Announcement PDF ATOMOS LIMITED ACN 139 730 500 NOTICE OF EXTRAORDINARY GENERAL MEETING Notice is hereby given that an Extraordinary General Meeting of shareholders of Atomos Limited (Company) will be held on Thursday, 16 May 2024 at 11.00 a.m. (AEST) at the offices of Henslow Pty Ltd, Level 15, 25 Bligh Street, Sydney (Meeting). The business to be considered at the Meeting is set out below. This Notice should be read in its entirety in conjunction with the accompanying Explanatory Notes, which contain information in relation to the Resolutions. The Explanatory Notes provide additional information on the matters to be considered at the Meeting. The Explanatory Notes and the Proxy Form form part of this Notice. Terms and abbreviations used in this Notice and the Explanatory Notes are defined in the Glossary accompanying this Notice. BUSINESS OF THE MEETING Resolution 1: Approval to issue securities to Directors under the Placement To consider and, if thought fit, to pass the following Resolution as an ordinary resolution of the Company: “That, pursuant to and in accordance with Listing Rule 10.11 and for all other purposes, Shareholders approve the issue to Directors, Jeromy Young, Peter Barber and Paul Greenberg (or their nominee/s), of a total of: (a) 205,000,000 Placement Shares at an issue price of $0.02 per Placement Share; and (b) 102,500,000 Placement Options, being issued on the basis of one free-attaching quoted Placement Option (exercisable at $0.03 each on or before 30 November 2025) for every two Placement Shares subscribed for and issued under the Placement, on the terms and conditions set out in the Explanatory Notes.” Resolution 2: Approval to issue securities to Institutional Investors under the Placement To consider and, if thought fit, to pass the following Resolution as an ordinary resolution of the Company: “That, for the purpose of Listing Rule 7.1 and for all other purposes, Shareholders approve the issue to Institutional Investors of a total of: (a) 195,000,000 Placement Shares at an issue price of $0.02 per Placement Share; and (b) 97,500,000 Placement Options, being issued on the basis of one free-attaching quoted Placement Option (exercisable at $0.03 each on or before 30 November 2025) for every two Placement Shares subscribed for and issued under the Placement, on the terms and conditions set out in the Explanatory Notes.” Resolution 3: Approval to issue Options to Executive Directors under the Executive Director Offer To consider and, if thought fit, to pass the following Resolution as an ordinary resolution of the Company: “That, pursuant to and in accordance with Listing Rule 10.11 and for all other purposes, Shareholders approve the issue to Executive Directors, Jeromy Young and Peter Barber (or their nominee/s), of a total of 100,000,000 Executive Director Options, exercisable at $0.03 each on or before 30 November 2025, on the terms and conditions set out in the Explanatory Notes.” Resolution 4: Approval to issue Options to Lead Manager under the Broker Offer To consider and, if thought fit, to pass the following Resolution as an ordinary resolution of the Company: “That, for the purpose of Listing Rule 7.1 and for all other purposes, Shareholders approve the issue to the Lead Manager of 50,000,000 Broker Options, exercisable at $0.03 each on or before 30 November 2025, on the terms and conditions set out in the Explanatory Notes.” VOTING EXCLUSIONS Pursuant to the Listing Rules, the Company will disregard any votes cast in favour of: (a) Resolution 1, by or on behalf of Jeromy Young, Peter Barber and Paul Greenberg (or their nominee/s), and any other person who will obtain a material benefit as a result of the issue of the Placement Securities to Jeromy Young, Peter Barber and Paul Greenberg (or their nominee/s) (except a benefit solely by reason of being a Shareholder), or any of their respective associates; (b) Resolution 2, by or on behalf of any person who is expected to participate in, or who will obtain a material benefit as a result of, the proposed issue of the Placement Securities to the Institutional Investors (except a benefit solely by reason of being a Shareholder) or any of their respective associates; (c) Resolution 3, by or on behalf of Jeromy Young and Peter Barber (or their nominee/s), and any other person who will obtain a material benefit as a result of the issue of the Executive Director Options to Jeromy Young and Peter Barber (or their nominee/s) (except a benefit solely by reason of being a Shareholder), or any of their respective associates; and (d) Resolution 4, by or on behalf of the Lead Manager, and any other person who will obtain a material benefit as a result of the issue of the Broker Options to the Lead Manager (except a benefit solely by reason of being a Shareholder), or any of its respective associates. The above voting exclusions do not apply to a vote cast in favour of the relevant Resolution by: (a) a person