The Original Agreement set out the rights of those Baydonhill shareholders which accepted the alternative to the cash offer (the “Earnout Offer”) for the acquisition of Baydonhill. The Earnout Offer comprised 4.80 pence in cash and one CVR for each Baydonhill share held. A total of 49,177,912 CVRs are currently outstanding.

Under the terms of the Original Agreement:
- Baydonhill shareholders who opted for the Earnout Offer were eligible to receive an earnout payment (“the CVR Entitlement”) following the conclusion of the three-year earnout period, ended 30 June 2016
- The CVR Entitlement was to be determined by a formula dependent on the aggregate free-cash-flow generated by Baydonhill during the Earnout Period, as specified in the Original Agreement
- In aggregate, the CVR Entitlement was to be no less than a minimum of £1.0 million (to be paid entirely in Earthport ordinary shares (“Earthport Shares”) at a rate of 0.097 Earthport Shares per CVR held, at a fixed price per Earthport Share of 21.24 pence), and no greater than a maximum of £4.2 million (to be paid 70% in Earthport Shares at a rate of 0.281 Earthport Shares per CVR held, at a fixed price per Earthport Share of 21.24 pence and 30% in loan notes ("Loan Notes"). The Loan Notes bear interest at a rate of 1% per annum and are redeemable one day and six months from the date of issue

The Amendment has been agreed by Earthport and the CVR Committee in response to the impact of the February loss at Baydonhill (“Loss Incident”), as announced on 25 February 2016 (see RNS 1396Q), in accordance with the terms of the Original Agreement. Both parties have agreed that:

a. The aggregate free-cash-flow figure used to calculate the current CVR Entitlement will bear a partial impact of the £5 million Baydonhill loss resulting from the Loss Incident; and
b. CVR holders would have the opportunity to receive an additional payment (“Additional Entitlement”) in the event of any potential insurance and/or legal recovery related to the Loss Incident greater than an agreed threshold of £2,639,004. There would be no additional entitlement if the recovery is below this amount

The Amendment is structured as follows:
- The amended CVR Entitlement shall be £2,295,400, to be paid as follows:
o A maximum of £135,935 by the issue of Loan Notes to the CVR holders; and
o A minimum of £2,159,465 payable by the issue of at least 10,797,671 Earthport Shares, at an average issue price of 20.00p (with the maximum of £2,295,400 payable by the issue of 11,710,103 Earthport shares, at an average price of 20.00p)
o The final mix of Loan Notes and Earthport Shares, as well as the resulting average issue price, will be determined following the formal acceptance and elections of CVR holders, to be completed no later than 8 days following this announcement

- In the event of an insurance and/or legal recovery in respect to the Loss Incident, greater than the agreed amount of £2,639,004, the CVR holders will be eligible to receive an additional entitlement, up to a maximum of £1,923,297 to be paid:
o 40% by the issue of Loan Notes; and
o 60% by the issue of Earthport Shares at 21.24p per Earthport Share
- The Amendment is subject to approval by way of a written resolution from holders of not less than two thirds of the CVRs. Ekwienox Limited, which holds 92% of the CVRs, has already signed a written resolution approving the Amendment, meaning that the Amendment has been duly approved under the terms of the Original Agreement
- All Earthport Shares issued pursuant to the terms of the Amendment will rank pari passu in all respects with the existing shares in issue

As a result of the Amendment, approximately £700,000 in cash will be returned to Earthport from an escrow account established and funded for meeting its obligations under the Original Agreement. This results in a pro forma cash balance of £15.1 million for fiscal year ended 30 June 2016. The Board of Directors of Earthport has concluded that the Amendment is in the best interests of its shareholders.