Advance Subscription Agreement (England & Wales)

Definitions

"Qualifying Funding Round" means the first issue by the Company of new shares for cash after the date of this Agreement, in one transaction or several related ones, at a fixed pre-money valuation, in which at least the Qualifying Round Threshold is subscribed in cash by persons other than the Investor and its associates, not counting the conversion of this Agreement or any other advance subscription, convertible loan or similar instrument.

"Funding Shares" means the class of shares issued to the new cash investors in the Qualifying Funding Round, and "Funding Price" means the lowest price paid per Funding Share.

"Conversion Shares" means the shares to be allotted to the Investor under this Agreement, being shares of the same class and carrying the same rights as the Funding Shares, issued credited as fully paid.

"Convertible Instruments" means this Agreement and every other advance subscription agreement, convertible loan note, convertible equity instrument or other right to acquire shares in the Company at a future date on conversion terms.

"Exit" means a sale of shares as a result of which a person (or persons acting together) holds more than half the voting rights in the Company, a sale of all or substantially all of the Company's business and assets, or the admission of any of the Company's shares to trading on a recognised investment exchange or other public market.

"Winding-Up" means the passing of a resolution for the Company's winding up (other than for a solvent reorganisation), the making of a winding-up order, the appointment of an administrator or liquidator, or any arrangement for the benefit of the Company's creditors in general.

"Articles" means the Company's articles of association as amended from time to time and "Act" means the Companies Act 2006. "Business Day" means any day on which banks are open for general business in London, other than a Saturday, a Sunday or a public holiday in England.

"Fully Diluted Share Capital" means the number of issued shares of the Company immediately before the Qualifying Funding Round completes, plus all shares that would be issued on the exercise of every option and right to subscribe for shares (granted or promised), plus all shares that would be issued on conversion of every Convertible Instrument including this Agreement, plus the shares reserved and not yet granted under any employee share option plan, with no share counted twice.

Advance Subscription

The Investor shall pay the Subscription Amount to the Company's bank account in cleared funds within 5 Business Days after the date of this Agreement. The Subscription Amount is an advance payment for shares to be allotted to the Investor under this Agreement. Until shares are allotted it is held by the Company as a prepayment for them and is not a loan or deposit.

This Agreement is not a loan and does not create a debt. No interest accrues on the Subscription Amount, there is no maturity date and, except as the Winding-Up provision and, if it is included, the Long-Stop Repayment provision say, the Company has no obligation to repay it. The Investor is not a creditor of the Company merely because it has paid the Subscription Amount.

Company Authority to Allot

The Company shall ensure that, when shares fall to be allotted under this Agreement, its directors have authority to allot them and statutory pre-emption rights do not apply to the allotment. The Company shall for that purpose convene and hold any general meeting, and pass any resolution of its shareholders, that the Act or the Articles require. A director may allot shares only under a general or specific authority given by the shareholders (or, in a private company with one class of shares, as the Act allows), so allotment is conditional on those approvals and the Company shall obtain them before the date of allotment.

Conversion

If a Qualifying Funding Round completes before this Agreement ends, the Company shall, on completion of the Qualifying Funding Round, allot and issue to the Investor the number of Conversion Shares equal to the Subscription Amount divided by the Conversion Price, rounded down to a whole share, and shall pay the Investor in cash the value of any fraction. Conversion takes place automatically and the Investor shall sign the subscription letter and any shareholders' agreement and articles on the same terms as the cash investors, with customary exceptions in the Investor's favour, limiting its warranties to its own status and authority.

Conversion Price

The "Conversion Price" is the Valuation Cap divided by the Fully Diluted Share Capital. No discount applies.

Conversion

If the Conversion Price, or any price at which shares fall to be issued under this Agreement, would be less than the nominal value of a share to be issued, it is increased to that nominal value, and the Company shall not allot any share at a discount to its nominal value. If shares of the right class have a higher nominal value than the Conversion Price, the Company and the Investor shall agree in good faith the means of issuing them, for instance by creating a new class with a lower nominal value.

Within 10 Business Days after completion of the Qualifying Funding Round the Company shall enter the Investor in its register of members for the Conversion Shares, issue the Investor a share certificate, and deliver to the registrar of companies a return of allotment and statement of capital within the time the Act requires. The Conversion Shares rank equally with the Funding Shares from allotment, and the Company shall obtain any consent of existing shareholders needed under the Articles or any shareholders' agreement.

Exit

If an Exit takes place before this Agreement ends, the Company shall, at or before completion of the Exit, either pay the Investor an amount equal to the greater of the Subscription Amount and the amount the Investor would have received on the Exit had it held the number of ordinary shares equal to the Subscription Amount divided by the Valuation Cap and multiplied by the Fully Diluted Share Capital at that time, or, if the Investor so elects, allot those shares to it before completion. Payment is made from the proceeds of the Exit.

Winding-Up

If a Winding-Up takes place before this Agreement ends, the Company shall pay the Investor the Subscription Amount out of its surplus assets, after the claims of its creditors have been met and the costs of the winding up paid, ahead of any distribution to its shareholders of any class and level with the holders of other Convertible Instruments, who share pro rata if the surplus is not enough. To the extent that applicable insolvency law does not permit this ranking, the Investor holds the right only as the law allows.

