Smart Employee Benefits Inc.
Toronto, Ontario, Canada
TSX-V Symbol: SEB
SEB Completes Acquisition of Paradigm Consulting Group Inc. and PCGI Consulting Services
Partnership
Consolidates SEB’s Presence in Western Canada
March 6, 2015 – TORONTO, ON: Smart Employee Benefits Inc. ("SEB") (TSX VENTURE: SEB), is
pleased to announce that its indirect wholly owned subsidiary, 101270941 Saskatchewan Ltd.,
has acquired all of the issued and outstanding shares of Paradigm Consulting Group Inc. and all of
the issued and outstanding units, directly and indirectly, of PCGI Consulting Services Partnership
(collectively referred to as “Paradigm”).
As previously disclosed in a press release dated January 29, 2015, the transaction was closed in
escrow with an effective date of December 31, 2014, subject to the completion of the amalgamations
described below which have now been completed.
Due to the fact that the Paradigm acquisition involved the purchase of shares as well as the
purchase of partnership units, both directly and indirectly through holding companies of certain of the
vendors, various companies were amalgamated to simplify the corporate structure and to enable the
business acquired to reside in a single company. The purchaser company, 101270941
Saskatchewan Ltd., was amalgamated with Paradigm Consulting Group Inc., 101275162
Saskatchewan Ltd. (formerly 5677387 Manitoba Ltd. before its continuance into Saskatchewan),
Craven Farms Ltd., 101275149 Saskatchewan Ltd. (formerly 4311612 Manitoba Inc. before its
continuance into Saskatchewan) and 101271586 Saskatchewan Ltd. The name of the amalgamated
company is Paradigm Consulting Group Inc.; and all of the issued and outstanding shares of this
company are owned by Somos Consulting Group Ltd., a wholly owned subsidiary of SEB.
The various continuances and amalgamations have been completed, the Paradigm transaction
documents have been released from escrow and the purchase price proceeds have been paid to the
vendors.
Paradigm is a very strategic acquisition for SEB, bringing significant government and corporate client
relationships along with technical skills and expertise, which allow SEB to compete more effectively
in Western Canada, particularly in the areas of healthcare and benefits administration and
adjudication. SEB has made significant progress in developing a presence in Western Canada and
Paradigm consolidates SEB’s strength, providing local presence and delivery capability to service
and manage important client relationships in this marketplace.
TRANSACTION TERMS: The purchase price of Paradigm is up to $15,793,436, consisting of firm
consideration of $13,427,864 and additional consideration of up to $2,365,572 if certain performance
targets are achieved.
The “firm consideration” consists of the following:
1) Cash of $9,288,112 (including $1,600,000 of a working capital balance sheet adjustment).
2) Vendor notes in the aggregate principal amount of $1,182,786, with interest accruing at an
annual rate of 3% payable quarterly in arrears with one third of the outstanding principal
payable at the end of year two and the balance payable at the end of year three. The notes
are convertible into SEB shares at $0.50 per share.
3) 5,913,877 SEB shares with a deemed value of $2,956,966. The shares are subject to a 36month contractual escrow, with shares being released every six months in equal amounts
following the closing of the transaction.
In addition, 1,000,000 share purchase warrants were issued to Paradigm employees as a retention
incentive, of which 12,500 warrants were issued to Paradigm’s President and 20,000 warrants were
issued to Paradigm’s Vice President of Finance. The majority of Paradigm employees received an
Smart Employee Benefits Inc.
Toronto, Ontario, Canada
TSX-V Symbol: SEB
allocation of warrants. All warrants have a 48-month term and an exercise price of $0.50 per share.
The warrants vest in equal amounts every six months following the closing of the transaction.
The “additional consideration”, payable in cash, consists of up to:
1) $1,774,179 to be paid at the end of year three following closing, subject to meeting a
cumulative EBITDA of $8,870,898.