as proxy or attorney for a person who is entitled to vote, in accordance with directions given to the proxy or attorney to vote on the Resolution in that way; (b) the Chair as proxy or attorney for a person who is entitled to vote, in accordance with a direction given to the Chair to vote on the Resolution as the Chair decides; or (c) a holder acting solely in a nominee, trustee, custodial or other fiduciary capacity on behalf of a beneficiary provided the following conditions are met: (i) the beneficiary provides written confirmation to the holder that the beneficiary is not excluded from voting, and is not an associate of a person excluded from voting, on the Resolution; and (ii) the holder votes on the Resolution in accordance with directions given by the beneficiary to the holder to vote in that way. ENTITLEMENT TO VOTE _________________________________________________________________________ The Directors have determined that the persons eligible to vote at the Meeting are those who are registered Shareholders of the Company as at 7.00 p.m. (AEST) on Tuesday, 14 May 2024 (Entitlement Time), subject to any applicable Voting Exclusion. This means that if you are not the registered holder of a Share in the Company at the Entitlement Time, you will not be entitled to vote at the Meeting. VOTING OPTIONS AND PROXIES _________________________________________________________________________ Voting If you do not plan to attend the Meeting in person, you are encouraged to complete and return the Proxy Form, which accompanies this Notice. Voting by Proxy A Shareholder who is entitled to attend and vote at this Meeting is entitled to appoint not more than two proxies to attend and vote in place of the Shareholder. If the Shareholder appoints two proxies, the Shareholder may specify the proportion or number of votes each proxy is entitled to exercise. If no proportion or number of votes is specified, each proxy may exercise half of the Shareholder’s votes. If the specified proportion or number of votes exceeds that which the Shareholder is entitled to, each proxy may exercise half of the Shareholder’s votes. Any fractions of votes brought about by the apportionment of votes to a proxy will be disregarded. A proxy need not be a Shareholder of the Company. A body corporate appointed as a shareholder’s proxy may appoint a representative to exercise any of the powers the body may exercise as a proxy at the Meeting. The representative should bring to the Meeting evidence (in an electronic format capable of distribution by email) of his or her appointment, including any authority under which the appointment is signed, unless it has previously been given to the Company. If a Shareholder has not directed their proxy how to vote, the proxy may vote (or abstain from voting) as the proxy determines. Proxy Voting by the Chair If a Shareholder appoints the Chair of the Meeting as proxy and does not direct the Chair how to vote on a Resolution, the Chair will vote in accordance with his voting intention as stated in this Notice. The Chair intends to vote all undirected proxies in favour of the Resolutions in this Notice. Proxy Forms To be effective, the Proxy Form must be completed, signed and lodged (together with the relevant original power of attorney or a certified copy if the proxy is signed by an attorney) with the Company’s Share Registry, as an original or by facsimile, no later than 11.00 a.m. (AEST) on Tuesday, 14 May 2024 (Proxy Deadline). Proxy forms may be submitted in one of the following ways: (i) by mail to Boardroom Pty Limited, GPO Box 3993 Sydney NSW 2001 Australia. Please allow sufficient time so that it reaches Boardroom Pty Limited by the Proxy Deadline; (ii) by fax to Boardroom Pty Limited on +61 2 9290 9655 (within Australia); or (iii) online via https://www.votingonline.com.au/amsegm2024. Proxy Forms and Powers of Attorney must be received by the Proxy Deadline. CORPORATE REPRESENTATIVES _________________________________________________________________________ Where a shareholding is registered in the name of a corporation, the corporate Shareholder may appoint a person to act as its representative to attend the Meeting by providing that person with: (i) a letter or certificate authorising him or her as the corporation's representative, executed in accordance with the corporation's constitution; or (ii) a copy of the resolution appointing the representative, certified by a secretary or director of the corporation. BY ORDER OF THE BOARD Vanessa Chidrawi Company Secretary 12 April 2024 EXPLANATORY NOTES RESOLUTION 1 – Approval to issue securities to Directors under the Placement 1.1 General The Company is proposing to issue a total of 205,000,000 Placement Shares (at an issue price of $0.02 per Placement Share) and 102,500,000 Placement Options (on the basis of one free-attaching quoted Placement Option for every two Placement Shares issued under the Placement) to Jeromy Young, Peter Barber and Paul Greenberg (or their nominee/s) (Director Participants). Resolution 1 seeks the approval of Shareholders for the proposed issue of Placement Securities to the Director Participants for the purposes of Listing Rule 10.11. 