PLEDGE AND SECURITY AGREEMENT
This
PLEDGE AND SECURITY AGREEMENT entered into at Northbrook, IL on October 29,
2007, is by and between TeknoCreations, Inc., a Nevada corporation (the
“Borrower”) and Micro Pipe Fund I, L.L.C., a Minnesota limited liability
company (“Payee” or “Lender” or “Secured Party”), and is executed
pursuant to the Secured Convertible Note Agreement dated of even date herewith
(as amended, supplemented or otherwise modified from time to time, the “Secured
Convertible Note” or the “Note”), between Borrower and Lender.
RECITALS
WHEREAS,
in conjunction with the sale of certain shares of TeknoCreations, Inc. as set
forth in the Secured Convertible Note, the Borrower has requested that the
Lender provide a loan of $250,000, to the Borrower (the “Loan”);
and
WHEREAS,
the Lender has agreed to make such Loan subject to the terms of the Secured
Convertible Note; and
WHEREAS,
the Borrower and Lender, will receive direct and indirect benefits from the
Stock Purchase Agreement and the Loan under the Secured Convertible Note;
and
WHEREAS,
it is a condition precedent to the obligations of the Lender to make the Loan
under the Secured Convertible Note that the Borrower and Lender execute and
deliver this Agreement;
NOW,
THEREFORE, in consideration of the promises herein and to induce the Lender to
enter into the Secured Convertible Note and to make the Loan thereunder, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE
I
DEFINITIONS;
TERMS GENERALLY
Section 1.01
Definitions. As used herein:
(a) terms
defined above have the meanings given such terms above;
(b) unless
otherwise defined herein, terms defined in the Secured Convertible Note and used
herein have the meanings given to them in the Secured Convertible
Note;
(c) unless
otherwise defined herein, terms defined in the Uniform Commercial Code (as
defined herein) and used herein have the same meanings herein as specified
therein; provided, however, that if a term is defined in Article 9 of the
Uniform Commercial Code differently than in another Article of the Uniform
Commercial Code, then such term has the meaning specified in Article 9;
and
(d) the
following terms have the following meanings:
“Agreement”
means this Pledge and Security Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
“Collateral”
has the meaning given such term in Section 2.01.
“Obligations”
means the collective reference to the payment and performance when due of all
indebtedness, liabilities, obligations and undertakings of the Borrower
(including, without limitation, all Indebtedness) of every kind or description
arising out of or outstanding under, advanced or issued pursuant to, or
evidenced by, the Loan Documents.
“Pledged
Property” shall have the same meaning as “Collateral”.
“Loan
Documents” means this Agreement, the Secured Convertible Note, the Warrant
Agreement and any other document made, delivered or given in connection with any
of the foregoing.
“Warrant
Agreement” means that certain Warrant Agreement from Borrower to the Lender in
the form attached hereto as Exhibit “C”, as the same may be amended, modified or
supplemented from time to time.
“Uniform
Commercial Code” means the Uniform Commercial Code as in effect in the State of
Illinois.
Section 1.02 Terms
Generally; Rules of Construction. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms.
ARTICLE
II
GRANT OF
SECURITY INTEREST
Section 2.01 Grant
of Security Interest. As collateral security for the prompt and complete payment
and performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations, the Borrower hereby pledges to the Secured Party,
and hereby grants to the Secured Party, a first priority continuing security
interest in, lien on and right of setoff against, all of all assets of the
Borrower (the “Collateral”).
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Section 2.02 Authorization
to File Financing Statements. The Lender and Borrower hereby irrevocably
authorize the Secured Party at any time and from time to time to file in any
filing office in any relevant jurisdiction any initial financing statements and
amendments thereto indicating the Collateral in such form as may be required by
the Secured Party. The Borrower agrees to furnish any information reasonably
requested by the Secured Party for such purposes promptly upon the Secured
Party’s request. The Borrower also ratifies its authorization for the
Secured Party to have filed in any relevant jurisdiction any like initial
financing statements or amendments thereto if filed prior to the date
hereof. In addition, to perfect security interests by Secured Party’s
possession, Borrower will deliver to Secured Party the Collateral, with a
separate endorsement signed in blank, and a certificate representing the
Borrower Stock, together with stock powers endorsed in blank sufficient to
effect a transfer of such stock. Upon payment in full of the Obligations,
Secured Party shall return possession of all Collateral to Borrower and release
all filed and recorded financing statements or other evidence of the security
interests arising hereunder.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
The
Borrower hereby represents and warrants to Secured Party, as of the date hereof
and at all times during the terms of this Agreement, as follows:
Section
3.01 Organization. The Borrower is duly organized, validly existing
and in good standing under the laws of Nevada, has all requisite power and
authority, and has all material governmental licenses, authorizations, consents
and approvals necessary, to own its assets and to carry on its business as now
conducted.
Section 3.02 Authority;
Enforceability. The execution and delivery by the Borrower of this Agreement and
the other Loan Documents and the performance of its obligations hereunder and
thereunder are within the powers of the Borrower and have been duly authorized
by all necessary corporate Board approval, and do not contravene any law,
regulation, or order applicable to the Borrower or any of its properties or
assets or any contractual restriction which may, individually or in the
aggregate, have a material adverse effect on the business, prospects or
condition (financial or otherwise) of the Borrower.
