IMPORTANT NOTICE

This document creates binding legal obligations.

You should obtain independent legal advice
if you are in any doubt about this document.

TEMPLATE UNSECURED SUBORDINATED LOAN AGREEMENT

Purpose and scope

This template has been made available by LCN Legal Limited to help investors and their advisers put in place
a suitable loan agreement with an investee company to support the investor’s commercial and personal
objectives. In particular, it may be suitable for a subordinated loan to an existing UK company in the context of
an application for a UK Tier 1 (Entrepreneur) Visa.

This template is written in general terms. While it aims to set out terms which are commonly used, it is not
suitable for all situations. It does not attempt to address every issue which parties could or should raise. What
is appropriate in any particular case will depend on a variety of factors, including the investment objectives,
the nature of the investee company’s business, the proposed interest rates and payment terms and the
intended allocation of risk.

This template does not provide for the loan amount to be convertible into shares in the Borrower, and the
Lender will therefore not participate in any growth in the value of the Borrower.

Structure

This template is structured as a short-form agreement with standard terms attached.

Licence, terms of use and disclaimer

Subject to the terms set out below, LCN Legal Limited ("LCN") grants users (including individual investors and
their advisers) a worldwide, royalty-free, non-exclusive, perpetual (for the duration of the applicable copyright)
licence to use and adapt this template solely for the purpose set out above.

By using the template, you confirm that you have read, understood and agree to these terms and, where you
are acting on behalf of a body corporate or partnership, that they agree to these terms and conditions. If you
do not agree to these terms, you must stop using the templates immediately. The licence and terms of use are
governed by English law. In the event of any matter or dispute arising out of or in connection with the licence
and terms of use, you and LCN shall submit to the non-exclusive jurisdiction of the English courts.

This template is provided on an “as is” basis. Users should take their own professional advice, and this
template should not be relied upon as a substitute for advice. No responsibility is accepted by LCN or any
other contributors, or any of their respective directors, partners, employees, agents or representatives for any
cost, loss or liability, however caused, incurred by any person by reliance on it.

This template is protected by copyright and/or other applicable law. Any use or distribution of the template
other than as authorised under this licence or copyright law is prohibited.

Improvements welcome

Templates can always be improved. Please send any comments or suggestions to LCN legal at
info@lcnlegal.com.

LCN Legal is the trading name for LCN Legal Limited, a limited liability company registered in England and
Wales with number 8496679. The practice address and registered office address is at 43 Berkeley Square,
Mayfair, London, W1J 5AP. LCN is authorised and regulated by the Solicitors Regulation Authority.

UNSECURED SUBORDINATED LOAN AGREEMENT

© LCN Legal Limited 2014 1

www.lcnlegal.com
IMPORTANT NOTICE
This document creates binding legal obligations.
You should obtain independent legal advice
if you are in any doubt about this document.

PARTIES:

1. The Lender (the "Lender")

Full name: [Name]

Full address: [Address]

Email address: [Email address]

Mobile number: [Number]

2. The Borrower (the "Borrower")

Full company name: [Name] Limited

Place of incorporation: [England and Wales]

Company registration number: [Number]

Registered office address: [Address]

Full name of director [Name]

representing the company:

Email address of director: [Email address]

Mobile number of director: [Number]

AGREEMENT:

This Agreement sets out the terms on which the Lender has agreed to provide to the Borrower the loan as
described below.

1. Loan amount and status

The Loan amount is £[ ] (the "Loan").

The Loan is unsecured and subordinated to the debts of the Borrower generally. Accordingly, no amounts
(whether in respect of principal or interest or otherwise) shall be payable by the Borrower under or in
connection with this Agreement unless and until all other creditors of the Borrower have been paid or provided
for in full.

2. Information about the Borrower

© LCN Legal Limited 2014 2

www.lcnlegal.com
IMPORTANT NOTICE
This document creates binding legal obligations.
You should obtain independent legal advice
if you are in any doubt about this document.