1.2 Listing Rule 10.11 Listing Rule 10.11 provides that, unless one of the exceptions in Listing Rule 10.12 applies, a listed company must not issue or agree to issue Equity Securities to any of the following persons without the approval of its shareholders: (a) a related party; (b) a person who is, or was at any time in the 6 months before the issue or agreement, a substantial holder (30%+) in the entity; (c) a person who is, or was at any time in the 6 months before the issue or agreement, a substantial holder (10%+) in the entity and who has nominated a director to the board of the entity pursuant to a relevant agreement which gives them a right or expectation to do so; (d) an associate of a person referred to in Listing Rules 10.11.1 to 10.11.3; or (e) a person whose relationship with the company or a person referred to in Listing Rule 10.11.1 or 10.11.4 is such that, in ASX's opinion, the issue or agreement should be approved by its shareholders. The Director Participants are all related parties of the Company by virtue of being Directors. Shareholder approval pursuant to Listing Rule 10.11 is therefore required in relation to the issue of Placement Securities to the Director Participants unless an exception applies. None of the exceptions set out in Listing Rule 10.12 apply in the current circumstances. Approval pursuant to Listing Rule 7.1 is not required for the issue of the Placement Securities to the Director Participants if approval is obtained under Listing Rule 10.11. Accordingly, if Resolution 1 is passed, the issue of the Placement Securities to the Director Participants will not be included in the Company’s 15% annual placement capacity pursuant to Listing Rule 7.1. 1.3 Effect of Resolution 1 If Resolution 1 is passed, the Company will be able to proceed with the issue of the Placement Securities to the Director Participants. By issuing the Placement Securities to the Director Participants, the Company will raise $4,100,000 (before costs) upon the issue of the Placement Shares to the Director Participants, and could raise up to a further $3,075,000 (before costs) upon exercise of all of the Placement Options issued to the Director Participants in the future. However, it is noted that any future exercise of the Placement Options is at the sole discretion of the Option holder and cannot be guaranteed. If Resolution 1 is not passed, the Company will not be able to proceed with the issue of the Placement Securities to the Director Participants, and the Company will not receive the funds committed by the Director Participants in respect of the Placement. 1.4 Specific information required by Listing Rule 10.13 Pursuant to and in accordance with Listing Rule 10.13, the following information is provided in relation to the proposed issue of Placement Securities to the Director Participants: (a) a total of 205,000,000 Placement Shares and 102,500,000 Placement Options will be issued to the Director Participants under the Placement, with 100,000,000 Placement Shares and 50,000,000 Placement Options to be issued to each of Jeromy Young and Peter Barber, and 5,000,000 Placement Shares and 2,500,000 Placement Options to be issued to Paul Greenberg; (b) the Director Participants each fall into the category of a related party, as stipulated by Listing Rule 10.11.1, by virtue of being Directors. In the event that Placement Securities are issued to a nominee of a Director Participant, that nominee will fall into the category of an associate of a person referred to in Listing Rule 10.11.1 (being a related party), as stipulated by Listing Rule 10.11.4; (c) the Placement Shares will be fully paid ordinary shares in the capital of the Company and will rank equally in all respects with the Company’s existing Shares on issue. The terms of the Placement Options are set out in Annexure A; (d) the Placement Securities are expected to be issued to the Director Participants on or around Monday, 20 May 2024 and in any event, no later than one month after the date of the Meeting; (e) the Placement Shares will be issued at $0.02 per Placement Share. The Placement Options are free-attaching quoted Options to the Placement Shares and will therefore have an issue price of nil, however they will have an exercise price of $0.03 per Placement Option; (f) the proceeds raised from the issue of the Placement Shares to the Director Participants are intended to be used: i. to repay the Company’s existing external debt facility (including any capitalised interest); ii. for costs associated with the Company’s cost saving initiatives following an operating cost review expected to be completed by April 2024; iii. for the development and stocking of new products; iv. for