About Us Our Solutions Investor Relations Newsroom Contact Us Press Releases All Years SEB announces the completion of $20 million Strategic Financing and $10 million new credit facility December 1, 2020 – Mississauga, ON Smart Employee Benefits Inc. (“SEB” or the “Company”) (TSXV: SEB) a leader in benefits processing solutions and services, today announced the issuance by SEB of a $20,000,000 convertible debenture (the “Debenture”) by way of a non-brokered private placement (the “Financing”). The Financing solidifies SEB’s balance sheet and provides the capital to focus on numerous growth opportunities. The Financing is being provided by Co-operators Financial Services Limited (“The Co-operators”). The proceeds of the Financing were used to repay term indebtedness of the Company and will also be used for general working capital purposes. States John McKimm, President, CEO, CIO of Smart Employee Benefits Inc.: “To take advantage of its many business opportunities, SEB initiated the process to find a strategic investment partner in mid-2019. Scotia Capital was engaged to review strategic alternatives. The process has culminated with a financing from The Co-operators who brings both capital and strategic partnership value. The Co-operators appreciates the strategic fit between SEB’s Technology Division and Benefits Division and the competitive advantage this gives SEB in creating value for its clients and winning new business. The management and Board of SEB believe The Co-operators represents the optimal value for SEB shareholders near term and long term; as SEB continues its product innovation, adding powerful new features that enhance our value proposition to customers and partners. The Co-operators Group Ltd., through its subsidiaries, is one of the leading Canadian owned multi-line insurers, offering auto, home, life, health, group benefits, farm, travel, and business insurance as well as investments. It is owned by 45 member organizations including co-ops, credit unions and representatives from farm organizations. Its asset base is over $51.0 billion with operations across Canada. Its 45 member organizations serve over 5.8 million individual members. SEB group benefit clients already include one of The Co-operators Group Ltd.’s member organizations.” TERMS OF THE CO-OPERATORS FINANCING The Debenture has an interest rate of 10% per annum, paid semi-annually with the first interest payment due on February 28, 2021, and the principal payment due at the maturity date (the “Maturity Date”), being 60 months after the closing (the “Closing Date”). The interest rate may be reduced to a floor of 7% depending on the success of select business initiatives. The principal amount of the Debenture is convertible into common shares of the Company (“Shares”) at a conversion price of $0.25 per Share, subject to adjustment (the “Conversion Price”). The Debenture is convertible at the option of the holder, at any time prior to the close of business on the last business day immediately preceding the Maturity Date. If the volume weighted average trading price of the Shares on the TSX Venture Exchange (the “Exchange”) is equal to at least 175% of the Conversion Price for a period of 30 trading consecutive days, then the Debenture will be convertible at the option of the Company. The Debenture and any Shares issued upon its conversion are subject to a hold period expiring four months and one day after the Closing Date. The Debenture is guaranteed by the material subsidiaries of the Company (the “Guarantors”) and secured by a first ranking pledge of the shares of SEB Administrative Services Inc. (“SEB Admin”), a wholly-owned subsidiary of the Company, and first ranking security over the software owned by SEB Admin, and second ranking security over all other undertaking, property and assets of the Company and of each Guarantor which such security is subject only to a first ranking security over such security in favour of SEB’s new operating credit facility lender. The Company, The Co-operators and such new operating credit facility lender entered into an intercreditor agreement governing, among other things, the priority of the first and second ranking security and the relationship of The Co-operators and the new operating credit facility lender with the Company and vis a vis each other. The Debenture is not redeemable at the option of the Company on or before June 1, 2023 (the “Call Date”). After the Call Date and prior to June 1, 2024, the Debenture may be redeemed in whole or in part from time to time at the option of the Company, at a price equal to the then outstanding principal amount plus accrued and unpaid interest thereon up to but excluding the date of redemption, provided that the volume weighted average trading price of the Shares on the Exchange during the 30 consecutive trading days preceding the date on which notice of redemption is given is not less than 125% of the Conversion