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Reading extracts from a General Security Agreement (1)

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Two days later, Dom’s lawyer friend receives the requested certificate of non-crystallisation. Dom is still unsure whether or not to invest, and is concerned about the company’s existing liabilities. He suspects that Pearl-e-whites.net’s main creditor, Capital Ventures plc, may already have a lien over some of the assets he has been offered as potential security.

Excerpt 1

WHEREAS:
(A) The Debtor has issued to the Secured Party a secured promissory note, dated the date hereof, in the principal amount of £50 000 (the “Note”); and

(B) As security for the obligations evidenced by the Note, the Debtor has agreed to pledge to the Secured Party and grant to the Secured Party a security interest in the Collateral (as hereinafter defined); and

(C) The Debtor and the Secured Party desire to execute and deliver this Agreement.

The Debtor covenants and agrees with the Secured Party as follows;

1. Security for Obligations. This Agreement is for the benefit of the Secured Party to secure the prompt and complete payment and performance of all the Debtor’s obligations arising under the Note.

2. Definition of Collateral. As used herein, the term “Collateral” shall mean all of the Debtor’s right, title and interest in the property described in Exhibit A hereto.

Excerpt 2

Remedies in Case of Event of Default

Upon the failure of the Debtor to make payments in accordance with the terms of the Note, or upon the occurrence of a default of any provision of the Note or at any time during the continuance of such default, any one of which shall constitute an “Event of Default”, the Secured Party, subject to the terms of the Note, may:

(a) take possession of the Collateral or any part thereof with or without process of law; and

(b) dispose of the Collateral as the Secured Party may choose, so long as every aspect of the disposition including the method, manner, time, place and terms are commercially reasonable.

Excerpt 3

Transfer by the Debtor

The Debtor shall not sell or otherwise dispose of or grant any option with respect to, or pledge or otherwise encumber, any of the Collateral or any interest therein.

Excerpt 4

Miscellaneous

The headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. In the event that any provision of this Agreement shall prove to be invalid or unenforceable, such provision shall be deemed to be severable from the other provisions of this Agreement.

Excerpt 5

Termination

Upon such time, if any, as the Debtor shall pay, satisfy or otherwise discharge in full the Obligations, this Agreement shall be null and void and the security interests granted hereunder shall automatically terminate.

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