2018, Fiscal 2019 and Fiscal
2020.
|
|
|
(3)
|
Reflects contributions made by the Company to Dr. Grammer’s and Ms. Smith’s 401(k) plan.
|
|
|
(4)
|
None of the NEOs are entitled to perquisites or other personal benefits which, in aggregate, are worth
over $50,000 or over 10% of their base salary.
|
|
|
(5)
|
Mr. Loubser took a medical leave of absence effective November 10, 2020. Mr. Loubser continued
to receive his base salary for the remainder of Fiscal 2020.
|
|
|
(6)
|
Mr. Cordell joined the Company on November 10, 2020. Accordingly, compensation in the above
table reflects Mr. Cordell’s compensation from November 10, 2020 to December 31, 2020. Mr. Cordell’s compensation
in respect of Fiscal 2020 was paid to a limited liability company wholly-owned by Mr. Cordell.
|
|
|
(7)
|
Mr. Drassinower’s compensation in respect of Fiscal 2018, Fiscal 2019 and Fiscal 2020 was paid
by Greybrook Health to a corporation wholly-owned by him pursuant to the Management Services Agreement. Commencing February 2021,
Mr. Drassinower’s compensation will be paid directly by the Company.
|
|
|
(8)
|
Ms. Smith joined the Company on May 1, 2019. Accordingly, compensation in the above table in
respect of Fiscal 2019 reflects Ms. Smith’s compensation from May 1, 2019 to December 31, 2019.
|
Outstanding
Share-Based Awards and Option-Based Awards
The following table sets out information on the
outstanding Option-based awards held by each of our NEOs as of December 31, 2020. None of our NEOs currently hold any share-based
awards.
|
|
|
Option-Based Awards
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Value of
|
|
|
|
|
Underlying
|
|
|
Option
|
|
|
Option
|
|
|
Unexercised
|
|
|
|
|
Unexercised
|
|
|
Exercise
|
|
|
Expiration
|
|
|
In-The-Money
|
|
|
Name and Principal Position
|
|
Options
|
|
|
Price(1)
|
|
|
Date
|
|
|
Options(2)
|
|
|
Bill Leonard(3)
|
|
|
10,000
|
|
|
$
|
10.52
|
|
|
|
February 3, 2030
|
|
|
|
—
|
|
|
President & Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Erns Loubser(4)
|
|
|
10,000
|
|
|
$
|
5.00
|
|
|
|
March 31, 2025
|
|
|
$
|
49,749
|
|
|
Chief Financial Officer and Treasurer
|
|
|
5,000
|
|
|
$
|
5.00
|
|
|
|
March 31, 2026
|
|
|
$
|
28,874
|
|
|
|
|
|
135,000
|
|
|
$
|
5.00
|
|
|
|
March 31, 2027
|
|
|
$
|
671,607
|
|
|
|
|
|
15,000
|
|
|
$
|
10.52
|
|
|
|
February 3, 2030
|
|
|
|
—
|
|
|
Ed Cordell
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Interim Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roberto Drassinower(5)
|
|
|
10,000
|
|
|
$
|
10.52
|
|
|
|
February 3, 2030
|
|
|
|
—
|
|
|
Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geoffrey Grammer(6)
|
|
|
40,000
|
|
|
$
|
5.00
|
|
|
|
March 31, 2025
|
|
|
$
|
198,995
|
|
|
Chief Medical Officer
|
|
|
5,000
|
|
|
$
|
5.00
|
|
|
|
March 31, 2026
|
|
|
$
|
24,874
|
|
|
|
|
|
2,000
|
|
|
$
|
5.00
|
|
|
|
March 31, 2027
|
|
|
$
|
9,950
|
|
|
|
|
|
20,000
|
|
|
$
|
10.52
|
|
|
|
February 3, 2030
|
|
|
|
—
|
|
|
Euphia Smith(7)
|
|
|
12,000
|
|
|
$
|
13.47
|
|
|
|
May 9, 2029
|
|
|
|
—
|
|
|
Chief Marketing Officer
|
|
|
4,000
|
|
|
$
|
10.52
|
|
|
|
February 3,
2030
|
|
|
|
—
|
|
Notes:
|
|
(1)
|
The exercise price of the options granted on May 9, 2019 and February 3, 2020 were C$17.15 and
C$13.40, respectively. All remaining options grants in the table above have an exercise price in U.S dollars.
|
|
|
(2)
|
The value of unexercised in-the-money Options is calculated based on the closing price per Share of C$12.70
on December 31, 2020, the last trading day of Fiscal 2020. The exchange rate used was the rate at December 31, 2020 of C$1.00
= $0.7854.
|
|
|
(3)
|
Mr. Leonard was granted 10,000 Options on February 3, 2020, which vest as to one-third on March 31,
2020, March 31, 2021 and March 31, 2022 and are subject to the terms of the Stock Option Plan.
|
|
|
(4)
|
Mr. Loubser was granted 10,000 Options on March 31, 2015, which are fully vested; 5,000 Options
on March 31, 2016, which are fully vested; 135,000 Options on March 31, 2017, which are fully vested; and 15,000 Options on
February 3, 2020, which vest as to one-third on March 31, 2020, March 31, 2021 and March 31, 2022 and are subject
to the terms of the Stock Option Plan.
|
|
|
(5)
|
Mr. Drassinower was granted 10,000 Options on February 3, 2020, which vest as to one-third on
March 31, 2020, March 31, 2021 and March 31, 2022 and are subject to the terms of the Stock Option Plan.
|
|
|
(6)
|
Dr. Grammer was granted 40,000 Options on March 31, 2015, which are fully vested; 5,000 Options
on March 31, 2016, which are fully vested; 2,000 Options on March 31, 2017, which are fully vested; and 20,000 Options on February 3,
2020, which vest as to one-third on March 31, 2020, March 31, 2021 and March 31, 2022 and are subject to the terms of the
Stock Option Plan.
|
|
|
(7)
|
Ms. Smith was granted 12,000 Options on May 9, 2019, which vest as to one-third on March 31,
2020, March 31, 2021 and March 31, 2022 and are subject to the terms of the Stock Option Plan; and 4,000 Options on February 3,
2020, which vest as to one-third on March 31, 2020, March 31, 2021 and March 31, 2022 and are subject to the terms of the
Stock Option Plan.
|
Incentive
Plan Awards – Value Vested or Earned During the Year
The following table indicates, for each of our
NEOs, the value of the Option-based awards vested in accordance with their terms during Fiscal 2020 and the value of the annual bonuses
paid in respect of Fiscal 2020:
|
|
|
Option-Based Awards –
|
|
|
Non-Equity Incentive Plan
|
|
|
|
|
Value Vested or Earned
|
|
|
Compensation – Value Earned
|
|
|
Name and Principal Position
|
|
During the Year(1)
|
|
|
During the Year(2)
|
|
|
Bill Leonard
|
|
|
—
|
|
|
$
|
275,000
|
|
|
President & Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
Erns Loubser
|
|
$
|
57,752
|
|
|
$
|
100,000
|
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
|
|
|
|
Ed Cordell
|
|
|
—
|
|
|
|
—
|
|
|
Interim Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
Roberto Drassinower
|
|
|
—
|
|
|
$
|
125,000
|
|
|
Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
Geoffrey Grammer
|
|
$
|
856
|
|
|
|
—
|
|
|
Chief Medical Officer
|
|
|
|
|
|
|
|
|
|
Euphia Smith
|
|
|
—
|
|
|
$
|
90,000
|
|
|
Chief Marketing Officer
|
|
|
|
|
|
|
|
|
Notes:
|
|
(1)
|
Includes time vesting Options that vested during the fiscal year. The value of time vesting Options vested
during the fiscal year is calculated based on the closing price of the Shares on the TSX on the applicable vesting date.
|
|
|
(2)
|
Amounts reflect annual bonuses that were paid to NEOs in respect of Fiscal 2020.
|
Changes
to Executive Compensation for Fiscal 2021
Working with Mercer, the Compensation Committee
adopted certain changes to our executive compensation structure, effective for 2021. In particular, Mercer worked with the Compensation
Committee to assist it in establishing a framework for executive officer compensation that was in-line with market comparables and with
a total direct compensation package (that is, base salary and incentive compensation) at target in the range of median compensation for
a selected peer group. For those purposes, the Compensation Committee selected a peer group from relevant industries in North America,
including from the healthcare services, healthcare facilities and healthcare equipment sectors, and then narrowed the resultant list based
on quantitative and qualitative factors. Those factors included whether a company is based in the United States or has primary operations
in the United States and the relative size of the company compared to Greenbrook. The final peer group used for assessing compensation
levels (the “Compensation Peer Group”) is comprised of the following 11 entities:
|
Compensation Peer Group
|
|
Star Equity Holdings, Inc.
|
|
Novation Companies, Inc.
|
|
CRH Medical Corporation
|
|
Neuronetics, Inc.
|
|
Enzo Biochem, Inc.
|
|
Sunlink Health Systems, Inc.
|
|
Protech Home Medical Corp.
|
|
BrainsWay Ltd.
|
|
OnTrack, Inc.
|
|
IMAC Holdings, Inc.
|
|
The Joint Corp.
|
|
|
On the advice of the Compensation Committee, the
Board adopted the following executive compensation structure for the executive officers such that the Company’s executive compensation
plan is now comprised of: (1) base salaries, (2) a short-term cash incentive (bonus) award, and (3) long-term incentive
awards in the form of Options, RSUs and PSUs under the Equity Incentive Plan. The principal changes that have been determined by the Company
as at the date of this Circular are described below.
