PLEDGE AGREEMENT
March 8, 2000
Law Offices of Michael S. Rosenblum
1875 Century Park East, Suite 700
Los Angeles, CA 90067
Attention: Michael S. Rosenblum, Esq.
Gentlemen:
Reference is made to (i) that certain Securities Purchase Agreement
(the "Purchase Agreement"), dated March 8, 2000, by and among BIOGAN
INTERNATIONAL, INC., a Delaware corporation (the "Pledgor"), on the one hand,
certain of your clients, for whom you are acting as Agent (each, a "Pledgee"),
on the other hand, (ii) that certain 8% Secured Convertible Debenture (the
"Debenture"), dated February 28, 2000, in the principal amount of $2,035,000 by
Pledgor in favor of Pledgee, (iii) that certain Registration Rights Agreement
(the "Registration Rights Agreement"), dated March 8, 2000 by and among Pledgor
and Pledgee and (iv) those certain Warrants (the "Warrant") to purchase an
aggregate of 489,000 shares of the Pledgor's common stock issued to Pledgee (the
Purchase Agreement, the Debenture Agreement, the Registration Rights Agreement
and the Warrant are sometimes collectively referred to herein as the "Loan
Documents"). The Loan Documents contemplate, among other things, that the
obligations of Debtor thereunder are to be secured by a pledge of 28,800,000
shares of the Common Stock of the Debtor (the "Pledged Shares").
1. PLEDGE.
(a) Pledgor hereby pledges, grants a security interest in, mortgage,
assigns, transfers, delivers, sets over and confirms unto you as Agent for the
Pledgee, their successors and assigns, the Pledged Shares as collateral security
for the payment in full when due of all obligations of the Pledgor under the
Debenture and monetary obligations accruing under Article 2 (b) (i) and (ii) of
the Registration Rights Agreement (collectively, the "Obligations").
(b) Whether or not stated with respect to each provision hereof, the
term "Pledgee" shall mean each respective Pledgee, in each case unless the
context otherwise requires.
(c) Pledgor warrants and represents that, except as set forth in
Section 19 or as noted on the reverse side of the certificate(s) or
instrument(s) evidencing the Pledged Shares, there are no restrictions upon the
transfer of any of the Pledged Shares and that Pledgor has the right to transfer
the Pledged Shares free of any encumbrance.
(d) Pledgor hereby agrees promptly to pledge and deposit hereunder with
the Pledgee any stock or other securities declared as a dividend with respect to
or issued as a split of any Pledged Shares now or hereafter held in pledge
hereunder and any additional property hereafter pledged to the Pledgee by
Pledgor, whether taken in substitution for or in addition to the above-described
property. Such stock, other securities and property shall stand pledged and
assigned for the Obligations in the same manner as the property described in the
first paragraph hereof. (The Pledged Shares and all of the property described in
this paragraph is hereinafter called the "Collateral").
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR.
Pledgor hereby represents, warrants and covenants to the Pledgee as
follows:
(a) Except for the security interest and pledge hereunder, upon
delivery of the Collateral to the Pledgee, the Pledgor is, or to the extent that
certain of the Collateral is to be acquired after the date hereof, will be, the
sole owner of the Collateral free from any adverse lien, security interest or
encumbrance, and the Pledgor will defend the Collateral against all claims and
demands of all persons at any time claiming any interest therein.
(b) The Pledgor will promptly pay any and all taxes, assessments and
governmental charges upon the Collateral prior to the date penalties are
attached thereto, except to the extent that such taxes, assessments and charges
shall be contested in good faith by the Pledgor.
(c) The Pledgor will not sell or otherwise assign, transfer or dispose
of the Collateral or any interest therein without the prior written consent of
the Pledgees.
(d) Except for the security interest and pledge hereunder, the Pledgor
will keep the Collateral free from any adverse lien, security interest or
encumbrance.
(e) The Collateral is duly and validly issued, fully paid and
nonassessable, and each certificate evidencing Collateral is issued by the
Pledgor from its authorized and unissued shares.
3. VOTING POWER, DIVIDENDS, ETC.
(a) Unless and until an Event of Default (as defined below) has
occurred and except as provided below, the Pledged Shares shall be deemed to be
unissued shares of the Pledgor for the purpose of any and all exercises of
voting, consensual and other powers of ownership pertaining to the Pledged
Shares. With respect to any dividends (whether in stock or cash) or other
distributions to holders of shares of Pledgor's Common stock, the Pledgor shall
add to the Collateral, the proportionate amount of such dividend or other
distribution, as if the Pledged Shares were issued and outstanding.
