10 January 2024

Silverwood Brands Plc

("Silverwood" or the "Company")

Settlement Deed

Silverwood Brands Plc (AQSE: SLWD), a holding company established to invest primarily in branded consumer businesses, is pleased to announce that the Company has agreed a conditional settlement deed (the "Settlement Deed") with Andrew Gerrie and Alison Hawksley (the "Lush Vendors").

Terms used in this announcement are defined at the end of this announcement unless otherwise defined herein.

On 12 December 2022, the Company announced a transaction (the "Lush Transaction") to acquire a 19.8% stake in Lush Cosmetics Limited and Cosmetic Warriors Limited (together, "Lush") from the Lush Vendors. Following Lush's refusal to register the transfers of shares in Lush (the "Lush Shares") to Cosmic Circles Limited, the Company announced on 9 October 2023 that it had decided to withdraw the request that Lush register the transfers of the Lush Shares to Cosmic. The Company further announced that it was seeking to take steps with a view to unwinding the Lush Transaction.

As part of this process, the Company has now reached a settlement with the Lush Vendors pursuant to the Settlement Deed.

The terms of the Settlement Deed include (but are not limited to) the following:

·    An initial cash payment of £300,000 from the Lush Vendors to the Company, as a contribution to Silverwood for some of the costs it has incurred and/or will incur in connection with the Lush Transaction and the subsequent litigation.  Such sum is to be paid by the Lush Vendors to the Company by 16 January 2024.

·    The Lush Vendors have conditionally agreed to pay, or procure certain payments are made (whether in cash or in kind), to Silverwood including:

o  following a Successful Outcome, the amount of the stamp duty paid in relation to the Lush Transaction in the event that the Company is unable to recover the same from HM Revenue & Customs; 

o  a cash amount equivalent to one per cent. of any net cash amount that the Lush Vendors receive as a result of a Successful Outcome;

o  an investment or loan of a sum equivalent to at least five per cent. of the net proceeds received by the Lush Vendors in connection with a Successful Outcome (less certain agreed amounts that may be advanced by the Lush Vendors during the Cooperation Period as defined below) provided that Andrew Gerrie is a director of the Company at the time of such proposed investment or loan.

In addition, the parties have agreed in the Settlement Deed to enter into a period during which the Lush Vendors will work together with the Company to cancel the Consideration Shares via a Proposed Capital Reduction Procedure (the "Cooperation Period").  The Cooperation Period shall commence from the date that the Lush Vendors hold all of the Consideration Shares including those Consideration Shares currently held by VSA Capital Limited ("VSA Capital"). The Lush Vendors have in that regard undertaken to the Company to recover the Consideration Shares currently held by VSA Capital.  The Cooperation Period shall end once the Consideration Shares have been cancelled pursuant to the Proposed Capital Reduction Procedure.  Until Completion or the lapse of the Settlement Deed, the parties have agreed not to take active steps to make Claims (if any) against each other in relation to the Lush Transaction.

Furthermore, each of the Lush Vendors has agreed in the Settlement Deed not to exercise any rights attaching to the Consideration Shares during the Cooperation Period without the prior written consent of Silverwood.  Accordingly, the Lush Vendors will not sell, transfer or otherwise dispose of, or create any encumbrance over, any of their Consideration Shares (or any interest in them), or enter into any agreement to do so.

In the event that the Cooperation Period has not commenced by 30 April 2024, or such later date as agreed by the parties, the Settlement Deed shall lapse and will not be binding on the parties.

Upon Completion, the parties have agreed to fully and finally settle and release all Claims against each other arising under or in connection with the Lush Transaction save that in the event that there is no Completion or a Change of Control Event occurs prior to Completion:

·    there will be no settlement of Claims under the Settlement Deed;

·    any payments (including the Initial Payment) or loans made by or on behalf of the Lush Vendors to the Company pursuant to the Settlement Deed shall be immediately repayable by the Company; and

·    certain obligations of the Lush Vendors under the Settlement Deed that became effective prior to Completion shall be terminated with immediate effect and no further performance by them will be required.

The Settlement Deed is intended to be and is a compromise amongst the parties.

As Andrew Gerrie is Chief Executive of the Company, the Settlement Deed is deemed to be a related party transaction pursuant to Rule 4.6 of the Access Rulebook. The Company's directors (excluding Andrew Gerrie) having exercised reasonable care, skill and diligence, consider that the terms of the Settlement Deed are fair and reasonable insofar as the shareholders of the Company are concerned.

Non- Delivery Notice

On or about 24 October 2023, the Company delivered the Non-Delivery Notice to the Lush Vendors to notify them that title of the Lush Shares had not been delivered.  Pursuant to the terms of the SPA, the Lush Vendors appointed a director of the Company, namely Paul Hodgins, as attorney over the Consideration Shares, with full power to exercise all rights, powers and privileges in relation to the Consideration Shares in order to protect the Company's interests. 

Separately, in consideration of Silverwood consenting to the transfer by the Lush Vendors of some of the Consideration Shares to VSA Capital in January 2023, VSA Capital undertook to the Company to comply with, observe, perform and be bound by the provisions in the SPA concerning the appointment of the attorney over those Consideration Shares in the same way as the Lush Vendors. Silverwood notes from the announcement made by VSA Capital on 29 November 2023 that they are in dispute with the Lush Vendors in relation to the Consideration Shares.  

The Company will announce further information regarding the process to unwind the Lush Transaction as soon as practicable. Pending the publication of that further information, trading in the Company's ordinary shares on the Access segment of the Aquis Growth Market will remain suspended. 

Sonotas

In January 2023, the Company completed the acquisition of 90% of the issued share capital of Sonotas Holdings Corporation and 100% of the share capital of Sonotas Corporation from, amongst others, Andrew Tone, a Director of the Company, for an initial consideration of approximately £16.0 million, satisfied in cash and ordinary shares in Silverwood. The Company also agreed to pay Andrew Tone deferred consideration, on or before 15 December 2023, with such consideration being satisfied in cash or ordinary shares in Silverwood.

The Company and Andrew Tone have agreed to postpone the settlement of this deferred consideration until the process and timing of the Proposed Capital Reduction Procedure have been confirmed.

As Andrew Tone is an Executive Director of the Company, the agreement regarding the deferred consideration is deemed to be a related party transaction pursuant to Rule 4.6 of the Access Rulebook. The Company's directors (excluding Andrew Tone) having exercised reasonable care, skill and diligence, consider that the terms of the agreement regarding the deferred consideration are fair and reasonable insofar as the shareholders of the Company are concerned.

Market Abuse Regulation (MAR) Disclosure

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation EU 596/2014 as it forms part of retained EU law (as defined in the European Union (Withdrawal) Act 2018).

Definitions