Mr. Silas Garrison reports

HS GOVTECH ANNOUNCES EXECUTION OF ARRANGEMENT AGREEMENT

HS Govtech Solutions Inc. has entered into a definitive arrangement agreement with a British Columbia subsidiary of a United States private equity fund operated by Banneker Partners LLC (the purchaser), pursuant to which the purchaser will acquire all of the issued and outstanding common shares of the company, on a fully diluted basis, for an all-cash consideration of 54 cents per share.

Key transaction highlights:

• HS Govtech shareholders to receive 54 cents per share in cash, representing an aggregate transaction value of approximately $33.3-million.
• The purchase price represents a 151.2-per-cent premium to the closing price of 21.5 cents and a 174.1-per-cent premium to the 20-day volume-weighted price of 19.7 cents per share on Sept. 15, 2023.
• Both a special committee composed of directors of HS Govtech and the board of directors of the company (with conflicted directors abstaining) unanimously recommend that HS Govtech securityholders vote in favour of the transaction.
• The transaction is subject to customary closing conditions, including approval from HS Govtech securityholders.

Ali Hakimzadeh, chair of the company's board, commented: "We are pleased to announce this transaction with Banneker Partners, which offers our securityholders a significant premium to the recent trading price of the company's shares. After careful consideration, the special committee and the company's board have both unanimously concluded (with conflicted directors abstaining) that the transaction is fair to HS Govtech's securityholders and recommends that they vote in favour of the transaction."

Kenneth Frank, partner at Banneker Partners, commented, "HS Govtech's robust technology platform, innovative product portfolio and committed team have proven themselves in delivering mission-critical tools to agencies supporting our communities." Hugh Kirkpatrick, principal at Banneker, added, "We are excited to partner with HS Govtech's talented management team to drive continued growth, as we build upon their leading government software platform and bring new solutions to the market."

Silas Garrison, chief executive officer of the company, stated: "I am excited about partnering with Banneker Partners to continue delivering the best service and platform available in the market. This partnership will allow us to invest even more into new features and products that will further our mission of helping government agencies operate more efficiently by going beyond data management."

Transaction summary

Pursuant to the terms and conditions of the arrangement agreement, the purhaser has agreed to acquire 100 per cent of the issued and outstanding shares for consideration of 54 cents in cash per share. The consideration reflects a 151.2-per-cent premium to the closing price of the shares on the Canadian Securities Exchange of 21.5 cents on Sept. 15, 2023, the last trading day of the shares prior to the announcement of the transaction. The transaction will be implemented by way of a court-approved plan of arrangement under the Business Corporations Act (British Columbia). Pursuant to the arrangement, the purchaser will pay a total of approximately $31,622,489 for the fully diluted equity of the company.

In connection with entry into the arrangement agreement, the purchaser has also provided a $500,000 (U.S.) non-convertible, unsecured, 10-per-cent-interest-bearing loan to the company, in part to pay expenses related to the transaction.

The board (other than non-independent directors who abstained from voting on the transaction), after receiving the unanimous recommendation of the special committee, has determined that the arrangement, including the transactions contemplated thereunder, is fair to holders of shares, holders of options to acquire shares, holders of restricted share units (RSUs) to acquire shares and holders of warrants to acquire shares (together with the shareholders, the securityholders), and is in the best interests of the company. Accordingly, the board approved the arrangement agreement and recommends that securityholders vote their securities in favour of the arrangement. In making its recommendation, the board considered a number of factors, including the receipt of a fairness opinion from Echelon Capital Markets which determined that, subject to the assumptions, limitations, qualifications and other matters set forth therein, the consideration offered to securityholders is fair, from a financial point of view, to the shareholders.

Each of the directors and executive officers of the company, who hold in the aggregate approximately 8.99 per cent of the issued and outstanding shares (assuming no exercise of existing convertible securities), have entered into voting and support agreements with the purchaser and have agreed to, among other things, vote their securities in favour of the arrangement.