CEO Compensation
The base salary for our President & Chief
Executive Officer has increased effective January 1, 2021 to $450,000 per year (from $375,000), a target short-term cash incentive
(bonus) award of $350,000, and an expected long-term equity incentive grant (to be comprised of Options, RSUs and PSUs) of $400,000. The
allocation of the long-term equity incentive grant as between Options, RSUs and PSUs has yet to be determined.
Other Executive Officer Compensation
The base salaries for certain of the Company’s
other NEOs have also increased effective January 1, 2021, as follows:
|
|
·
|
Chief Financial Officer: $300,000 (from $290,000);
|
|
|
·
|
Chief Operating Officer: $240,000 (from $232,500);
and
|
|
|
·
|
Chief Marketing Officer: $225,000 (from $210,000)
and a target short-term cash incentive (bonus) award of $100,000 (from $80,000).
|
Minor changes to long-term equity incentive grants
for the Company’s other executive officers may be adopted during fiscal 2021, however no such determinations have been formalized
in this regard.
OTHER
INFORMATION
Indebtedness
of Directors and Executive Officers
None of our directors, executive officers, employees,
former directors, former executive officers or former employees or any of our subsidiaries, and none of their respective associates, is
or has within 30 days before the date of this Circular or at any time since the beginning of the most recently completed financial
year been indebted to us or any of our subsidiaries or another entity whose indebtedness is the subject of a guarantee, support agreement,
letter of credit or other similar agreement or understanding provided by us or any of our subsidiaries.
Interests
of Certain Persons or Companies in Matters to be Acted Upon
To the knowledge of the directors and executive
officers of Greenbrook, no director or executive officer of the Company, any proposed nominee for election as director of the Company,
or any associate or affiliate of any of the foregoing persons, has any material interest, direct or indirect, by way of beneficial ownership
of securities or otherwise, in any matter to be acted upon at the Meeting, other than the election of directors.
Interests
of Informed Persons in Material Transactions
Other than as described elsewhere in this Circular
and in our most recent annual information form under the heading “Interest of Management and Others in Material Transactions”,
there are no material interests, direct or indirect, of any of our directors or executive officers, any shareholder that beneficially
owns, or controls or directs (directly or indirectly), more than 10% of any class or series of our outstanding voting securities, or any
associate or affiliate of any of the foregoing persons, in any transaction since the commencement of our most recently completed financial
year or in any proposed transaction that has materially affected or is reasonably expected to materially affect us or any of our subsidiaries.
Shareholder
Proposals
There are no shareholder proposals to be considered
at the Meeting. The OBCA permits certain eligible shareholders to submit shareholder proposals to us, which proposals may be included
in a management information circular relating to an annual meeting of shareholders. The final date by which we must receive shareholder
proposals for our annual meeting of shareholders to be held in 2022 is April 15, 2022.
Additional
Information
The Company is a reporting issuer under the applicable
legislation of all of the provinces of Canada, excluding Quebec, and is required to file financial statements and information circulars
with the various securities commissions. The Company has filed its annual information form with those securities commissions which, among
other things, contained all of the disclosure required by Form 52-110F1 under NI 52-110.
Additional copies of our latest annual information
form, this Circular and our consolidated financial statements and management’s discussion and analysis can be obtained upon request
from the General Counsel of Greenbrook by writing to:
Greenbrook TMS Inc.
890 Yonge Street, 7th Floor
Toronto, Ontario M4W 3P4.
Financial information
is provided in our audited consolidated financial statements and management’s discussion and analysis for its most recently completed
financial year. Additional information about or relating to the Company can also be found at www.greenbrooktms.com, on SEDAR at
www.sedar.com and on EDGAR at www.sec.gov.
Contacting
the Board of Directors
Shareholders, employees and other interested parties
may communicate directly with the Board through the Lead Independent Director by writing to:
Lead Independent Director
Greenbrook TMS Inc.
890 Yonge Street, 7th Floor
Toronto, Ontario M4W 3P4.
Board
Approval
The contents and sending of this Circular to Shareholders
entitled to receive notice of the Meeting, to each director, to the auditors of the Company and to the appropriate securities regulatory
authorities have been approved by the Board.
|
|
On behalf of the Board of Directors,
|
|
|
|
|
|
/s/Bill Leonard
|
|
Toronto, Ontario
|
Bill Leonard
|
|
May 7, 2021
|
President and Chief Executive Officer
|
Appendix A
MANDATE OF THE BOARD OF DIRECTORS
The members of the board of directors
(respectively, the “Directors” and the “Board”) of Greenbrook TMS Inc. (the “Company”)
are elected by the shareholders of the Company and are responsible for the stewardship of the Company. The purpose of this mandate (the
“Board Mandate”) is to describe the principal duties and responsibilities of the Board, as well as some of the policies
and procedures that apply to the Board in discharging its duties and responsibilities.
Certain aspects of the composition and
organization of the Board are prescribed and/or governed by the Business Corporations Act (Ontario) and the constating documents
of the Company.
The Board will appoint an independent
director to act as Chair of the Board (the “Chair”). If the Board determines that this is not appropriate in the circumstances
and instead appoints a non-independent director to act as Chair of the Board, the Board will also appoint an independent director to act
as lead director (the “Lead Director”). Either an independent Chair of the Board or the Lead Director will act as the
effective leader of the Board and ensure that the Board’s agenda will enable it to successfully carry out its duties. The Chair
of the Board and the Lead Director, as applicable, may be removed at any time at the discretion of the Board.
The constating documents of the Company
provide that the Board shall be comprised of a minimum of three (3) Directors and a maximum of fifteen (15) Directors. The Board
shall periodically review its size in light of its duties and responsibilities from time to time. Applicable residency requirements will
be complied with in respect of the composition of the Board.
The Board shall be comprised of a majority
of independent Directors. A Director shall be considered independent if he or she would be considered independent for the purposes of
National Instrument 58-101 – Disclosure of Corporate Governance Practices and NASDAQ Rule 5605(a)(2).
|
|
5.
|
Role and Responsibilities of the Board
|
The Board is responsible for supervising
the management of the business and affairs of the Company and is expected to focus on guidance and strategic oversight with a view to
increasing shareholder value.
In accordance with the Business Corporations
Act (Ontario), in discharging his or her duties, each Director must act honestly and in good faith, with a view to the best interests
of the Company. Each Director must also exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable
circumstances.
|
|
(a)
|
In accordance with the constating documents of the Company, meetings of the Board may be held at such
times and places as the Chair may determine and as many times per year as necessary to effectively carry out the Board’s responsibilities.
The non-employee Directors may meet without senior executives of the Company, as required. The independent Directors shall have regularly
scheduled meetings, at least twice annually, without senior executives of the Company and any non-independent Directors.
|
|
|
(b)
|
The Chair shall be responsible for establishing or causing to be established the agenda for each Board
meeting, and for ensuring that regular minutes of Board proceedings are kept and circulated on a timely basis for review and approval.
|
|
|
(c)
|
The Chair (or other Directors as delegated by the Chair from time to time) may invite, at its discretion,
any other individuals to attend its meetings. Senior executives of the Company shall attend a meeting if invited by the Chair (or another
Director delegated by the Chair).
|
|
|
7.
|
Delegations and Approval Authorities
|
|
|
(a)
|
The Board shall appoint the chief executive officer of the Company (the “CEO”) and
delegate to the CEO and other senior executives the authority over the day-to-day management of the business and affairs of the Company.
|
|
|
(b)
|
The Board may delegate certain matters it is responsible for to the committees of the Board, currently
consisting of the Audit Committee, and the Governance, Compensation and Nominating Committee. The Board may appoint other committees,
as it deems appropriate, to the extent permissible under applicable law. The Board will, however, retain its oversight function and ultimate
responsibility for such matters and associated delegated responsibilities.
|
|
|
8.
|
Strategic Planning Process and Risk Management
|
|
|
(a)
|
The Board shall adopt a strategic planning process to establish objectives and goals for the Company’s
business and shall review, approve and modify as appropriate the strategies proposed by senior executives to achieve such objectives and
goals. The Board shall review and approve, at least on an annual basis, a strategic plan which takes into account, among other things,
the opportunities and risks of the Company’s business and affairs.
|
|
|
(b)
|
The Board, in conjunction with management, shall be responsible to identify the principal risks of the
Company’s business and oversee management’s implementation of appropriate systems to seek to effectively monitor, manage and
mitigate the impact of such risks. Pursuant to its duty to oversee the implementation of effective risk management policies and procedures,
the Board may delegate to applicable Board committees the responsibility for assessing and implementing appropriate policies and procedures
to address specified risks, including delegation of financial and related risk management to the Audit Committee and delegation of risks
associated with compensation policies and practices to the Governance, Compensation and Nominating Committee.
|
|
|
9.
|
Succession Planning, Appointment and Supervision of Senior Executives
|
|
|
(a)
|
The Board shall approve the corporate goals and objectives of the CEO and review the performance of the
CEO against such corporate goals and objectives. The Board shall take steps to satisfy itself as to the integrity of the CEO and other
senior executives of the Company and that the CEO and other senior executives create a culture of integrity throughout the organization.
|
|
|
(b)
|
The Board shall approve the succession plan for the Company, including the selection, appointment, supervision
and evaluation of the senior executives of the Company, and shall also approve the compensation of the senior executives of the Company
upon recommendation of the Governance, Compensation and Nominating Committee. The CEO may not be present during voting or deliberations
on his/her executive compensation.
|
|
|
10.
|
Financial Reporting and Internal Controls
|
The Board shall review and monitor,
with the assistance of the Audit Committee, the adequacy and effectiveness of the Company’s system of internal controls over financial
reporting, including any significant deficiencies or changes in internal control and the quality and integrity of the Company’s
external financial reporting processes.
