Document title: Earn-out: share purchase agreement.

CONTENTS
____________________________________________________________
CLAUSE
1. Interpretation..........................................................................................................................1
2. Purchase price........................................................................................................................1
3. Completion.............................................................................................................................2

SCHEDULE
Schedule 1 Earn-out................................................................................................................3
1. Definitions...............................................................................................................................3
2. Earn-out Payments.................................................................................................................4
3. Earn-out Statement and agreeing the Earn-out Payments....................................................5
4. Expert determination..............................................................................................................7
5. Conduct of business during the Earn-out Period....................................................................9
1. Interpretation

Include the following definitions in the interpretation clause of the SPA. Update the
clause cross-references in this provision to reflect the final numbering of the purchase
price and earn-out provisions in the SPA.
Completion Payment: the sum of £[AMOUNT].
Earn-out Payments: has the meaning set out in 42.1 of Schedule [NUMBER OF EARN-
OUT SCHEDULE].
Purchase Price: the aggregate purchase price for the Sale Shares, as set out in 12.1.
Replace the purchase price clause in the SPA with the following provision. Update the
clause numbers and cross-references in this provision to reflect the final numbering of
the purchase price and earn-out clauses in the SPA.

2. Purchase price

2.1 The Purchase Price is the aggregate of:

(a) the Completion Payment, which shall be paid by the Buyer in cash on
Completion in accordance with 12.2; and
(b) the Earn-out Payments, which shall be calculated and paid in accordance with
Schedule [NUMBER OF EARN-OUT SCHEDULE] and 12.2.

2.2 All payments to be made to the Seller under this agreement shall be made in sterling by
electronic transfer of immediately available funds to the Seller['s Solicitors (who are
irrevocably authorised by the Seller to receive the same)] to the following account:
[INSERT ACCOUNT DETAILS]. [Payment in accordance with this clause shall be a
good and valid discharge of the Buyer's obligation to pay the sum in question and the
Buyer shall not be concerned to see the application of the monies so paid.]

2.3 The Purchase Price shall be deemed to be reduced by the amount of any payment
made to the Buyer for each and any:
(a) Claim; [or]
(b) [Indemnity Claim; or]
(c) claim under the Tax Covenant.

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 Replace the relevant sub-clause in the completion clause of the SPA with the following
provision. Update or complete the clause cross-references to reflect the final numbering
of the completion and purchase price clauses.

3. Completion

3.1 [At Completion:]

(a) the Buyer shall (subject to the Seller complying with [ADD CROSS-
REFERENCE TO CLAUSE IN SPA SETTING OUT SELLER'S COMPLETION
OBLIGATIONS]) pay the Completion Payment in accordance with 12.1(a) and
12.2 and deliver (or cause to be delivered) to the Seller:

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Schedule 1 Earn-out

1. Definitions

The definitions in this paragraph apply in this agreement.

[Applicable IFRS: International Financial Reporting Standards (including international
accounting standards, international financial reporting standards and interpretations of
such standards) adopted for use in the UK from time to time.]
Earn-out Payments: has the meaning set out in 42.1 of this Schedule.
Earn-out Period: the period beginning on [Completion OR [DATE]] and ending on
[DATE].
Earn-out Statement: has the meaning set out in 53.2(b) of this Schedule.
Expert: has the meaning set out in 63.6 of this Schedule.
Financial Year: each and any financial year (within the meaning of section 390 of the
CA 2006) of the Company and the Subsidiaries ending during the Earn-out Period.
[FRC: the Financial Reporting Council in the United Kingdom.]
[FRS 102: Financial Reporting Standard 102: The Financial Reporting Standard
applicable in the UK and Republic of Ireland [(applying the permitted reduced disclosure
requirements as set out in Section 1 thereof)] as issued by the FRC and in force from
time to time.]
Objection Notice: has the meaning set out in 53.3 of this Schedule.
Reference Accounts: in relation to a Financial Year, the audited statement of financial
position, [income statement and statement of other comprehensive income OR
statement of comprehensive income], statement of changes in equity, statement of cash
flows and the notes thereto (in each case as described under [IAS 1: Presentation of
Financial Statements OR Sections 3 to 7 of FRS 102]) of the Company and each of the
Subsidiaries, and the audited consolidated statement of financial position, [income
statement and statement of other comprehensive income OR statement of
comprehensive income], statement of changes in equity, statement of cash flows and
the notes thereto (in each case described under [IAS 1: Presentation of Financial
Statements OR Sections 3 to 7 of FRS 102]) of the Company and the Subsidiaries, in
each case for the [12 month] period ended on the last day of that Financial Year and
prepared in accordance with [UK GAAP OR Applicable IFRS and the applicable
accounting requirements of the CA 2006] in force for that Financial Year.
Relevant Profits: in relation to a Financial Year, the [consolidated] profit or loss of the
Company and the Subsidiaries for that period as shown in the Reference Accounts for
that Financial Year, but adjusted to:
a) add back any current or deferred taxation;

