Exhibit 2(3)
PLAN OF REORGANIZATION & SHARE PURCHASE AGREEMENT dated as of May 11, 1998
("Purchase Agreement") between Telefficiency Holding Corporation, a Delaware
corporation ("Delco") and Telefficiency Corporation, an Ontario, Canada
corporation ("Telefficiency").
Telefficiency and Delco are desirous of effecting a corporate
reorganization of Telefficiency on a tax deferred basis (the "Reorganization")
upon the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual covenants
and representations hereinafter stated and for other good and valuable
considerations the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. Definitions.
Articles of Amendment: shall mean the Articles of Amendment attached as
Exhibit 2(a)(iii) hereto.
Call Right: shall have the meaning set forth in Section
6(c).
Class A Exchangeable Shares: shall mean the Class A Exchangeable Shares, no
par value, of Telefficiency, having those
attributes set forth in the Articles of
Amendment.
Class B Exchangeable Shares: shall mean the Class B Exchangeable Shares, no
par value, of Telefficiency, having those
attributes set forth in the Articles of
Amendment.
Common Shares: shall mean the Common Shares no par value of
Telefficiency.
Delco: shall mean Telefficiency Holding Corporation, a
Delaware Corporation.
Delco Class A Common Shares: shall mean the Class A Voting and Participating
Common Shares of Delco having a par value of
$.0001 per share.
Delco Class B Common Shares: shall mean the Class B Convertible Voting and
Non-participating Common Shares of Delco having
a par value of $.0001 per shares.
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Effective Date: shall mean the date on which the second set of
Articles of Amendment are filed and receipted by
the appropriate regulatory bodies in Ontario,
Canada.
Equivalent Factor: shall mean, in the case of the Class A
Exchangeable Shares the factor of 1.0, and in
the case of Class B Exchangeable Shares the
factor of 0.5, providing, however, that such
Equivalent Factor shall be adjusted from time to
time in proportion to any splits or
consolidation of the Delco Class A Common Shares
or any stock dividends issued on the Delco Class
A Common Shares of Telefficiency Holding
Corporation.
Equivalent Number of
Exchangeable Shares: shall be the number of Exchangeable shares
multiplied by the respective Equivalent Factor.
Exchangeable Shares: shall mean either the Class A Exchangeable
Shares or the Class B Exchangeable Shares of the
Corporation, as the case may be.
Put Option: shall have the meaning set forth in Section 5(a)
hereof.
Redemption Right: shall have the meaning set forth in Section 7(a)
hereof.
Restriction Period: shall mean a period of one year commencing on
the Effective Date.
Retraction Right: shall have the meaning set forth in Section 6(a)
hereof.
Share Consolidation: shall have that meaning set forth in Section
2(a)(iii) hereof.
Special Common Shares: shall mean the Special Common Shares, no par
value of Telefficiency, having those attributes
set forth in the Articles of Amendment.
Stock Dividend: shall have that meaning set forth in Section
2(a)(i) hereof.
Telefficiency: shall mean Telefficiency Corporation, a
corporation formed and existing under the laws
of Ontario, Canada.
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2. Share Restructuring.
(a) Stock Dividend and Consolidation.
(i) On or prior to the Effective Date, Telefficiency shall declare and pay
a stock dividend in respect of its Common Shares (the "Stock Dividend") of
0.379862735 Common Shares for each issued and outstanding Common Share.
(ii) Notwithstanding the foregoing, Messrs. Xxxxxxx Xxxxxx and Xxxxxxx
Xxxxxxx and parties related and associated with them (collectively the "Control
Group") will irrevocably waive their rights in and to the Stock Dividend.
(iii) Subsequent to the payment and receipt of the Stock Dividend and
subject to shareholder approval, Telefficiency will or will cause existing
Articles of Incorporation to be amended (the "Articles of Amendment") to, among
other things consolidate the 7,589,241 then to be outstanding and allotted
Common Shares into 5,500,000 Common Shares of Telefficiency (the "Share
Consolidation"). It is intended that as a result of the Stock Dividend and Share
Consolidation, the Control Group will suffer a reduction in their existing
Common Share ownership by 2.11% and all remaining Shareholders will then enjoy
an increase in their interest in the Company by 34.88% over the ownership
division as at the record date. The Articles of Amendment shall be substantially
as set forth in Exhibit 2(a)(iii) hereto.
