(1)

ArQit Limited (company no. 10544841) whose registered office address is 3 More London Riverside, London, SE1 2RE (the “Original Grantor”);

(2)

ArQit Quantum Inc., a Cayman Islands exempted limited liability company with registered number 374857 and whose registered office is at c/o Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands (the “Company”); and

(3)

[Name of Optionholder (A)] of [Address (B)] (the “Optionholder”).

(A)

By an agreement dated [Grant Date Of Original Option (C)] (the “Original Grant Agreement”), the Original Grantor granted to the Optionholder an option  intended to be a tax qualifying EMI option over ordinary shares in the capital of the Original Grantor.

(B)

The Company has obtained Control of the Original Grantor pursuant to the terms of a business combination agreement dated 12 May 2021 between the Company, the Original Grantor and others (the “BCA”).  In accordance with the terms of the BCA, the Company is the new holding company of the Original Grantor and all shareholders of the Original Grantor have become shareholders of the Company.

(C)

The Optionholder remains an employee of the Original Grantor.

(D)

By execution by deed of an offer letter sent to the Optionholder in April 2021, the Optionholder has confirmed that he/she wishes to surrender the Original Option (as defined below) in consideration of the grant of an EMI option by the Company to the Optionholder on the terms set out in this Agreement.

(E)

The Company wishes to grant a replacement EMI option to the Optionholder in consideration of the release of the Original Option on the terms set out in this Agreement. It is intended that the Option granted under this Agreement shall be a “replacement option” as defined in paragraph 41 of Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003.

(F)

The Directors of the Company consider that it is in the best interests of the Company to retain and incentivise the Optionholder and have therefore determined to grant him an option to acquire shares in the capital of the Company on the terms contained in this Agreement.

(G)

It is intended that this Option is an enterprise management incentive option in accordance with the provisions of Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003.

(H)

The Company is a qualifying company as defined in Part 3 of Schedule 5.

1.

DEFINITIONS AND INTERPRETATION

1.1

Definitions

1.2

Interpretation

(a)

Clause headings are for reference purposes only and shall not affect the construction of this Agreement;

(b)

references to any statutory provision are to that provision as amended or re-enacted from time to time; and

(c)

where the context permits words in the singular shall include the plural and the masculine shall include the feminine and vice versa.

2.

GRANT OF THE OPTION AND RELEASE

2.1

Consideration

(a)

In consideration of the release of the Original Option under Clause 2.1(b) below, and following receipt from the Optionholder of a written declaration, dated on or around the date of this Agreement, that the Optionholder satisfies the Committed Working Time Requirement, the Company grants to the Optionholder the Option, which is an option to acquire the Option Shares at the Exercise Price, on the terms set out in this Agreement.

(b)

In consideration of the grant of the Option under Clause 2.1(a) above, the Optionholder:

(i)

waives all rights the Optionholder has or may have under the Original Option; and

(ii)

releases the Original Grantor from all obligations it has or may have under the Original Option.

2.2

Number of Shares

2.3

Exercise Price

2.4

Status of the Option

3.

NON-ASSIGNABILITY

4.

RESTRICTIONS ATTACHING TO THE SHARES

5.

DISQUALIFYING EVENTS

6.

EXERCISE AND LAPSE OF THE OPTION

6.1

When the Option may first be exercised

6.2

Vesting of the Option

(a)

as to one third on the third anniversary of the Date of Grant; and

(b)

as to the remaining two thirds in equal tranches of 1/24^th at the end of each subsequent calendar month following the third anniversary of the Date of Grant,

6.3

Lapse of the Option

(a)

the Optionholder failing to comply with his obligations under Clause 3 (Non-Assignability);

(b)

the Cessation Date of the Optionholder’s employment within the Group other than by reason of his death or a reason specified in Clause 7.2 (Cessation of employment as a good leaver);

(c)

the expiry of the period in Clause 7.1 (Death of the Optionholder);

(d)

the expiry of the period in Clause 7.2 (Cessation of employment as a good leaver) ;

(e)

save as provided in Clause 9 (Option Rollover) in the case of a Change of Control, Compromise or Arrangement or Compulsory Share Purchase, the expiry of the applicable period in Clause 8 (Company Events) to the extent the Option has not then been exercised;

(f)

the date on which the Optionholder becomes bankrupt or does or omits to do anything as a result of which he is deprived of the legal or beneficial ownership of the Option; and

(g)

the tenth anniversary of the Date of Grant.

7.

DEATH AND CESSATION OF EMPLOYMENT AS A GOOD LEAVER

7.1

Death of the Optionholder

7.2

Cessation of employment as a good leaver

(a)

injury, ill-health or disability evidenced to the satisfaction of the Directors;

(b)

redundancy within the meaning of the Employment Rights Act 1996;

(c)

the Group Company or undertaking by which is employed being transferred outside the Group; or

(d)

any other reason the Directors consider justifies treating him as a good leaver for the purposes of this clause,

8.

COMPANY EVENTS

8.1

Acceleration of vesting

8.2

Business Sale

8.3

Change of Control

8.4

Compromise or Arrangement

8.5

Compulsory Purchase

8.6

Winding up

9.