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(b) Any provisions herein to the contrary notwithstanding, if any Event
of Default (or, as to subsection (ii) below, an event which, with the passage of
time and/or the giving of notice, or both, would constitute an Event of Default)
shall have occurred, then and whether or not any holder of the Obligations
exercises any available option to declare the Obligations due and payable or
seeks or pursues any other relief or remedy available to such holder under this
Pledge Agreement, or any agreement evidencing or securing any of the
Obligations,
(i) The Pledgees, or their respective nominee or nominees,
shall forthwith, without further act on the part of any person, have the sole
and exclusive right to exercise all voting, consensual and other powers of
ownership pertaining to the Collateral and shall exercise such powers in such
manner as the Pledgees, in their sole discretion, shall determine to be
necessary, appropriate or advisable, and, if the Pledgees shall so request in
writing, the Pledgor agrees to execute and deliver to the Pledgees such other
and additional powers, authorizations, proxies, dividends and such other
documents as the Pledgees may request to secure to the Pledgees' the rights,
powers and authorities intended to be conferred upon the Pledgees by this
subsection (b); and
(ii) All dividends and other distributions on the Collateral
shall be paid directly to the Pledgees and retained by it as part of the
Collateral, subject to the terms of this Pledge Agreement, and, if the Pledgees
shall so request in writing, the Pledgor agrees to execute and deliver to the
Pledgees appropriate additional dividend, distribution and other orders and
documents to that end.
Notwithstanding the foregoing or any other provision hereof, in no event shall
any Pledgee hold in excess of 9.99% of the shares of the Common Stock as such
limitation is more specifically provided for in Section 4.E. of the Debenture.
4. SALE OF COLLATERAL AFTER AN EVENT OF DEFAULT.
If any Event of Default shall have occurred, and the principal amount
of or any of the Obligations shall have been declared forthwith due and payable,
then, unless the Debenture and the Obligations shall have been paid in full, the
Pledgees may, in their sole discretion, without further demand, advertisement or
notice, except as expressly provided for in subsection (a) of this Section 4,
(i) apply the cash, if any, then held by it as collateral hereunder, for the
purposes and in the manner provided in Section 5 hereof, and (ii) if there shall
be no such cash or the cash so applied shall be insufficient to make in full all
payments provided in subsections (a) and (b) of Section 5 hereof,
(a) Sell the Collateral, or any part thereof, in one or more
sales, at public or private sale, conducted by any officer or agent of, or
auctioneer or attorney for, the Pledgees, at the Pledgees' place of business or
elsewhere, for cash, upon credit or future delivery, and at such price or prices
as the Pledgees shall, in their sole discretion, determine, and the Pledgees may
be the purchaser of any or all of the Collateral so sold. Upon any such sale the
Pledgees shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser (including, without limitation,
the Pledgees) at any such sale shall hold the Collateral so sold, absolutely
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free from any claim or right of whatsoever kind, including, without limitation,
any equity or right of redemption of the Pledgor, which the Pledgor hereby
specifically waives, to the extent it may lawfully do so, and all rights of
redemption, stay or appraisal which Pledgor has or may have under any rule of
law or statute now existing or hereafter adopted. The Pledgees shall give the
Pledgor at least ten (10) days prior written notice of any such public or
private sale. Any such public sale shall be held at such time or times within
ordinary business hours as the Pledgees shall fix in the notice of such sale. At
any such public or private sale the Collateral may be sold in one lot as an
entirety or in separate parcels. The Pledgees shall not be obligated to make any
sale pursuant to any such notice. The Pledgees may, without notice or
publication, adjourn any public or private sale from time to time by
announcement at the time and place fixed for such sale, or any adjournment
thereof, and any such sale may be made at any time or place to which the same
may be so adjourned without further notice or publication. In case of any sale
of all or any part of the Collateral for credit or for future delivery, the
Collateral so sold may be retained by the Pledgees until the selling price is
paid by the purchaser thereof, but the Pledgees shall not incur any liability in
case of the failure of such purchaser to take up and pay for the Collateral so
sold, and in case of any such failure, such Collateral may again be sold under
and pursuant to the provisions hereof; or
(b) Proceed by a suit or suits at law or in equity to
foreclose upon this Pledge Agreement and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
If at any time when the Pledgees shall determine to exercise their right to sell
all or any part of the Collateral pursuant to Section 4(a) hereof, such
Collateral or the part thereof to be sold shall not, for any reason whatsoever,
be effectively registered under the Securities Act of 1933, as from time to time
in effect (the "Securities Act"), the Pledgees, in their sole and absolute
discretion, are hereby expressly authorized to sell such Collateral or such part
thereof by private sale in such manner and under such circumstances as the