Long-Stop Date

If no Qualifying Funding Round, Exit or Winding-Up has taken place by the Long-Stop Date, the Subscription Amount converts on that date into fully paid ordinary shares at the Valuation Cap divided by the Fully Diluted Share Capital, or, if there is no Valuation Cap, at the price per share set by an independent valuer chosen by the Company and the Investor jointly. The Subscription Amount is not repayable in any circumstances and this Agreement cannot be cancelled, varied or assigned after the date it is signed.

Tax Relief

The parties do not intend the shares to qualify for relief under the Seed Enterprise Investment Scheme or the Enterprise Investment Scheme and the Company makes no statement that they will. The Investor shall take its own advice on tax.

Rights Before Conversion

Until shares are allotted to it, the Investor is not a member of the Company and has no right to vote, to receive notice of general meetings, to receive dividends or other distributions, or to inspect the register of members.

Pre-emption Rights on Later Issues

The Investor may subscribe in cash for up to its pro rata share of the shares issued in the Qualifying Funding Round, on the terms offered to the other subscribers. Its pro rata share is the number of Conversion Shares divided by the Fully Diluted Share Capital. The right must be exercised within 10 Business Days of the Company's notice of the terms and ends on completion of that round.

Information

While this Agreement is in force the Company shall send the Investor a copy of its annual accounts within 6 months after each financial year end and give prompt notice of any proposed Qualifying Funding Round, Exit or Winding-Up. The Investor shall keep the information confidential.

Most-Favoured-Nation

If, before the Qualifying Funding Round completes, the Company issues another Convertible Instrument on terms more favourable to its holder in respect of the valuation cap, discount or payout, it shall promptly notify the Investor, who may within 15 Business Days elect to adopt those terms in place of the corresponding terms of this Agreement, as a package.

Warranties

The Company warrants to the Investor on the date of this Agreement that: it is validly incorporated and existing under the laws of its place of incorporation; it has power to enter into and perform this Agreement and has taken the corporate action needed; this Agreement binds it in accordance with its terms; its performance does not breach its constitution, any law or any material contract; apart from the shareholder resolutions the Act or the Articles require for allotment, no consent is needed; and its issued share capital and options are as disclosed to the Investor in writing.

The Investor warrants to the Company that it has power and authority to enter into and perform this Agreement; that it is buying the right to shares for investment and on its own account; that it is a certified high net worth investor, a certified sophisticated investor, a self-certified sophisticated investor or otherwise a person to whom the Company may lawfully communicate this offer, and has signed any statement that the exemption requires; and that it understands that the investment is illiquid and may be lost in full.

Financial Promotion

The Company shall not communicate this Agreement or any invitation to enter into it to anyone in the United Kingdom unless the communication is made or approved by a person authorised under the Financial Services and Markets Act 2000 or falls within an exemption from the restriction on financial promotions. The Company confirms it has taken advice on that restriction, and the Investor confirms it has received the communication in reliance on an exemption.

Transfer

The Investor may not assign, transfer, charge or hold on trust its rights under this Agreement without the Company's written consent, which shall not be unreasonably withheld for a transfer to an affiliate or to the Investor's estate, and any transfer to which the Company consents takes effect only when the transferee signs a deed of adherence. If relief is sought under the Tax Relief provision, no transfer is permitted.

Variation and Waiver

A term of this Agreement may be varied or waived in writing by the Company and either the Investor or the holders of a majority of the subscription amounts of all advance subscription agreements on the same cap and discount, provided that the Subscription Amount cannot be varied this way, each holder is asked to consent, and all are treated alike. If relief is sought under the Tax Relief provision, no variation may be made that is inconsistent with the conditions it refers to.

Termination

This Agreement ends on the earliest of (a) allotment of the Conversion Shares to the Investor, (b) payment to the Investor, or the setting aside of payment, of the sum due on an Exit or a Winding-Up, and (c) the passing of the Long-Stop Date and the steps that follow it. Termination does not affect rights that arose before it.

Notices

A notice under this Agreement must be in writing and sent by hand, by recorded delivery or by email to the address in the Key Terms: the Company at [TO BE CONFIRMED — Company notice address and email] and the Investor at [TO BE CONFIRMED — Investor notice address and email]. It is treated as received on delivery by hand, at 9.00 am on the second Business Day after posting, or at the time of sending an email if that is on a Business Day before 5.00 pm, and otherwise on the next Business Day.

General

This Agreement is the entire agreement of the parties on its subject and replaces earlier discussions. No term of it may be enforced by a person who is not a party under the Contracts (Rights of Third Parties) Act 1999. It may be signed in counterparts and by electronic signature. A provision held invalid is severed and the rest continues.

Governing Law and Jurisdiction

This Agreement and any dispute or claim arising out of it, whether contractual or not, are governed by the law of England and Wales. The courts of England and Wales have exclusive jurisdiction over any such dispute.