(b) Exchangeable Shares of Telefficiency into Delco Class A Common Shares.
(i) The Articles of Amendment will provide that, in addition to the
existing unlimited number of authorized Common Shares, the share capital of
Telefficiency be further increased and amended, by creation of: (1) Special
Common Shares and (2) two new classes of exchangeable shares consisting of Class
A Exchangeable Shares and Class B Exchangeable Shares.
(ii) Pursuant to the Articles of Amendment, each Common Share will be
converted into a Class A Exchangeable Share on the basis of one Class A
Exchangeable Share for each Common Share. However, Telefficiency Shareholders
will have the option to exchange all or a portion of their Common Shares for
Special Common Shares, thus realizing the benefit of the capital gains exemption
afforded under applicable Canadian tax legislation. Pursuant to the Articles of
Amendment, each Special Common Shares issued will be converted into two Class B
Exchangeable Shares.
(iii) The Class A Exchangeable Shares and Class B Exchangeable Shares shall
have the designations, powers and attributes set forth in the Articles of
Amendment.
(iv) On the Effective Date, Telefficiency will have no voting securities of
any type issued and outstanding and, except as contemplated hereby with respect
to the issuance to Delco, no commitment or obligation to issue any such voting
securities.
3. Sale, Purchase and Delivery of Delco Class B Common Shares.
In order to provide the Telefficiency Shareholders with a pro rata voting
interest in Delco, on the Effective Date subject to the terms and conditions of
this Agreement, Telefficiency agrees to sell,
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transfer, convey, assign and deliver 5,500,000 Common Shares (the
"Reorganizational Shares") to Delco, and Delco agrees to purchase the
Reorganizational Shares in consideration, in part, of the delivery to the
Telefficiency Shareholders of 5,500,000 of Delco Class B Common shares on the
basis of one share of Delco Class B Common Shares for every (i) one Class A
Exchangeable Share or (ii) two Class B Exchangeable Shares owned of record by
such Telefficiency Shareholder. The certificates representing the Delco Class B
Common Shares shall be delivered to the Telefficiency Shareholders at the
addresses set forth in Telefficiency's Shareholder register.
4. Restrictions on Transfer.
(a) Once issued and delivered as aforesaid, neither the Delco Class B
Common Shares nor the Class A Exchangeable shares (the "Class A Exchangeable
Unit") on the one hand and/or the Delco Class B Common Shares and the Class B
Exchangeable Shares (the "Class B Exchangeable Unit") on the other hand, may be
detached and/or transferred or otherwise disposed of separate and apart from the
other securities constituting such Unit.
(b) No transfer or other disposition of either a Class A Exchangeable Unit
or Class B Exchangeable Unit will be permitted during the Restriction Period.
(c) Upon termination of the Restriction Period, a Class A Exchangeable Unit
and Class B Exchangeable Unit may only be transferred in accordance with (i)
Sections 5, 6 and 7 hereof, or (ii) an applicable exemption from the
registration requirements of the Securities Act of 1933, as amended.
(d) The certificates representing the Class A Exchangeable Shares,
Class B Exchangeable shares and the Delco Class B Common Shares shall bear a
legend reflecting the foregoing transferability restrictions.
5. Exchange Rights.
(a) Notwithstanding the restrictions set forth in Section 4 hereof, at any
time after the expiration of the Restriction Period and subject to the further
provisions of this Section 5,
(i) each holder of Class A Exchangeable Shares shall have the right to
sell (the "Class A Put Option") a Class A Exchangeable Share to Delco in
exchange, subject to adjustments as provided in the Articles of Amendment,
for one Delco Class A Common Share for each Class A Exchangeable Share; and
(ii) each holder of Class B Exchangeable Shares shall have the right
to sell (the "Class B Put Option") two Class B Exchangeable Shares to Delco
in exchange, subject to adjustments as provided in the Articles of
Amendments, for one Delco Class A Common Share. The Class A Put Option and
the Class B Put Option are sometimes collectively referred to as the "Put
Options."
