Dominion Lending Centres Inc. Enters into Acquisition Agreement to Acquire All Issued and Outstanding Series I Class “B” Preferred Shares

Dominion Lending Centres Inc. (TSX:DLCG) (“DLCG” or the “Corporation”) is pleased to announce that it has entered into an acquisition agreement (the “Acquisition Agreement”) with KayMaur Holdings Ltd. (“KayMaur”) and certain minority holders to acquire (the “Proposed Acquisition”) all of the issued and outstanding non-voting series I class “B” preferred shares of the Corporation (the “Preferred Shares”) in exchange for $137 million payable as follows: 30,500,000 class “A” common shares (“Common Shares”) (having a 20 day volume weighted average price of $4.00 per share) and an aggregate cash payment of $15 million.

The Proposed Acquisition, if completed, would be a related-party transaction for the purposes of Multilateral Instrument 61-101 (“MI 61-101”) as Gary Mauris and Chris Kayat are both officers and directors of the Corporation, indirectly own and control KayMaur and also beneficially own, or exercise control or direction over, directly or indirectly, more than 10% of the issued and outstanding Common Shares of the Corporation. Upon completion of the Proposed Acquisition, the Corporation intends to cancel the Preferred Shares and amend the articles of incorporation to cancel the Preferred Shares as a class and series of shares available for issuance by the Corporation (the “Proposed Constating Document Amendment”). The resolution to approve the Proposed Acquisition, the special resolution to approve the Proposed Constating Document Amendment, as well as a special resolution to increase the stated capital of the Preferred Shares prior to completion of the Proposed Acquisition (collectively, the “Transaction Resolutions”), will be considered at a special meeting of holders of common shares of the Corporation, anticipated to be held in the fourth quarter of 2024 (the "Meeting").

The Proposed Acquisition and the Proposed Constating Document Amendment are subject to a number of conditions, including approval by the Toronto Stock Exchange (the “Exchange”). If such conditions are met, the Corporation anticipates closing to occur at or near the end of 2024.

Trevor Bruno, Lead Independent Director commented: “The Preferred Shares were created and issued in connection with our reorganization at the end of 2020. The Preferred Shares segregated the DLCG operations from the various non-core assets and associated indebtedness related to the Corporation’s legacy operations as an investment firm prior to the reorganization. All non-core assets have been disposed of and all associated indebtedness has been repaid, negating the original purpose of the Preferred Shares. As such, the Corporation desires to have simpler capital structure with one class of equity, the Common Shares. We believe the Proposed Acquisition will enable shareholders and market participants to better understand the Corporation’s financial performance going forward, will better align the Corporation’s financial reporting with other Canadian public companies and will allow the Corporation to more effectively manage its cash flow.”

Gary Mauris, co-founder of DLCG and Chairman of the Corporation commented: “The creation of the Preferred Shares were fundamental to Chris and I proceeding with the 2020 reorganization. However, since that time, the Corporation has disposed of the non-core assets and retired all related debt. Further, we have received considerable feedback from many market participants that they found DLCG’s capital structure and financial reporting to be overly complicated. While the Preferred Shares served the Corporation well for a transitional period, we understand that the time has come to simplify the Corporation’s capital structure and have one class of Common Shares.”

The Proposed Acquisition, the Acquisition Agreement and the Proposed Constating Document Amendment

The highlights for the Proposed Acquisition, the Acquisition Agreement and the Proposed Constating Document Amendment (upon completion) are summarized as follows:

• The Corporation will acquire 26,774,054 Preferred Shares (being all of the Preferred Shares issued and outstanding) in exchange for $137 million payable as follows: 30,500,000 Common Shares (having a 20 day VWAP of $4.00 per share) and a cash payment of $15 million.
• Upon completion of the Proposed Acquisition, the Preferred Shares shall be cancelled and the articles of incorporation will be amended to cancel the Preferred Shares as a class and series of shares available for issuance by the Corporation.
• The Investor Rights Agreement entered into between the Corporation and the holders of Preferred Shares will be terminated upon closing of the Proposed Acquisition.
• If the Proposed Acquisition is completed, the Corporation will have 78,724,438 Common Shares and Nil Preferred Shares outstanding, of which 47,233,265 Common Shares (approximately 60% of the issued and outstanding Common Shares) will be held by KayMaur.
• The Acquisition Agreement contains additional representations, covenants and conditions customary for a transaction of the nature of the Proposed Acquisition.

