Velocity Comp Regulatory News (VEL)

7 January 2020

VELOCITY COMPOSITES PLC

("Velocity Composites" or the "Company")

Relationship, Orderly Market and Settlement Agreements with Founder Shareholders

 Related Party Transactions

Velocity Composites plc (AIM: VEL.L), the leading supplier of advanced composite material kits to the aerospace market, announces that it has entered into a new relationship agreement (the "Relationship Agreement") with the Company's founder shareholders who in aggregate hold approximately 42.8% of the Company's issued ordinary shares, being Velocity Composites Chief Executive Jon Bridges, Gerald Johnson and Christopher Banks (together the "Founder Shareholders").

The Company also announces that it has entered into settlement agreements with the Founder Shareholders in relation to their removal from office in October 2018 and related matters (the "Settlement Agreements") and entered into orderly market agreements in respect of each of the Founder Shareholders shareholdings (the "Orderly Market Agreements").

The Relationship Agreement will regulate aspects of the continuing relationship between the Company and the Founder Shareholders.

Relationship Agreement

The Relationship Agreement replaces a previous relationship agreement between, inter alia, the Company and the Founder Shareholders signed on 12 May 2017. Under the Relationship Agreement, each of the Founder Shareholders has undertaken to use his voting rights (and procure that his associates use their voting rights) to ensure that the Company is capable at all times of carrying on its business independently of the Founder Shareholders and that future transactions between the Company and any of the Founder Shareholders are on an arm's length basis and on normal commercial terms. Each of the Founder Shareholders has also undertaken not to take any action that would prevent the Company from complying with any applicable laws or regulations, including Rule 13 (related party transactions) of the AIM Rules for Companies. The Relationship Agreement will terminate with immediate effect when both the following criteria are met, (i) if the interests of each of the Founder Shareholders in voting rights falls below 15%nd (ii) in aggregate the interest of the Founder Shareholders in voting rights falls below 25%.

Settlement Agreements and Orderly Market Agreements

The Company announced on 5 November 2018 that the employment contracts of two of the Founder Shareholders, Gerry Johnson and Christopher Banks, had been terminated on 25 October 2018 with immediate effect. The basis upon which both were removed from their positions with the Company has been a matter dispute with the Company since that date. The board members in place at that time have each since resigned and, following the appointment of Andy Beaden and Rob Soen to the Board in July 2019, the Founder Shareholders have sought to resolve this matter with the new Board.

As a result of constructive discussions between the parties the Company has now signed Settlement Agreements with each of the Founder Shareholders. Under the terms of the Agreement with Gerald Johnson he will receive a termination payment of £67,000, including related legal costs, and Christopher Banks will receive a termination payment of £32,000, including related legal costs. Jon Bridges, who was reappointed as a director of the Company in July 2019, has not requested, and will not receive, any compensation for relinquishing his position as CEO in 2018. In addition, the Founder Shareholders' solicitors were paid earlier in the year £50,000, as awarded by the High Court in relation to the unsuccessful action bought by the Company against the Founder Shareholders on 21 March 2019.

In finalising the terms of the Settlement Agreements, the Company and the Founder Shareholders have entered into Orderly Market Agreements in relation to each of the Founder Shareholders' respective shareholdings in Velocity Composites. Under the terms of the Orderly Market Agreements, each of the Founder Shareholders has undertaken not to sell or otherwise dispose of any ordinary shares in the Company except through the Company's broker, unless and until such individual shareholding represents 5% of less of the Company's issued ordinary share capital.

Related Party Transactions

The Settlement Agreements entered into by the Company with each of the Founder Shareholders constitute related party transactions under the AIM Rules for Companies. The independent directors, being the Company's directors excluding Jon Bridges consider, having consulted with the Company's nominated adviser, that the terms of the Settlement Agreements to be fair and reasonable insofar as the Company's shareholders are concerned.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

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About Velocity Composites

Velocity Composites manufactures advanced carbon fibre and ancillary material kits for use in the production of aircraft. The Company uses its process knowledge, business processes and proprietary software to reduce the amount of material required by its customers and also reduce the associated material waste when making aircraft parts. In turn, this reduces the aircraft manufacturer's costs, with the kits delivered on time and in the required form to allow its customers to more readily meet the significant increases in build rates.

The Company trades under the name "Velocity Composites".