TMS NeuroHealth Centers Inc.

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Appli-cations in Multiple Jurisdictions – Relief from the require-ments applicable to issuer bids in Part 2 of NI 62-104 – Non-reporting issuer proposes to exchange its common shares for common shares of a newly incorporated Canadian parent company – Issuer is fundamentally a closely-held company – Transaction will be effected on a voluntary basis and all shareholders will be entitled to participate and will be provided with disclosure – Non-participating shareholders will maintain their proportionate interest in the issuer.

Applicable Legislative Provisions

National Instrument 62-104 Take-Over Bids and Issuer Bids, Part 2 and s. 6.1.

January 19, 2018

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the “Jurisdiction”)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
TMS NEUROHEALTH CENTERS INC.
(the “Filer”)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the “Legislation”) exempting the Filer from the requirements applicable to issuer bids in Part 2 of National Instrument 62-104 Take-Over Bids and Issuer Bids (“NI 62-104”) in connection with the proposed purchase by the Filer of all of the issued and outstanding common shares (the “Common Shares”) of the Filer (the “Exemption Sought”).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions

(a)           the Ontario Securities Commission is the principal regulator for this application; and

(b)           the Filer has provided notice that sub-section 4.7(1) of Multilateral Instrument 11-102 Passport System (“MI 11-102”) is intended to be relied upon in Manitoba and British Columbia.

Interpretation

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

Representations

This decision is based on the following facts represented by the Filer:

1.             The Filer is a corporation governed by the Delaware General Corporation Law.

2.             The Filer’s registered office is located in Wilming-ton, Delaware. The Filer’s principal Canadian office is located in Toronto, Ontario.

3.             The authorized share capital of the Filer consists of 42,350,000 Common Shares. As at the date hereof, the Filer has 37,524,375 Common Shares issued and outstanding.

4.             The Filer is not a “reporting issuer” for the pur-poses of securities legislation in any jurisdiction in Canada, nor is it the equivalent under the securities laws of any other jurisdiction. There is no published market in respect of the Common Shares.

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

6.             The Filer carries on, directly and through its subsidiaries, the business of healthcare manage-ment and administration services to facilitate the delivery of Transcranial Magnetic Stimulation therapy for the treatment of depression and related psychiatric services.

7.             The Filer has determined that forming a Canadian parent for the Filer’s business may offer more favourable market opportunities, including poten-tial Canadian public offerings and/or a stock exchange listing.

8.             The Filer intends to incorporate a Canadian subsidiary (“CanCo”) with the intention of CanCo becoming the parent of the Filer. In order to facilitate this, the Filer will have CanCo offer holders of Common Shares (the “Shareholders”) the opportunity to exchange their Common Shares for common shares of CanCo (the “CanCo Shares”) on a one-for-one basis (with corre-sponding changes to outstanding options granted by the Filer) (the “Transaction”).

9.             The Transaction will be effected on a voluntary basis. Each Shareholder will be provided with a short disclosure document that will include a description of the Transaction, a description of the Canadian and federal United States tax considerations associated with the Transaction, and a description of the material differences between the rights of shareholders of a Canadian corporation relative to the rights of shareholders of a Delaware corporation.

10.          Each Shareholder will also be provided with a letter of transmittal that will enable a Shareholder to deliver its share certificate and confirm its intention to exchange its Common Shares for CanCo Shares pursuant to the Transaction. Each Shareholder that signs its letter of transmittal and completes the exchange will become a shareholder of CanCo.

11.          Following the completion of the Transaction: (a) a Shareholder that has exchanged its Common Shares for CanCo Shares pursuant to the Transaction will hold an equivalent number of CanCo Shares; (b) a Shareholder that has not exchanged its Common Shares for CanCo Shares pursuant to the Transaction will maintain its proportionate interest in the Filer; and (c) the Filer expects that the majority of the Common Shares will be owned by CanCo.

12.          The Transaction will constitute an “issuer bid” as that term is defined in NI 62-104.

13.          Pursuant to section 4.9 of NI 62-104 (the “Non-Reporting Issuer Exemption”), an issuer bid is exempt from Part 2 of NI 62-104 if all of the following conditions are satisfied:

(a)           the issuer is not a reporting issuer;

(b)           there is no published market for the securities that are the subject of the bid; and

(c)           the number of security holders of that class of securities at the commencement of the bid is not more than 50, exclusive of holders who (i) are in the employment of the issuer or an affiliate of the issuer, or (ii) were formerly in the employment of the issuer or in the employment of an entity that was an affiliate of the issuer at the time of that employment, and who while in that employment were, and have continued after that employment to be, security holders of the issuer.

14.          The Filer cannot rely on the Non-Reporting Issuer Exemption because the number of security holders of the Filer exceeds 50.

15.          The Filer currently has 65 Shareholders, of which 62 acquired their Common Shares pursuant to the accredited investor exemption set out in section 2.3 of National Instrument 45-106 Prospectus Exemptions (“NI 45-106”). Of the Filer’s 65 Shareholders:

(a)           60 reside in Ontario, holding 32,509,375 Common Shares or approximately 86.63% of the issued and outstanding Common Shares;

(b)           one resides in British Columbia, holding 112,500 Common Shares or approxi-mately 0.3% of the issued and out-standing Common Shares;

(c)           one resides in Manitoba, holding 300,000 Common Shares or approximately 0.8% of the issued and outstanding Common Shares; and

(d)           three reside in the United States, holding 4,602,500 Common Shares or approxi-mately 12.27% of the issued and out-standing Common Shares.

16.          Of the Filer’s 65 Shareholders:

(a)           two are current or former officers of the Filer or holding companies owned or controlled by current or former officers of the Filer, including one that is a resident of the United States; and

(b)           two are residents of the United States.

17.          Accordingly, the Filer has 61 Shareholders, excluding employees and former employees and residents of the United States.

18.          The Filer is fundamentally a closely-held company. Although the Filer is not technically a private issuer as defined in NI 45-106, all of the Shareholders are persons to whom a private issuer is permitted to distribute securities under the exemption in section 2.4 of NI 45-106.

19.          Although the proposed exchange of Common Shares for CanCo Shares pursuant to the Transaction will be effected on a voluntary basis, the Filer expects that all of the Shareholders will participate in the Transaction.

20.          The Transaction will not result in any change in the business or operations of the Filer or its subsidiaries.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that, at the time of the Transaction:

(a)           the Filer is not a reporting issuer; and

(b)           there is no published market for the Common Shares.