OCTOBER 29, 2007 $250,000 SECURED CONVERTIBLE NOTE AGREEMENT
EXHIBIT
10.1
OCTOBER
29, 2007 $250,000 SECURED CONVERTIBLE NOTE AGREEMENT
FOR VALUE
RECEIVED, TeknoCreations, Inc. (the “Maker” or the “Company”), a Nevada
corporation, having a place of business at 8100 M4 Wyoming Blvd NE, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, hereby promises to pay to the order of Micro
Pipe Fund I, L.L.C. (“Payee” or “Lender”), a Minnesota limited liability
company, having its principal address at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, the sum of $250,000, advanced to the Company, $70,000 on October 29,
2007, $70,000 on November 29, 2007, $70,000 on December 29, 2007, $40,000 on
January 29, 2007. This Secured Convertible Note Agreement (this “Note”) is
issued due to loans for the “Company’s operations. All capitalized terms used
herein but not otherwise defined herein shall have the meanings ascribed to them
in the Pledge And Security Agreement.
1. Maturity. The
amount outstanding under this Note will be due and payable at the address of
Lender or such other place as Lender may designate on October 29, 2008 (the
“Maturity Date”). No advances shall be made by Lender after the
Maturity Date.
2. Payments of Interest and
Principal. Interest and principal on the borrowed outstanding
principal balance under this Note shall be payable quarterly, commencing on the
first banking day of February 2008, and on the first business day of each month
thereafter until the Debenture is no longer outstanding. Each monthly
payment shall consist of 1/12th of the
original principal amount of this Debenture and all accrued but unpaid
interest.
3. Interest
Rate. The outstanding principal balance of this Note shall bear
interest at a rate per annum equal to 10.0% per annum, amortized monthly in
arrears interest calculated on a 365-day basis
4. Alternative
Method of Payment / Optional Prepayment
A. Alternate Methods of
Payment: Subject to the conditions set forth below and customary
equity conditions (including an effective registration statement), the Company
may elect to make such payments of principal and interest under the Debenture,
in freely tradable shares of the Company’s common stock. Each share
of the of the Company’s Common stock will be valued at the Fixed Price (as
defined in Section 5 below), as determined at the lesser of (1) on the day the
Company gives notice, or (2) on the day the Company delivers the
shares. The Company is required to notify Micro Pipe Fund I, L.L.C.
of its election to make such payment in shares at least ten days prior to the
payment date. Notwithstanding anything herein to the contrary, the
Company’s right to make such payment in shares in lieu of cash can only be made
if the volume weighted average price of the Company’s common stock has been
trading at a price of $0.05 or above per share for 10 consecutive days prior to
the date of the payment date and the average daily trading volume is at least 15
times the number of shares to be so issued hereby as payment.
B. Pre-Payment
Option: Subject to customary equity conditions, the Company may at
any time, upon 30 days written notice, prepay all of the outstanding Notes on a
pro-rata basis at 110% of the outstanding principal balance only after the note
has amortized 1 year. In the event that Maker sends a Prepayment Notice to
Lender, Lender may elect prior to the Prepayment Date to convert into common
stock of TeknoCreations, Inc. (“TeknoCreations, Inc. Common Stock”), pursuant to
Section 5 hereof, all or part of the amount of principal to be repaid by the
proposed Prepayment instead of receiving such prepayment.
5. Optional/Mandatory
Conversion. At any time prior to repayment of all amounts as under the Note, but
not sooner than six months from the date of this Note, all or any portion of the
principal amount of the Note shall be convertible at the option of the Lender
into fully paid and non-assessable shares of TeknoCreations, Inc. Common
Stock. The number of shares of TeknoCreations, Inc. Common Stock that
Lender shall be entitled to receive upon conversion shall be equal to the number
attained by dividing the principal, including accrued interest pursuant to the
Note being converted by the Conversion Price. The “Conversion Price”
shall be shall be equal to the lesser of (a) fifty percent (50%) of the closing
bid price for Common Stock on the trading day immediately prior to the Lender’s
receipt of shares pursuant to such Conversion or payment, or Notice of such
Conversion or (b) fifty percent (50%) of the average closing bid price for
Common Stock on the five trading days immediately prior to the Lender’s receipt
of shares pursuant to such Conversion or payment, or Notice of such Conversion
(the “Fixed Price”). For purposes of the preceding sentence, (a) and
(b), and the pricing, where the Lender already has possession of shares pursuant
to such Conversion or payment, Notice shall be operative, and not receipt. For
purposes of the preceding sentence, if the Maker delivers shares on a date other
than when shares are due or payable in accordance with the terms hereof, the
Lender can treat the share delivery as though made when due.