The Board shall approve applicable regulatory
filings that require or are advisable for the Board to approve, which the Board may delegate in accordance with Section 7(b) of
this mandate. These include, but are not limited to, the annual audited financial statements, interim financial statements and related
management’s discussion and analysis accompanying such financial statements, earnings press releases, management proxy circulars,
annual information forms and annual reports, prospectuses and offering documents and other applicable disclosure.
|
|
12.
|
Corporate Disclosure and Communications
|
The Board will seek to ensure that corporate
disclosure of the Company complies with all applicable laws, rules and regulations and the rules and regulations of the stock
exchanges upon which the Company’s securities are listed. In addition, the Board shall adopt appropriate procedures designed to
permit the Board to receive feedback from shareholders on material issues.
The Board shall adopt and periodically
review policies and procedures designed to ensure that the Company and its Directors, officers and employees comply with all applicable
laws, rules and regulations and conduct the Company’s business ethically and with honesty and integrity.
The Board may, from time to time, permit
departures from the terms of this Board Mandate, either prospectively or retrospectively. This Board Mandate is not intended to give rise
to civil liability on the part of the Company or its Directors or officers, to shareholders, security holders, customers, suppliers, competitors,
employees or other persons, or to any other liability whatsoever on their part.
The Board may review and recommend changes
to this Board Mandate from time to time and the Governance, Compensation and Nominating Committee may periodically review and assess the
adequacy of this mandate and recommend any proposed changes to the Board for consideration.
Appendix B
Option Plan Amendment Resolution
Whereas
on October 3, 2018, the board of directors (the “Board”) of Greenbrook TMS Inc. (the “Company”)
adopted a stock option plan, which stock option plan was amended and restated on May 24, 2019 (the “Stock Option Plan”);
AND WHEREAS
the Board further amended and restated the Stock Option Plan on May 6, 2021, which is now referred to as the Amended and Restated
Omnibus Equity Incentive Plan (the “Equity Incentive Plan”), to (a) permit the grant of restricted share units
(“RSUs”) and performance share units (“PSUs” and, collectively with RSUs, “Share-Based
Awards”), (b) set limitations on employee post-employment entitlements that might arise pursuant to statute or the common
law, (c) update the non-employee director participation limits to account for RSUs and PSUs, (d) update the amendment provisions
that do not require shareholder approval to account for RSUs and PSUs, (e) update the amendment provisions that do require shareholder
approval to account for RSUs and PSUs and to meet the requirements of the Toronto Stock Exchange, (f) include a clawback provision,
(g) qualify for favorable treatment under applicable tax laws, and (h) to make other changes of a housekeeping nature (the amendments
described in subsections (d) and (e) above are collectively referred to as the “Amendment Provision Updates”),
as more particularly described in the management information circular of the Company dated May 7, 2021 (the “Circular”);
AND WHEREAS
pursuant to the terms of the Equity Incentive Plan, the Amendment Provision Updates require shareholder approval.
UPON
MOTION DULY MADE AND SECONDED, Be it resolved that:
|
|
1.
|
The Amendment Provision Updates, as described in the Circular, be and are hereby approved; and
|
|
|
2.
|
any one or more directors or officers of the Company are hereby authorized, for and on behalf of the Company,
to take, or cause to be taken, any and all such acts and things and to execute and deliver, under the corporate seal of the Company or
otherwise, all such deeds, instruments, notices, consents, acknowledgments, certificates, assurances and other documents (including any
documents required under applicable laws or regulatory policies) as any such director or officer in his or her sole discretion may determine
to be necessary or desirable to give effect to the foregoing resolution, such determination to be conclusively evidenced by the taking
of any such action or such director’s or officer’s execution and delivery of any such deed, instrument, notice, consent, acknowledgement,
certificate, assurance or other document.
|
Appendix C
Amended and Restated Omnibus Equity Incentive Plan
Appendix D
Unallocated Awards Resolution
Whereas
on October 3, 2018, the board of directors (the “Board”) of Greenbrook TMS Inc. (the “Company”)
adopted a stock option plan, which stock option plan was amended and restated on May 24, 2019 (the “Stock Option Plan”),
which does not have a fixed maximum number of common shares issuable;
AND WHEREAS
the Board amended and restated the Stock Option Plan on May 6, 2021, which is now referred to as the Amended and Restated Omnibus
Equity Incentive Plan (the “Equity Incentive Plan”) to permit the grant of restricted share units (“RSUs”)
and performance share units (“PSUs” and, collectively with RSUs, “Share-Based Awards”), among other
amendments, as more particularly described in the management information circular of the Company dated May 7, 2021 (the “Circular”);
AND WHEREAS
the shareholders of the Company last approved the Stock Option Plan, by a majority of votes cast, on June 28, 2019;
AND WHEREAS
the rules of Toronto Stock Exchange provide that all unallocated options, rights or other entitlements under a security-based compensation
arrangement which does not have a fixed number of maximum securities issuable, be approved every three (3) years.
UPON
MOTION DULY MADE AND SECONDED, Be it resolved that:
|
|
1.
|
All unallocated Options and Share-Based Awards under the Equity Incentive Plan, as described in the Circular,
be and are hereby approved;
|
|
|
2.
|
The Company has the ability to continue granting Options and Share-Based Awards under the Equity Incentive
Plan until June 14, 2024, which is the date that is three (3) years from the date of the shareholders meeting at which shareholder
approval is being sought; and
|
|
|
3.
|
any one or more directors or officers of the Company are hereby authorized, for and on behalf of the Company,
to take, or cause to be taken, any and all such acts and things and to execute and deliver, under the corporate seal of the Company or
otherwise, all such deeds, instruments, notices, consents, acknowledgments, certificates, assurances and other documents (including any
documents required under applicable laws or regulatory policies) as any such director or officer in his or her sole discretion may determine
to be necessary or desirable to give effect to the foregoing resolution, such determination to be conclusively evidenced by the taking
of any such action or such director’s or officer’s execution and delivery of any such deed, instrument, notice, consent, acknowledgement,
certificate, assurance or other document.
|
GREENBROOK TMS INC.
AMENDED AND RESTATED
OMNIBUS EQUITY INCENTIVE PLAN
Greenbrook TMS Inc. (the “Corporation”)
hereby adopts this Amended and Restated Omnibus Equity Incentive Plan for certain Employees, Directors and Consultants of the Corporation
and/or its Affiliates.
Article 1
Purpose
The purpose of the Plan is
to attract and retain Employees, Directors and Consultants of the Corporation and/or its Affiliates, and to ensure that interests of key
persons are aligned with the success of the Corporation and its Affiliates.
Article 2
Interpretation
In the Plan, the following
terms have the following meanings:
“Active Employment”
or “Actively Employed” means a person is employed and actively performing employment duties for the Corporation
or any of its Affiliates, or is on a leave of absence approved by the Corporation or any of its Affiliates. “Active Employment”
or “Actively Employed” does not include any period during, or in respect of, which the person is receiving or is entitled
to receive payments in lieu of notice, severance pay or damages for wrongful dismissal or otherwise, in each case, under statute, contract,
common law or otherwise. For purposes of the Plan, an Employee is not Actively Employed if his or her employment has been terminated by
his or her resignation or by the Corporation or any of its Affiliates, regardless of whether the Employee’s employment has been
terminated with or without cause, with or without notice, lawfully or unlawfully;
“Affiliate”
means, with respect to any Person, any other Person who, directly or indirectly (including through one or more intermediaries), controls,
is controlled by, or is under common control with, such Person, including any partner, member, shareholder or other equity holder of such
Person or manager, director, officer or employee of such Person. For purposes of this definition, “control,” when used with
respect to any specified Person, shall mean the power, direct or indirect, to direct or cause the direction of the management and policies
of such Person, whether through ownership of voting securities or partnership or other ownership interests, by contract or otherwise;
and the terms “controlling” and “controlled” shall have correlative meanings;
“Award”
means an Option, RSU or PSU (and Dividend Share Unit) granted under the Plan (as the context requires);
“Award Agreement”
means an Option Agreement, an RSU Agreement or a PSU Agreement (as the context requires);
“Blackout Period”
means the period of time when, pursuant to any policies or determinations of the Corporation, securities of the Corporation may not be
traded by insiders or other specified persons, including any period in which insiders or other specified persons are in possession of
material undisclosed information, but excluding any period during which a regulator has halted trading in the Corporation’s securities;
“Board”
means the board of directors of the Corporation;
“Business Day”
means any day on which the Toronto Stock Exchange is open for business;
“Canadian Participants”
means Participants who are residents for purposes of the Income Tax Act (Canada), or otherwise performing services in Canada for
which the compensation under the Plan is not exempt from taxation under the Income Tax Act (Canada);
“Cause”
means:
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(a)
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with respect to any Employee or Consultant, (i) in the case where there is an employment or consulting
agreement or arrangement in effect between the Corporation or one of its Affiliates and the Participant that defines “cause”
(or words of like import), “cause” as defined under such agreement or arrangement; or (ii) in the case where there is
no such agreement or arrangement in effect between the Corporation or one of its Affiliates and the Participant:
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(A)
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theft, fraud, dishonesty or misconduct by the Participant involving the property, business or affairs
of the Corporation or any of its Affiliates or the carrying out of the Participant’s duties to the Corporation or any of its Affiliates;
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(B)
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any material breach or non-observance by the Participant of any term of any employment or consulting agreement
or arrangement between the Participant and the Corporation or any of its Affiliates, the Plan or any non-competition, non-solicitation,
confidentiality or intellectual property covenants between the Participant and the Corporation or any of its Affiliates;
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(C)
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the material failure by the Participant to perform the Participant’s duties with the Corporation
or any of its Affiliates provided that the Participant has been given notice in writing thereof and a reasonable period of time in which
to rectify such failure;
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(D)
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the failure of the Participant to comply with the Participant’s fiduciary duties to the Corporation
or any of its Affiliates; or
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(E)