working capital; and v. for costs associated with the Placement. No proceeds will be raised from the issue to the Director Participants of the Placement Options, but the Company could potentially receive up to $3,075,000 (before costs) in further capital if all of the Placement Options issued to the Director Participants are exercised in the future (although there is no guarantee that this will occur); (g) the proposed issue of the Placement Securities to the Director Participants is on exactly the same terms as the proposal under Resolution 2 (to approve the issue of Placement Securities to Institutional Investors) and is not intended to remunerate or incentivise the Director Participants or provide any additional benefit to the Director Participants. (h) there are no other material terms to the proposed issue of the Placement Securities to the Director Participants; and (i) a voting exclusion statement is included in the Notice. 1.5 Chapter 2E of the Corporations Act In accordance with Chapter 2E of the Corporations Act, in order to give a financial benefit to a related party, the Company must: (a) obtain Shareholder approval in the manner set out in section 217 to 227 of the Corporations Act; and (b) give the benefit within 15 months following such approval, unless the giving of the financial benefit falls within an exception set out in sections 210 to 216 of the Corporations Act. The proposed issue of the Placement Securities to the Director Participants constitutes giving a financial benefit to related parties of the Company. Sir Hossein Yassaie (being the only Director who will not be participating in the proposed issue of Placement Securities) considers that Shareholder approval pursuant to Chapter 2E of the Corporations Act is not required in respect of the issue of the Placement Securities to the Director Participants because they will be issued on the same terms as the Shares and Options being issued to the Company’s Shareholders under the entitlement offer being undertaken by the Company as part of the Capital Raising, and on the same terms as the issue of the Placement Securities to Institutional Investors under the Placement, and as such, the giving of the financial benefit is on arm's length terms pursuant to section 210 of the Corporations Act. 1.6 Additional information Resolution 1 is an ordinary resolution. Sir Hossein Yassaie (being the only Director who does not have a material personal interest in the outcome of the Resolution) recommends that Shareholders vote in favour of Resolution 1. RESOLUTION 2 – Approval to issue securities to Institutional Investors under the Placement 2.1 General The Company is proposing to issue a total of 195,000,000 Placement Shares (at an issue price of $0.02 per Placement Share) and 97,500,000 Placement Options (on the basis of one free-attaching quoted Placement Option for every two Placement Shares issued under the Placement) (Placement Securities) to a number of institutional investors (Institutional Investors). Resolution 2 seeks the approval of Shareholders for the proposed issue of Placement Securities to the Institutional Investors for the purposes of Listing Rule 7.1. 2.2 Listing Rule 7.1 Broadly speaking, and subject to a number of exceptions, Listing Rule 7.1 limits the amount of Equity Securities that a listed company can issue without the approval of its shareholders over any 12 month period to 15% of the fully paid ordinary shares it had on issue at the start of that period. The issue of Placement Securities to Institutional Investors under Resolution 2 does not fall within any of these exceptions and exceeds the 15% limit in Listing Rule 7.1. It therefore requires the approval of Shareholders under Listing Rule 7.1. If Resolution 2 is passed, the Company will be able to proceed with the issue of the Placement Securities to Institutional Investors. By issuing Placement Securities to the Institutional Investors, the Company will raise $3,900,000 (before costs) upon the issue of the Placement Shares to the Institutional Investors, and could raise up to a further $2,925,000 (before costs) upon exercise of all of the Placement Options issued to the Institutional Investors in the future. However, it is noted that any future exercise of the Placement Options is at the sole discretion of the option holder and cannot be guaranteed. In addition, if Resolution 2 is passed, the issue of Placement Securities to the Institutional Investors will be excluded from the calculation of the number of equity securities that the Company can issue without Shareholder approval under Listing Rule 7.1. If Resolution 2 is not passed, the Company will not be able to proceed with the issue of the Placement Securities to the Institutional Investors, and the Company will not receive the funds committed by the Institutional Investors in respect of the Placement. 