PLEDGE AGREEMENT
AND IRREVOCABLE PROXY
PLEDGE AGREEMENT dated as of January 12, 2001 between The Goodwill Group
Pty Limited (ACN 056 258 201), a corporation organized and existing under the
laws of Australia (the "Grantor"), and FAI Home Security Holdings Pty Ltd., a
corporation organized and existing under the laws of Australia (the "Lender"),
Capitalized terms used herein and not defined herein shall have the respective
meanings assigned to such terms in that certain Stock Purchase Agreement, dated
as of the date hereof, by and between the Lender and the Grantor (the "Stock
Purchase Agreement").
The Lender has agreed to accept payment for shares of stock, in part, in
the form of a two-year secured promissory note (the "Note") and thereby extend
credit and certain other financial accommodations to the Borrower ("Credit")
pursuant to, and subject to the terms and conditions of, the Stock Purchase
Agreement. The obligation of the Lender to extend such Credit is conditioned on
the execution and delivery by the Grantor of a pledge agreement in the form
hereof to secure the following (collectively, the "Secured Obligations"): (i)
all obligations of the Grantor arising under the Stock Purchase Agreement and
the Note, and (ii) all obligations of the Grantor at any time and from time to
time under this Pledge Agreement.
Accordingly, the Grantor and the Lender, intending to be legally bound,
hereby agree as follows:
1. Pledge. As security for the payment and performance in full of the
Secured Obligations, the Grantor hereby transfers, grants, bargains, sells,
conveys, hypothecates, pledges, sets over, endorses over, and delivers unto he
Lender, and grants to the Lender, for its own benefit and for the benefit of the
Lender, a security interest in, (a) the shares of capital stock listed in
Schedule I annexed hereto next to such Grantor's name (the "Pledged Stock"), and
(b) subject to Section 5 below, all proceeds of the Pledged Stock, including,
without limitation, all cash, securities or other property at any time and from
time to time receivable or otherwise distributed in respect of or in exchange
for any of or all such Pledged Stock (the items referred to in clauses (a) and
(b) being collectively called the "Collateral"). Upon delivery to the Lender,
any securities now or hereafter included in the Collateral including, without
limitation, the Pledged Stock (the "Pledged Securities") shall be accompanied by
undated stock powers duly executed in blank or other instruments of transfer
satisfactory to the Lender and by such other instruments and documents as the
Lender may reasonably request. Each delivery of Pledged Securities shall be
accompanied by a schedule showing a description of the securities theretofore
and then being pledged hereunder, which schedule shall be attached hereto as
Schedule I and made a part hereof. Each schedule so delivered shall supersede
any prior schedules so delivered.
2. Delivery of Collateral. The Grantor agrees to deliver promptly or cause
to be delivered to the Lender any and all Pledged Securities, and any and all
certificates or other
instruments or documents representing any of the Collateral (together with any
necessary endorsement).
3. Representations, Warranties and Covenants. The Grantor hereby
represents, warrants and covenants to and with the Lender that:
(a) except for the security interest granted to the Lender, the
Grantor (i) is and will at all times continue to be the direct owner,
beneficially and of record, of the Pledged Securities that it is pledging
hereunder, (ii) holds the Collateral that it is pledging hereunder free and
clear of all liens, charges, encumbrances and security interests of every kind
and nature, and the Pledged Stock is subject to no options to purchase or any
similar or other rights of any person, (iii) will make no assignment, pledge,
hypothecation or, subject to the provisions of the Stock Purchase Agreement,
transfer of, or create any security interest in, the Collateral that it is
pledging hereunder including, without limitation, by virtue of becoming bound by
any agreement which restricts in any manner the rights of any present or future
holder of any Pledged Stock with respect thereto, and (iv) subject to Section 5
below, will cause any and all Collateral, whether for value paid by the Grantor
or otherwise, to be forthwith deposited with the Lender and pledged or assigned
hereunder;
(b) the Grantor (i) has good right and legal authority to pledge the
Collateral it is pledging hereunder in the manner hereby done or contemplated,
(ii) will not amend, modify or supplement any Pledged Security without the prior
written consent of the Lender, nor forgive any indebtedness evidenced by any
Pledged Security, and (iii) will defend its title or interest thereto or therein
against any and all attachments, liens, claims, encumbrances, security interests
or other impediments of any nature, however arising, of all persons whomsoever;
(c) no consent or approval of any governmental body or regulatory
authority or any securities exchange was or is necessary to the validity of the
pledge effected hereby;
(d) by virtue of the execution and delivery by the Grantor of this
Agreement, when the certificates, instruments or other documents representing or
evidencing the Collateral are delivered to the Lender in accordance with this
Agreement, the Lender will obtain a valid and perfected first lien upon and
security interest in such Collateral as security for the repayment of the
Secured Obligations, prior to all other liens and encumbrances thereon and
security interests therein;
(e) the pledge effected hereby is effective to vest in the Lender the
rights of the Lender in the Collateral as set forth herein; and
(f) all of the Pledged Stock has been duly authorized and validly
issued and as of the date hereof, the Initial Pledged Stock constitutes all of
the issued and outstanding shares of capital stock of the issuers listed on
Schedule I annexed hereto and acquired by the Grantor from the Lender pursuant
to the Stock Purchase Agreement.