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the Participant’s conviction of, or plea of guilty or no contest to, or entering into a pre-trial
diversion program for, a criminal offence, felony, or a crime or offence involving moral turpitude;
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(b)
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with respect to a Director, a determination by a majority of the disinterested Board members that such
Director has engaged in any of the following; (i) malfeasance in office; (ii) fraud, gross negligence or willful misconduct;
(iii) false or fraudulent misrepresentation inducing the Director’s appointment; (iv) willful conversion of corporate
funds; or (v) repeated failure to participate in Board meetings on a regular basis despite having received proper notice of the meetings
in advance;
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“Change in Control”
means: (i) the sale of all or substantially all of the consolidated assets of the Corporation and the Subsidiaries to a Third
Party Purchaser; (ii) a sale resulting in no less than a majority of the Common Shares (or other voting shares of the Corporation)
on a fully diluted basis being held by a Third Party Purchaser; (iii) a merger, consolidation, recapitalization or reorganization
of the Corporation with or into a Third Party Purchaser that results in the inability of the holders of Common Shares (or other voting
shares of the Corporation) to designate or elect a majority of the board of directors (or its equivalent) of the resulting entity or its
parent company; or (iv) any additional event that the Board determines is a Change in Control;
“Code”
means the U.S. Internal Revenue Code of 1986, as amended;
“Code Section 409A”
means Section 409A of the Code and the U.S. Treasury Regulations and other guidance promulgated thereunder;
“Common Shares”
means the common shares in the capital of the Corporation and any securities into which such common shares may hereafter be converted,
changed, reclassified or exchanged;
“Consultant”
means an individual consultant or a consultant entity, other than an Employee or Director that:
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(a)
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is engaged to provide services on a bona fide basis to the Corporation or any of its Affiliates,
other than services provided in relation to a distribution of securities of the Corporation or any of its Affiliates;
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(b)
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provides the services under a written contract with the Corporation or any of its Affiliates; and
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(c)
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spends or will spend a significant amount of time and attention on the affairs and business of the Corporation
or any of its Affiliates,
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and includes, (i) for an individual consultant,
(A) a company of which the individual consultant is an employee or shareholder; or (B) a partnership of which the individual
consultant is an employee or partner, and (ii) for a consultant that is not an individual, an employee or director of the consultant,
provided that the individual employee or director spends or will spend a significant amount of time and attention on the affairs and business
of the Corporation or any of its Affiliates;
“Director”
means a member of the Board from time to time who is neither an Employee nor a Consultant;
“Disability”
means the Participant’s inability to substantially fulfill his or her duties to the Corporation or any of its Affiliates for a continuous
period of six months or more or the Participant’s inability to substantially fulfill his or her duties to the Corporation or any
of its Affiliates for an aggregate period of six months or more during any consecutive 12-month period, (taking into account any accommodation
by the Corporation or any of its Affiliates as is required under applicable law); if there is any disagreement between the Corporation
and the Participant as to the Participant’s Disability or as to the date any such Disability began or ended, the same shall be determined
by a physician mutually acceptable to the Corporation and the Participant whose determination shall be conclusive evidence of any such
Disability and of the date any such Disability began or ended;
“Dividend Share Unit”
has the meaning ascribed to such term in Section 5.5;
“Employee”
means (subject to any applicable securities laws) a full-time or part-time employee of the Corporation or any of its Affiliates;
“Exchange”
means the Toronto Stock Exchange, The Nasdaq Stock Market LLC or other stock exchange comparable or trading system as is approved by the
Board (as the context requires);
“Fair Market Value”
means with respect to a Common Share or other security, as of any date, (i)(a) for United States residents, the closing price reported
on The Nasdaq Stock Market LLC on such date, or (b) for residents of any other jurisdiction (including Canada), the closing price
reported on the Toronto Stock Exchange on such date, or, in each case, if there is no sale of such Common Share or other security on such
date, then on the last previous date on which there was a sale on the applicable securities exchange, or (ii) if such Common Share
or other security is not then traded on an established securities market, the fair market value of such Common Share or other security
as determined by the Board (by the reasonable application of a reasonable valuation method), provided that no illiquidity or minority
or similar discount is applied;
“Grant Date”
means, for any Award, the date specified by the Board at the time it grants the Award (provided, however, that such date shall not be
prior to the date the Board acts to grant the Award);
“insider”
has the meaning attributed thereto in the Toronto Stock Exchange Company Manual in respect of the rules governing security-based
compensation arrangements, as amended from time to time;
“Intrinsic Value”
means, with respect to an Option, an amount equal to the excess, if any, of the Fair Market Value of a Common Share as of the applicable
date of determination over the Option Price;
“Investor”
means Greybrook Health Inc., an Ontario corporation, and any successors thereto;
“Notice”
means a notice substantially in the form set out as Schedule B to the Plan, as amended by the Board from time to time;
“Option”
means the right to purchase Common Shares granted under the Plan pursuant to the terms and conditions of an Option Agreement;
“Option Agreement”
means an agreement between the Corporation and an Employee, Director or Consultant evidencing the grant of an Option and the terms and
conditions of such Option, which shall substantially be in the form of Schedule A hereto or such other form(s) as determined by the
Board, in its discretion from time to time, specifying the terms and conditions of an Option;
“Optionee”
means an Employee, Director or Consultant who holds Options granted under the Plan pursuant to an Option Agreement;
“Option Price”
means the purchase price per Optioned Share determined in accordance with Section 4.3;
“Optioned Shares”
means the Common Shares which may be purchased by an Optionee pursuant to an Option;
“Participant”
means any Employee, Director or Consultant to whom an Award is granted;
“Performance Period”
means, with respect to PSUs, the period of time specified in the PSU Agreement during which the applicable Performance Vesting Conditions
may be achieved;
“Performance Vesting
Conditions” means such performance-related conditions in respect of the vesting of Share Units determined by the Board at the
Grant Date, which may include but are not limited to, financial or operational performance of the Corporation, total shareholder return
or individual performance criteria, measured over the Performance Period;
“Person”
means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with or
without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory
body or agency, government or governmental agency, authority or entity however designated or constituted;
“Plan”
means this Amended and Restated Omnibus Equity Incentive Plan, as may be amended from time to time, and including the Addendum for U.S.
Participants attached hereto;
“PSU” means
a right granted to an Employee or Consultant to receive, at the discretion of the Corporation, a Common Share issued from treasury or
a cash payment equal to the Fair Market Value thereof, which right generally becomes vested, if at all, subject to the attainment of Performance
Vesting Conditions and the satisfaction of such other conditions to vesting, if any, as may be determined by the Board;
“PSU Agreement”
means an agreement between the Corporation and an Employee or Consultant evidencing the grant of an PSU and the terms and conditions of
such PSU, which shall substantially be in the form of Schedule D hereto or such other form(s) as determined by the Board, in its
discretion from time to time, specifying the terms and conditions of a PSU;
“Replacement Options”
means the options to acquire Common Shares that were granted by the Corporation in exchange for options granted under the TMS NeuroHealth
Centers, Inc. Stock Option Plan;
“RSU” means
a right granted to an Employee, Director or Consultant to receive, at the discretion of the Corporation, a Common Share issued from treasury
or a cash payment equal to the Fair Market Value thereof, which right generally becomes vested, if at all, following a period of continuous
employment;
“RSU Agreement”
means an agreement between the Corporation and an Employee, Director or Consultant evidencing the grant of an RSU and the terms and conditions
of such RSU, which shall substantially be in the form of Schedule D hereto or such other form(s) as determined by the Board, in its
discretion from time to time, specifying the terms and conditions of an RSU;
“security-based compensation
arrangement” has the meaning attributed thereto in the Toronto Stock Exchange Company Manual, as amended from time to time;
“Settlement Date”
has the meaning ascribed to such term in Section 5.7;
“Share Unit”
means an RSU, PSU or Dividend Share Unit (as the context requires);
“Share Unit Account”
has the meaning ascribed to such term in Section 5.6;
“Shareholder”
means a holder of Common Shares;
“Subsidiaries”
means any direct or indirect subsidiary of the Corporation;
“Termination Date”
means (i) in respect of a Participant who is a Consultant or Director, the date the Participant ceases to provide services to the
Corporation or any of its Affiliates (for any reason), and (ii) in respect of a Participant who is an Employee, means the date that
the Participant ceases to be Actively Employed for any reason, but in any case (a) without regard to whether the Participant’s
employment with the Corporation or any of its Affiliates is terminated with or without Cause, with or without notice, lawfully or unlawfully
or with or without any adequate compensation in lieu of notice, and (b) does not include any severance period or notice period to
which the Participant might then be entitled or any period of salary continuance or deemed employment or other damages paid or payable
to the Participant in respect of the termination of employment, and, in the case of both Subsections (a) and (b), whether pursuant
to any applicable statute, contract, civil law, the common law or otherwise. Any applicable severance period or notice period shall not
be considered a period of employment for the purposes of the Participant’s rights under the Plan;
“Third Party Purchaser”
means any Person who is not an Affiliate of the Investor or an Affiliate of the Corporation and is the acquirer in connection with a Change
in Control;
“Treasury Regulation”
means any U.S. Treasury Regulation promulgated under the Code;
“U.S. Participant”
means any Participant who is a United States citizen or United States resident alien as defined for purposes of Section 7701(b)(1)(A) of
the Code or for whom an Award is otherwise subject to taxation under the Code; provided, however, that a Participant shall be a U.S. Participant
solely with respect to those affected Awards; and
“Vesting Date”
means the date or dates set out in the RSU Agreement or PSU Agreement on which Awards will vest, or such earlier date as is provided for
in the Plan or is determined by the Board in its discretion from time to time.