Pledgees may deem necessary or advisable in order that such sale may legally be
effected without such registration. Without limiting the generality of the
foregoing, in any such event the Pledgees, in their sole and absolute
discretion, (x) may proceed to make such private sale notwithstanding that a
registration statement for the purpose of registering such Collateral or such
part thereof shall have been filed under such Securities Act; (y) may approach
and negotiate with a restricted number of potential purchasers to effect such
sale; and (z) may restrict such sale to purchasers as to their number, nature of
business and investment intention, including, without limitation, to purchasers
each of whom will represent and agree to the satisfaction of the Pledgees that
such purchaser is purchasing for its own account, for investment, and not with a
view to the distribution or sale of such Collateral or part thereof, it being
understood that the Pledgees may require the Pledgor, and the Pledgor hereby
agrees upon the written request of the Pledgees, to cause: (i) a legend or
legends to be placed on the certificates to be delivered to such purchasers to
the effect that the Collateral represented thereby has not been registered under
the Securities Act and setting forth or referring to restrictions on the
transferability of such securities or (ii) the issuance of stop transfer
instructions to the transfer agent of any issuer (each an "Issuer") of such
securities, if any, with respect to the Collateral, or if the Issuer transfers
its own securities, a notation in the appropriate records of such Issuer, and
that the Pledgees may require to be obtained, and the Pledgor will cooperate
with the Pledgees in obtaining from the purchasers a signed written agreement
that the Collateral will not be sold without registration or other compliance
with the requirements of the Securities Act. In the event of any such sale, the
Pledgor does hereby consent and agree that the Pledgees shall incur no
responsibility or liability for selling all or any part of the Collateral at a
price which the Pledgees, in their sole and absolute discretion, may deem
reasonable under the circumstances, notwithstanding the possibility that a
substantially higher price might be realized if the sale were public and
deferred until after registration under the Securities Act.
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The Pledgees, as attorney-in-fact pursuant to Section 6 hereof, may, in
the name and stead of the Pledgor, make and execute all conveyances, assignments
and transfers of the Collateral sold pursuant to this Section 4. The Pledgor
shall, if so requested by the Pledgees, ratify and confirm any sale or sales by
executing and delivering to the Pledgees, or to such purchaser or purchasers,
all such instruments as may, in the judgment of the Pledgees, be advisable for
the purpose.
The receipt of the Pledgees for the purchase money paid at any such
sale made by it shall be a sufficient discharge therefor to any purchaser of the
Collateral, or any portion thereof, sold as aforesaid; and no such purchaser (or
his or its representatives or assigns), after paying such purchase money and
receiving such receipt, shall be bound to see to the application of such
purchase money or any part thereof or in any manner whatsoever be answerable for
any loss, misapplication, necessity, expediency or regularity of any such sale.
Except as otherwise provided herein, the Pledgor shall have such rights
of redemption as are afforded by the Uniform Commercial Code as then in effect
in the State of New York.
5. APPLICATION OF PROCEEDS.
The proceeds of any sale, or of collection, of all or any part of the
Pledged Stock shall be applied by the Pledgees, without any marshaling of
assets, in the following order:
(a) first, to the payment of all of the reasonable costs and
expenses of such sale, including, without limitation, reasonable attorneys'
fees, and all other expenses, liabilities and advances reasonably made or
incurred by the Pledgees in connection therewith; and
(b) second, to the payment of the Obligations in such order as
the Pledgees shall determine, until payment in full thereof; and
(c) finally, to the payment to the Pledgees, their respective
successors or assigns, or their respective heirs, executors or administrators,
or to whomsoever may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may direct, of any surplus remaining from such proceeds
after payments of the character referred to in subsections (a) and (b) of this
Section 5 shall have been made.
6. PLEDGEE'S APPOINTED ATTORNEY-IN-FACT.
Effective upon the occurrence of an Event of Default, the Pledgees,
their successors and assigns, are hereby appointed the attorney-in-fact, with
full power of substitution, of the Pledgor for the purpose of carrying out the
provisions of this Pledge Agreement and taking any action and executing any
instruments which such attorney-in-fact may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney- in-fact is
irrevocable and coupled with an interest, including, without limitation, the
power:
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(a) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due upon or by virtue thereof;
(b) to receive, take, endorse, assign and deliver any and all
checks, notes, drafts, documents and other negotiable and non-negotiable
instruments and chattel paper taken or received by the Pledgees in connection
therewith;
(c) to settle, compromise, prosecute or defend any action or
proceeding with respect thereto; and
(d) to discharge any taxes, liens, security interests or other
encumbrances at any time placed thereon.