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All representations, warranties and covenants of the Grantor contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement until the termination of this Agreement pursuant to Section 15 hereof.
4. Registration in Nominee Name: Denominations. Upon the occurrence and
during the continuance of an Event of Default, the Lender shall have the right
(in its sole and absolute discretion with subsequent notice of the Grantor) to
transfer to or to register the Pledged Securities in its own name or the name of
its nominee. In addition, the Lender shall at all times have the right to
exchange the certificates representing Pledged Securities for certificates of
smaller or larger denominations for any purpose consistent with this Agreement.
The term "Event of Default" as used hereunder shall have the meaning ascribed to
such term in the Note.
5. Voting Rights; Dividends: etc. (a) Unless and until an Event of Default
hereunder shall have occurred and be continuing:
(i) The Grantor shall be entitled to exercise any and all voting
and/or consensual rights and powers accruing to an owner of Pledged Securities
or any part thereof for any purpose not inconsistent with the terms of this
Agreement and the Stock Purchase Agreement provided that such action would not
adversely affect the rights inuring to the Lender or the Lender under this
Agreement or the Stock Purchase Agreement or adversely affect the rights and
remedies of the Lender or the Lender under this Agreement or the Stock Purchase
Agreement or the ability of the Lender or the Lender to exercise the same.
(ii) The Lender shall execute and deliver to the Grantor, or cause to
be executed and delivered to the Grantor, all such proxies, powers of attorney,
and other instruments as the Grantor may reasonably request for the purpose of
enabling the Grantor to exercise the voting and/or consensual rights and powers
which they are entitled to exercise pursuant to subparagraph (i) above.
(iii) The Grantor shall be entitled to receive and retain any and all
cash dividends paid on the Pledged Securities only to the extent that such cash
dividends are permitted by, and otherwise paid in accordance with the terms and
conditions of, the Stock Purchase Agreement and applicable laws and are applied
as provided in the Note. Any and all
a. noncash dividends.
b. stock or dividends paid or payable in cash or otherwise in
connection with a partial or total liquidation or dissolution, and
c. instruments, securities, other distributions in property,
return of capital, capital surplus or paid-in surplus or other distributions
made on or in respect of Pledged Securities (other than dividends permitted by
this Section 5(a)(iii)), whether paid or payable in cash or otherwise, whether
resulting from a subdivision, combination or reclassification of the
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outstanding capital stock of the issuer of any Pledged Securities or received in
exchange for Pledged Securities or any part thereof, or in redemption thereof,
as a result of any merger, consolidation, acquisition or other exchange of
assets to which such issuer may be a party or otherwise, shall be and become
part of the Collateral, and, if received by any Grantor, shall not be commingled
by such Grantor with any of its other funds or property but shall be held
separate and apart therefrom, shall be held in trust for the benefit of the
Lender and shall be forthwith delivered to the Lender in the same form as so
received (with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event of
Default, all rights of the Grantor to receive any dividends, stock, instruments,
securities and other distributions which such Grantor is authorized to receive
pursuant to paragraph (a)(iii) of this Section 5 shall cease, and all such
rights shall thereupon become vested in the Lender, which shall have the sole
and exclusive right and authority to receive and retain such dividends. All
dividends which are received by any Grantor contrary to the provisions of this
Section 5(b) shall be received in trust for the benefit of the Lender, shall be
segregated from other property or funds of such Grantor and shall be forthwith
delivered to the Lender as Collateral in the same form as so received (with any
necessary endorsement). Any and all money and other property paid over to or
received (with any necessary endorsement). Any and all money and other property
paid over to or received by the Lender pursuant to the provisions of this
Section 5 (b) shall be retained by the Lender in an account to be established
by the Lender upon receipt of such money or other property and shall be applied
in accordance with the provisions of Section 9 hereof.
