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Early Warning News Release of Co-operators Financial Services Limited

Dec 1, 2020

GUELPH, ON, Dec. 1, 2020 /CNW/ - Co-operators Financial Services Limited ("CFSL") has acquired, ownership of a 10% senior secured convertible debenture in the principal amount of $20,000,000 (the "Debenture") issued by Smart Employee Benefits Inc. (the "Issuer"). CFSL is a wholly owned subsidiary of The Co-operators Group Ltd.

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, being 60 months after the closing (the "Maturity Date"). The principal amount of the Debenture is convertible into common shares of the Issuer ("Common Shares") at a conversion price of $0.25 per Common Share, subject to adjustment (the "Conversion Price"). The Debenture is convertible at the option of CFSL 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 Common Shares on the TSX Venture Exchange is equal to at least 175% of the Conversion Price for a period of 30 consecutive trading days, then the Debenture will be convertible at the option of the Issuer.

CFSL acquired the Debenture on November 30, 2020 on a private placement basis for an aggregate purchase price of $20,000,000. If converted in full (at an assumed conversion price of $0.25 per Common Share), CFSL would receive 80,000,000 Common Shares.

The Debenture was purchased pursuant to a debenture purchase agreement entered into between the Issuer and CFSL dated November 15, 2020. SEB Administrative Services Inc. ("SEB Admin"), a wholly-owned subsidiary of the Issuer, and CFSL also entered into an intellectual property license agreement pursuant to which CFSL has a license to use certain technology and intellectual property of SEB Admin pursuant to a services agreement to be agreed on commercial terms.

Immediately before the transaction, CFSL did not own or control any Common Shares or Debentures. Immediately following the transaction, CFSL owned the Debenture and on an as converted basis (at an assumed conversion price of $0.25) owned 80,000,000 Common Shares representing approximately 33% of the outstanding Common Shares on an as converted basis.

CFSL acquired the Common Shares for investment purposes and CFSL may, depending on market and other conditions, increase or decrease its beneficial ownership, control or direction over additional securities of the Issuer, through market transactions, private agreements, treasury issuances, exercise of convertible securities or otherwise.

In connection with the issuance of the Debenture, CFSL entered into an investor rights agreement with the Issuer and SEB Admin providing for, among other things the right for CFSL to appoint up to two nominees to the board of directors of the Issuer, including one member on each of the audit committee and the governance and compensation committee of the Issuer, and the right to nominate a third director upon conversion of the Debenture into equity.

The head office of CFSL is located at 130 Macdonell Street, Guelph Ontario N1H 6P8, The head office of the Issuer is located at 5500 Explorer Drive, 4th Floor, Mississauga, Ontario L4C 5C7.

SOURCE The Co-operators Group Limited

For further information: please refer to the Early Warning Report to be posted on the Issuer's SEDAR profile at or which may be obtained by contacting Conor Quinn, VP Group Benefits Insurance of CFSL at 306-347-6375 ext. 606375.

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