OPTION ROLLOVER

9.1

Conditions for rollover

9.2

Grant of New EMI Option

(a)

if the New EMI Option consists of rights which are “equivalent”, for the purposes of paragraph 41 of Schedule 5, to the rights contained in the Old EMI Option but which relate to shares in the Acquiring Company;

(b)

during the period specified in paragraph 42 of Schedule 5;

(c)

if at the time the Old EMI Option is released:

(i)

the Optionholder is an eligible employee (within the meaning of Part 4 of Schedule 5) in relation to the Acquiring Company;

(ii)

the requirements of paragraphs 4 (purpose of granting an EMI option), paragraph 7 (maximum value of options in respect of relevant company’s shares) and Part 5 (requirements relating to options) of Schedule 5 are met in relation to the New EMI Option; and

(iii)

the Acquiring Company satisfies the independence requirement in paragraph 9 of Schedule 5 and the trading activities requirement in paragraphs 13 to 23 of Schedule 5;

(d)

if the total Market Value of the Shares which were subject to the Old EMI Option immediately before it is released is equal to the total Market Value of the shares subject to the New EMI Option immediately after it is granted; and

(e)

if the total amount payable by the Optionholder to acquire all the shares subject to the New EMI Option is equal to the total Exercise Price that would have been paid to acquire all the Shares subject to the Old EMI Option.

9.3

General

(a)

A New EMI Option issued in consideration of the release of the Old EMI Option shall be evidenced by a certificate issued by the Acquiring Company which shall import the relevant provisions of this Agreement and Schedule 5.

(b)

The requirements of paragraph 44 of Schedule 5 (notification of option to HMRC) must be satisfied in respect of the New EMI Option.

(c)

The New EMI Option shall, for all other purposes of this Agreement, be treated as having been acquired at the same time as the released Old EMI Option.

9.4

Effect of a Change of Control etc. on the New EMI Option

10.

MANNER OF EXERCISE

10.1

Notice of exercise

10.2

Allotment or transfer of shares

10.3

Withholding on account of income tax and NICs

(a)

withhold the appropriate amount of tax and/or NICs from the Optionholder’s remuneration; or

(b)

make such other arrangements as it considers necessary (including without limitation the sale of Shares on behalf of the Optionholder, or the deduction from proceeds of Shares sold before proceeds are distributed to the Optionholder) to finance the amounts due,

10.4

Employers’ NICs

(a)

meets such liability to pay Employers’ NICs; or

(b)

enters into an election to transfer the liability for Employers’ NICs to the Optionholder in a form approved by HMRC,

10.5

Section 431 elections

10.6

Other exercise conditions

10.7

No exercise if conditions not met

11.

VARIATION OF SHARE CAPITAL

12.

ADMINISTRATION

12.1

Discretion to be exercised fairly and reasonably

12.2

Directors’ decisions to be final and binding

12.3

Provision of documents to the Optionholder

12.4

Notification of Option grant to HMRC

(a)

the information required by HMRC pursuant to paragraph 44 of Schedule 5;

(b)

a declaration from a Director or the Company Secretary of the Company, that in his opinion the requirements of Schedule 5 have been met in relation to the Option and that to the best of his knowledge, the information provided is correct and complete; and

(c)

confirmation that the Optionholder has signed a declaration that he meets the Committed Working Time Requirement and that declaration is held by the Company.

12.5

Data protection

13.

GENERAL

13.1

No obligation to ensure EMI status or to avoid a disqualifying event

13.2

Availability of Shares to satisfy the Option

13.3

Ranking of Shares

13.4

Relationship with contract of employment and exclusion of liability

(a)

the Optionholder shall not be entitled, and by accepting this Option he shall be deemed to have waived any possible entitlement, to any compensation for any loss he may suffer as a result of the exercise by the Directors of any discretion given to them in accordance with this Agreement, or the failure by the Directors to exercise any such discretion, even if such exercise or failure to exercise constitutes a breach of contract by the Company or a breach of any other duty owed by the Company or gives rise to any other claim whatsoever; and

(b)

if the Optionholder shall cease to be employed within the Group for any reason whatsoever, including as a result of being wrongfully or unfairly dismissed, he shall not be entitled, and by accepting the Option he shall be deemed to have waived any possible entitlement, to any sum or benefit to compensate him for any loss or curtailment of any right or benefit accrued or in prospect under this Agreement, and no such loss or curtailment shall form part of any claim for damages for breach of the Optionholder’s contract of employment or compensation for unfair or wrongful dismissal or any other claim whatsoever.

13.5

Amendments

13.6

Notices

13.7

Counterparts

13.8

Governing law

1.

I hereby exercise the option (the “Option”) granted to me by an option agreement (the “Option Agreement”) dated [•]¹ and made between the Company and me in respect of [all/[•]]² the Ordinary $0.0001 shares (the “Option Shares”) subject to it.

2.

I enclose a remittance in respect of the exercise price or other completed documentation relating to other arrangements for payment of the exercise price agreed with the Company.³

3.

I request you to allot or procure the transfer to me of the Option Shares and I agree to accept them subject to the Memorandum and Articles of Association of the Company.

4.

If, as a result of the exercise of the Option, a liability to income tax and social security contributions (“Tax”) arises and the Company is liable to account for this on my behalf, to the extent it is recoverable from me I wish to meet this liability by:⁴

¹

Insert date of rollover option agreement.

²

Delete as appropriate and insert number of shares if partial exercise.

³

Insert aggregate exercise price payable.

⁴

There may be a tax liability on exercise if, e.g, you have ceased to work full-time but have been permitted to keep the option. Please delete as applicable – if no selection is made the Company will withhold sufficient option shares to cover any tax.