$SEBFF Corporate Update: Payment of Convertible In

$SEBFF Corporate Update: Payment of Convertible Interest-in-Kind

https://www.globenewswire.com/news-release/20...-Kind.html

MISSISSAUGA, Ontario, June 02, 2022 (GLOBE NEWSWIRE) -- Smart Employee Benefits Inc. (“SEB” or the “Company”) (TSXV: SEB) (OTCQB: SEBFF) a leader in benefits processing solutions and services today announced that as contemplated in the $5,000,000 convertible debenture (the “Debenture”) previously issued to Co-operators Financial Services Limited (“The Co-operators”), SEB intends to issue common shares (the “Shares”) in satisfaction of the accrued interest and PIK Fees (as hereinafter defined) payable on May 31, 2022 under the Debenture.

The Debenture has an interest rate of 12% per annum, paid quarterly in arrears on the last day of May, August, November and February of each year, with the principal repayment due on the maturity date of November 30, 2025. Interest accrued from the issuance of the Debenture until February 28, 2023, is payable quarterly in Shares at the then market price, subject to approval of the TSX Venture Exchange (the “TSXV”) at the time of each interest payment in Shares. To the extent TSXV approval is not obtained, such interest would be capitalized and added to the principal of the Debenture.

Furthermore, an additional fee of 3% per annum of the outstanding principal amount of the Debenture (“PIK Fee”) is payable on the last day of May and November in each year. For PIK Fees relating to a PIK Fee payment date on or prior to November 30, 2023, such PIK Fees are payable in Shares at the then market price, subject to TSXV approval at the time of each PIK Fee payment in Shares. To the extent TSXV approval is not obtained, such PIK Fee would be capitalized and added to the principal of the Debenture.

The Company intends to issue 1,150,684 Shares to The Co-operators at a deemed issue price of $0.15 per Share, being the closing price of the Shares on the TSXV on May 31, 2022, in satisfaction of the $138,082.19 owing in accrued interest and $34,520.55 owing in PIK Fees.

The issuance of the Shares as payment for accrued interest and PIK Fees owing on the Debenture remains subject to approval from TSXV. All Shares issued as payment for accrued interest and PIK Fees owing on the Debenture will be subject to a hold period expiring four months and one day from the date of issuance of the Shares.

There are currently approximately 171,000,000 Shares of the Company that are issued and outstanding. The Co-operators does not currently own any Shares of the Company, but it does hold a convertible debenture (“Initial Debenture”) convertible into 80,000,000 Shares, as well as the Debenture convertible into 20,000,000 Shares. Pursuant to the issuance of the Shares as payment for accrued interest and PIK Fees, The Co-operators would be issued 1,150,684 Shares. As a result, if The Co-operators were to convert the principal amount of the Initial Debenture as well as the Debenture, then The Co-operators would beneficially own or control, directly or indirectly, an additional 100,000,000 Shares, for a total of 101,150,684 Shares, representing approximately 37% of the approximately 272,000,000 then issued and outstanding Shares of the Company.

The prior issuance of the Debenture to The Co-operators in March of 2022 was considered a related party transaction within the meaning of TSXV Policy 5.9 and Multilateral Instrument 61-101 (“MI 61-101”). The Company relied on the exemptions from the valuation and minority shareholder approval requirements of MI 61-101 contained in Sections 5.5(b) (Company is listed on the TSXV) and 5.7(1)(a) (fair market value of the Debenture did not exceed 25% of the Company’s market capitalization) in respect of such transaction. A resolution of the board of directors of the Company was passed to approve the issuance of the Debenture, with the two director appointees of The Co-operators, abstaining from voting. No materially contrary view or abstention was exercised or made by any other director.