A. In order to exercise the
conversion privilege, Lender shall give written notice of conversion to Maker
stating Lender’s election to convert this Note or the portion thereof in whole
or in part, as specified in said notice. As promptly as practicable
after receipt of the notice, Maker shall issue and shall deliver to Lender a
certificate or certificates for the number of full shares of TeknoCreations,
Inc. Common Stock issuable upon the conversion of this Note or portion thereof
registered in the name of Lender in accordance with the provisions of this
Section 5.
B. Each conversion shall be
deemed to have been effected on the date the conversion notice shall have been
received by Maker, as aforesaid, and Lender shall be deemed to have become on
said date the holder of record of the shares of Common Stock issuable upon such
conversion. No fractional shares of Common Stock shall be issued upon
conversion of this Note. Any amounts so converted shall not be
reborrowed.
C. The Lender shall not be
entitled to convert, if such conversion would result in beneficial ownership by
the Lender and its affiliates, of more than 9.99% of the outstanding shares of
common stock of the Company on such exercise or conversion date,
including:
(i) the
number of shares of common stock beneficially owned by the Lender and its
affiliates ( and such identified non-affiliated persons), and
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(ii) the
number of shares of common stock issuable upon the exercise of the warrant
and/or options and/or conversion.
For the
purposes of this provision as set forth in the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. Subject to the foregoing, the Lender shall not be limited
to aggregate warrant and/or option exercises and/or conversion of only 9.99% and
aggregate warrant and/or option exercises and/or conversion by the Lender may
exceed 9.99%. The Lender may void the exercise limitation described
in this Section upon 61 days prior written notice to the Company. The
Lender may allocate which of the equity of the Company deemed beneficially owned
by the Lender shall be included in the 9.99% amount described above and which
shall be allocated to the excess above 9.99%.
6. Security. As
security for the repayment of all liabilities arising under this Note, the Maker
hereby grants to Lender a security interest in and a lien on all of the
Collateral (as that term is defined in the Pledge and Security
Agreement). The Lender shall have all rights provided to a secured
party under the Pledge and Security Agreement and under the Uniform Commercial
Code of the State of Illinois. The Lender has the right to sell or
hypothecate such Collateral, to the extent permitted under applicable securities
laws. The Maker shall execute and deliver such documentation as Lender may
reasonably request to evidence and perfect Lender’s security interest granted in
this Section 6.
7. Use of
Proceeds. Funds advanced under this Note shall be used for the
Maker’s general corporate purposes consistent with the Maker’s
business.
8. Covenants. Maker
covenants and agrees that, so long as any indebtedness is outstanding hereunder,
it will comply with each of the following covenants (except in any case where
Lender has specifically consented otherwise in writing):
A. Financial
Reporting. Maker shall furnish to Lender a copy of each financial
report submitted on Form 10-K or 10-Q filed with the Securities and Exchange
Commission within seven (7) days of such filing.
B. Notice of Event of
Default. Maker shall furnish to Lender notice of the occurrence of
any Event of Default (as defined herein) within five (5) days after it becomes
known to an executive officer of Maker.
C. Financial
Statements. Maker shall furnish to Lender quarterly financial
statements, including balance sheets and statements of income, for the Company,
which statements shall be annually audited, as soon as practicable after they
are prepared for internal use.
9. Event of
Default. For purposes of this Note, the Maker shall be in default
hereunder (and an “Event of Default” shall have occurred hereunder)
if:
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A. Maker shall fail to pay
when due any payment of principal, interest, fees, costs, expenses or any other
sum payable to Lender hereunder or otherwise;
B. Maker shall default in
the performance of any other agreement or covenant contained herein (other than
as provided in subparagraph A above), and such default shall continue uncured
for twenty (20) days after notice thereof to Maker given by Lender, or if an
Event of Default shall occur under any other Loan Document;
C. Maker: becomes insolvent,
bankrupt or generally fails to pay its debts as such debts become due; is
adjudicated insolvent or bankrupt; admits in writing its inability to pay its
debts; or shall suffer a custodian, receiver or trustee for it or substantially
all of its property to be appointed and if appointed without its consent, not be
discharged within thirty (30) days; makes an assignment for the benefit of
creditors; or suffers proceedings under any law related to bankruptcy,
insolvency, liquidation or the reorganization, readjustment or the release of
debtors to be instituted against it and if contested by it not dismissed or
stayed within ten (10) days; if proceedings under any law related to bankruptcy,
insolvency, liquidation, or the reorganization, readjustment or the release of
debtors is instituted or commenced by Maker; if any order for relief is entered
relating to any of the foregoing proceedings; if Maker shall call a meeting of
its creditors with a view to arranging a composition or adjustment of its debts;
or if Maker shall by any act or failure to act indicate its consent to, approval
of or acquiescence in any of the foregoing.
10.