2) $591,393 to be paid at the end of year four following closing, subject to meeting a cumulative
EBITDA of $11,827,864.
If the cumulative EBITDA targets are reached prior to the three year and four year benchmarks,
respectively, the additional consideration will be paid earlier.
In addition, Paradigm employees will be entitled to participate in two annual bonus pools:
1) All employees of Paradigm will be entitled to participate in a bonus pool, with the aggregate
pool amount calculated as the amount exceeding a benchmark of $2,956,966 EBITDA for
Paradigm in each year over a 4 year period from the closing at a rate of 20% of such excess.
2) Senior management of Paradigm shall be entitled to participate in a bonus pool calculated as
5% of the EBITDA of Paradigm.
MANAGEMENT COMMENTS:
John McKimm, President/CEO/CIO of SEB states "Paradigm’s experience and enviable
references add to our growing Canadian presence, particularly in Saskatchewan and Manitoba, both
long time innovators of healthcare services. This acquisition is in line with our focus on deepening
client relationships in government and healthcare in Western Canada. Paradigm brings both
important client relationships and technology expertise that add to SEB’s suite of solutions and
services, enhancing SEB’s technology offerings and significantly increasing SEB’s delivery capability
to corporate and government sectors in Western Canada. SEB has substantial client opportunities in
Western Canada for its technology solutions and the Paradigm acquisition is expected to significantly
increase the success of these opportunities. Paradigm’s executive management and employees are
very experienced and highly regarded in the marketplace. The acquisition of Paradigm is expected to
increase consolidated SEB sales to over $60.0 million annually, and contribute substantially to the
overall profitability of the SEB Group. Paradigm has annual revenue of approximately $24 million and
a track record of substantial profitability.” Mr. McKimm continues “Healthcare systems and software
for benefits management have not kept up with the evolution of technology in other industries. SEB’s
focus has been on utilizing our technology expertise and knowledge, in managing and transacting
data in other industry sectors, to create high value-added end-to-end software solutions and services
which provide healthcare and benefits clients with more cost-effective and flexible technology
solutions, enhanced automation, reduced error rates and allow the real-time detailed reporting
required to make informed business decisions. Paradigm enhances SEB’s delivery and support of
these solutions in the marketplace, particularly in western Canada.”
Mark Hustak, President/CEO of Paradigm states “Having grown unique specialties in healthcare
IT and managing and transacting big data, SEB has the ability to significantly deepen our expertise in
our current markets and beyond. With SEB, we are poised for delivery of high value-add solutions
that satisfy customers’ most relevant needs in the growing demand for immediate Business
Intelligence around Big Data.” He continues, “Paradigm has been evaluating its options during the
last year to expedite our growth prospects. Over the past 23 years, Paradigm has provided
management consulting, change management and application and IT services to corporate and
government clients. Paradigm has over 150 billable consultants, mostly employees, who service a
legacy client base where the top 10 clients have an average engagement history of over 12 years.
Paradigm has unique specialty practices and strong client relationships in healthcare, government,
technology integrators, insurance and utilities. The SEB Group gives Paradigm the opportunity to
Smart Employee Benefits Inc.
Toronto, Ontario, Canada
TSX-V Symbol: SEB
incorporate advanced software and solutions in its sales mix. These solutions will have significant
value for the majority of Paradigm’s client base. SEB has made significant progress in establishing a
footprint in Western Canada and Paradigm gives SEB the local presence and delivery capability to
expedite and expand this footprint. The combination of Paradigm and SEB significantly enhances
the opportunity for both companies to become a major competitor in Western Canada in providing
technology to clients, particularly solutions for healthcare and benefits and claims management.”
PARADIGM’S STRATEGIC FIT WITH SEB:
 Healthcare: Paradigm has provided IT services and ongoing support on numerous healthcare
projects including electronic medical records, payor/provider registration, system integration
expertise, insurance applications, acquisition integration projects and has key vendor
relationships with numerous government and corporate clients in this sector. Clients include
eHealth organizations, Ministries of Health, and Regional Health Authorities to mention a few.
 Public Sector: Paradigm maintains long term vendor relationships within multiple areas of
government and government organizations, including crown corporations. A number of these
organizations are excellent opportunities for implementation of SEB technology solutions. Major
projects have been completed for provincial government ministries, provincial crown corporations
and the Government of Canada. The specific areas include: driver and vehicle licencing and
insurance, justice, social services, education, agriculture, energy and resources, liquor retail and
licencing, gaming, and land titles.
 Insurance: Paradigm has been involved in multiple technology projects in the insurance industry
and has extensive ongoing client relationships. A full range of services was provided and major
projects have been completed for national and international insurance companies and financial
services companies headquartered in Manitoba and Saskatchewan. The specific business areas
include: group health insurance, individual life insurance, casualty insurance, crop insurance,
vehicle insurance, and investment portfolio management. SEB technology solutions and
expertise have significant value added for automating numerous insurer business processes.
 Technology Expertise: Paradigm has key specialty skill sets and experience which are critical
to managing the systems integration required to connect legacy data systems to new technology
solutions while allowing seamless connectivity between the two environments. Most healthcare
and benefits administration processes require this connectivity and systems integration expertise.
 Client References: Paradigm has numerous client references which carry substantial weight in
responding to RFPs in both the government and corporate sectors. References are a critical
ingredient of meeting RFP mandatory requirements as well as an indicator of successful projects.
 Delivery and Support: Paradigm provides local expertise and delivery capabilities along with
ongoing support infrastructure to manage existing and future SEB client relationships in Western
Canada. This is particularly critical with client outsourcing projects and fits well with SEB’s
“SaaS” (software as a service) business model.
ABOUT PARADIGM: Paradigm has a 23-year history of providing management and information
technology consulting services to healthcare, insurance, financial services, public sector, telecom
and energy clients. With over 150 billable consultants, primarily employee based, Paradigm is a
market leader for delivering management consulting, portfolio/program/project management and
application technology services to an enterprise level client base. Paradigm has a very deep portfolio
of IP for its key client verticals which enables accelerated delivery of projects and maintains long
term client relationships. Paradigm’s staff has very strong accreditations in numerous technology
disciplines which differentiate them in the marketplace. The majority of Paradigm’s employees are
shareholders. The “senior partner team” of six has over 180 years of combined industry expertise.
Paradigm’s services are as follows:
Smart Employee Benefits Inc.
Toronto, Ontario, Canada
TSX-V Symbol: SEB
 Portfolio, Program & Project Management: This area includes Consulting Services, Program
and Project Management, Portfolio Management and Project Management Office. Paradigm is
widely known for the Project Management services it provides to its customers. Not only can
Paradigm provide Project Management resources that effectively manage the time, scope, and
quality of projects, but also Paradigm is well known for rescuing projects that are off track,
managing high profile and high-risk projects, and managing multiple projects concurrently.
Paradigm consultants have experience helping customers establish a Project Management
Office (“PMO”) as well as maintaining, assessing and recommending improvements to the PMO
once it is in place.
 Business Analysis: Paradigm provides a full range of Business Analysis services to support its
customer’s business. These services integrate with related disciplines such as Project
Management, Management Consulting, and IT Service Management to provide a full life-cycle
solution to meet customer’s business needs. Business Analysis identifies business needs and
determines solutions to business problems. Solutions often include a systems development
component, but also consist of process improvement or organizational change.
 Business Process Consulting: Paradigm has three areas of expertise within its Business
Process Consulting offering: Business Planning, Business Process Analysis and Design, and
Continuous Improvement Process including Lean Six Sigma.
Paradigm has extensive
experience consulting in Business Process Management. Its consultants have worked with
customers to implement BPM within their organizations including analyzing and documenting
existing business processes, developing and implementing BPM plans, managing the changes
and mentoring staff through the change process.
 Management Consulting: The Management consulting services consist of four areas of
expertise: Strategic Planning, Efficiency Reviews, Organizational Change Management, and
Procurement Service. Its consultants have an average of 18 years’ experience in the information
technology sector with expertise in a variety of industries including public sector, healthcare,
insurance, utilities, telecommunications, and banking.
 Training: Paradigm offers its customers Best Practice accredited training, including PRINCE2®,
MSP®, P3O®, MoR® and MoP®, as well as Agile Project Management. Paradigm offers both
public and private courses for customers.
 Independent Project Review: Paradigm has a proven methodology for Project, Program and
Portfolio Health checks, and it has provided this service for many of its Public Sector clients.
Specifically, it has been a service to either perform: 1) a readiness assessment on the
organizations’ aptitude for initiating a project/ program or portfolio 2) a health check of the Project
Management Office, or the health of a specific project or 3) a rescue of the potentially troubled
project by implementing corrective action.
 Application Development: Paradigm’s Application Services include Application Architecture,
Application Design and Development, and Application Support. It provides a full range of
business application development and application management services. Its specialists provide
services in a variety of hardware and software environments, following formal delivery guidelines
and accepted methodologies. Paradigm is committed to following the standards for system
development set out in the Software Engineering Institute’s Capability and Maturity Model for
software, and it actively pursues other improvement initiatives, including Software Configuration
Management, and Software Quality Assurance practices.
 Technology Management: This service offering is comprised of the following areas of expertise:
Architecture, IT Operations Design, and ITSM Education Services. Paradigm offers a complete
range of information technology architecture services as standalone engagements or as a
component of a project or broader services initiative.
Smart Employee Benefits Inc.
Toronto, Ontario, Canada
TSX-V Symbol: SEB
ABOUT SEB: SEB’s core expertise is managing specialized Big Data environments, of which
healthcare is a major focus. SEB is a technology company providing, via a SaaS business model,
software, solutions and services specializing in managing group benefit solutions and healthcare
claims processing environments for corporate and government clients. Health Claims Processing
alone is a $60.0 plus billion industry, of which over $37.0 billion is employee group benefit plans and
over $25.0 billion of other healthcare benefit claims (e. g. workers’ compensation claims, travel
benefits, various federal and provincial government programs, dental associations, drug
associations, etc.).
In the employee group benefits industry, SEB operates as a Third Party Administrator and Insurance
Brokerage utilizing its software platform to provide “totally hosted PCI compliant supply chain
solutions” for managing the complete group benefits business processes between insurers, clients,
brokers, consultants, technology service providers and healthcare service providers. In healthcare
claims processing, SEB also operates as a systems integrator utilizing its technology platform
together with other technologies to provide customized, fully integrated solutions for specialized
environments (e.g. travel claims, student benefits, hospitals, unique government applications, etc.).
The technology and expertise deployed in this area also allows SEB to provide other related supply
chain, systems integration and human resource solutions and services to the same clients.
Forward-Looking Statements: This news release is intended for information purposes only.
Statements made in this news release may contain "forward looking" information about the
company's future business prospects. These statements while expressed in good faith and believed
to have a reasonable basis are subject to risk and uncertainties that could cause actual results to
differ materially from those set forth or implied by such forward looking statements. Investors should
consult a professional advisor before making any investment decision.
For further information about SEB, please visit www.seb-inc.com.
MEDIA AND INVESTOR CONTACTS:
Smart Employee Benefits Inc.
John McKimm
President/Chief Executive Officer
(416) 460-2817
[email protected]
Shelly Frank
Vice-President, Marketing
(888) 939-8885 x 358
[email protected]
First Canadian Capital Corp.
Dan Boase
416-742-5600 or 1-866-580-8891
[email protected]
Neither the TSX Venture Exchange 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.