The arrangement agreement

Pursuant to the arrangement, each share outstanding immediately prior to the effective time of the arrangement will be transferred to and purchased by the purchaser for consideration of 54 cents per share, and each option, warrant and RSU outstanding immediately prior to the effective time of the arrangement will be cancelled in exchange for a cash payment equal to the amount (if any) by which 54 cents exceeds the exercise price of such option, warrant or RSU, as applicable. The company's outstanding non-convertible debentures, with a principal amount of $2,195,000 plus interest at a rate of 10 per cent per annum, will be repaid in connection with closing of the arrangement. Pursant to Section 3.7 of the company's RSU plan, the payment of consideration under the arrangement to RSU holders who are United States persons will be conditional upon receipt by the company of an indemnity from such RSU holder respecting the payment of applicable income or other taxes.

The implementation of the arrangement will require court approval and the approval of: (i) at least two-thirds (66-2/3 per cent) of the votes cast by the shareholders; (ii) at least two-thirds (66-2/3 per cent) of the votes cast by all the securityholders, voting together as a single class; and (iii) at least a simple majority of the votes cast by shareholders, excluding votes from certain shareholders as required under Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions, at a special meeting of the securityholders. An announcement about the exact timing of the special meeting will follow in the near future.

In addition to securityholder and court approvals, the arrangement is subject to applicable regulatory approvals and the satisfaction of certain other closing conditions customary in transactions of this nature. Subject to the satisfaction (or waiver) of the conditions precedent, the arrangement is expected to close in late November, 2023. The arrangement agreement includes customary provisions relating to non-solicitation of alternative transactions, subject to customary fiduciary-out provisions that entitle the company to consider and accept a superior proposal if not matched by the purchaser. The company has also agreed to pay a termination fee to the purchaser of $1,375,000 in connection with termination of the arrangement agreement due to the occurrence of certain events, including if the arrangement is not completed as a result of a superior proposal. Further, the arrangement agreement provides for a reciprocal expense reimbursement fee of up to $400,000 if the arrangement agreement is terminated by the company or the purchaser, as the case may be, in certain specified circumstances.

Full details of the arrangement agreement and the special meeting will be included in a management information circular of the company to be filed with applicable regulatory authorities and mailed to securityholders in accordance with applicable securities laws.

Securityholders and other interested parties are advised to read the materials relating to the proposed arrangement, including the arrangement agreement that will be filed by the company with securities regulatory authorities in Canada, when they become available. Anyone may obtain copies of these documents when available, free of charge, on the company's profile at the Canadian Securities Administrators' website at SEDAR+.

Upon completion of the transaction, no securities of the company will be listed on any public market and the company will cease to be a reporting issuer under Canadian laws.

Echelon Capital Markets acted as financial adviser to the company and the special committee. McMillan LLP acted as legal counsel to the company, Stikeman Elliott LLP, and Orrick Herrington & Sutcliffe LLP acted as legal counsel to the purchaser, and Wildeboer Dellelce LLP acted as counsel to Echelon Capital Markets.

This announcement is for informational purposes only and does not constitute a solicitation or a proxy.

About HS Govtech Solutions Inc.

HS Govtech is an industry-leading software-as-a-service company serving the state, provincial and local government market across the United States and Canada. HS Govtech's cutting-edge platforms currently provide inspection, information, communication and data management systems that enable government agencies to operate more efficiently. HS Govtech's cloud and mobile-based platforms are currently deployed in over 800 state and local government organizations across North America. HS Govtech currently offers the only fully integrated inspection, administration and analytics product suite across all platforms in North America. HS Govtech also delivers its government-grade technologies to private businesses through its My Health Department platform, enabling citizens and private businesses to gain visibility and predictability into their own organizations and move from a reactive to a pro-active operational status. As HS Govtech continues to deliver focused service and innovative solutions to government organizations, the company entered the fintech space through its HSPay offering which serves as a payment platform that streamlines the intake of government revenue. Further, HS Govtech's GovCall platform offers one of the only teleconferencing and video collaboration platforms tailored exclusively for government agencies.

About Banneker Partners LLC

Banneker Partners invests in growing, mission-critical enterprise software businesses to drive sustainable long-term value. Banneker takes a partnership approach to support founders and management teams to achieve their goals by implementing proven best practices and making additional investments across functional areas, including sales, marketing, product management, product development, professional services and customer success, and complements these growth initiatives with strategic acquisitions that are focused on enhancing customer value. Banneker Partners is at arm's-length with HS Govtech, its significant shareholders and subsidiaries.

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