7. NO WAIVER.
No failure on the part of the Pledgees to exercise, and no delay on the
part of the Pledgees in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise by the
Pledgees of any right, power or remedy hereunder preclude the single or partial
exercise by the Pledgees of any other or further right, power or remedy. The
remedies herein provided are cumulative and are not exclusive of any remedies
provided by law.
8. TERMINATION OF PLEDGE.
When all of the Obligations, including, without limitation, the
Debentures, shall have been paid in full, this Pledge Agreement shall terminate.
The Pledgees shall forthwith assign, transfer and deliver to the Pledgor or its
respective successors or assigns without representation, warranty or recourse,
against appropriate receipts, all the Pledged Stock, if any, then held by the
Pledgees in pledge hereunder, free and clear of all liens and encumbrances
created by the Pledgees or its representatives. This provision shall survive the
termination of this Pledge Agreement.
9. GOVERNING LAW; CONSENT TO JURISDICTION.
(a) This Pledge Agreement shall in all respects be construed and
interpreted in accordance with and governed by the laws of the State of
California.
(b) The Pledgor to the extent that Pledgor may lawfully do so, hereby
submits to the jurisdiction of any courts, federal or state, sitting in the
State of California, as well as to the jurisdiction of all courts from which an
appeal may be taken from the aforesaid courts, for the purpose of any suit,
action or other proceeding arising out of any of the Pledgors' obligations under
or with respect to this Pledge Agreement, and Pledgor expressly waives any and
all objections Pledgors may now or hereafter have as to the venue in any of such
courts. The Pledgor also waives trial by jury in any such action or proceeding.
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10. SUCCESSORS AND ASSIGNS.
This Pledge Agreement shall be binding upon and inure to the benefit of
the respective successors, assigns, legal representatives, executors and
administrators of the Pledgor and the Pledgees, and any subsequent holder of a
Debenture or the Obligations.
11. ADDITIONAL INSTRUMENTS AND ASSURANCE.
The Pledgor hereby agrees, at Pledgor's own expense, to execute and
deliver, from time to time, any and all further, or other, instruments, and to
perform such acts, as the Pledgees may reasonably request to effect the purposes
of this Pledge Agreement and to secure to the Pledgees, and to all persons who
may from time to time be the holder of a Debenture or the Obligations, the
benefits of all right, authorities and remedies conferred upon the Pledgees by
the terms of this Pledge Agreement.
12. FUTURE HOLDERS OF DEBENTURES.
This Pledge Agreement is for the benefit of any and all future holders
of a Debenture or the Obligations in addition to the Pledgees, each of whom
shall, without further act, become a party hereto by becoming a holder of a
Debenture or the Obligations.
13. NOTICES.
All notices, requests, demands, consents or other communications given
hereunder or in connection herewith shall be in writing and sent by certified
mail, return receipt requested, postage prepaid, addressed to the Pledgor at the
address set forth below, and if to the Pledgees, addressed to the Pledgees at
their principal offices set forth above. The Pledgor or the Pledgees may, by
notice given as aforesaid, change their address for all subsequent notices.
Notice shall be deemed given on the earlier to occur of: (i) the third day
following deposit thereof in the mail as aforesaid or (ii) receipt by the party
to whom such notice is directed.
14. SEPARABILITY.
In case any one or more of the provisions of this Pledge Agreement
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision hereof, but this Pledge Agreement shall be construed as if such
invalid, illegal or unenforceable provision had not been included.
16. EVENTS OF DEFAULT.
The Pledgor shall be in default under this Pledge Agreement upon the
occurrence of any of the following events (an "Event of Default"):
(a) if any representation or warranty made by the Pledgor in this
Pledge Agreement shall be false or misleading in any material respect;
(b) if the Pledgor fails to duly observe or perform any covenant,
condition or agreement contained in this Pledge Agreement and on Pledgor's part
to be observed or performed, which default continues unremedied for five (5)
days after the earlier to occur of (i) the discovery by the Pledgor, or any of
them, of such default or (ii) written notice thereof from the Pledgees to the
Pledgor; or
(c) the occurrence of an Event of Default as defined in a Debenture or
any other Loan Document.
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16. CUMULATIVE REMEDIES; INDEMNIFICATION.