The Borrower carries on business as [describe business] (the “Business”).

The Borrower has provided the Lender with the following documents:

 A business plan dated [insert date] relating to the Business (the "Business Plan");
 A copy of the last statutory accounts of the Borrower;
 A copy of the management accounts of the Borrower for the period ended [insert date not more than
3 months before the expected date of signature of the agreement];
 [Describe any other documents provided].

3. Payment of the Loan

Either:
The Borrower acknowledges that the Lender has paid the loan amount to the Borrower in full on [insert date]
(the “Start Date”).

Or:
The Lender will pay the loan amount to the Borrower in full within [7 days] after the date on which this
Agreement has been signed by both parties.

The loan amount shall be paid to the following Bank account of the Borrower:

Account name:
Account number:
Name of Bank:
Sort code:
IBAN code:

The date on which the Lender actually pays the loan amount to the Borrower shall be referred to as the “Start
Date.”

4. Use of the proceeds of the loan

The Borrower agrees to use the proceeds of the loan exclusively for the purpose of [expanding the Business
as described in the Business Plan, including the creation of the employment positions referred to in clause 6
below.

5. Main financial terms

The main financial terms of the loan shall be as follows:

The "Repayment Date": Either [date] Or [[2] years after the Start Date]

The "Interest rate": [10] % per annum

The "Default Interest Rate": [15] % per annum

Payment of interest Either (if interest is to be paid during the life of the loan):

The Borrower shall pay interest [monthly / quarterly / 6-monthly /

annually] in arrears, starting on [insert date of first interest payment].
Any unpaid interest shall be compounded at the Default Interest Rate
on the interest payment dates.

Or (if interest is to be paid only on the repayment of the

principal):

© LCN Legal Limited 2014 3

www.lcnlegal.com
IMPORTANT NOTICE
This document creates binding legal obligations.
You should obtain independent legal advice
if you are in any doubt about this document.

Interest shall be compounded [monthly / quarterly / 6-monthly /

annually] starting on [insert first date on which interest is to be
compounded].

Early repayment The Borrower may repay all or part of the loan at any time on not less
than [1 month’s] written notice. Any such repayment must include all
accrued interest on the amount repaid.

Either:

The Lender shall not be entitled to receive any premium or penalty in

relation to any repayment under this clause.

Or:

If any such repayment is made within 1 year after the Start Date, the
Borrower shall pay a fee equal to [5]% of the amount of the principal
repaid.

If any such repayment is made with 2 years but after 1 year after the
Start Date, the Borrower shall pay a fee equal to [2.5]% of the
principal repaid.
Redrawing: The Borrower is not entitled to redraw any amount of the loan which
has been repaid.

6. Employment positions to be created using the Loan

The Borrower shall procure that the employment positions summarised in the table below shall be created and
filled by people who are British Citizens or who have indefinite leave to remain in the UK.

Position 1 Position 2

Job title of position: [Job description] [Job description]

Minimum number of hours to [30] [30]

be worked per week:

Budgeted annual salary: £[amount] £[amount]

Deadline for commencement of [date] [date]

employment:

Minimum period of position: [2 years] [2 years]

7. Lender’s right to be appointed as director

For so long as any amount is outstanding under this Agreement, the Lender is entitled to be appointed as a
director of the Borrower. The Lender shall not receive any fee or other remuneration for acting as director.

The Borrower shall ensure that a meeting of directors is held at least once every [calendar quarter]. Such
meeting shall be called on not less than 7 days’ notice. The Borrower shall allow the Lender to participate in

© LCN Legal Limited 2014 4

www.lcnlegal.com
IMPORTANT NOTICE
This document creates binding legal obligations.
You should obtain independent legal advice
if you are in any doubt about this document.

each such meeting in person, or by telephone, or by video conference, or by such electronic means as the
Lender may reasonably request from time to time.

8. Lender’s right to receive information

For so long as any amount is outstanding under this Agreement, the Borrower will promptly provide any
financial or other information relating to the Borrower or its compliance with the terms of this Agreement which
the Lender may request from time to time.

9. Borrower’s warranties

9.1. The Borrower represents and warrants to the Lender that:

(a) it is a duly incorporated limited liability company validly existing under the laws of its jurisdiction
of incorporation;
(b) the person who executes this Agreement has been duly authorised;
(c) the entry into and performance by it of, and the transactions contemplated by, this Agreement, do
not and will not contravene or conflict with (a) its constitutional documents or (b) any agreement
or instrument binding on it or (c) any law or regulation or judicial or official order, applicable to it;
(d) its obligations under this Agreement are legal, valid, binding and enforceable in accordance with
their terms;
(e) no Event of Default (as defined in the Standard Terms referred to below) has occurred or is
continuing, or is reasonably likely to result from making the loan or the entry into, the
performance of, or any transaction contemplated by this Agreement;
(f) no litigation, arbitration or administrative proceedings are taking place, pending or, to the
Borrower's knowledge, threatened against it, any of its directors or any of its assets;
(g) the statutory accounts referred to in clause 2 above have been prepared in accordance with
consistently applied accounting principles, standards and practices generally accepted in the UK
and present a true and fair view of the Borrower’s financial condition and operations during the
relevant accounting period;
(h) the management accounts referred to in clause 2 above and all other information, in written or
electronic format, supplied by, or on its behalf, to the Lender in connection with this Agreement
was, at the time it was supplied or at the date it was stated to be given (as the case may be):
(i) if it was factual information, complete, true and accurate in all material respects;
(ii) if it was a financial projection or forecast, prepared on the basis of recent historical
information and on the basis of reasonable assumptions and was fair and made on
reasonable grounds; and
(iii) if it was an opinion or intention, made after careful consideration and was fair and made on
reasonable grounds; and
(iv) not misleading in any material respect, nor rendered misleading by a failure to disclose
other information,
except to the extent that it was amended, superseded or updated by more recent information
supplied by, or on behalf of, the Borrower to the Lender.
9.2. Each of the representations and warranties in this clause 9 is deemed to be repeated by the Borrower
on:
(a) the date on which this Agreement is signed by the Borrower;
(b) the Start Date;
(c) each date on which interest is due to be paid or compounded under this Agreement,
by reference to the facts and circumstances existing on each such date.

10. Lender’s rights of control

For so long as any amount is outstanding under this Agreement, the Borrower must not do any of the following
things without the Lender’s prior written consent:

10.1. carry on any business other than the Business;

10.2. enter into any arrangement, contract or transaction which is outside the normal course of the Business
or which is not provided for in the Business Plan;

© LCN Legal Limited 2014 5

www.lcnlegal.com
IMPORTANT NOTICE
This document creates binding legal obligations.
You should obtain independent legal advice
if you are in any doubt about this document.

10.3. enter into any commitment by way of a transaction or series of related transactions having a value in
excess of £[5,000];
10.4. enter into or vary any arrangement with the Borrower’s directors or shareholders (or any person
connected with them) or make any payment to any such person which is not expressly provided for in
the Business Plan;
10.5. make any borrowing other than from the Borrower’s bankers in the ordinary and usual course of the
Business; or
10.6. give any guarantee, suretyship or indemnity to secure the liability of any person or assume the
obligations of any person.

11. Incorporation of Standard Loan Terms

This Agreement shall be deemed to incorporate the “Standard Loan Terms” attached.

12. Entire agreement

This Agreement, together with the Standard Loan Terms referred to above, constitutes the whole
agreement in respect of the loan facilities referred to above.