Consequences of Default. Upon the occurrence of an Event of Default
and at any time thereafter, the entire unpaid principal balance of this Note,
together with interest accrued thereon and with all other sums due or owed by
Maker hereunder, shall become immediately due and payable. In
addition, the principal balance and all past-due interest shall thereafter bear
interest at the rate of 18% per annum until paid.
11.
Liquidated
Damages/Remedies not Exclusive.
A. The
remedies of Lender provided herein or otherwise available to Lender at law or in
equity shall be cumulative and concurrent, and may be pursued singly,
successively and together at the sole discretion of Lender, and may be exercised
as often as occasion therefore shall occur; and the failure to exercise any such
right or remedy shall in no event be construed as a waiver or release of the
same.
B. Liquidated
Damages In the event that the Company fails to deliver the shares when due,
whether by Section 4 or 5, or otherwise, the number of shares otherwise due
shall increase by 5% for each month or partial month, until the Company does
deliver such shares. The parties agree that this is a reasonable amount for
liquidated damages, given the difficulty to determine, in advance, what actual
damages may lie.
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12. Notice. All
notices required to be given to any of the parties hereunder shall be in writing
and shall he deemed to have been sufficiently given for all purposes when
presented personally to such party or sent by certified or registered mail,
return receipt requested, to such party at its address set forth
below:
| If to the Maker: | TeknoCreations, Inc. |
| 8100 ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇, | |
| ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ | |
| If to the Lender: | Micro Pipe Fund I, L.L.C. |
| ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇ | |
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Phone:(▇▇▇)
▇▇▇-▇▇▇▇; Fax:(▇▇▇) ▇▇▇-▇▇▇▇
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Such
notice shall be deemed to be given when received if delivered personally or five
(5) business days after the date mailed. Any notice mailed shall be
sent by certified or registered mail. Any notice of any change in
such address shall also be given in the manner set forth
above. Whenever the giving of notice is required, the giving of such
notice may be waived in writing by the party entitled to receive such
notice.
13. Severability. In the
event that any provision of this Note is held to be invalid, illegal or
unenforceable in any respect or to any extent, such provision shall nevertheless
remain valid, legal and enforceable in all such other respects and to such
extent as may be permissible. Any such invalidity, illegality or
unenforceability shall not affect any other provisions of this Note, but this
Note shall be construed as if such invalid, illegal or unenforceable provision
had never been contained herein.
14. Successors and Assigns.
This Note inures to the benefit of the Lender and binds the Maker, and its
respective successors and assigns, and the words “Lender” and “Maker” whenever
occurring herein shall be deemed and construed to include such respective
successors and assigns.
15. Entire
Agreement. This Note embodies the entire understanding and agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, whether express or implied,
oral and written.
16. Modification of
Agreement. This Note may not be modified, altered or amended, except
by an agreement in writing signed by both the Maker and the Lender.
17. Governing
Law. This instrument shall be construed according to and governed by
the laws of the State of Illinois.
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18. Consent to Jurisdiction
and Service of Process. Maker irrevocably appoints each and every
officer of Maker as its attorney upon whom may be served any notice, process or
pleading in any action or proceeding against it arising out of or in connection
with this Note; and Maker hereby consents that any action or proceeding against
it be commenced and maintained in any court within the State of Illinois by
service of process on any such, officer; and Maker agrees that the courts of the
State of Illinois shall have jurisdiction with respect to the subject matter
hereof and the person of Maker and the collateral securing Maker’s obligations
hereunder. Notwithstanding the foregoing, Lender, in its absolute discretion may
also initiate proceedings in the courts of any other jurisdiction in which Maker
may be found or in which any of its properties or any such Collateral may be
located.
19. Mandatory
Prepayments. Maker shall apply, as Prepayments to the Loan until paid
in full, all payments or proceeds received by Maker with respect to the
disposition or sale of any of the Collateral (whether or not such sale or
disposition is permitted by the terms of the Pledge and Security
Agreement).
20. Merger, License or Any
Other Similar Arrangement: Micro Pipe Fund I, L.L.C. or its designee
shall also be entitled to a commission of 5% of any and all amounts received,
directly or indirectly, by TeknoCreations, Inc. and/or its principals as a
consequence of a merger, license or any other similar arrangement or
remuneration as a consequence of the efforts of Micro Pipe Fund I, L.L.C. or its
designee or agent. All references to “TeknoCreations, Inc.” shall
include associates, and any individual, corporation, organization, firm or
company, of which TeknoCreations, Inc. is a member, employee, principal, party
to, or from which such it would otherwise benefit financially, directly or
indirectly.
21. Right of First
Refusal. The Lender shall have a Right of First Refusal as to any
financings of the Borrower/Maker within a one-year period of this
Note.
IN WITNESS WHEREOF, Maker has duly
executed this Note as of the date first written above.
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MAKER
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TeknoCreations,
Inc.
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By: /s/
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇
▇▇▇▇▇▇▇, CEO
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