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 b) [exclude any profits or add back any losses arising on the disposal,
revaluation or impairment of any long-term assets or investments of the
Company or any of the Subsidiaries;]
c) [exclude the effect of the agreed restructuring after Completion [as
detailed in Schedule [NUMBER];]
d) [exclude the effect of any transactions with related parties, except to the
extent that they are transacted at an arm’s length value [as determined by
reference to market prices];]
e) [exclude the reversal of any provisions made before Completion;]
f) [exclude any interest or other finance charges or income;]
g) [INSERT DETAILS OF ANY OTHER SPECIFIC ADJUSTMENTS TO BE
APPLIED.]
Resolution Notice: has the meaning set out in 63.6 of this Schedule.
Review Period: has the meaning set out in 53.3 of this Schedule.
[UK GAAP: generally accepted accounting principles, standards and practices applied in
the United Kingdom, including Financial Reporting Standards 100 to 105 issued by the
FRC (and applied as appropriate having regard to the position of the Company and the
Subsidiaries), and the applicable accounting requirements of the CA 2006.]

2. Earn-out Payments

2.1 As additional consideration for the Sale Shares, the Buyer shall make the following
payments to Seller (together the Earn-out Payments, each an Earn-out Payment):
(a) an amount equal to [NUMBER]% of the Relevant Profits in respect of the
Financial Year ending on [DATE];
(b) an amount equal to [NUMBER]% of the Relevant Profits in respect of the
Financial Year ending on [DATE]; and
(c) an amount equal to [NUMBER]% of the Relevant Profits in respect of the
Financial Year ending on [DATE],

PROVIDED ALWAYS that if the amount of the Relevant Profits in any Financial Year is
zero or a negative number, the Earn-out Payment in respect of that Financial Year shall
be zero.

2.2 The Earn-out Payments shall be agreed or determined (as the case may be) in
accordance with 53 and 64 of this Schedule, and paid in accordance with 52.3 of this
Schedule.

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2.3 [Subject to 52.4 of this Schedule, the OR The] Buyer shall pay the amount due (if any) in
respect of each Earn-out Payment in cash within [5] Business Days of:
(a) the Seller agreeing (or being deemed to have agreed in accordance with 63.4 of
this Schedule) the Earn-out Statement specifying the amount of the relevant
Earn-out Payment; or
(b) if an Objection Notice is served in accordance with 53.3 of this Schedule, the
parties:
(i) agreeing [in writing] all disputed matters concerning the relevant Earn-
out Statement and the calculation of the corresponding Earn-out
Payment; or
(ii) receiving notice of the Expert's determination of the relevant Earn-out
Payment in accordance with 64 of this Schedule.

2.4 [The Buyer shall be entitled to withhold and set off against any Earn-out Payment
otherwise due and payable to the Seller under this Schedule any amount due and
payable by the Seller to the Buyer in respect of a Claim[, Indemnity Claim] or claim
under the Tax Covenant, or that may become payable by the Seller upon the settlement
or determination of an outstanding Claim[, Indemnity Claim] or claim under the Tax
Covenant.]