SIGNATURES:

(1) Signed by the LENDER

Signature: ___________________________________

Date of actual signature: ___________________________________

(2) Signed for and on behalf of the BORROWER

Signature of director: ___________________________________

Date of actual signature: ___________________________________

© LCN Legal Limited 2014 6

www.lcnlegal.com
IMPORTANT NOTICE
This document creates binding legal obligations.
You should obtain independent legal advice
if you are in any doubt about this document.

STANDARD LOAN TERMS

1. INTERPRETATION

1.1. In these Standard Loan Terms unless the context requires otherwise:

"Agreement" means the agreement between the Lender and the Borrower incorporating these Standard Loan
Terms;

"Business Day" means any day, other than Saturday or Sunday, on which clearing banks are open for
commercial business in London;

"Event of Default" has the meaning given to it in clause 9.1; and

"Loan" means the Loan made available by the Lender to the Borrower as specified in the Agreement.

1.2. Words and expressions defined in the Agreement have the same meanings in these Standard Loan Terms.
1.3. If there is any conflict between the Agreement and these Standard Loan Terms, the terms of the Agreement
shall prevail.
1.4. Any action required to be performed on a day which is not a Business Day shall be performed on the next
Business Day.

2. THE LOAN
The Loan is made available by the Lender with effect from the Start Date until the Repayment Date and will be
advanced to the Borrower as specified in the Agreement.

3. CONDITIONS PRECEDENT
Each advance under the Loan is subject to satisfaction (or waiver by the Lender) of such conditions precedent (if any)
as may be specified in the Agreement.

4. INTEREST
4.1. Interest shall accrue at the Interest Rate on a daily basis on the balance outstanding from time to time under
the Loan, and shall be calculated on the basis of a 365 day year.
4.2. Where the Interest Rate is expressed as a variable rate, it will be fixed on the Start Date for the period until the
next date for payment or compounding of interest. Thereafter, it will be fixed on the immediately following day
until the next date for payment or compounding of interest (or until the Repayment Date if earlier).

5. REPAYMENT
5.1. Subject as otherwise provided in the Agreement, the balance outstanding under the Loan including all accrued
interest and all other amounts due under the Agreement shall be repaid by the Borrower to the Lender on the
Repayment Date.
5.2. Unless otherwise specified in the Agreement, the Borrower may not re-borrow any amount repaid or prepaid
under the terms of the Agreement.
5.3. Any amounts not paid when they are required to be paid pursuant to the Agreement shall bear interest at the
Default Interest Rate.

6. PREPAYMENT
Unless otherwise specified in the Agreement, the Borrower may prepay all or part of the Loan without premium or
penalty at any time on not less than 14 days’ written notice. Any such prepayment must be accompanied by all
accrued interest on the amount prepaid.

7. NO DEDUCTIONS
7.1. All sums payable by the Borrower under the Agreement (whether of principal or interest) shall be paid in full
without any set-off or counterclaim whatsoever and without any deductions for any taxes, deductions or
withholdings of any nature unless the Borrower is required by law to make such a deduction.
7.2. If the Borrower is required by law to withhold or deduct any amounts from any sum paid or payable to the
Lender under this Agreement, the sum payable by the Borrower shall be increased by an amount so as to result

© LCN Legal Limited 2014 7

www.lcnlegal.com
IMPORTANT NOTICE
This document creates binding legal obligations.
You should obtain independent legal advice
if you are in any doubt about this document.

in the receipt by the Lender of a net amount equal to the full amount expressed to be payable under this
Agreement.

8. UNDERTAKINGS
The Borrower undertakes that, so long as any sum remains payable under the Agreement, it will notify the Lender in
writing of the occurrence of any Event of Default, or any event or circumstance which, with the giving of notice and/or
lapse of any period of time and/or the fulfilment of any other requirement, would or may become an Event of Default,
immediately upon becoming aware of it.