Section
3.03 Perfected First Priority Liens. The security interests granted
pursuant to this Agreement upon the filing of a financing statement describing
the Collateral with the Secretary of State of Nevada and delivery of possession
of the Collateral, shall constitute valid perfected security interests of the
Collateral in favor of the Secured Party as collateral security for the
Obligations, enforceable in accordance with the terms hereof against all
creditors of the Borrower and any Persons purporting to purchase any Collateral
from the Borrower and there are no prior or other Liens on the Collateral in
existence on the date hereof.
Section
3.04 Solvency. The Borrower is not insolvent as of the date hereof
and will not be rendered insolvent as a result of this Agreement.
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ARTICLE IV
AFFIRMATIVE
COVENANTS
The
Borrower hereby unconditionally covenants and agrees with the Secured Party,
until the entire Obligation shall have been paid in full as
follows:
Section 4.01 Maintenance
of Perfected Security Interest; Further Documentation.
(a) The
Borrower shall maintain the security interest and lien created by this Agreement
as a perfected security interest and lien having at least the priority described
in Section 3.03; and
(b) The
Borrower shall promptly give notice to the Secured Party of, and shall defend
against, any suit, action, proceeding or lien that involves the Collateral or
that could adversely affect the security interest and lien granted by it
hereunder, and the Borrower shall defend the security interest and lien created
by this Agreement against the claims and demands of all Persons whomsoever;
and
(c) The
Lender and Borrower will furnish to the Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Secured Party may
reasonably request.
(d) The
Lender and Borrower shall timely perform and comply with all provisions of the
Loan Documents.
ARTICLE
V
NEGATIVE
COVENANTS
Section 5.01 Restrictions
on Sales and other Dispositions. The Borrower shall not sell, assign, convey,
pledge, encumber, transfer, redeem, exchange, substitute, replace or otherwise
dispose of or abandon all or any part of the Collateral without the prior
written consent of the Secured Party.
Section 5.02 Impairment
of Security Interest. The Borrower will not take or fail to take any action
which would in any manner impair the enforceability or priority of the Secured
Party’s security interest in any Collateral, impair the Collateral or the
rights, remedies, powers and privileges conferred on the Secured Party pursuant
to this Agreement or by operation of law or otherwise.
ARTICLE
VI
WARRANTS,
REGISTRATION
Section
6.01 Warrants. Borrower agrees to have issued in Lender’s
name or its designee, warrants to purchase Borrower Common Stock in accordance
with the Warrant Agreement.
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Section
6.02 Registration. Lender shall have full registration
rights on the Warrant shares exercised.
ARTICLE
VII
EVENT OF
DEFAULT
Section 7.01 Event
of Default. One or more of the following events or circumstances
shall constitute an “Event of Default” hereunder:
A. An
“Event of Default” under the Secured Convertible Note or any other Loan Document
shall occur and be continuing; or
B. The
Borrower shall fail to pay any amount hereunder or under any other Loan Document
to which it is a party when the same shall become due and payable.
ARTICLE
VIII
RIGHTS
AND REMEDIES
Section 8.01 Rights
and Remedies. Upon the occurrence and during the continuance of an
Event of Default, the Secured Party may exercise, in addition to all other
rights and remedies granted to it in the Secured Documents and in any other
instrument or agreement securing, evidencing or relating to the Obligations, all
rights and remedies of a secured party under the Uniform Commercial Code or any
other applicable law or otherwise available at law or equity. All
proceeds of sale of any Collateral shall be applied to the Obligations, and
Borrower shall be entitled to any surplus proceeds or Collateral remaining after
the Obligations are paid in full.
ARTICLE
IX
MISCELLANEOUS
Section 9.01 Notices. All
notices and other communications provided for herein shall be given in the
manner and subject to the terms of Section 12 of the Secured Convertible Note
(including provisions regarding a change of address or telecopy number of a
party).
Section 9.02 Amendments.
No amendment, supplement or modification of this Agreement, and no waiver of any
provision of this Agreement or consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same has been agreed to in
writing by the parties.
Section 9.03 Successors
and Assigns. The provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns permitted hereby, except that any assignment must be approved in
writing by the other party. Such written consent shall not be unreasonably
withheld by either party.
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Section 9.04 Governing
Law; Consent to Jurisdiction.
(a) This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Illinois.
(b) Any
legal action or proceeding with respect to this Agreement or any other loan
document shall be brought in the Courts of the State of Illinois.
Section 9.05 Entire
Agreement. This written Agreement and the other Loan Documents represent the
entire agreement among the parties as to the subject matter hereof.
IN
WITNESS WHEREOF, intending to be legally bound, the Borrower has caused this
Agreement to be duly executed as of the date first above written.
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TeknoCreations,
Inc.
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By: /s/
Xxxxxx Xxxxxxx
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Xxxxxx
Xxxxxxx
Title: CEO
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Accepted:
Micro
Pipe Fund I, L.L.C.
000
Xxxxxx Xxxxx, Xxxxx 00
Xxxxxxxxxx
XX 00000
Phone:(000)
000-0000; Fax:(000) 000-0000
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By: /s/
Xxxxxxx X. Xxxxxxxx
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Name: Xxxxxxx
X. Xxxxxxxx
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Title:
Manager
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