Price. Provided, however, that if the Company delivers such written notice of redemption, The Co-operators shall have 10 days to convert the principal amount of the Debenture, or any part thereof, into that number of Shares as are equal to the principal amount of such Debenture, or any part thereof, divided by the Conversion Price. After June 1, 2024, the Debenture will be redeemable at the Company’s option at any time at an amount equal to the then outstanding principal amount of the Debenture plus accrued and unpaid interest (provided, however, that the same 10-day notice shall apply to allow for the conversion at the option of The Co-operators). On a change of control of the Company (a “Change of Control”), the Company shall notify The Co-operators of the Change of Control in writing, and The Co-operators shall, in its sole discretion, have the right to require the Company to, either: (i) purchase the Debenture, in whole or in part, at a price equal to (a) 125% of the principal amount thereof plus unpaid interest, if the notice of change of control is delivered on or prior to the second anniversary of the issue date or (b) 101% of the principal amount thereof plus unpaid interest, if the notice of change of control is delivered following the second anniversary of the issue date; or (ii) convert the Debenture, in whole or in part, at the Conversion Price. The Debenture contains affirmative covenants, negative covenants and financial covenants that are customary for transactions of this nature. Pursuant to an investor rights agreement between SEB and The Co-operators, The Co-operators has the right to have up to two nominees appointed to the board of directors of the Company, including one member on each of the audit committee and the governance and compensation committee of the Company. The Co-operators is entitled to nominate a third director of the Company upon conversion of the Debenture to equity. The Co-operators also has the right to license the Company’s technology and intellectual property on commercial terms. APPROVALS AND CLOSING The policies of the Exchange require that any new Control Person (as defined under Exchange policies e.g. a holder of more than 20% of the outstanding voting shares of an issuer) requires Exchange approval and shareholder approval. Exchange policies also provide that shareholder approval may be obtained by written shareholder consent. There are currently 165,760,699 Shares issued and outstanding. The Co-operators currently does not own or control any Shares; however, if The Co-operators were to convert the principal amount of the Debenture, then The Co-operators would beneficially own or control, directly or indirectly, 80,000,000 Shares, representing approximately 32.6% of the then 245,760,699 issued and outstanding Shares. The Company has obtained final approval from the Exchange as well as the written consent of holders of a majority of the Shares for the Financing and creation of The Co-operators as a new Control Person. NEW CREDIT FACILITY Coincident with the closing of the Financing from The Co-operators, SEB also closed a new senior secured operating credit facility (the “Credit Facility”) with an international asset-focused lender. The Credit Facility is a $10,000,000 revolving credit facility with an interest rate based on the London Interbank Offered Rate plus 6.9%; and advances thereunder determined by a formula based on the Company’s accounts receivable borrowing base. The Credit Facility is secured by first ranking security over all undertaking, property and assets of the Company and the Guarantors, subject only to a first ranking security held by The Co-operators over the shares of SEB Admin and the software owned by SEB Admin. The Credit Facility has a term of three years and replaces the Company’s previous bank operating and term facilities that were repaid on the closing of the Credit Facility. Under the terms of the Credit Facility, the Company will be subject to certain financial covenants and ratios and customary terms and conditions. Advisors Scotiabank acted as financial advisor to SEB on The Co-operators financing and Canaccord Genuity Corp. acted as financial advisor to SEB on the revolving Credit Facility. Harris + Harris LLP acted as legal counsel to SEB and Fasken Martineau DuMoulin LLP acted as legal counsel to The Co-operators. ABOUT SEB SEB is a technology company providing Business Process Automation and Outsourcing software, solutions and services to a national and global client base. SEB has a specialty growth focus in cloud enabled processing solutions for managing employer and government sponsored health benefit plans on a BPO (Business Processing Outsourcing) business model, globally (through wholly owned SEB Administrative Services Inc.). SEB currently serves corporate and government clients across Canada and internationally. Over 80% of SEB’s revenues derive from government, insurance and health care