The Preferred Share Terms

The existing terms for the Preferred Shares are as follows:

• The key economic provisions for the Preferred Shares (being the dividend entitlements and liquidation rights) are set out in the Preferred Share Terms and the key governance provisions for the Preferred Shares are set out in the Investor Rights Agreement (both of which are available for review on SEDAR+ and filed on January 4, 2021 as part of the 2020 reorganization).
• The Preferred Share Terms define the DLCG operations as the Corporation’s “Core Business” and the Corporation’s “Non-Core Business” which includes the public company operations and various legacy assets (which have since been sold).
• Core Business Distributable Cash is a defined term in the Preferred Share Terms as a proxy for 95% of the distributable free cash flow of the Corporation and generally includes cash flows from operating activities (excluding non-cash working capital), cash flows from investing activities and cash flow from financing activities attributable to the Core Business for a given fiscal year.
• The Preferred Shares are entitled to receive 40% of the Core Business Distributable Cash.
• On a liquidation of the Corporation or the sale of the Core Business, the Preferred Shares are entitled to 40% of the net proceeds on liquidation.
• The Preferred Shares are not burdened by expenses incurred by the Corporation to operate as a public company.
• The Preferred Shares have no economic entitlements to the Non-Core Business.
• The holders of Preferred Shares are entitled to nominate 40% of the Corporation’s directors.
• Certain corporate activities (such as incurring more debt related to the Core Business or completing a new Non-Core acquisition) require approval by the Preferred Shareholders.
• The Preferred Shares are non-voting and are not convertible into Common Shares.

Special Committee of Independent Directors

The Board of Directors appointed a special committee comprised entirely of independent directors (the “Special Committee”) to review the Proposed Acquisition. The Special Committee was comprised of Trevor Bruno (Chairman), Ron Gratton, Dennis Sykora and Kingsley Ward. The Special Committee retained Bennett Jones LLP to act as legal counsel. The Special Committee supervised the appointment of Evans & Evans, Inc. (the “Valuator”) and the preparation of the valuation of the subject matter of the Proposed Transaction. Following receipt of the valuation, the Special Committee met independently with the Valuator to review the valuation and discuss with the Valuator. Following such review, the Special Committee unanimously recommended that the Board of Directors approve the Proposed Acquisition.

Following receipt of the Special Committee's recommendation, the Board of Directors unanimously approved the Proposed Acquisition, the Acquisition Agreement and Proposed Constating Document Amendment (with Messrs. Mauris and Kayat abstaining) and resolved unanimously to recommend that shareholders vote in favour of the Proposed Acquisition and the Proposed Constating Document Amendment.

Related Party Matters – The Proposed Acquisition

The Proposed Acquisition is subject to certain approvals including the approval of the Exchange. Because the KayMaur principals are related parties (within the meaning of MI 61-101) and, as such, the Proposed Acquisition is a related party transaction (within the meaning of MI 61-101), and the Corporation is required to obtain a formal valuation for, and minority approval of, the Proposed Acquisition.

The Special Committee engaged the Valuator to prepare an independent formal valuation of the subject matter of the Proposed Acquisition and the property being exchanged in the Proposed Acquisition. Completing such valuation also required that the Valuator prepare a formal valuation of the Corporation as a whole. The Valuator concluded that the fair market value of 100% of the equity of DLCG was between $396.7 million and $441.5 million; the fair market value of the Preferred Shares being acquired (on a controlling, marketable basis assuming a full corporate sale) was between $158.7 million and $176.6 million; and the fair market value of the Preferred Shares being acquired, on a stand-alone basis with no corporate acquisition control premium was between $124.4 million and $137.4 million. Further, the Valuator concluded that, using the fair market value of 100% of the equity of DLCG as set out above, the value of the Common Shares being issued pursuant to the Proposed Acquisition plus the $15.0 million cash payment was valued at between $165.5 million and $182.5 million. The Valuator concluded that, using the 30 day VWAP for the Common Shares as at August 31, 2024, the value of the Common Shares being issued pursuant to the Proposed Acquisition plus the $15.0 million cash payment was valued at between $131.3 million and $137.3 million.

