COSOL : Notice of Extraordinary General Meeting/Proxy Form

For personal use only

COSOL LIMITED

ACN 635 371 363 (COMPANY)

NOTICE OF GENERAL MEETING & EXPLANATORY MEMORANDUM

Notice is given that the General Meeting of the Company will be held as follows:

TIME: 10.00am (AWST)

DATE: 4 February 2022

PLACE: Boardroom

Suite 183, Level 6, 580 Hay Street Perth WA 6000

As this is an important document, please read it carefully and in its entirety. If you do not understand it please consult your professional advisors.

If you are unable to attend the General Meeting, please complete the proxy form enclosed and return it in accordance with the instructions set out on that form.

COVID-19MEETING PROTOCOLS

INTRODUCTION

Notice is given that the General Meeting of Shareholders of the Company will be held at Suite 183, Level 6, 580 Hay Street Perth WA 6000 on 4 February 2022 commencing at 10.00am (AWST). The Explanatory Memorandum to this Notice of Meeting provides additional information on matters to be considered at the General Meeting. The Explanatory Memorandum and the Proxy Form are part of this Notice of Meeting.

The terms and abbreviations used in this Notice and Explanatory Memorandum are defined in the attached Glossary.

onlyThe Company advises Shareholders that the Meeting will be held to comply with the Government's recommendations in relation to gatherings of persons during the current COVID-19 situation. As at the date of this notice, Government directives and recommendations on gatherings and travel restrictions mean that some Shareholders may not be able to attend the Meeting in person. The Company therefore strongly encourages Shareholders who wish to vote on the business of the Meeting to do so by l dging a directed proxy prior to the date of Meeting as per the instructions on the Proxy Form.

Shareholders can submit any questions in advance of the Meeting by emailing them to [e-mail].

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	The Meeting will consider only the business detailed in the Agenda below, followed by a Company update presentation made to
	Shareholders.
		AGENDA
1	RESOLUTION 1 - FINANCIAL ASSISTANCE BY SUBSIDIARIES OF THE COMPANY
		To consider and, if thought fit, to pass the following resolution as a special resolution:
		"That, for the purposes of section 260B(2) of the Corporations Act, the giving of financial assistance by Clarita Solutions Pty
personalCompany Secretary

Ltd, a wholly owned subsidiary of the Company, in connection with the acquisition of all of the shares in Clarita Solutions Pty Ltd by the Company and the terms and conditions of the Company's loan facility arrangements with Bankwest Limited, in the manner described in the Explanatory Memorandum, be approved."

The Directors have determined pursuant to regulation 7.11.37 of the Corporations Regulations that the persons eligible to vote at the Meeting are those who are registered as Shareholders of the Company at 5pm (AWST) on 2 February 2022.

By Order of the Board

Lisa Wynne

5 January 2022

For

Pursuant to section 260B of the Act, the Company must have the Financial Assistance approved by:

(a) a special resolution passed at a general meeting of the Company, with no votes being cast in favour of the resolution by the person acquiring the Shares or by their associates; or

(b) a resolution agreed to, at a general meeting, by all of its Shareholders.

1.2 Particulars of the proposed Financial Assistance

On 31 August 2020, the Company entered into the Facility Agreement (Facility Agreement), under which the Lender agreed to provide a loan facility (Facility) under the Facility Agreement. As is the case with similar funding arrangements, the Lender

Under section 260A(2) of the Act, the Financial Assistance may be given before or after the acquisition of the Shares. Based on the timeline set out above the Financial Assistance is provided after the Acquisition.

Financial assistance is defined very broadly and includes an entity giving a guarantee and granting a security interest over its assets and undertaking in connection with the acquisition of shares in the Company, or an entity which becomes a wholly owned subsidiary, or as security for the obligations of the buyer.

(c) the assistance is exempted under section 260C of the Act.

the assistance is approved by Shareholders under section 260B of the Act (as to which see paragraph (iv) below); or

(b)

(ii) the Company's ability to pay its creditors; or

(i) the interests of the Company or its Shareholders; or

giving the assistance does not materially prejudice:

(a)

Pursuant to section 260A(1) of the Act, Clarita and the Company, as its holding company, may financially assist a person to acquire shares in Clarita only if:

The Company has a loan facility in place with Bankwest Ltd (Lender) for the provision of loan funds to the Company for acquisition and working capital purposes. The Facility was drawn down in order to pay the cash consideration to the Clarita shareholders. Following the Acquisition the Company was required by the Lender to arrange for Clarita to give a guarantee to the Lender of the obligations of the Company under the Facility and grant a general security interest to the Lender as security for the guarantee obligations (Security). As a part of these requirements the Lender requires the Company to seek Shareholder approval for Clarita providing that financial assistance (Financial Assistance).

On 22 November 2021 the Company announced it had completed the Acquisition of Clarita for an upfront consideration of $7 million in cash and 7,951,123 full paid ordinary Shares, with a further $3.75 million payable in cash and Shares by way of earn-outconsideration.

The shareholders of Clarita Solutions Pty Ltd (Clarita), Clarita and the Company itself are each party to a Share Purchase Agreement dated 5 November 2021 (SPA) pursuant to which all of the shares in the capital of Clarita were acquired by the Company (Acquisition).

This section of the Explanatory Memorandum is for the purposes of section 260B(4) of the Corporations Act and contains all of the information known to the Company that is material to a Shareholder in determining whether to approve Resolution 1.

