-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HDG4TSkipkpsX0CHvitljprTURFgWGS3fvOGUYB8t+NLcgXvAKwADlLpy1gzRYxS 3aKwuhzMPeY+emw7J7BT7Q== 0000950131-01-000320.txt : 20010123 0000950131-01-000320.hdr.sgml : 20010123 ACCESSION NUMBER: 0000950131-01-000320 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20010122 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: HOME SECURITY INTERNATIONAL INC CENTRAL INDEX KEY: 0001038262 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-DETECTIVE, GUARD & ARMORED CAR SERVICES [7381] IRS NUMBER: 980169495 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-51301 FILM NUMBER: 1512826 BUSINESS ADDRESS: STREET 1: LEVEL 7 77 PACIFIC HIGHWAY CITY: NORTH SYDNEY STATE: C3 ZIP: 00000 BUSINESS PHONE: 3125802354 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: COOPER BRADLEY D CENTRAL INDEX KEY: 0001044270 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: LEVEL 7 77 PACIFIC HWY STREET 2: NSW 2060 AUSTRALIA CITY: NORTH SYDNEY MAIL ADDRESS: STREET 1: LEVEL 7 77 PACIFIC HWY STREET 2: NSW 2060 AUSTRALIA CITY: NORTH SYDNEY SC 13D/A 1 0001.txt AMENDMENT #1 TO SCHEDULE 13D BRADLEY COOPER UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D/A Under the Securities Exchange Act of 1934 (Amendment No 1)* Home Security International, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, $0.001 par value per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 437333107 - -------------------------------------------------------------------------------- (CUSIP Number) Bradley D. Cooper Unit 7 33 The Esplanade Balmoral, NSW 2088 Australia 917-841-8635 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) January 12, 2000 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of (S)240.13d-1(e), (S)240.13d-1(f) or (S)240.13d-1(g), check the following box [_]. Note. Schedules filed in paper format shall include a signed original and five copies, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D - --------------------- ------------------- CUSIP NO. 437333107 Page 2 of 5 Pages - --------------------- ------------------- - ------------------------------------------------------------------------------ NAMES OF REPORTING PERSONS 1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only). Bradley D. Cooper - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) 2 (a) [_] (b) [_] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS (See Instructions) 4 PF, AF - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] 5 - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 Australia - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF 3,272,894 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 0 OWNED BY ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 3,272,894 PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 0 - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 3,422,894 - ------------------------------------------------------------------------------ CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 (See Instructions) - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 57.26% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON (See Instructions) 14 IN, CO - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ ------------------- Page 3 of 5 Pages ------------------- This Amendment No. 1 supplements and amends Brad Cooper's ("Cooper") original filing on Schedule 13D dated October 14, 1997 ("Original Filing"). This Amendment No. 1 is being filed to report that Cooper, both individually and through The Goodwill Group Pty Limited ("Goodwill"), a company owned and controlled solely by Cooper, together purchased 3,022,894 shares of common stock ("Common Stock") of Home Security International, Inc. (the "Issuer"). This Amendment No. 1 supplements and amends the Original Filing with respect to Items 1-7 as set forth below. All other items are unchanged from the Original Filing. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Original Filing. Item 1. Security and Issuer. Item 1 of the Original Filing is hereby amended by deleting the last sentence therefrom and inserting the following sentence in its place. The address of the principle executive offices of the Issuer is Unit 3, 167 Prospect Highway, Seven Hills, NSW 2147 Australia. Item 2. Identity and Background. The following subparagraphs of Item 2 of the Original Filing are hereby supplemented and amended to read in their entirety as stated below. Those subparagraphs of Item 2 of the Original Filing not listed below remain unchanged from the Original Filing. (a) Name: Bradley D. Cooper, individually and The Goodwill Group Pty Limited, a company owned and controlled solely by Mr. Cooper. (b) Residence or business address: Cooper's residence is Unit 7 33 The Esplanade, Balmoral NSW 2088, Australia. The business address of The Goodwill Group Pty Limited is Level 15, 77 Pacific Highway, North Sydney 2060 Australia. (c) Mr. Cooper is the Chairman of the Board of Directors and Chief Executive Officer of Home Security International, Inc., which is principally in the home security business. The principal address of Home Security International, Inc. is Unit 3, 167 Prospect Highway, Seven Hills, NSW 2147 Australia. Item 3. Source and Amount of Funds or Other Consideration. Item 3 of the Original Filing is supplemented and amended by inserting the following paragraph at the end thereof: The Goodwill Group, purchased 292,394 shares of the Issuer for approximately $137,608 ($0.469 per share) and the total consideration for said purchase came from Cooper's unencumbered personal funds. Goodwill purchased 2,730,500 shares of the Issuer from FAI Home Security Holdings Pty Limited ("FAI") for approximately $701,738 ($0.257 per share) and the consideration for said purchase was structured as follows: Goodwill paid FAI approximately $140,347 in cash and issued to FAI a promissory note for the approximate remaining amount of $561,390. The promissory note requires that Goodwill pay to FAI: approximately $112,278 on or before June 30, 2001; approximately $140,347 on or before December 31, 2001 and; approximately $308,765 on or before December 31, 2002. The promissory note does not bear interest unless Goodwill defaults on any of the above stated payments, at which point the promissory shall bear interest at a rate at the lesser of ten percent (10%) per annum or the higher rate then allowable by applicable law. The approximate cash payment of $140,347 by Goodwill to FAI came from a portion of a loan in the approximate amount of $531,461 from Negresco Investments Limited, a British Virgin Island company ("Negresco"), beneficially owned by Paul Brown, an affiliate and director of the Company. Although the loan document between Negresco and Goodwill has not been finalized as of the date hereof, the agreed upon terms provide that: (i) the loan shall bear interest at a rate of six percent (6%) per annum, (ii) both principal and interest under the loan shall be due in full no later than two years from the date of the loan, and (iii) the loan shall be secured by a secondary interest in the 2,730,500 shares of the Company's common stock purchased from FAI, a second mortgage on Cooper's home and a personal guaranty from Cooper. ------------------- Page 4 of 5 Pages ------------------- Item 4. Purpose of the Transaction. Item 4 of the Original Filing is hereby deleted in its entirety and is amended to read in its entirety as follows: Cooper's purpose in purchasing the shares of the Issuer (through Goodwill) was to gain control of the Issuer and the transaction was approved by the Issuer's Board of Directors. If Cooper believes that further investment in the Issuer is attractive, whether because of the market price of the Issuer's securities or otherwise, he may acquire Common Stock in the open market or in privately negotiated transactions. Similarly, depending on market and other factors, Cooper may determine to dispose of some or all of the Common Stock he currently owns or otherwise acquired by him, either in the open market or in privately negotiated transactions. Except as set forth above, the Reporting Person currently has no plans or proposals to engage in any of the activities described in items (a) through (j) of the Instructions to Item 4 of Schedule 13D. Item 5. Interest in the Securities of the Issuer. Subparagraphs (a)-(b) of Item 5 of the Original Filing is hereby supplemented and amended to read in its entirety as follows: As of the date hereof, Cooper has acquired beneficial ownership of 3,422,894 shares of Common Stock (Cooper's beneficial ownership now totals 57.26% of the total number of common shares outstanding). Cooper has the sole power to vote and direct the vote and the sole power to dispose and direct the disposition of 3,272,894 of such shares. Of the 3,422,894 shares of Common Stock that Cooper has beneficial ownership of: 2,730,500 shares of Common Stock were purchased on January 12, 2001 by Goodwill, a company owned and controlled solely by Cooper, for consideration in the approximate of $701,738 ($0.257 per share); 292,394 shares of Common Stock were purchased on November 6, 2000 in a private transaction between Goodwill and Adler Corporation Pty Limited, an affiliate of the Company for consideration in the approximate of $137,060 ($0.47 per share); 250,000 shares of Common Stock were purchased by Cooper prior to the Issuer's initial public offering for $10 per share, 95% of which were paid through a five-year promissory note payable to the Issuer and secured by the shares purchased and; 150,000 shares of Common Stock are issuable upon the exercise of Cooper's stock options and carry a $10 exercise price. The above stated percentage ownership