organizations. SEB’s technology infrastructure of over 650 multi-certified technical professionals, across Canada and globally, is a critical competitive advantage in supporting the implementation and management of SEB’s benefits processing solutions into client environments. SEB’s Benefits Processing Solutions can be game changing for SEB clients. The core expertise of SEB is automating and managing business processes utilizing SEB proprietary software solutions combined with solutions of third parties through joint ventures and partnerships. SEB’s client acquisition model in benefits processing is “Channel Partnerships” where SEB processing solutions both improve cost structures and enable new revenue models for Channel Partners and clients. All SEB solutions are cloud enabled and can be delivered on a SaaS platform. SEB solutions turn cost centers to profit centers for our Channel Partners. ABOUT SEB ADMIN SEB Admin’s FlexPlus processing environment encompasses over 20 benefit processing modules driving more than 20 revenue models. The modules can operate standalone or as a single sign-on fully integrated environment. A number of the modules are unique in the marketplace. All FlexPlus modules are cloud enabled, can be provided in French and English, and can be cost effectively customized for multiple languages applicable to both Canadian and international markets. SEB’s “Channel Partner White-Label” business model is unique in the Canadian market. Channel Partners include insurance brokers, benefit consultants, MGAs, TPAs, Insurers, plan sponsors, corporate, government entities, unions, insurers and payroll companies. FlexPlus turns “cost centres” to “profit centres” for Channel Partners. All FlexPlus solutions can be deployed in multiple environments and delivered as a fully outsourced, co-sourced or SaaS model. FlexPlus solutions are applicable to all benefit plan types including Flex Cafeteria, traditional, multi-employer and hour bank/dollar bank plan designs. For further information about SEB Administrative Services Inc., please visit www.seb-admin.com ABOUT THE CO-OPERATORS GROUP LTD. The Co-operators Group Limited is a Canadian co-operative with more than $51.4 billion in assets under administration. Through its group of companies, it offers home, auto, life, group, travel, commercial and farm insurance, as well as investment products. The Co-operators is well known for its community involvement and its commitment to sustainability. The Co-operators is ranked as a Corporate Knights' Best 50 Corporate Citizen in Canada and listed among the Best Employers in Canada by Kincentric (formerly AON). For more information, visit www.cooperators.ca. FORWARD LOOKING INFORMATION The statements made in this release that are not historical facts contain forward-looking information that involves risks and uncertainties. All statements, including statements regarding the Company’s areas of focus, other than statements of historical facts, which address the Company’s expectations, should be considered as forward-looking statements and therefore subject to various risks and uncertainties. The words “may”, “will”, “could”, “should”, “would”, “suspect”, “outlook”, “believe”, “plan”, “anticipate”, “estimate”, “expect”, “intend”, “forecast”, “objective”, “hope”, “target” and “continue” (or the negative thereof), and words and expressions of similar import, are intended to identify forward-looking statements. Such forward-looking statements are based on knowledge of the environment in which the Company currently operates, but because of the factors listed herein, as well as other factors beyond the Company's control, actual results may differ materially from the expectations expressed in the forward-looking statements. Investors are cautioned not to put undue reliance on forward-looking statements. The Company undertakes no obligation, and does not intend, to update, revise or otherwise publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of any unanticipated events, other than as required by applicable law. Neither TSX Venture Exchange Inc. nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. This news release does not constitute an offer to sell or a solicitation of an offer to sell any of the securities described herein in the United States. The securities described in this news release have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available. For further information about SEB, please visit www.seb-inc.com. All figures are in Canadian dollars unless otherwise stated. MEDIA AND INVESTOR CONTACTS: John McKimm, President/CEO/CIO Office (888) 939-8885 x 2354 Cell (416) 460-2817 john.mckimm@seb-inc.com QUICK LINKS About Us Our People Newsroom Site Directory EXPLORE SEB Investor Relations SEB Updates Our Culture OUR SOLUTIONS IT Services Business Process Services Professional Services GET IN TOUCH Careers Our Offices Contact Us © Copyright 2021 by Smart Employee Benefits Inc. (SEB Inc.)