Hybrid Air Vehicles Limited

Key Terms of the UK Government backed Future Fund Convertible Loan Agreement

Please see below a summary of the key terms of the Future Fund Convertible Loan
Agreement.

Please note that the terms below are not exhaustive and do not contain every
outcome. You must also read the full Future Fund Convertible Loan Agreement.

A Convertible Loan is a loan that may convert into equity at a later date.

Being a loan, the holders benefit in specified circumstances from interest, in this case at 8%
per annum, during the life of the loan.

The loan is either repaid or it converts into equity.

The terms being offered are the default terms set by the Government’s Future Fund
Convertible Loan Agreement. Although the funds invested by Crowdcube members are not
being matched by the Government, as the Future Fund has now completed its investment in
HAV, the investors are participating on the same key terms as the Government.

Terms Summary

Duration/Maturity 36 months The loan cannot be repaid

Date early by the company other
than with the agreement of
all of the investors or upon
an event of default.

The loan can convert to

equity during its term.

If no conversion event
occurs before the maturity
date, the loan will
automatically convert into
shares unless there has
been an election by a
majority of loan holders to
receive cash repayment plus
the redemption premium.

Discount Rate 20% This is the amount of

discount which investors will
receive, where applicable,
compared to the share price
at which other shares in the
company are being issued
or purchased following a
conversion event.
Interest 8% per annum, simple (non- Interest is payable in two
compounding) interest. circumstances:

On conversion, in which
case the company can
decide whether to pay the
interest in cash or whether
to capitalise it by adding the
interest to the loan principal
before converting it to
shares; or

On an event of default.

Security Unsecured

Redemption 100% A premium equal to 100% of

Premium any particular loan

Conversion Price The price per share paid in a The conversion price is not
future funding round or Exit less yet set.
the discount; or
The conversion price will be
determined by the next
If no funding round happens by the funding round, an Exit or,
maturity date, then the conversion if no funding round happens
price per share paid, then there is by the convertible loan’s
default price used maturity date, then a default
price is used, which refers
back to the company’s
previous fundraising price.

Conversion Events Qualified Financing round - if the The convertible loan will
company raises an amount equal convert into fully paid shares
to the amount raised under the in the company on the
Future Fund Convertible Loan occurrence of certain events
Agreement. for example a new funding
round, an IPO or other exit.
Non-Qualified Financing round – However, the loans can also
(i) If the company raises newly be repaid in certain
committed capital that is greater circumstances.
than 25% of the aggregate of the
principal amount outstanding
under the Future Fund Convertible
Loan Agreement, conversion is at
the election of holders of in excess
of 50% of the loans (excluding the
Future Fund);

(ii) If the company raises newly

committed capital that is equal to
or less than 25% of the aggregate
principal amount outstanding
under the Future Fund Convertible
Loan Agreement, conversion is at
the election of holders of in excess
of 50% of the loans and the Future
Fund.

Exit - an arm’s length sale of the

company, or a listing, unless
redemption generates a more
favourable outcome.

Maturity - if no conversion event

occurs at the maturity of the loan.