calculation assumes 5,828,278 shares of the Issuer are issued and outstanding (as stated in Issuer's Quarterly Report on Form 10-Q dated November 14, 2000), assumes exercise of Cooper's options which are currently exercisable or exercisable within sixty days of the date hereof (150,000) and includes shares owned by Cooper and Goodwill. See Item 2 for information on Control Persons. Item 6. Contracts, Arrangements, Understandings, or Relationships With Respect to Securities of the Issuer. As part of the stock purchase agreement between Goodwill and FAI, Goodwill entered into a pledge agreement and irrevocable proxy (the "Proxy"). Should Goodwill fail to make a required payment under the terms of the promissory note (as detailed in Item 3 hereof), an event of default would occur thereby permitting FAI, in its sole discretion, to transfer to or register the 2,730,500 shares of Common Stock covered by the Proxy in its own name. Until such an event of default occurs, Goodwill controls all voting rights of the 2,730,500 shares of Common Stock covered by the Proxy. Although the loan document between Negresco and Goodwill has not been finalized as of the date hereof, the agreed upon terms provide that Negresco will have a secondary security interest to that of FAI in the 2,730,500 shares of Company common stock purchased by Cooper from FAI. Therefore, should Goodwill fully pay FAI in accordance with the terms of the promissory note (as described in Item 3), but fail to pay the principal and interest under the loan within two years from the date of the loan, then Negresco could take control of all or a portion of the 2,730,500 shares. ------------------- Page 5 of 5 Pages ------------------- Item 7. Material to be Filed as Exhibits. The following contracts are filed as exhibits hereto: a. Promissory Note between Goodwill and FAI dated January 12, 2001. b. Pledge Agreement and Irrevocable Proxy between Goodwill and FAI dated January 12, 2001. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: January 22, 2001 By:/s/ Bradley D. Cooper --------------------- Bradley D. Cooper EX-99.A 2 0002.txt PROMISSORY NOTE PROMISSORY NOTE (Aus) $1,000,000.00 January 12, 2001 FOR VALUE RECEIVED, THE GOODWILL GROUP PTY LIMITED (ACN 056 258 201), a corporation organized and existing under the laws of Australia ("Maker"), promises to pay to the order of FAI HOME SECURITY HOLDINGS PTY LTD., a corporation organized and existing under the laws of Australia ("Holder"), at the office of the Holder, Level 2, AMP Centre, 50 Bridge Street, Sydney, NSW 2000. Australia, or at such other place as the Holder may from time to time designate, the principal sum of ONE MILLION AUSTRALIAN DOLLARS AND ZERO CENTS ((Aus) $1,000,000.00), in lawful money of Australia in immediately available funds, payable on such dates as set forth below. Maker shall pay the aggregate outstanding principal amount of this Note in installments as follows: (i) Two Hundred Thousand Australian Dollars ((Aus) $200.000) on or before June 30, 2001; (ii) Two Hundred Fifty Thousand Australian Dollars ((Aus) $250,000.00) on or before December 31, 2001; and (iii) Five Hundred Fifty Thousand Australian Dollars ((Aus) $550,000.00) on or before December 31, 2002; and (iv) within 30 days after the receipt of any cash dividends paid to the Maker with respect to the stock of owned by Maker (and pledged to Holder pursuant to the Pledge Agreement referred to below), Maker shall make a mandatory prepayment of the outstanding principal amount of this Note in an amount equal to one hundred percent (100%) of such cash dividends. This Note shall not bear interest prior to a default in payment. All principal payments in respect of this Note shall be accompanied by accrued interest on the principal amount being repaid to the date of payment and shall be applied to the remaining payments in inverse order of maturity. This Note may be prepaid in whole or in part at any time. The indebtedness evidenced by this Note is secured by a Pledge Agreement of even date herewith; provided, however, that no remedy conferred on Holder herein or therein or otherwise is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or thereunder or now or hereafter existing at low or in equity or by statute or any other provision of law. Upon notice to the Maker, the entire unpaid principal amount of this Note, together with all accrued interest thereon, shall at the option of the Holder, forthwith become and be due and payable if any one or more of the following events (each an "Event of Default") shall have occurred and be continuing at the time of such notice: (a) If default shall be made in the payment of any installment of the principal of this Note when and as the same shall become due and payable; (b) if the Maker shall (i) admit in writing its inability to pay its debts generally as they