(c) Upon the occurrence and during the continuance of an Event of
Default, all rights of the Grantor to exercise the voting and consensual rights
and pursuant to the irrevocable proxy granted herein, powers which it is
entitled to exercise pursuant to Section 5(a)(i) shall cease, and all such
rights shall thereupon become vested in the Lender, which shall have the sole
and exclusive right and authority to exercise such voting and consensual rights
and powers.
(d) In order to permit the Lender to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section 5(c)
and to receive all dividends and other distributions which it may be entitled to
receive under Section 5(a)(iii) or Section 5(b), the Grantor shall promptly
execute and deliver (or cause to be executed and delivered) to the Lender all
such proxies, dividend payment orders and other instruments as the Lender may
from time to time reasonably request.
Without limiting the effect of the foregoing, the Grantor does hereby
constitute and appoint the Lender as its proxy, and the Lender shall have the
right, upon the occurrence and during the continuance of an Event of Default, to
exercise all rights, benefits, privileges and powers accruing to such Grantor,
as owner of the Pledged Securities, including, without limitation, giving or
withholding consent, calling and amending shareholders meetings to be held from
time to time with full power to vote and act for and in the name, place, and
stead of such
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Grantor and in the same manner, to the same extent, and with the same effect
that such Grantor would if personally present at such meetings, giving to the
Lender full power of substitution and revocation, which proxy shall be
effective, automatically and without the necessity of any action (including any
transfer of any Pledged Stock on the record books of the issuer thereof) by any
person (including the issuer of the Pledged Stock or any officer or Lender
thereof).
THIS PROXY IS IRREVOCABLE
Any proxy or proxies heretofore given by any Grantor to any person or
persons whatsoever are hereby revoked. This proxy shall continue in full force
and effect until such time as all Secured Obligations are paid and satisfied in
full in accordance with the terms of the Stock Purchase Agreement and the Note.
6. Remedies upon Event of Default. If an Event of Default shall have
occurred and be continuing, the Lender may sell or otherwise dispose of all or
any part of the Collateral, at public or private sale or at any broker's board
or on any securities exchange, for cash, upon credit or for future delivery as
the Lender shall deem appropriate. Each such purchaser at any such sale shall
hold the property sold absolutely, free from any claim or right on the part of
any Grantor, and the Grantor hereby waives (to the extent permitted by law) all
rights of redemption, stay and appraisal which such Grantor now has or may at
any time in the future have under any rule of law or statute now existing or
hereinafter enacted.
The Lender shall give the applicable Grantor 10 days' written notice (which
the Grantor agrees is reasonable notice within the meaning of Section 9-504(3)
of the Uniform Commercial Code as in effect in New York) of the Lender's
intention to make any sale of Collateral. Such notice, in the case of a public
sale, shall state the time and place for such sale and, in the case of a sale at
a broker's board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Lender may fix and state in the notice (if
any) of such sale. At any such sale, the Collateral, or portion thereof, to be
sold may be sold in one lot as an entirety or in separate parcels, as the Lender
may (in its sole and absolute discretion) determine. The Lender shall not be
obligated to make any sale of any Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of such Collateral shall have been
given. The Lender may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, any such sale may, without further
notice, be made at the time and place to which the same was so adjourned. In
case any sale of all or any part of the Collateral is made on credit or for
future delivery, the Collateral so sold may be retained by the Lender until the
sale price is paid by the purchaser or purchasers thereof, but the Lender shall
not incur any liability in case any such purchaser or purchasers shall fail to
take up and pay for the Collateral so sold and, in case of any such failure,
such Collateral may be sold again upon like notice. At any public sale made
pursuant to this Section 8, the Lender may bid
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for or purchase, free (to the extent permitted by law) from any right of
redemption, stay or appraisal on the part of the Grantor (all said rights being
also hereby waived and released to the extent permitted by law), with respect to
the Collateral or any part thereof offered for sale and the Lender may make
payment on account thereof by using any claim then due and payable to the Lender
from the Grantor as a credit against the purchase price, and the Lender may,
upon compliance with the terms of sale, hold, retain and dispose of such
property without further accountability to the Grantor therefor. For purposes
hereof, a written agreement to purchase the Collateral or any portion thereof
shall be treated as a sale thereof; the Lender shall be free to carry out such
sale and purchase pursuant to such agreement, and no Grantor shall be entitled
to the return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after the Lender shall have entered into such an
agreement all Events of Default shall have been remedied and the Secured
Obligations paid in full. The Grantor shall remain liable for any deficiency. As
an alternative to exercising the power of sale herein conferred upon it, the
Lender may proceed by a suit or suits at law or in equity to foreclose this
Agreement and to sell the Collateral or any portion thereof pursuant to a
judgment or decree of a court or courts having competent Jurisdiction or
pursuant to a proceeding by a court-appointed receiver.
7. Application of Proceeds of Sale. The proceeds of any sale of Collateral,
as well as any Collateral consisting of cash, shall be applied by the Lender as
follows:
FIRST, to the payment of all reasonable costs and expenses incurred by the
Lender in connection with such sale or otherwise in connection with this
Agreement or any of the Secured Obligations, including, but not limited to, all
court costs and the reasonable fees and expenses of its Lenders and legal
counsel, the repayment of all advances made by the Lender hereunder on behalf of
the Grantor or to protect and preserve the Collateral and any other reasonable
costs or expenses incurred in connection with the exercise of any right or
remedy hereunder;
SECOND, pro rata to the payment in full of all Secured Obligations (other
than those referred to above) owed to the Lender; and
THIRD, to the Grantor, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
8. Lender Appointed Attorney-in-Fact. The Grantor hereby appoints the
Lender its attorney-in-fact for the purpose of carrying out the provisions of
this Agreement and taking any action and executing any instrument which the
Lender may deem necessary or advisable to accomplish the purposes hereof, which
appointment is irrevocable and coupled with an interest. Without limiting the
generality of the foregoing, the Lender shall have the right, upon the
occurrence and during the continuance of an Event of Default, with full power of
substitution either in the Lender's name or in the name of the Grantor, to ask
for, demand, xxx for, collect, receive receipt and give acquittance for any and
all moneys due or to become due and under and by virtue of any Collateral, to
endorse checks, drafts, orders and other instruments for the
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payment of money payable to the Grantor representing any interest or dividend,
or other distribution payable in respect of the Collateral or any part thereof
or on account thereof and to give full discharge for the same, to settle,
compromise, prosecute or defend any action, claim or proceeding with respect
thereto, and to sell, assign, endorse, pledge, transfer and make any agreement
respecting, or otherwise deal with, the same; provided, however, that nothing
herein contained shall be construed as requiring or obligating the Lender to
make any commitment or to make any inquiry as to the nature or sufficiency of
any payment received by the Lender, or to present or file any claim or notice,
or to take any action with respect to the Collateral or any part thereof or the
moneys due or to become due in respect thereof or any property covered thereby,
and no action taken by the Lender or omitted to be taken with respect to the
Collateral or any part thereof shall give rise to any defense, counterclaim or
offset in favor of the Grantor or to any claim or action against the Lender in
the absence of the gross negligence of wilful misconduct of the Lender.
9. No Waiver. No failure on the part of the Lender to exercise, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy by the Lender preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law. The
Lender shall not be deemed to have waived any rights hereunder or under any
other agreement or instrument unless such waiver shall be in writing and signed
by such parties.
10. Registration, etc. The Grantor and Xxxxxxx X. Xxxxxx agree that, upon
the occurrence and during the continuance of an Event of Default hereunder, if
for any reason the Lender desires to sell any of the Pledged Securities at a
public sale, they will, at any time and from time to time, upon the written
request of the Lender, take or use commercially reasonable efforts to cause the
Issuer of such Pledged Securities to take such action and to prepare, distribute
and/or file such documents, as are required or advisable in the opinion of
counsel for the Lender to permit the public sale of such Pledged Securities,
provided that the Lender has determined in good faith, after consultation with a
financial advisor, that such a public sale is feasible under the then existing
circumstances. The Grantor further agrees to indemnify, defend and hold harmless
the Lender and any underwriter and their respective officers, directors,
affiliates and controlling persons (within the meaning of Section 15 of the
Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934)
from and against all loss, liability, expenses, costs, fees and disbursements of
counsel (including, without limitation, a reasonable estimate of the cost to the
Lender of legal counsel), and claims (including the costs of investigation)
which they may incur insofar as such loss, liability, expense or claim arises
out of or is based upon any untrue statement of a material fact contained in any
prospectus (or any amendment or supplement thereto) or in any notification or
offering circular, or arises out of or is based upon any omission to state a
material fact required to be stated therein or necessary to make the statements
in any thereof not misleading, except insofar as the same arises out of any
untrue statement or omission based upon information furnished in writing to the
Grantor or the issuer of such Pledged Securities by the Lender or the
underwriter expressly for use therein. The Grantor further agrees to use
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its best efforts to qualify, file or register, or cause the issuer of such
Pledged Securities to qualify, file or register, any of the Pledged Securities
under the Blue Sky or other securities laws of such states as may be requested
by the Lender and keep effective, or cause to be kept effective, all such
qualifications, filings or registrations. The Grantor will bear all costs and
expenses of carrying out its obligations under this Section 10. The Grantor
acknowledges that there is no adequate remedy at law for failure by it to comply
with the provisions of this Section 10 and that such failure would not be
adequately compensable in damages, and therefore agrees that its agreements
contained in this Section 10 may be specifically enforced.