Any reference in the Plan
to gender shall include all genders and words importing the singular number only shall include the plural and vice versa. Whenever the
Board is entitled to exercise discretion in the administration of the Plan, the term “discretion” means the sole and absolute
discretion of the Board, as applicable. The division of the Plan into Articles and Sections and the insertion of headings are for reference
purposes only and shall not affect the interpretation of the Plan. Unless otherwise indicated, any reference in the Plan to an Article or
Section refers to the specified Article or Section of the Plan.
Article 3
Shares Reserved for Issuance
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3.1
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Shares Reserved for Issuance.
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The maximum number of Common
Shares reserved for issuance under the Plan (including upon the exercise of Replacement Options) shall be 10% of the issued and outstanding
Common Shares (subject to any adjustment pursuant to Section 9.1) from time to time; provided that, the maximum number of
Common Shares that may be issued pursuant to RSUs and PSUs shall not exceed 5% of the number of issued and outstanding Common Shares from
time to time. If any Option or Replacement Option is exercised, expires or otherwise terminates for any reason, the number of Common Shares
in respect of which the Option or Replacement Option has been exercised, expired or terminated shall again be available for issuance under
the Plan. Common Shares underlying Share Units that have been settled or disposed of or that have expired or been terminated for any reason
shall become available for subsequent issuance under the Plan.
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3.2
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Insider Participation Limits
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The number of Common Shares
that may be (i) issued to insiders of the Corporation within any one year period, or (ii) issuable to insiders of the Corporation
at any time, in each case, under the Plan alone or when combined will all other security-based compensation arrangements of the Corporation,
cannot exceed 10% of the outstanding Common Shares.
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3.3
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Director Participation Limits
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The aggregate value of all
Awards granted to any one Director in any one year period under all security-based compensation arrangements of the Corporation may not
exceed C$150,000 (with no more than C$100,000 attributable to Options) based on the grant date fair value of the Awards, other than Awards
granted in lieu of cash fees payable for serving as a Director.
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3.4
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No Fractional Shares.
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No fractional Common Shares
shall be issued under the Plan, and any fractional Share otherwise deliverable under an Award shall be forfeited for no consideration
unless other treatment is determined by the Board.
Article 4
Grant of Options and Rights of Optionees
The Board may, at any time
and from time to time grant Options to such Employees, Directors and Consultants as it may select for the number of Optioned Shares that
it shall designate, subject to the provisions of the Plan. The Board shall make all necessary or desirable determinations regarding the
granting of Options and may take into consideration the present and potential contributions of a particular Employee, Director or Consultant
to the success of the Corporation and its Affiliates and any other factors which it may deem proper and relevant. The grant of an Option
to an Employee, Director or Consultant at any time shall neither entitle such Person to receive, nor preclude such Person from receiving,
a subsequent grant of an Option.
In all cases, the Options
shall be in addition to, and not in substitution for or in lieu of, ordinary salary and wages payable to an Employee in respect of his
or her services to the Corporation or any of its Affiliates.
Each Option granted by the
Board shall be evidenced by an Option Agreement between the Optionee and the Corporation. Each Option Agreement shall specify the number
of Optioned Shares, the Option Price, and the terms and conditions of the Option.
The Option Price per Optioned
Share at the time any Option is granted shall be the greater of:
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(a)
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the Fair Market Value of the Optioned Shares on the Grant Date; and
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(b)
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such greater amount as is determined by the Board on the Grant Date, if any.
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4.4
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Vesting Specified in the Option Agreement.
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The Option Agreement shall
specify the date or dates upon which an Optionee’s right to purchase the Optioned Shares shall vest (including subject to the attainment
of certain financial results or other criteria). The Board shall have the discretion to provide for early vesting of any Option or Options.
Options shall be exercisable
as specified in the Option Agreement as to all or any lesser number of the Optioned Shares in respect of which the Optionee’s right
to purchase Optioned Shares has vested.
Options shall be exercised
by the Optionee or his or her personal legal representative delivering a Notice to the Corporation specifying the number of Optioned Shares
in respect of which such Option is then being exercised and such Notice shall include payment in full of the applicable Option Price (and
any applicable withholding taxes) through one or a combination of the following:
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(a)
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in cash or by certified check, bank draft or money order payable to the Corporation or by such other means
as might be specified from time to time by the Board;
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(b)
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at the Optionee’s
express request, to the extent permitted by the Board and as permitted by applicable law,
a net settlement method whereby the Corporation shall retain such number of Common Shares
otherwise issuable in connection with the exercise of the Option as shall have a Fair Market
Value on the date of such exercise equal to the aggregate Option Price; or
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(c)
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to the extent
permitted by the Board and as permitted by applicable law, pursuant to a broker-assisted
cashless exercise, whereby the Optionee shall elect on the Notice to receive:
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(i)
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an
amount in cash equal to the cash proceeds realized upon the sale, on the Optionee’s
behalf, in the capital markets of the Optioned Shares in respect of which such Option is
then being exercised by a securities dealer designated by the Corporation, less the aggregate
Option Price, any applicable withholding taxes, and any transfer costs charged by the securities
dealer to sell the Optioned Shares;
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(ii)
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an
aggregate number of Common Shares that is equal to the number of Optioned Shares in respect
of which such Option is then being exercised, minus the number of Optioned Shares sold in
the capital markets on the Optionee’s behalf by a securities dealer designated by the
Corporation as required to realize cash proceeds equal to the aggregate Option Price, any
applicable withholding taxes and any transfer costs charged by the securities dealer to sell
the Optioned Shares; or
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(iii)
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a
combination of (i) and
(ii).
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Subject to Section 10.13,
following the exercise of the Option, the Corporation shall take all actions necessary to issue fully paid and non-assessable Optioned
Shares to the Optionee, following which the Optionee shall have no further rights, title or interest with respect to such Option.
The Board will, at the time
the Option is granted, determine the date or dates upon which an Option will expire, which date cannot be greater than ten (10) years
from the Grant Date. On the expiry of an Option, the Option will be null, void and of no effect and no amount shall be payable to the
Optionee in respect thereof as compensation, damages or otherwise. Notwithstanding any other provision of the Plan, each Option that would
expire during a Blackout Period shall expire on the date that is ten (10) Business Days immediately following the expiration of the
Blackout Period.
Article 5
Share
Units
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5.1
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Granting of RSUs or PSUs.
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The Board may, from time to
time, grant RSUs or PSUs to such Employees, Directors and Consultants as it may select for the number of Common Shares that it shall designate,
subject to the provisions of the Plan, except that no Director may receive a grant of PSUs under the Plan. Each RSU and PSU granted by
the Board shall be evidenced by an RSU Agreement or PSU Agreement, respectively, between the Employee, Director or Consultant, as applicable,
and the Corporation. The grant of an RSU or PSU to an Employee, Director or Consultant at any time shall neither entitle such Person to
receive, nor preclude such Person from receiving, a subsequent grant of an RSU or PSU. Unless otherwise provided in the applicable Award
Agreement, Share Units granted to an Employee, Director or Consultant shall be awarded solely in respect of services provided by such
Person in the calendar year in which the Grant Date occurs. In all cases, the Share Units shall be in addition to, and not in substitution
for or in lieu of, ordinary salary and wages payable to an Employee in respect of his or her services to the Corporation or any of its
Affiliates.
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5.2
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Number and Type of Share Units.
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Each RSU Agreement and PSU
Agreement shall set forth: (i) the Grant Date of the RSUs or PSUs; (ii) the number of RSUs or PSUs subject to such Award; (iii) the
applicable vesting schedule; and (iv) any applicable Performance Vesting Conditions and Performance Period, and may specify such
other terms and conditions consistent with the terms of the Plan as the Board shall determine or as shall be required under any other
provision of the Plan.
Subject to the terms of any
employment, services or other agreement between the Participant and the Corporation or any of its Affiliates, or the Board expressly providing
to the contrary, a Participant’s RSUs shall vest as to 100% on the third anniversary of the Grant Date.
Subject to the terms of any
employment, services or other agreement between the Participant and the Corporation or any of its Affiliates, or the Board expressly providing
to the contrary, a Participant’s PSUs shall vest on the Vesting Date(s), conditional on the satisfaction of any Performance Vesting
Conditions during the applicable Performance Period.
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5.5
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Dividend Share Units.
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When dividends (other than
stock dividends) are paid on Common Shares, additional Share Units (“Dividend Share Units”) shall be credited to a
Participant’s Share Unit Account as of the dividend payment date. The number of Dividend Share Units to be credited to the Participant’s
Share Unit Account shall be determined by multiplying the aggregate number of Share Units held by the Participant on the relevant record
date by the amount of the dividend paid by the Corporation on each Common Share, and dividing the result by the Fair Market Value on the
dividend payment date, which Dividend Share Units shall be in the form of RSUs or PSUs, as applicable. Dividend Share Units credited to
a Participant’s Share Unit Account in accordance with this Section 5.5 shall be subject to the same vesting and settlement
conditions applicable to the related RSUs or PSUs.
An account, called a “Share
Unit Account”, shall be maintained by the Corporation for each Participant and will be credited with such grants of RSUs, PSUs
or Dividend Share Units as are received by the Participant from time to time. Share Units that fail to vest or that are settled in accordance
with Section 5.7 shall be cancelled and shall cease to be recorded in the Participant’s Share Unit Account as of the date on
which such Share Units are forfeited or cancelled under the Plan or are settled, as the case may be. Where a Participant has been granted
one or more RSUs or PSUs, such RSUs and PSUs (and related Dividend Share Units) shall be recorded separately in the Participant’s
Share Unit Account.