The rights, powers and remedies provided herein in favor of the
Pledgees shall not be deemed exclusive, but shall be cumulative, and shall be in
addition to all other rights and remedies in favor of the Pledgees existing at
law or in equity, including (without limitation) all of the rights, powers and
remedies available to a secured party under any law or regulation. The Pledgor
shall pay, indemnify and hold harmless the Pledgees from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may be imposed on,
incurred by or asserted against the Pledgees in any way relating to or arising
out of any misrepresentation by the Pledgor hereunder or any failure of the
Pledgor to perform and observe its obligations hereunder. The obligation of the
Pledgor under this Section 16 shall survive the payment in full of the
Obligations and the termination of this Pledge Agreement.
18. HEADINGS; EXECUTION.
(a) The headings of the Sections of this Pledge Agreement have been
inserted for convenience of reference only and shall in no way affect the
construction or interpretation of this Pledge Agreement.
(b) This Pledge Agreement may be executed by each Pledgor separately,
each of which shall be deemed a separate agreement.
19. GOVERNMENTAL.
Anything to the contrary contained herein notwithstanding, the Pledgees
will not take any action pursuant to this Pledge Agreement which would
constitute or result in any assignment of a governmentally-issued license or any
transfer of control of any entity owned or controlled by the Debtor if such
assignment of license or transfer of control would require under then existing
law the prior approval of the a government agency (the "Agency"), without first
obtaining such approval of the Agency. The Pledgor agrees to take any action
which the Pledgees may request in order that the Pledgees obtain and enjoy the
full rights and benefits granted to the Pledgees by this Pledge Agreement,
including, specifically, at the Pledgor's own cost and expense, the use of
Pledgor's best efforts to assist and cooperate in obtaining approval of the
Agency for any action or transaction contemplated by this Pledge Agreement which
is then required by law, and specifically, without limitation, upon request, to
prepare, sign (or cause to be signed) and file with the Agency any portion of
any application or applications for consent to the assignment of license or
transfer of control required to be signed by the Pledgor, the Debtor, its
officers and/or directors, and necessary or appropriate under the Agency's rules
and regulations for approval of (a) any sale or sales of the Collateral by or on
behalf of the Pledgees or the holder of a Debenture and the Obligations or (b)
any assumption by the Pledgees of voting rights or management rights in the
Collateral.
20. ADDITIONAL TERMS.
(a) Pledgor acknowledges that the Law Offices of Michael S. Rosenblum
is acting as agent for the Pledgees. The Agent has acted as legal counsel for
the Pledgees and the Placement Agent in the transaction between the Debtor and
the Pledgees, and may continue to act as legal counsel for such parties, from
time to time, notwithstanding its duties as the Agent hereunder. Pledgor
consents to the Agent acting in such capacity as legal counsel for the Pledgees
and the Placement Agent and waives any claim that such representation represents
a conflict of interest on the part of the Agent. Pledgor understands that the
Pledgees and the Agent are relying explicitly on the foregoing provision in
entering into these transactions with the Debtor and accepting this Pledge
Agreement, as the case may be.
(b) With respect to the terms of this Pledge Agreement or any matter
arising thereunder, Law Offices of Michael S. Rosenblum shall use the same
degree of care and skill in their exercise as reasonable men use in the conduct
of their own affairs; provided, however, that notwithstanding the foregoing, in
the event that Law Offices of Michael S. Rosenblum shall have received written
notice from the holders in excess of 66-2/3% or more of the Debentures, to act
or refrain from acting under the terms of the Pledge Agreement, Law Offices of
Michael S. Rosenblum shall be bound by such written direction, notwithstanding
the foregoing provisions of this Pledge Agreement.
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Please indicate your receipt of the property described in the first
paragraph hereof and your agreement to the terms and provisions hereof by
executing this Pledge Agreement in the space provided below.
BIOGAN INTERNATIONAL, INC., a Delaware corporation
/S/ GILLES LaVERDIERE
---------------------------------------------
[Print Name of Person or Entity]
By: /S/ GILLES LaVERDIERE
---------------------------------------------
[Print Name of Signatory]
CALP II, LLC, a Bermuda limited liability company
By: /S/ MARK VALENTINE
---------------------------------------------
Manager
Carbon Mesa Partners, LLC, a Nevada
limited liability company
By: /S/ MICHAEL ROSENBLUM
---------------------------------------------
Manager
Accepted and agreed to as of
the date first above written:
Law Offices of Michael S. Rosenblum
By: /S/ MICHAEL ROSENBLUM
---------------------------------
Name: