PLEDGE AND SECURITY INTEREST AGREEMENT
PLEDGE AND SECURITY INTEREST AGREEMENT ("Agreement") dated as
of the 17th day of March, 1997, by and between Gabelli Funds, Inc.,
a New York corporation, and Gabelli Securities, Inc., a New York
corporation (collectively "Lenders"), and Xxxxx Corporation, an
Indiana corporation ("LC"), and Xxxxx Michigan Telephone Holding
Corporation ("LMT").
WITNESSETH
WHEREAS, LC owns all of the issued and outstanding shares of
stock of Xxxxx Entertainment Corporation ("LEC") and Xxxxx
Entertainment Corporation II ("LEC II"), which stock has been
pledged to Gabelli Funds, Inc. pursuant to a Pledge and Security
Interest Agreement dated as of August 12, 1997, and LMT owns 5,123
shares of Common Stock of Upper Peninsula Telephone Company
("UPTC") and expects to acquire the remaining outstanding shares
of UPTC shortly, (all such shares, plus any additional shares of
UPTC, which LMT may acquire, being referred to herein as the
"Shares").
WHEREAS, to induce Lenders to make loans aggregating
$10,000,000 (the "Loans") to LC pursuant to Promissory Notes dated
March 17, 1997 (the "Promissory Notes"), LC and LMT have agreed to
pledge the Shares to Lenders, all as security for the repayment of
all amounts due to Lenders under the Promissory Notes.
NOW THEREFORE, in consideration of the promises and the mutual
representations, warranties and covenants herein contained, the
parties hereto agree as follows:
1. PLEDGE AND SECURITY INTEREST.
A. In consideration of the Loans from the Lenders to LC and
other good and valuable consideration accruing to each
of the parties pledging or granting a security interest
hereunder, each of LC and LMT, as to the collateral
owned by it, hereby grants a security interest to
Lenders in the Shares, as collateral, together with
stock powers duly endorsed in blank. The Lenders shall
hold the Shares, as security for the payment of all
amounts due under the Promissory Notes, and shall not
register the Shares in any other name, encumber, give up
possession or control of, assign, transfer, dispose of
or take any other action with respect to the Shares,
except in accordance with the provisions of Section 5 of
this Agreement.
B. If any person, entity or agency should claim that any
pledge, or grant of a security interest, under this
Agreement (i) would violate any law or require the
consent (which is not received) of any governmental
agency, (ii) would violate any provision, including any
restriction on transfer or similar provisions, or cause
a default under, any existing agreement to which the
parties hereto or any of their subsidiaries or any
entities in which the parties hereto or their
subsidiaries have an interest are parties or by which
any of their assets are bound or (iii) would give any
other person, entity or agency a right to acquire under
an existing agreement any assets owned by the parties
hereto, their subsidiaries or any entities which the
parties hereto or their subsidiaries have an interest
in, LC shall use its best efforts (a) to determine the
validity of such claim and, if it believes the claim
might be valid, (b) to remedy or seek a waiver or other
relief with respect thereto; provided, however, that if
the claim is legally valid, the pledge or grant of the
security interest under this Agreement shall be deemed
void ab initio and not to have been made, but only to
the extent necessary to make the claim not legally
valid, and Lenders will confirm that it has no pledge or
security interest to such extent. If any pledge or
grant of securities shall be deemed void and not to have
been made under this Section 1, LC shall use its best
efforts to grant or cause to be granted to Lenders
pledges or securities interests in other assets to
collateralize appropriately the Loans.
2. DISTRIBUTIONS.
During the term of this pledge and security interest, and so
long as LC is not in default under the Promissory Notes, all
cash dividends, interest, distributions and other cash
amounts received by LC or LMT as a result of their respective
record ownership of the Shares, shall belong to LC or LMT, as
the case may be.
3. VOTING RIGHTS.
During the term of this pledge and security interest, and so
long as LC is not in default under the Promissory Notes, LC
and LMT shall have the right to vote the Shares (including
the giving of written consents) on all corporate questions or
actions requiring shareholder approval; provided that (A) LC
and LMT shall not, without the prior written consent of
Lenders, vote the Shares (i) in a manner which would cause LC
to be in breach of the terms of this Agreement or the
Promissory Notes, or (ii) in favor of any amendment to the
Certificates of Incorporation of UPTC, LEC or LEC II, the
liquidation or dissolution of UPTC, LEC or LEC II, any
merger, consolidation or reorganization of UPTC, LEC or LEC
II, or any sale of substantially all of the assets of UPTC,
LEC or LEC II, except that UPTC may enter into a Plan of
Share Exchange substantially in the form attached as Exhibit
A hereto. In addition, LC and LMT agree that they will cause
UPTC, LEC and LEC II not, without the prior written consent
of Lenders, to vote to issue any additional shares or equity
securities or rights to acquire shares or equity securities,
or redeem any of its outstanding equity securities.
4. ADJUSTMENTS.
In the event that, during the term of this pledge and
security interest, any stock dividend, reclassification,
readjustment, or other change is declared or made in the
capital structure of UPTC, LEC or LEC II, all new,
substituted, or additional shares, or other securities,
issued in respect of the Shares by reason of any such change
shall be delivered to Lenders by LC or LMT and held by the
Lenders under the terms of this Agreement in the same manner
as the Shares.
5. DEFAULT.
In the event that LC defaults in the performance of any of
its obligations under either of the Promissory Notes, and
such default is not cured within twenty (20) business days
after receipt by LC of a written notice advising of same, the
Lenders shall have the rights and remedies available to the
Lenders as secured lenders under the Promissory Notes, this
Agreement and applicable law.
6. TERMINATION.
The security interest granted under this Agreement in the
Shares shall terminate upon the full payment by LC of all of
its obligations under both of the Promissory Notes, and the
Lenders shall immediately redeliver the Shares to LC or LMT,
as the case may be.
7. CERTIFICATES.
The Certificate for the Shares shall bear a legend as
follows: "This Certificate has been delivered to, and is
being held by, Gabelli Funds, Inc., a New York corporation,
and Gabelli Securities, Inc., a New York corporation
(collectively the "Lenders") as security for loans, pursuant
to, and subject to the terms of, a Pledge and Security
Interest Agreement dated as of March 18, 1997 between
Lenders, Xxxxx Corporation, an Indiana corporation, and Xxxxx
Michigan Telephone Holding Corporation, a Michigan
corporation."
8. NOTICES.
All notice, requests, demands or other communication
hereunder shall be in writing, and shall be delivered to the
parties at the addresses set forth below (or to such other
person or entity or address as either party may specify by
due notice to the other party) and shall be deemed to have
been duly given if delivered or mailed, first class postage
prepaid:
(a) If to Lenders:
Gabelli Funds, Inc.
Gabelli Securities, Inc.
000 Xxxxxxxx Xxxxx Xxxxxx
Xxxxx X-000
Xxx, XX 00000-0000
Attn:
Copy to: General Counsel at the same address
(b) If to LC or LMT:
c/x Xxxxx Corporation
0 Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx
Copy to: General Counsel at the same address
9. GOVERNING LAW.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, including
without limitation Article 9 of the New York Uniform
Commercial Code.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year hereinabove set forth.
ATTEST: GABELLI FUNDS, INC.
By:
ATTEST: GABELLI SECURITIES, INC.
By:
ATTEST: XXXXX CORPORATION
By:
Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxx
Secretary Chief Financial Officer
ATTEST: XXXXX MICHIGAN TELEPHONE HOLDING
CORPORATION
By:
Xxxxxx X. Xxxxx
President