3. Earn-out Statement and agreeing the Earn-out Payments

3.1 The Buyer shall [procure OR use its reasonable endeavours to procure] that the
Reference Accounts for each Financial Year are prepared and audited [as soon as
practicable and in any event] within [NUMBER] [Business Days OR days] of the last day
of the relevant Financial Year.

3.2 Within [NUMBER] [Business Days OR days] of completion of the audit of the Reference
Accounts in respect of a Financial Year, the Buyer shall deliver to the Seller:
(a) a copy of the relevant Reference Accounts; and
(b) a statement prepared by the Buyer['s auditors] (Earn-out Statement) setting
out [in reasonable detail]:
(i) its calculation of the Relevant Profits for that Financial Year;
(ii) any adjustments made in calculating the Relevant Profits; and
(iii) its calculation of the resulting Earn-out Payment (if any) payable in
respect of that Financial Year.

3.3 The Seller shall, within [NUMBER] Business Days from receipt of the Reference
Accounts and the Earn-out Statement for a Financial Year (Review Period), deliver to
the Buyer a written notice stating whether it agrees with the Earn-out Statement and the

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 Buyer's calculation of the Earn-out Payment. In the case of any disagreement, the notice
(Objection Notice) shall specify the areas disputed by the Seller[ and describe, in
reasonable detail, the basis for the dispute] [provided that the only [grounds on which the
Seller may dispute any matter in the Earn-out Statement [is OR are]: [SPECIFY ANY
LIMITS ON SCOPE OF OBJECTIONS]].

3.4 If the Seller fails to deliver an Objection Notice during the Review Period it shall, with
effect from the expiry of the Review Period, be deemed to agree the Earn-out Statement
and the amount of Earn-out Payment specified in it.

3.5 During each Review Period, the Buyer shall upon reasonable notice and during normal
business hours, permit the Seller (and its agents or advisers) to access and review [the
Buyer’s working papers relating to the preparation of the Earn-out Statement and] such
books and records of the Company and the Subsidiaries as the Seller (or its agents or
advisers) may reasonably require for the purpose of reviewing the Earn-out Statement
and the Buyer's calculation of the corresponding Earn-out Payment.

3.6 If the Seller serves an Objection Notice in accordance with 53.3 of this Schedule, the
parties shall seek in good faith to resolve the disputed matters and agree the amount of
the Relevant Profits and the Earn-out Payment for the relevant Financial Year [as soon
as reasonably possible]. If the parties are unable to reach agreement within [NUMBER]
Business Days of the service of the Objection Notice, then at any time following the
expiry of such period either party may, by written notice to the other (Resolution
Notice), require the disputed matters to be referred for determination in accordance with
64 of this Schedule, by an independent chartered accountant based in a firm of
[international] repute and with appropriate experience of determining similar disputes
(Expert).

3.7 Each party shall bear and pay its own costs incurred in connection with the preparation,
review and agreement of each Earn-out Statement and the calculation of each Earn-out
Payment.

4. Expert determination

4.1 If either party serves a Resolution Notice:

(a) the parties shall endeavour to agree as soon as reasonably possible who will be
appointed to act as the Expert, and to agree the terms of their appointment; and
(b) if the parties fail to agree and appoint the Expert within [20] Business Days of an
appointee being proposed by a party for this purpose, either party shall be
entitled to request [NAME OF NOMINATING BODY] to appoint the Expert[, and
to agree the terms of their appointment on the parties' behalf].

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4.2 The Buyer and the Seller shall co-operate with each other fully and promptly in relation
to appointing the Expert, including [(without limitation)]:
(a) taking all necessary actions to agree (and shall not unreasonably withhold or
delay their consent to) the Expert's terms of appointment; and
(b) agreeing and signing any engagement letter, terms of reference or other
documentation in connection with the Expert's appointment.