11. Security Interest Absolute. All rights of the Lender hereunder,
the grant of a security interest in the Collateral and all obligations of the
Grantor hereunder, shall be absolute and unconditional irrespective of (i) any
lack of validity or enforceability of the Stock Purchase Agreement, the Note any
agreement with respect to any of the Secured Obligations or any other agreement
or instrument relating to any of the foregoing, (ii) any change in time, manner
or place of payment of, or in any other term of, all or any of the Secured
Obligations, or any other amendment or waiver of or any consent to any departure
from the Stock Purchase Agreement, the Note or any other agreement or
instrument, (iii) any exchange, release or nonperfection of any other
collateral, or any release or amendment or waiver of or consent to or departure
from any guarantee, for all or any of the Secured Obligations or (iv) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Grantor in respect of the Secured Obligations or in respect of
this Agreement.
12. Lender's Fees and Expenses. The Grantor shall be obligated to,
upon demand, pay to the Lender the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts
which the Lender may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Lender hereunder or (iv) the failure by
the Grantor to perform or observe any of the provisions hereof. In addition, the
Grantor indemnifies and holds the Lender harmless from and against any and all
liability incurred by the Lender hereunder or in connection herewith, unless
such liability shall be due to the gross negligence or wilful misconduct of the
Lender. Any such amounts payable as provided hereunder or thereunder shall be
additional Secured Obligations secured hereby and by the other Security
Documents.
13. Termination. This Agreement shall terminate when all the Secured
Obligations have been fully and indefeasibly paid in cash, at which time the
Lender shall reassign and deliver to the Grantor, or to such person or persons
as the Grantor shall designate, against receipt, such of the Collateral (if any)
as shall not have been sold or otherwise still be held by it hereunder, together
with appropriate instruments of reassignment and release; provided, however,
that all indemnities of the Grantor contained in this Agreement shall survive,
and remain operative and in full force and effect regardless of, the termination
of this Agreement. Any such reassignment shall be without recourse to or
warranty by the Lender and at the expense of the Grantor.
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14. Notices. All communications and notices hereunder shall be in writing
and given as provided in the Stock Purchase Agreement.
15. Further Assurances. The Grantor agrees to do such further acts and
things, and to execute and deliver such additional conveyances, assignments,
agreements and instruments, as the Lender may at any time reasonably request in
connection with the administration and enforcement of this Agreement or with
respect to the Collateral or any part thereof or in order better to assure and
confirm unto the Lender its rights and remedies hereunder.
16. Binding Agreement; Assignments. This Agreement and the terms covenants
and conditions hereof, shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that Grantor
shall not be permitted to assign this Agreement or any interest herein or in the
Collateral, or any part thereof, or otherwise pledge, encumber or grant any
option with respect to the Collateral, or any part thereof, or any cash or
property held by the Lender as Collateral under this Agreement.
17. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (EXCEPT CONFLICTS OF LAWS
PRINCIPLES THEREOF), EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
18. Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired.
19. Counterparts. This Agreement may be executed in two or more
counterparts (including by facsimile), each of which shall constitute an
original, but all of which, when taken together, shall constitute but one
instrument. This Agreement shall be effective when a counterpart which bears the
signature of the Grantor shall have been delivered to the Lender.
20. Section Headings. Section headings used herein are for convenience
only and are not to affect the construction of, or be taken into consideration
in interpreting, this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Pledge
Agreement as of the day and year first above written.
GRANTOR,
THE GOODWILL GROUP PTY LIMITED
/s/ Xxxxxxx X. Xxxxxx
------------------------------
As Power of Attorney for the
Group Pty Limited Registered
Bank 4237 No 8L
FAI HOME SECURITY HOLDINGS PTY LTD., as
Lender
By /s/ Xxxxxxx Xxxxxx
----------------------------
Name: Xxxxxxx Xxxxxx
Title: Attorney.
As to Section 10 only
/s/ Xxxxxxx X. Xxxxxx
------------------------------
As Power of Attorney for
Xxxxxxx X. Xxxxxx Registered
No 4237 No 87
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SCHEDULE I
to Pledge Agreement
Percentage
Stock of
Certificate Number Outstanding
Stock Issuer Class of Stock No(s) Par Value of Shares Shares
------------ -------------- ----------- --------- --------- -----------
Home Security
International Inc. Common $0.001 2,730,000
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