(b) the Put Options are exercisable by delivery to Delco of the notice (the
"Put Notice") in the form attached hereto as Exhibit 5(b).
(c) The exercise of the Put Options is further conditioned upon the
delivery by the exercising Telefficiency Shareholder to Delco of (i) the
certificate(s) representing the Class A
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Exchangeable Shares and Class B Exchangeable Shares which are the subject of the
Put Options, and (ii) as well as the certificate(s) representing one Delco B
Common Share for (i) in the case of Class A Exchangeable Shares, every one Class
A Exchangeable Share tendered and (ii) in the case of the Class B Exchangeable
Shares, every two Class B Exchangeable Shares tendered. All such certificates
shall be duly endorsed, in blank, for transfer. Within 10 business days of
receipt the Put Notice and all requisite certificates, Delco will issue the
Delco Class A Common Shares to the exercising Telefficiency Shareholders. The
Delco Class B Common Shares transferred pursuant to the exercise of Put Options
shall be restored to the status of authorized and unissued Delco Class B Common
Shares.
6. Retraction and Overriding Call Right.
(a) Holders of Class A Exchangeable Shares or Class B Exchangeable Shares
may, at any time after the Restriction Period, require Telefficiency to redeem
(the "Retraction Right"), respectively, all or any portion of such Exchangeable
Shares owned of record by such holder, for a redemption price equal to the fair
market value at the time of redemption of the Equivalent Number of Delco Class A
Common Shares to be paid and satisfied by the delivery of an Equivalent Number,
of Delco Class A Common Shares of Delco and any additional amount representing
any declared and unpaid dividends on the respective Exchangeable Shares.
(b) The Retraction Right is exercisable by delivery to Telefficiency and
Delco of the notice (the "Retraction Notice") in the form attached hereto as
Exhibit 6(b).
(c) The exercise of the Retraction Right is further conditioned on the
delivery by the exercising Telefficiency Shareholder to (i) Telefficiency, the
certificates representing the Class A or Class B Exchangeable Shares, as the
case may be, being tendered and to (ii) Delco, the certificate(s) representing
one Delco B Common Share for (i) in the case of Class A Exchangeable, every one
Class A Exchangeable Share tendered and (ii) in the case of the Class B
Exchangeable, every two Class B Exchangeable Shares tendered. All such
certificates shall be duly endorsed in blank, for transfer to Telefficiency in
the case of the Class A or Class B Exchangeable Shares and to Delco in the case
of the Delco Class B Common Shares. Subject to its Call Right, within 20
business days of the receipt by Telefficiency and Delco of the Retraction Notice
and the requisite certificates, Delco will issue an Equivalent Number of Delco
Class A Common Shares to the tendering Telefficiency Shareholder. Delco B Common
Shares tendered in connection with the exercise of the Retraction Right shall be
restored to the status of authorized and unissued Delco Class B Common Shares.
(d) The Retraction Right provided in Section 6(a) herein is subject to the
overriding call right (the "Call Right") of Delco, pursuant to which Delco may
acquire the Class A Exchangeable or Class B Exchangeable Shares tendered in
consideration of the issuance of the Equivalent Number, subject to adjustment as
provided in the Articles of Amendment, of Delco Class A Common Shares in
priority to Telefficiency's obligations under the Retraction Right. The Call
Right may be exercised by Delco within 20 days of receipt of the Retraction
Notice by providing written notice thereof to the tendering Telefficiency
Shareholder. Upon the exercise of the Call Right by Delco, the certificate(s)
representing the Class A Exchangeable and Class B Exchangeable Shares as well as
the certificate(s) representing Delco Class B Common Shares delivered along with
the Retraction Notice to Delco will be deemed delivered pursuant to Delco's
exercise of its Call Right. Upon consummation of the Call Right, the Delco Class
B Common Shares shall be restored to the status of authorized and unissued Delco
Class B Common Shares.