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5.7
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Settlement of Share Unit Awards.
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On or as soon as practicable
following the Vesting Date of a Share Unit and in any event no later than December 31 of the third year following the year in respect
of which the Share Unit is granted (the “Settlement Date”), and subject to Section 10.12, the Corporation shall,
in its sole discretion (i) issue from treasury the number of Common Shares that is equal to the number of vested Share Units held
by the Participant as at the Settlement Date (rounded down to the nearest whole number), as fully paid and non-assessable Common Shares,
(ii) deliver to the Participant an amount in cash (net of applicable withholding taxes) equal to the number of vested Share Units
held by the Participant as at the Settlement Date multiplied by the Fair Market Value as at the Settlement Date, or (iii) a combination
of (i) and (ii). Upon settlement of such Share Units, the corresponding number of Share Units credited to the Participant’s
Share Unit Account shall be cancelled, and the Participant shall have no further rights, title or interest with respect thereto.
Notwithstanding the ability
for the Corporation to settle vested RSUs (and related Dividend Share Units) in Common Shares pursuant to subsection (i) or through
a cash payment pursuant to subsection (ii) above, vested RSUs held by Directors who are Canadian Participants will be settled in
Common Shares pursuant to subsection (i); provided that, the Corporation may, in its sole discretion, permit such a Director to
elect to receive a cash payment pursuant to subsection (ii).
Article 6
cESSATION
OF EMPLOYMENT OR SERVICES
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6.1
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Cessation of Employment or Services Other Than for Cause.
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Unless otherwise determined
by the Board, in the event a Participant ceases to be Actively Employed by, or provide services to, the Corporation or any of its Affiliates
and the Employee, Director, or Consultant has not been terminated for Cause, all unvested Awards held by the Participant on the Participant’s
Termination Date shall automatically terminate and be forfeited on the Termination Date and be of no further force or effect, and no amount
shall be payable to the Participant in respect thereof as compensation, damages or otherwise, including on account of severance, payment
in lieu of notice or damages for wrongful dismissal.
All Options that are held
by an Optionee that are vested on the Optionee’s Termination Date may be exercised by the Optionee (or, in the case of death or
Disability, the Optionee’s heirs, executors, administrators, trustees, personal legal representatives or the like in accordance
with Section 10.15) during the applicable period specified in, and otherwise in accordance with the terms of, the Option Agreement,
but in no event later than the expiration of the stated term of such Options, after which time such Options shall automatically terminate
and be forfeited and no amount shall be payable to the Optionee (or any other Person) in respect thereof as compensation, damages or otherwise,
including on account of severance, payment in lieu of notice or damages for wrongful dismissal.
Any vested Share Units in
the Participant’s Share Unit Account on the Participant’s Termination Date shall be settled as soon as practicable following
the Termination Date in accordance with Section 5.7.
The provisions of the Plan
may take away or limit a Participant’s common law rights to Awards and any common law rights to damages as compensation for the
loss of such Awards during any reasonable notice period.
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6.2
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Cessation of Employment or Service for Cause.
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Subject to applicable law,
unless otherwise determined by the Board, in the event a Participant ceases to be Actively Employed by, or provide services to, the Corporation
or any of its Affiliates and the Employee, Director, or Consultant has been terminated for Cause, all Awards (whether vested or unvested)
held by the Participant on the Participant’s Termination Date shall automatically terminate and be forfeited on the Termination
Date and be of no further force or effect, and no amount shall be payable to the Participant in respect thereof as compensation, damages
or otherwise, including on account of severance, payment in lieu of notice or damages for wrongful dismissal.
Article 7
Change in Control
In the
event of a Change in Control, except as otherwise provided in an Award Agreement, the Board shall provide for the treatment of each outstanding
Award as it determines in its discretion, which treatment need not be uniform for all Participants and/or Awards and which may include,
without limitation, one or more of the following:
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(a)
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(i) continuation
of such Award or (ii) conversion of such Award into, or substitution or replacement
of such Award with, an award with respect to equity interests of the successor (or a parent
or subsidiary thereof) with substantially equivalent terms and value as such Award (which
value for an Option as of immediately following such Change in Control shall not exceed the
Intrinsic Value of such Option as of immediately prior to such Change in Control);
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(b)
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acceleration
of the vesting and/or exercisability of Awards;
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(c)
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upon written
notice, providing that outstanding Options must be exercised, to the extent then exercisable,
during a specified period of time preceding the Change in Control as determined by the Board,
and further providing for the right to exercise an Option as of immediately, or during a
specified period, prior to such Change in Control, and the termination and forfeiture of
any such Option without payment of any consideration therefor to the extent such Option is
not timely exercised;
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(d)
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if vesting
of such Award is subject to performance criteria (including any Performance Vesting Conditions),
the level of attainment (including deemed attainment) of such criteria shall be determined
by the Board in its discretion, including, without limitation, by deeming such criteria attained
at the applicable target or maximum level regardless of actual performance, or measuring
the attainment of such criteria based on actual performance through such Change in Control
or a specified date prior thereto;
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(e)
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other than
for Canadian Participants in respect of their Options, automatic cancellation or voluntary
surrender of all or any portion of outstanding Awards for payment of their fair value (in
the form of cash, securities, rights and/or other property) as determined in the sole discretion
of the Board, and which value may be zero; provided, that in the case of an Option, the fair
value shall be equal to the Intrinsic Value of such Option as of immediately prior to such
Change in Control; provided, further, that payment shall be made promptly following such
Change in Control or on a specified date or dates following such Change in Control;
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(f)
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permitting
the Optionee to surrender to the Corporation all or any portion of an outstanding Option
in consideration for a payment, in cash, securities, rights and/or other property, in an
amount equal to the Intrinsic Value of such Option as of immediately prior to such Change
in Control; provided, that payment shall be made promptly following such Change in Control
or on a specified date or dates following such Change in Control; and/or
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(g)
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cancellation
of all or any portion of outstanding unvested and/or unexercisable Awards for no consideration.
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Article 8
Shareholder Rights
A
Participant shall have no rights whatsoever as a shareholder in respect of any of the Common Shares (including any right to vote or to
receive dividends or other distributions therefrom), unless and only to the extent that the Participant shall from time to time duly
exercise an Option or receive a Common Share in settlement of a Share Unit, and thereby become a Shareholder.
Article 9
Certain Adjustments
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9.1
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Adjustment in the Number of Shares.
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In
the event that there is any change in the Common Shares or in the capital structure of the Corporation by reason of any stock or extraordinary
cash dividend, stock split, reverse stock split, an extraordinary corporate transaction such as any recapitalization, reorganization,
merger, consolidation, combination, exchange or other relevant change in capitalization, then the Board, to prevent inappropriate dilution
or enlargement of Participants’ rights under the Plan, shall substitute or adjust, in its sole discretion: (i) the number
and kind of shares or other securities that may be granted pursuant to Awards; (ii) the number and kind of shares or other securities
subject to outstanding Awards; (iii) the Option Price applicable to outstanding Options; (iv) the number of Share Units in
the Participants’ Share Unit Accounts; (v) the vesting of PSUs; and/or (vi) other value determinations (including performance
conditions) applicable to the Plan or outstanding Awards; provided, however, that no adjustment will obligate the Corporation to issue
or sell fractional securities. Any such adjustments shall, to the extent applicable, be made in good-faith compliance with Code Section 409A
and/or paragraph 7(1.4)(c) of the Income Tax Act (Canada), as applicable.
Article 10
General
Any
notice required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand
or via email and addressed to the recipient, if to the Corporation, at its principal office to the attention of its Corporate Secretary,
and if to the Participant, as indicated in the Award Agreement or at the Participant’s last known postal or email address shown
in the records of the Corporation or any Affiliate. It is the responsibility of the Participant to advise the Corporation of any change
in address, and neither the Corporation nor any Affiliate shall have any responsibility for any failure by the Participant to do so.
Any Participant may change the Participant’s address from time to time by notice in writing to the Corporation. The Corporation
shall give written notice to each Participant of any change of the Corporation’s address. Any such notice shall be effective, if
delivered, on the date of delivery.
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10.2
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Continued Employment and Engagement;
Voluntary Participation.
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No
Participant shall be induced to acquire, exercise or settle an Award by expectation of employment, engagement or other service or continued
employment, engagement or other service. Nothing contained in the Plan or by the grant of any Awards will confer upon any Participant
any right to the continuation of the Participant’s employment, engagement or other service by or with the Corporation or any of
its Affiliates or interfere in any way with the right of the Corporation or any of its Affiliates at any time to terminate a Participant’s
employment, engagement or other service or to increase or decrease the compensation of a Participant. Nothing in the Plan may be construed
to provide any Participant with any rights whatsoever to compensation or damages in lieu of notice or continued participation in, or
entitlements under, the Plan as a consequence of a Participant’s termination of employment, engagement or other service (regardless
of the reason for the termination and the party causing the termination, including a termination without Cause). The Plan does not give
any Participant any right to claim any benefit or compensation except to the extent specifically provided in the Plan. Participation
in the Plan by an Employee, Director or Consultant shall be voluntary.
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10.3
|
Amendment and Termination.