2.3 Specific information required by Listing Rule 7.3 Pursuant to and in accordance with Listing Rule 7.3, the following information is provided in relation to the proposed issue of Placement Securities to the Institutional Investors: (a) the Placement Securities to be issued under Resolution 2 will be issued to the Institutional Investors, being a number of non-related party institutional investors introduced to the Company by the Lead Manager; (b) a total of 195,000,000 Placement Shares and 97,500,000 Placement Options will be issued to the Institutional Investors under the Placement; (c) the Placement Shares will be fully paid ordinary shares in the capital of the Company and will rank equally in all respects with the Company’s existing Shares on issue. The terms of the Placement Options are set out in Annexure A; (d) the Placement Securities are expected to be issued to the Institutional Investors on or around Monday, 20 May 2024 and in any event, no later than three months after the date of the Meeting; (e) the Placement Shares will be issued at $0.02 per Placement Share. The Placement Options are free-attaching quoted Options to the Placement Shares and will therefore have an issue price of nil, however they will have an exercise price of $0.03 per Placement Option; (f) the proceeds raised from the issue of the Placement Shares to the Institutional Investors are intended to be used: i. to repay the Company’s existing external debt facility (including any capitalised interest); ii. for costs associated with the Company’s cost saving initiatives following an operating cost review expected to be completed by April 2024; iii. for the development and stocking of new products; iv. for working capital; and v. for costs associated with the Placement. No proceeds will be raised from the issue to the Institutional Investors of the Placement Options, but the Company could potentially receive up to $2,925,000 (before costs) in further capital if all of the Placement Options issued to the Institutional Investors are exercised in the future (although there is no guarantee that this will occur); and (g) a voting exclusion statement is included in the Notice. 2.4 Additional information Resolution 2 is an ordinary resolution. The Board recommends that Shareholders vote in favour of Resolution 2. RESOLUTION 3 – Approval to issue Options to Executive Directors under the Executive Director Offer 3.1 General The Company is proposing to issue a total of 100,000,000 Executive Director Options, exercisable at $0.03 each on or before 30 November 2025 (Executive Director Options), to Jeromy Young and Peter Barber (Executive Directors) (or their nominee/s) under the Executive Director Offer. Resolution 3 seeks the approval of Shareholders for the proposed issue of Executive Director Options to the Executive Directors (or their nominee/s) for the purposes of Listing Rule 10.11. 3.2 Listing Rule 10.11 Paragraph 1.2 above applies equally to this Resolution 3, except that all references to “Placement Securities” in paragraph 1.2 above are replaced with “Executive Director Options” for the purposes of this Resolution 3, and all references to “Director Participants” in paragraph 1.2 above are replaced with “Executive Directors (or their nominee/s)” for the purposes of this Resolution 3. If Resolution 3 is passed, the Company will be able to proceed with the issue of the Executive Director Options to the Executive Directors (or their nominee/s). By issuing the Executive Director Options, the Company could raise up to $3,000,000 (before costs) upon exercise of all of the Executive Director Options in the future. However, it is noted that any future exercise of the Executive Director Options is at the sole discretion of the Option holder and cannot be guaranteed. In addition, if Resolution 3 is passed, the Executive Director Options issued to the Executive Directors (or their nominee/s) will be excluded from the calculation of the number of Equity Securities that the Company can issue without Shareholder approval under Listing Rule 7.1. If Resolution 3 is not passed, the Company will not be able to proceed with the issue of the Executive Director Options, and the Company will not receive the funds committed by the Executive Directors (or their nominee/s) in respect of the Executive Director Offer. 