4.3 Except for any procedural matters, or as otherwise expressly provided in this Schedule,
the scope of the Expert's remit shall:
(a) be limited to [determining the unresolved matters in the Objection Notice
relating to:
(i) whether the Earn-out Statement has been prepared, and the
corresponding calculation of the Earn-out Payment has been made, in
accordance with the requirements of this Schedule;
(ii) whether any errors have been made in the preparation of the Earn-out
Statement and the corresponding calculation of the Earn-out Payment;
and
(iii) any consequential adjustments, corrections or modifications that are
required for the Earn-out Statement to have been prepared, and the
corresponding calculation of the Earn-out Payment to have been made,
in accordance with the requirements of this Schedule;]
(b) [include awarding interest as part of their decision; and]
(c) [not] include making a determination as to the proper interpretation or
construction of any provision of this agreement [where this is necessary to
enable the determination of the amount of the Earn-out Payment].

4.4 To the extent not provided for by this 64, the Expert may in their reasonable discretion
determine such other procedures as they consider just or appropriate[ including (to the
extent they consider necessary) taking legal advice or instructing other professional
advisers to assist in reaching their determination].

4.5 Each party shall:

(a) co-operate with the Expert and provide all assistance and access to such
information, documents or records in the possession or control of that party (or
any member of its Group) as the Expert may reasonably require for the purpose
of making their determination;
(b) be entitled to make submissions to the Expert [including oral submissions], and
each party shall, with reasonable promptness, supply the other with access to
such information, documents or records in the possession or control of that

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 party (or any member of its Group) as the other party may reasonably require to
make a submission under this paragraph; and
(c) shall act reasonably and co-operate in good faith to give effect to the provisions
of this 64, and shall not do anything to hinder or prevent the Expert from making
their determination.

4.6 The Expert shall be required to prepare a written decision ([including OR but shall not be
obliged to include] reasons) and to provide a copy to each party [as soon as reasonably
practicable and in any event] within [30] Business Days of their appointment.

4.7 [All matters under this 64 shall be conducted, and the Expert's decision shall be written,
in the English language.]

4.8 The Expert shall act as an expert and not as an arbitrator. The Expert's written decision
on the matters referred to them shall be final and binding on the parties in the absence
of [manifest error or] fraud.

4.9 If an appointed Expert dies or becomes unwilling or incapable of acting, or does not
deliver their determination within the time required by this 64:
(a) the parties shall use all reasonable endeavours to agree the identity and terms
of appointment of a replacement Expert;
(b) if the parties fail to agree and appoint a replacement Expert within [10] Business
Days of a replacement being proposed in writing by a party, then either party
may apply to [NAME OF NOMINATING BODY] to discharge the appointed
Expert and to appoint a replacement Expert; and
(c) this 64 shall apply in relation to each and any replacement Expert as if they
were the first Expert appointed.

4.10 Each party shall bear and pay its own costs incurred in connection with the Expert's
determination pursuant to this 64. The Expert's fees and any costs or expenses properly
incurred in making their determination (including the fees and costs of any advisers
appointed by the Expert) shall be borne equally between the Buyer and the Seller, or in
such other proportions as the Expert shall direct.

4.11 All matters concerning the process and result of the determination by the Expert shall be
kept confidential among the parties and the Expert.

5. Conduct of business during the Earn-out Period

5.1 [Subject to 95.2 of this Schedule, the OR The] Buyer shall:

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 (a) have sole discretion with regard to all matters relating to the management and
operation of the Company and the Subsidiaries following Completion; and
(b) be under no obligation to operate the Company or the Subsidiaries with a view
to achieving or maximising the amount of the Earn-out Payments.

5.2 [The Buyer undertakes to the Seller that [at all times between Completion and the expiry
of the Earn-out Period OR for the duration of the Earn-out Period] it shall not take any
action (or cause or permit anything to be done) in [bad faith] with the [sole] purpose of
avoiding or reducing the amount of any Earn-out Payment.]