The formal valuation will be included in its entirety in the Material Change Report to be filed by the Corporation in respect of the Proposed Acquisition. Details of the formal valuation also will be included in the management information circular sent to shareholders in advance of the Meeting. The fair market value figures above use the mid-point value for the range of values determined by the Valuator.

There are no prior valuations in respect of the Corporation that relate to the subject matter of the Proposed Transaction or otherwise relevant to the Proposed Transaction that have been made in the 24 months prior to the date hereof and the existence of which is known, after reasonable inquiry, to the Corporation or any director or senior officer of the Corporation.

Voting Support Agreements

In connection with the Proposed Acquisition, each of the Corporation’s directors (except for Messrs. Mauris and Kayat), as well as Belkorp Industries Inc., has entered into irrevocable voting and support agreements pursuant to which they have agreed to vote their Common Shares in favour of the Proposed Acquisition at the Meeting, subject to certain customary exceptions.

The Common Shares subject to voting and support agreements represent approximately 32% of outstanding Common Shares (and approximately 52% of the outstanding Common Shares eligible to vote on the resolution to approve the Proposed Acquisition after excluding the Common Shares owned by KayMaur).

Lender Approval

The Corporation has entered into a consent and waiver agreement with its lender relating to the Proposed Acquisition, whereby the lender has consented to the Proposed Acquisition subject to the Corporation providing evidence of certain approvals and filed documents.

Cautionary Note Regarding Forward-looking Information

Certain statements in this document constitute forward-looking information under applicable securities legislation. Forward-looking information typically contains statements with words such as "anticipate," "believe," "estimate," "will," "expect," "plan," "intend," or similar words suggesting future outcomes or an outlook. Forward-looking information in this document includes, but is not limited to: the anticipated completion of the Proposed Acquisition and the Proposed Constating Document Amendment; the anticipated benefits of the simplification of our corporate structure resulting from the Proposed Acquisition; the approval of Proposed Acquisition by the Corporation's senior lender and the anticipated closing date of the Proposed Acquisition and the Proposed Constating Document Amendment. Such forward-looking information is based on a number of assumptions which may prove to be incorrect. Assumptions have been made with respect to the following matters, in addition to any other assumptions identified in this news release: the conditions to complete the Proposed Acquisition and the Proposed Constating Document Amendment will be satisfied and the transactions will be completed as anticipated; and the Corporation's senior lender will approve the Proposed Acquisition on terms and conditions acceptable to the Corporation.

Such forward-looking information is necessarily based on many estimates and assumptions, including material estimates and assumptions, related to the factors identified below that, while considered reasonable by the Corporation as at the date hereof considering management’s experience and perception of current conditions and expected developments, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to changes in taxes and other risks and uncertainties described elsewhere in this document and in our other filings with Canadian securities authorities. Many of these uncertainties and contingencies can affect our actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, us. Readers are cautioned that forward-looking statements are not guarantees of future performance. All forward-looking statements made in this press release are qualified by these cautionary statements. The foregoing list of risks is not exhaustive. For more information relating to risks, see the risk factors identified in our Annual Report. The forward-looking information contained in this document is made as of the date hereof and, except as required by applicable securities laws, we undertake no obligation to update publicly or revise any forward-looking statements or information, whether because of new information, future events or otherwise.

About Dominion Lending Centres Inc.

Dominion Lending Centres Inc. is Canada’s leading network of mortgage professionals. DLCG operates through Dominion Lending Centres Inc. and its three main subsidiaries, MCC Mortgage Centre Canada Inc., MA Mortgage Architects Inc. and Newton Connectivity Systems Inc., and has operations across Canada. DLCG extensive network includes over 8,000 agents and over 520 locations. Headquartered in British Columbia, DLC was founded in 2006 by Gary Mauris and Chris Kayat.

DLCG can be found on X (Twitter), Facebook and Instagram and LinkedIn @DLCGmortgage and on the web at www.dlcg.ca.

Contact information for the Corporation is as follows:

Eddy [e-mail]	James BellEVP, Corporate and Chief Legal [e-mail]