Background

RESOLUTION1 - FINANCIAL ASSISTANCE BY SUBSIDIARIES OF THE COMPANY

This Explanatory Memorandum should be read in conjunction with the accompanying Notice of Meeting. The purpose of this Explanatory Memorandum is to provide information which the Directors believe to be material to Shareholders in deciding whether

onlyor not to pass the Resolution in the Notice of Meeting.

A Proxy Form has been dispatched to Shareholders together with a letter advising Shareholders the Company is not dispatching physical copies of the Notice of Meeting and Explanatory Memorandum and where those documents are available for viewing and downloading.

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1.1

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EXPLANATORY MEMORANDUM

This Explanatory Memorandum has been prepared for the information of Shareholders of COSOL Limited (Company) in connection with the business to be conducted at the General Meeting of the Company to be held at Suite 183, Level 6, 580 Hay Street Perth WA 6000 on 4 February 2022 commencing at 10.00am (AWST).

only1.3

(a)

(b)

use(c)

1.4

(a)

personal(b)

(c)

1.5

1.6

(a)

(b)

For(c)

(d)

requires the Company's obligations under the Facility Agreement and related finance documents, to be guaranteed and secured by certain of the Company's wholly-owned subsidiaries, which includes Clarita following the Acquisition.

The Company is the listed holding company of Clarita and therefore is required to obtain approval from its Shareholders for the Financial Assistance under Section 260B(2) of the Corporations Act in order for the Financial Assistance to be given. Following the completion of the Acquisition, the Company (as the sole shareholder of Clarita) will pass the required resolution of approval of the shareholders of Clarita for the purposes of section s260B(1) of the Corporations Act.

Reasons for the Financial Assistance

The Financial Assistance is proposed because:

it is a requirement of the Lender under the Facility Agreement that, following the Acquisition, the Company procure Clarita accedes as guarantor under the Facility Agreement and provide the Security and guarantee. By acceding to the Facility Agreement and providing the Security and guarantee, Clarita may be assisting the Company to comply with its obligations under the Facility Agreement which in turn is providing Financial Assistance to acquire the shares in Clarita;

if Clarita does not give the Financial Assistance, the Company will be in breach of the Facility Agreement, which would give the Lender the right to call for all or any part of the Facility loaned to the Company under the Facility Agreement (plus accrued interest) to be immediately due and payable. This would have an adverse impact on the Company's existing cash reserves and may require refinancing or renegotiating the facilities under the Facility Agreement, which may result in more restrictive and expensive terms, which would likely impact the Company's operations; and

it is considered the giving of Financial Assistance is beneficial to all shareholders as it allows for the Acquisition to proceed in the manner it occurred.

Effect of the proposed Financial Assistance

The effect of the Financial Assistance will be that:

Clarita will be a guarantor of the Company's obligations under the Facility Agreement and may be required to perform obligations of the Company in the event of defaults by the Company or another guarantor;

Clarita will provide the Security and the Lender may be entitled to enforce the Security in the event the Company or another guarantor fails to perform its obligations under the Facility Agreement;

Clarita will be required to perform and comply with the obligations under the Facility Agreement and related finance documents to the extent those documents impose obligations on Clarita.

The directors of Clarita and the Directors of the Company do not believe the giving of the Financial Assistance will have the effect of materially prejudicing the interests of the creditors or shareholders of Clarita or the Company.

Advantages of the proposed Financial Assistance

If Clarita provides the Financial Assistance by granting the Security, this will allow the Company to satisfy its obligations to the Lender under the Facility Agreement.

Disadvantages of the proposed Financial Assistance

The Company is already liable for the amounts due under the Facility Agreement, accordingly the Directors do not believe there are any disadvantages to the Company in the Financial Assistance being provided.

If the Financial Assistance is given, then Clarita may be liable to repay all moneys payable under the Facility Agreement. This may have an adverse impact on the financial position of Clarita in the event it is liable for the debts and obligations of the Company under the Facility Agreement. In the event of the Company defaulting, the Lender may make a demand under the Security requiring Clarita pay the amounts due under the Facility Agreement.

The operations of Clarita, including its ability to borrow money in the future from other financiers may be restricted by the Security.

However, the Directors have no reason to believe there are any prevailing circumstances the Lender making a claim against the Security is probable or likely. Accordingly, the potential disadvantages to Clarita for providing the Financial Assistance our outweighed by the advantages to the Company (and Clarita as a subsidiary) in accessing the Facility.

1.7 Other information material to the decision

1. The Directors consider the consequences of not providing the Financial Assistance (as outlined in section 1.4) will have a far greater adverse impact on Shareholders than any potential consequence of providing the Financial Assistance (as outlined in section 1.6).
2. The Directors consider this section 1 of the Explanatory Memorandum contains all of the information known to the Company which would be material to Shareholders in deciding whether to approve the resolution the subject of this document, other than the information which it would be unreasonable to require the Company to include because it has been previously

disclosed to Shareholders or is otherwise within the existing knowledge of the Shareholders as the holders of all of the Shares and was considered as a part of the decision to sign the SPA.

1. Resolution 1 requires a Special Resolution, which means that to be passed the item needs the approval of at least 75% of the votes cast by Shareholders entitled to vote on the Resolution.

1.8 Board Recommendation

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The Board recommends you vote in favour of Resolution 1. Each of the Directors currently intend to vote their respective shareholdings in favour of this Resolution.