become due, (ii) file a petition in bankruptcy or a petition to take advantage of any insolvency act, (iii) make an assignment for the benefit of creditors, (iv) consent to the appointment of a receiver for itself or of the whole or any substantial part of its property, (v) on a petition in bankruptcy filed against it, be adjudicated bankrupt, (vi) file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any similar applicable law or any statute of Australia or the United States of America or any State therein, district or territory thereof, or (vii) breach any representation, warranty, provision or covenant of the Maker in the aforementioned Pledge Agreement. (c) if a court of a competent jurisdiction shall enter an order, judgment, or decree appointing, without the consent of the Maker, a receiver of the Maker or of the whole or any substantial part of its property, or approving a petition filed against it seeking reorganization or arrangement of the Maker under the bankruptcy laws of Australia or the United States of America or any other applicable law or statute, and such order, judgment or decree shall not be vacated or set aside or stayed within ninety (90) days from the date of entry thereof; or (d) if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the Maker or of the whole or any substantial part of its property and such custody or control shall not be terminated or stayed within ninety (90) days from the date of assumption of such custody or control. Upon default in the payment of principal hereof, this Note shall bear interest at the lesser of (i) ten percent (10%) per annum and (ii) the highest rate then allowable by applicable law. No failure by the holder of this Note to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by such holder of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy. The rights and remedies of the holder as herein specified are cumulative and not exclusive of any other rights or remedies which such holder may otherwise have. No modification, recession, waiver, forbearance, release or amendment of any provision of this Note shall be made, except by a written agreement duly executed by the undersigned and the holder hereof. In the event Holder or any holder hereof shall refer this Note to an attorney for collection, Maker agrees to pay, in addition to unpaid principal and interest, all the costs and expenses 2 incurred in attempting or effecting collection hereunder, including without limitation, actual attorney's fees. THIS NOTE IS GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF MAKER AND INSURE TO THE BENEFIT OF HOLDER, AS SUCCESSORS, ENDORSEES AND ASSIGNS. If any term or provision of this Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions herein shall in no way be affected thereby. All payments and prepayments of the principal amount of this Note and interest hereon and the respective dates thereof shall be endorsed by the Holder on the schedule attached hereto and made a part hereof, or on a continuation thereof which shall be attached hereto and made a part hereof, or otherwise recorded by the Holder in its internal records; provided, however, that the failure of the Holder to make such a notation or any error in such a notation shall not in any manner affect the obligations of the Maker to make payments of principal and interest in accordance with the terms of this Note. IN WITNESS WHEREOF, the Maker has hereunto set its hand and executed this Note as of the date first above written. Maker: THE GOODWILL GROUP PTY LIMITED By: /s/ Bradley D. Cooper ------------------------------ As power of attorney for the Goodwill Group PTY Limited Registered No 4237 No 86 3 EX-99.B 3 0003.txt PLEDGE AGREEMENT 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. 2 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 3 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 4 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 5 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, sue 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 6 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 Bradley D. Cooper 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 7 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. 8 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. 9 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/ Bradley D. Cooper ------------------------------ As Power of Attorney for the Group Pty Limited Registered Bank 4237 No 8L FAI HOME SECURITY HOLDINGS PTY LTD., as Lender By /s/ William Howard ---------------------------- Name: William Howard Title: Attorney. As to Section 10 only /s/ Bradley D. Cooper ------------------------------ As Power of Attorney for Bradley D. Cooper Registered No 4237 No 87 10 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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