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(a)
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The Board
may amend or suspend any provision of the Plan or any Award, or terminate the Plan, at any
time without approval of security holders, subject to those provisions of applicable law
and the rules, regulations and policies of the Exchanges, if any, that require the approval
of security holders or any governmental or regulatory body regardless of whether any such
amendment or suspension is material, fundamental or otherwise, and notwithstanding any rule of
common law or equity to the contrary. However, except as expressly set forth herein or as
required pursuant to applicable law or to qualify for any intended tax treatment, no action
of the Board or security holders may materially adversely alter or impair the rights of a
Participant under any Award previously granted to the Participant without the consent of
the affected Participant. Without limiting the generality of the foregoing, the Board may
make the following types of amendments to the Plan or any Award without seeking security
holder approval:
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(i)
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amendments
of a “housekeeping” or administrative nature, including any amendment for the
purpose of curing any ambiguity, error or omission in the Plan or any Award or to correct
or supplement any provision of the Plan or any Award that is inconsistent with any other
provision of the Plan or any Award;
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(ii)
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amendments
necessary to comply with the provisions of applicable law or the rules, regulations and policies
of the Exchanges;
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(iii)
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amendments
necessary for Awards to qualify for favorable treatment under applicable tax laws;
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(iv)
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amendments
to the vesting provisions of the Plan or any Award;
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(v)
|
amendments
to include or modify a cashless exercise feature, payable in cash or Common Shares, which
provides for a full deduction of the number of underlying Common Shares from the Plan maximum;
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(vi)
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amendments
to the termination or early termination provisions of the Plan or any Award, whether or not
such Award is held by an insider, provided such amendment does not entail an extension beyond
the original expiry date of the Award; and
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(vii)
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amendments
necessary to suspend or terminate the Plan.
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(b)
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Security
holder approval will only be required for the following types of amendments:
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(i)
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any
amendment to increase the maximum number of Common Shares issuable under the Plan, other
than pursuant to Section 9.1;
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(ii)
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any
amendment to the Plan that increases the length of the period after a Blackout Period during
which Options may be exercised;
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(iii)
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any
amendment which would result in the Option Price for any Option granted under the Plan being
lower than the Fair Market Value at the Grant Date of the Option;
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(iv)
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any
amendment that would permit the introduction or reintroduction of Directors as eligible recipients
of Awards on a discretionary basis or any amendment that increases the limits previously
imposed on Director participation;
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(v)
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any
amendment to remove or to exceed the insider participation limit set out in Section 3.2;
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(vi)
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any
amendment which reduces the Option Price of an Option or allows for the cancellation and
reissuance of an Option, which would be considered a repricing under the rules of the
Toronto Stock Exchange, in each case, other than pursuant to Section 7.1 or Section 9.1;
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(vii)
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any
amendment extending the term of an Option beyond the original expiry date, except as provided
in Section 4.8;
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(viii)
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any
amendment which deletes or reduces the range of amendments which require approval by the
security holders of the Corporation under this Section 10.3(b);
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(ix)
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any
amendment which would allow for the transfer or assignment of Awards under the Plan, other
than pursuant to Section 10.15 and for normal estate settlement purposes; and
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(x)
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amendments
required to be approved by security holders under applicable law or the rules, regulations
and policies of the Exchanges.
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The
Plan shall be administered by the Board, which shall be empowered to: (i) interpret and administer the Plan from time to time; (ii) adopt,
amend and rescind rules and regulations for carrying out the Plan; (iii) grant Awards; (iv) determine the Option Price,
Performance Period, Performance Vesting Conditions, vesting schedule, term, limitations, restrictions and conditions applicable to Awards;
(v) waive or amend the Performance Vesting Conditions, any other vesting conditions or vesting schedule; and (vi) make any
other determinations that the Board deems necessary or desirable for the administration of the Plan. The Board may correct any defect
or supply any omission or reconcile any inconsistency in the Plan, in the manner and to the extent the Board deems, in its discretion,
necessary or desirable. Any decision or determination made or action taken by the Board arising out of or in connection with the interpretation
and administration of the Plan shall be final and conclusive, and the interpretation and construction of any provision of the Plan by
the Board shall be final and conclusive. To the extent permitted by applicable law, the Board may, from time to time, delegate to a committee
of the Board all or any of the powers conferred on the Board pursuant to the Plan. No member of the Board or any Person acting pursuant
to authority delegated by it, shall be liable for any action or determination in connection with the Plan made or taken in good faith,
and each member of the Board and each such Person shall be entitled to indemnification with respect to any such action or determination
in the manner provided for by the Corporation.
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10.5
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No Undertaking or Representation.
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The
Participants, by participating in the Plan, shall be deemed to have accepted all risks associated with acquiring Common Shares pursuant
to the Plan. The Corporation, its Affiliates and the Board make no undertaking, representation, warranty or guarantee as to the future
value or price, or as to the listing on any stock exchange or other market, of any Common Shares issued in accordance with the provisions
of the Plan, and shall not be liable to any Participant for any loss whatsoever resulting from that Participant’s participation
in the Plan or as a result of the amendment, suspension or termination of the Plan or any Award.
Notwithstanding
any other provision of the Plan, any Award which is subject to recovery or recoupment under applicable laws, stock exchange listing requirements
or policies adopted by the Corporation, as may be adopted and amended from time to time, will be subject to such deductions and clawbacks
as may be required pursuant to such laws, stock exchange listing requirements or policies.
The
Plan and the provisions hereof shall be governed by and interpreted and enforced in accordance with the laws of the Province of Ontario
and the federal laws of Canada applicable therein.
Unless
otherwise specifically provided herein or in a Grant Agreement to the contrary, all references to dollars in the Plan and in the Grant
Agreements are references to United States dollars.
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10.9
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Compliance with Applicable Law.
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If
any provision of the Plan or any Award contravenes any law or any order, policy, by-law, rule or regulation of any regulatory body
or stock exchange having jurisdiction or authority over the securities of the Corporation or its Affiliates or the Plan, then such provision
may in the discretion of the Board be amended to the extent considered necessary or desirable to bring such provision into compliance
therewith, and appropriate consideration shall be paid by the Corporation to the extent that a Participant is adversely affected by such
amendment.
The
Corporation intends for the Plan to comply with 42 U.S.C. §§ 1320, 1320a-7, 7a and 7b, 1395w-4, 1395i, 1395 and 1395u (commonly
referred to as the Federal Fraud Statutes), 42 U.S.C. § 1395nn (commonly referred to as the Stark Law), 31 U.S.C. §§ 3729-3733
(commonly referred to as the Federal False Claims Act) and 42 U.S.C. §§ 1320d through 1320d-8 and 42 C.F.R. §§160,
162 and 164 (commonly referred to as the Health Insurance Portability and Accountability Act of 1996, or HIPAA), and all other laws specifically
applicable to the Corporation by virtue of the business(es) it may conduct and/or the industries in which it may operate from time to
time (for avoidance of doubt, in addition to all laws of general applicability). Accordingly, and without limitation, the Board shall
not base its decision to grant an Award to a particular Employee, Director, or Consultant, or its inclusion of certain terms and conditions
into an Award Agreement therefor, on such Employee’s, Director’s, or Consultant’s referrals to the Corporation or any
of its Affiliates.
The
Plan is unfunded. To the extent any individual holds any rights under the Plan, such rights (unless otherwise determined by the Board)
are no greater than the rights of a general unsecured creditor of the Corporation.
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10.11
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Successors and Assigns.
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The
Plan shall be binding on all successors and assigns of the Corporation and each Participant, including without limitation, the legal
representative of a Participant, or any receiver or trustee in bankruptcy or representative of the creditors of the Corporation
or a Participant.
It is the responsibility of
the Participant to complete and file any tax returns which may be required under any applicable tax laws within the periods specified
in those laws as a result of the Participant’s participation in the Plan. The Corporation shall not be held responsible for any
tax consequences to the Participant as a result of the Participant’s participation in the Plan. The exercise of each Option and
the settlement of each Share Unit granted under the Plan is subject to the condition that if at any time the Corporation determines, in
its discretion, that the satisfaction of withholding tax or other withholding liabilities is required under applicable law in respect
of such Award, such exercise or settlement is not effective unless such withholding has been effected to the satisfaction of the Corporation.
In such circumstances, the Corporation may require a Participant to: (i) pay to the Corporation sufficient cash as is reasonably
determined by the Corporation to be the amount necessary to permit the required tax remittance to the relevant taxing authority; or (ii) make
other arrangements acceptable to the Corporation to fund the required tax remittance. To the extent permitted by the Board and as permitted
by applicable law, a Participant may elect to surrender vested Options or Share Units to the Corporation for a cash payment which shall
be used to satisfy the withholding tax or other withholding liabilities as required under applicable law. The number of vested Options
or Share Units that may be surrendered for a cash payment shall be equal to the withholding tax and other withholding liabilities as required
under applicable law divided by the Fair Market Value of a Common Share on the applicable exercise date (rounded up to the nearest whole
vested Option) or Settlement Date, as applicable.
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10.13
|
Government Regulation and Grant Restrictions.
|
The Corporation’s obligation
to issue and deliver Common Shares under any Award is subject to: (i) the completion of such registration or other qualification
of such Common Shares or obtaining approval of such regulatory authority as the Corporation shall determine to be necessary or advisable
in connection with the authorization, issuance or sale thereof; (ii) the admission of such Common Shares to listing on any Exchange
on which such Common Shares may then be listed; and (iii) the receipt from the Participant of such representations, agreements and
undertakings as to future dealings in such Common Shares as the Corporation determines to be necessary or advisable in order to safeguard
against the violation of the securities laws of any jurisdiction. The Corporation shall take all reasonable steps to obtain such approvals,
registrations and qualifications as may be necessary for the issuance of such Common Shares in compliance with applicable securities laws
and for the listing of such Common Shares on any Exchange on which such Common Shares are then listed. The Corporation may endorse such
legend or legends upon the certificates for, or other evidences of, Common Shares issued upon the exercise or settlement of an Award and
may issue such “stop transfer” instructions to its transfer agent in respect of such Common Shares as, in its absolute discretion,
it determines to be necessary or appropriate. Awards may not be granted with a Grant Date or effective date earlier than the date on which
all actions required to grant the Awards have been completed.