9. DEFAULT
9.1. The occurrence of any of the following events shall constitute an "Event of Default":-
9.1.1. the Borrower does not perform or comply with any one or more of its obligations under the Agreement and,
if that default is capable of remedy, it is not remedied within 5 Business Days after written notice of that
default has been given to the Borrower by the Lender;
9.1.2. the Borrower becomes bankrupt or insolvent, is unable to pay its debts as they fall due or is deemed
unable to pay its debts pursuant to or for the purposes of any applicable law;
9.1.3. the Borrower applies for or consents to or suffers the appointment of a liquidator, receiver, manager,
administrative receiver or administrator of itself or the whole or any material part of its undertaking,
property, assets or revenues;
9.1.4. any order is made by any competent court, a resolution passed for the winding up or dissolution of the
Borrower;
9.1.5. the Borrower ceases or threatens to cease to carry on the whole or a substantial part of its business;
9.1.6. any present or future security over a material part of the assets of the Borrower becomes enforceable and
any step (including the taking of possession or the appointment of a receiver, manager, administrator or
similar officer) is taken to enforce that security;
9.1.7. it is unlawful for the Borrower to perform or comply with any one or more of its obligations under the
Agreement; or
9.1.8. there is a material adverse change in the financial condition of the Borrower which materially impairs the
ability of the Borrower to perform or comply with any one or more of its obligations under the Agreement.
9.2. If an Event of Default occurs and is continuing the Lender may by notice to the Borrower cancel any amount still
available to the Borrower under the Agreement and/or declare any amount outstanding under the Agreement
together with all accrued interest thereon to be immediately due and payable whereupon they shall become so
due and payable.
9.3. Any amounts not paid following a demand under this clause shall bear interest at the Default Interest Rate.

10. NOTICES
10.1. A notice given to a party under or in connection with the Agreement:
10.1.1. shall be in writing and in English;
10.1.2. shall be sent to the party at the address provided for in the Agreement;
10.1.3. shall be sent by a method listed in clause 10.3; and
10.1.4. unless proved otherwise, is deemed received as set out in clause 10.3 if prepared and sent in
accordance with this clause.
10.2. A party may change its details by giving notice, the change taking effect for the party notified of the change at
9.00 am UK time on the later of:
10.2.1. the date, if any, specified in the notice as the effective date for the change; or
10.2.2. the date five Business Days after deemed receipt of the notice.
10.3. This table sets out delivery methods for sending a notice to a party under this Agreement, and, for each delivery
method, the corresponding delivery date and time when delivery of the notice is deemed to have taken place
provided that all other requirements in this clause 10 have been satisfied and subject to the provisions in clause
10.4:

Delivery method Deemed delivery date and time

Delivery by hand On signature of a delivery receipt or at the time the notice

is left at the address.

© LCN Legal Limited 2014 8

www.lcnlegal.com
IMPORTANT NOTICE
This document creates binding legal obligations.
You should obtain independent legal advice
if you are in any doubt about this document.

Pre-paid first class recorded delivery post or The time recorded by the delivery service
other next working day delivery
service providing proof of delivery.

Email, followed by a text message stating that the The time of successful delivery of the text message as
email has been sent shown by the relevant telecommunications message
service

10.4. For the purpose of clause 10.3 and calculating deemed receipt, if deemed receipt would occur on a day which is
not a Business Day, deemed receipt is deemed to take place at 9.00 am on the next Business Day.
10.5. This clause does not apply to the service of any proceedings or other documents in any legal action or, where
applicable, any arbitration or other method of dispute resolution.

11. ENTIRE AGREEMENT

11.1. These Standard Loan Terms and the Agreement constitute the entire agreement of the parties and supersede
all prior agreements and understandings between the parties in connection with its subject matter.
11.2. Any representation, warranty or undertaking implied by law or by custom is expressly excluded.
11.3. Nothing in the Agreement operates to exclude any liability for fraud.

12. APPLICABLE LAW AND JURISDICTION

The Agreement shall be governed by the laws of England and Wales and shall be subject to the non-exclusive
jurisdiction of the English court.

© LCN Legal Limited 2014 9

www.lcnlegal.com