3.3 Specific information required by Listing Rule 10.13 Pursuant to and in accordance with Listing Rule 10.13, the following information is provided in relation to the proposed issue of Executive Director Options: (a) a total of 100,000,000 Executive Director Options will be issued to the Executive Directors (or their nominee/s) under the Executive Director Offer, with 50,000,000 Executive Director Options to be issued to each of the Executive Directors (or their nominee/s); (b) the Executive Directors each fall into the category of a related party, as stipulated by Listing Rule 10.11.1, by virtue of being Directors. In the event that Executive Director Options are issued to a nominee of the Executive Directors, that nominee will fall into the category of an associate of a person referred to in Listing Rule 10.11.1 (being a related party), as stipulated by Listing Rule 10.11.4; (c) the Executive Director Options are exercisable at $0.03 each on or before 30 November 2025. The terms of the Executive Director Options are the same as those for the Placement Options as set out in Annexure A; (d) the Executive Director Options are expected to be issued to the Executive Directors (or their nominee/s) on or around Monday, 20 May 2024 and in any event, no later than one month after the date of the Meeting; (e) the Executive Director Options have an issue price of nil; (f) no proceeds will be raised from the issue of the Executive Director Options, but the Company could potentially receive up to $3,000,000 (before costs) in capital if all of the Executive Director Options are exercised in the future (although there is no guarantee that this will occur); (g) the Company proposes to issue the Executive Director Options to the Executive Directors (or their nominee/s) for the following reasons: i. to further incentivise the Executive Directors in delivering on the company’s restructure and recapitalisation plan; ii. to further align the Executive Directors’ interests with the Shareholders; iii. to recognise the valuable contributions made by the Executive Directors since the commencement of their employment, including through the contribution of customer and supplier relationships, technology and industry know-how and the development of new products; iv. to acknowledge the reduced salaries that the Executive Directors have agreed to be paid (to ease the cash burden on the Company) and the lack of any other incentive arrangements being provided to the Executive Directors as part of their agreed remuneration packages; and v. to provide a cost effective method of remuneration which allows the Company to spend a greater proportion of its cash reserved on its operations; (h) the Company values the Executive Director Options at approximately $0.0074 per Executive Director Option based on the Black-Scholes model and the assumptions set out in Annexure B. The current total remuneration package for Jeromy Young is $400,000 and for Peter Barber is $400,000 per annum, albeit both have currently reduced their base salary by 20% (to $320,000 per annum) until 30 June 2024, reflecting desire to preserve cash during the Company’s recapitalisation. If the Executive Director Options are issued, the initial value for each of the Executive Directors will be approximately $370,000 being the value of the Executive Director Options. It should be noted this is a theoretical value based on the Black-Scholes model with no guarantee that the Executive Director Options will be able to be exercisable or traded for a ‘tangible’ cash value; (i) there are no other material terms to the proposed issue of the Executive Director Options; and (j) a voting exclusion statement is included in the Notice. 3.4 Chapter 2E of the Corporations Act A summary of Chapter 2E of the Corporations Act is set out in paragraph 1.5 above. The proposed issue of the Executive Director Options to the Executive Directors (or their nominee/s) constitutes giving a financial benefit to related parties of the Company. The Board (other than the Executive Directors) considers that Shareholder approval pursuant to Chapter 2E of the Corporations Act is not required in respect of the issue of the Executive Director Options because the commitment to issue the Executive Director Options is considered reasonable remuneration in the circumstances of the Company and each of the Executive Directors’ circumstances (including the responsibilities of each of the Executive Directors). 3.5 Additional information Resolution 3 is an ordinary resolution. The Board (other than the Executive Directors who have a material personal interest in the outcome of the Resolution concerning their subscription for Executive Director Options) recommends that Shareholders vote in favour of Resolution 3. RESOLUTION 4 – Approval to issue Options to Lead Manager under the Broker Offer 4.1 General The Company is proposing to issue 50,000,000 Options, exercisable at $0.03 each on or before 30 November 2025 (Broker Options), to the Lead Manager. Resolution 4 seeks the approval of Shareholders for the proposed issue of Broker Options to the Lead Manager for the purposes of Listing Rule 7.1. 4.2 Listing Rule 7.1 Broadly speaking, and subject to a number of exceptions, Listing Rule 7.1 limits the amount of Equity Securities that a listed company can issue without the approval of its shareholders over any 12 month period to 15% of the fully paid ordinary shares it had on issue at the start of that period. The issue of the Broker Options under Resolution 4 does not fall within any of these exceptions. While the issue of the Broker Options does not exceed the 15% limit in Listing Rule 7.1 and can the