Nothing contained herein shall
prevent the Board from adopting other or additional compensation arrangements for the benefit of any Participant, subject to any required
regulatory or shareholder approval.
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10.15
|
Prohibition on Transfer, Assignment or Pledge of Awards.
|
Awards are personal to the
Participant. No Participant may deal with any Award or any interest in it or transfer or assign any Award held by the Participant, except
in the event of death or Disability, where an Award may be transferred to the Participant’s heirs, executors, administrators, trustees,
personal legal representatives or the like. A purported transfer or assignment of any Award in any other circumstances will not be valid
and the Corporation will not issue any Common Shares upon the attempted exercise or settlement of any such improperly transferred or assigned
Award. A Participant may not mortgage, hypothecate, pledge or grant a security interest in any Award.
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10.16
|
Other Employee Benefits.
|
The amount of any compensation
received or deemed to be received by a Participant as a result of his or her participation in the Plan will not constitute compensation,
earnings or wages with respect to which any other employee benefits of that Participant are determined, including, without limitation,
benefits under any bonus, pension, profit-sharing, insurance, termination, severance or salary continuation plan or any other employee
benefit plans, nor under any applicable employment standards or other legislation, except as otherwise specifically determined by the
Board.
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10.17
|
Priority of Agreements.
|
In the event of any inconsistency
or conflict between the provisions of the Plan and any Award Agreement, the provisions of the Plan shall prevail. In the event of any
inconsistency or conflict between the provisions of the Plan or any Award Agreement, on the one hand, and a Participant’s employment
or service agreement with the Corporation or any of its Affiliates (or a similar agreement), on the other hand, the provisions of the
employment or service agreement (or a similar agreement) shall prevail.
The existence of any Award
does not affect in any way the right or power of the Corporation to make, authorize or determine any adjustment, recapitalization, reorganization
or any other change in the Corporation’s capital structure or its business, or any amalgamation, arrangement, combination, merger
or consolidation involving the Corporation, to create or issue any bonds, debentures, Common Shares or other securities of the Corporation
or to determine the rights and conditions attaching thereto, to effect the dissolution or liquidation of the Corporation or any sale or
transfer of all or any part of its assets or business, or to effect any other corporate act or proceeding, whether of a similar character
or otherwise, whether or not any such action referred to in this Section 10.18 would have an adverse effect on the Plan or any Award
pursuant to the Plan.
If any provision of the Plan
shall be determined by any court of competent jurisdiction to be illegal, invalid or unenforceable, that provision shall be severed from
the Plan and the remaining provisions shall continue in full force and effect.
The Plan was effective as
of October 3, 2018 and was amended and restated on May 24, 2019 and on May 6, 2021. The Replacement Options shall be governed
by the terms of the Plan effective as of October 3, 2018. The Plan, as amended and restated on May 6, 2021, shall apply to all
Awards granted hereunder on or after May 6, 2021.
ADDENDUM FOR U.S. PARTICIPANTS
GREENBROOK TMS INC.
AMENDED AND RESTATED OMNIBUS EQUITY INCENTIVE
PLAN
The provisions of this addendum
to the Plan (the “Addendum”) apply to Options and Share Units granted to or held while a U.S. Participant. All capitalized
terms used but not defined in this Addendum have the meanings ascribed to them in the Plan. Section references set forth below refer
to sections of the Plan where not otherwise indicated. This Addendum shall have no effect on any other terms and provisions
of the Plan or any Awards except as set forth below.
As
used in this Addendum, the Plan or any Award Agreement with respect to any U.S. Participant:
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(a)
|
“Change
in Control” has the meaning ascribed to such term in the Plan; provided, that a
Change in Control shall be limited to a “change in control event” as defined
under Code Section 409A to the extent necessary to avoid the imposition of taxes, penalties
and interest under Code Section 409A in the case of a U.S. Participant.
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|
(b)
|
“Fair
Market Value” has the meaning ascribed to such term in the Plan; provided, that
Fair Market Value shall be determined consistent with the principles of Code Section 409A
to the extent applicable in the case of a U.S. Participant.
|
|
|
(c)
|
“Separation
from Service” means, with respect to a U.S. Participant, any event that qualifies
as a separation from service under Treasury Regulation Section 1.409A-1(h).
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(d)
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“Settlement
Date” has the meaning ascribed to such term in Section 4 of this Addendum.
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(e)
|
“Vesting
Date” means, in the case of a U.S. Participant, the date that a Share Unit ceases
to be subject to a substantial risk of forfeiture for purposes of Code Section 409A.
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2.
|
Plan Not Subject
to ERISA.
|
The
Plan is not subject to the Employee Retirement Income Security Act of 1974, as amended.
|
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3.
|
Options Granted
to U.S. Participants.
|
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|
(a)
|
Each
Option granted to a U.S. Participant is intended as a “nonqualified stock option”
exempt from Code Section 409A and is not intended to meet the requirements of Code Section 422.
An Option may be granted to a U.S. Participant only if, with respect to such U.S. Participant,
the Corporation is an “eligible issuer of service recipient stock” within the
meaning of Code Section 409A.
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(b)
|
In
the case of an Option granted to a U.S. Participant, the Board shall extend the expiration
of the Option due to a Blackout Period as provided under Section 4.8 of the Plan solely
to the extent permitted in good-faith compliance with Code Section 409A, including Treasury
Regulation Section 1.409A-1(b)(5)(v)(C)(1) promulgated thereunder.
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|
|
4.
|
Settlement
of Share Units.
|
With
respect to a Share Unit held by a U.S. Participant, settlement shall be made (if ever) on or as soon as practicable following the Vesting
Date, and in any event no later than the earlier of (i) December 31 of the third year following the year in respect of which
the Share Unit is granted and (ii) March 15 of the year following the year in which the Vesting Date occurs (the date of such
settlement, the “Settlement Date”). Subject to the timing set forth in the immediately preceding sentence, the settlement
of a Share Unit held by a U.S. Participant shall be effected in accordance with Section 5.7 of the Plan.
With
respect to Awards held by U.S. Participants, any actions taken under Section 7.1 of the Plan shall be taken in good-faith compliance
with Code Section 409A. Without limitation, if any consideration payable under Section 7.1(e) of the Plan is deferred
and/or contingent as a result of escrows, earnouts, holdbacks or any other contingencies, then, in order to comply with Code Section 409A,
payment of such consideration may be accelerated, delayed or limited, or may made on substantially the same terms and conditions as are
applicable to, and only to the extent actually paid to, the holders of Common Shares in connection with the Change in Control.
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6.
|
No Acceleration
or Delay.
|
With
respect to any Award held by a U.S. Participant that is subject to Code Section 409A, the acceleration or delay of the time or schedule
of any payment except as provided under the Plan (including this Addendum) is prohibited except to the extent permitted in regulations
and administrative guidance promulgated under Code Section 409A.
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(a)
|
Each
Award made to a U.S. Participant is intended to be exempt from Code Section 409A, and
the Plan and each Award Agreement shall be construed and interpreted consistent with such
intent. Notwithstanding the foregoing, to the extent that any Award granted to a U.S. Participant
is determined to constitute “nonqualified deferred compensation” within the meaning
of Code Section 409A, such Award will be subject to such additional rules and requirements
as may be specified by the Board from time to time in order to comply with Code Section 409A.
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|
(b)
|
With
respect to Awards subject to Code Section 409A, all payments to be made upon, or on
a date determined by reference to, a U.S. Participant’s Termination Date shall only
be made upon or by reference to a Separation from Service, and in such a case, “termination,”
“separation,” “Termination Date” and similar terms will be construed
accordingly. If on the date of the U.S. Participant’s Separation from Service (i) the
Corporation’s stock (or stock of any other company that is required to be aggregated
with the Corporation in accordance with the requirements of Code Section 409A) is publicly
traded on an established securities market or otherwise, and (ii) the U.S. Participant
is a “specified employee” as defined in Treasury Regulation Section 1.409A-1(i),
then any amounts payable to the U.S. Participant under the Plan due to, and upon or within
six months following, the U.S. Participant’s Separation from Service (other than due
to death) will be postponed and instead paid in a single lump sum, without interest, within
30 days after the date that is six months following the U.S. Participant’s Separation
from Service; provided, that if the U.S. Participant dies prior to payment of any amounts
postponed hereunder, such amounts shall be paid to the U.S. Participant’s estate within
30 days following the U.S. Participant’s death.
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|
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(c)
|
If
any provision of the Plan or any Award or Award Agreement contravenes Code Section 409A
or could cause a U.S. Participant to incur any tax, interest or penalties under Code Section 409A,
the Board may, in its sole discretion and without the U.S. Participant’s consent, modify
such provision to: (i) comply with, or avoid being subject to, Code Section 409A,
or to avoid incurring taxes, interest and penalties under Code Section 409A; and/or
(ii) maintain, to the maximum extent practicable, the original intent and economic benefit
to the U.S. Participant of the applicable provision without materially increasing the cost
to the Corporation or contravening Code Section 409A. However, the Corporation shall
have no obligation to modify the Plan or any Award or Award Agreement and does not guarantee
that Awards will not be subject to taxes, interest and penalties under Code Section 409A.
In no event shall the Corporation or any of its Affiliates be liable for any additional tax,
interest or penalties that may be imposed on a U.S. Participant under Code Section 409A
or for any damages for failing to comply with Code Section 409.
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