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7. Redemption Rights.
(a) Telefficiency shall have the right at any time after June 1, 2028 to
redeem (the "Redemption Right"), respectively, the Class A Exchangeable and
Class B Exchangeable Shares for a redemption price equal to the fair market
value at the time of redemption of the Equivalent Number of Delco Class A Common
Shares, to be paid and satisfied by the delivery of the Equivalent Number of
Delco Class A Common Shares, and an additional amount representing any declared
and unpaid dividends on Class A or Class B Exchangeable Shares.
(b) The Redemption Right is exercisable by delivery of the notice (the
"Redemption Notice") in form attached hereto as Exhibit 7(b).
(c) Delivery of the Delco Class A Shares to the Telefficiency Shareholders
is subject to the further condition that the Telefficiency Shareholders deliver
(i) to Telefficiency the certificates representing the Class A or Class B
Exchangeable Shares to be redeemed and (ii) to Delco, the certificate(s)
representing one Delco B Common Share for (i) in the case of Class A
Exchangeable, every one Class A Exchangeable Share redeemed and (ii) in the case
of the Class B Exchangeable, every two Class B Exchangeable Shares being
redeemed. All such certificates are to be duly endorsed in blank for transfer,
in the case of the Class A and Class B Exchangeable Shares to Telefficiency and
in the case of the Delco Class B Common Shares to Delco.
(d) Upon consummation of the Redemption Right, the Delco B Common Shares
delivered to Delco shall be restored to the status of authorized and unissued
Delco Class B Common Shares.
8. Representations, Warranties and Covenants of Delco.
Delco hereby represents and warrants to, and covenants with Telefficiency
that:
(a) Delco is a corporation duly and validly organized and existing under
the laws of the State of Delaware, with full power and authority to execute and
deliver this Agreement, and to perform its obligations hereunder.
(b) Delco has duly and lawfully executed and delivered this Agreement, and
this Agreement represents the legally binding obligation of Delco, enforceable
in accordance with the terms and conditions hereof, subject to any applicable
bankruptcy, reorganization, insolvency, or other laws, now or hereafter in
effect, affecting creditors' rights generally, and with respect to the specific
performance hereof, to equitable doctrines applicable thereto.
(c) Delco agrees that the certificates for Telefficiency's Common Shares to
be purchased by it shall bear an appropriate legend indicating that such Common
Shares will be subject to the restrictions set forth in Section 4 herein and may
be sold only if registered under the Securities Act of 1933, as amended (the
"Act"), or pursuant to an applicable exemption from the registration
requirements of the Act, or if the sale is not subject to the Act.
9. Representations, Warranties, Covenants and Certain Agreements of
Telefficiency.
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Telefficiency hereby represents and warrants to, and covenants and further
agrees with, Delco that:
(a) Telefficiency is a corporation duly and validly organized and existing
under the laws of the Ontario, Canada, with full power and authority to execute
and deliver this Agreement, and to perform its obligations hereunder.
(b) Telefficiency has duly and lawfully executed and delivered this
Agreement, and this Agreement constitutes a valid and binding obligation of
Telefficiency enforceable in accordance with its terms and conditions hereof,
subject to any applicable bankruptcy, reorganization, insolvency or other laws,
now or hereafter in effect, affecting creditors' rights generally and with
respect to the specific performance hereof, to equitable doctrines applicable
thereto. Telefficiency's shareholders have duly approved and authorized the
Reorganization, the execution and delivery by Telefficiency of this Agreement
and the consummation by Telefficiency of the transactions contemplated hereby.
(c) Telefficiency agrees that the certificates for Delco's Class B Common
Shares to be acquired by it shall bear an appropriate legend indicating that
such Shares will be subject to the restrictions set forth in Section 4 herein
and may be sold only if registered under the Securities Act of 1933, as amended
(the "Act"), or pursuant to an applicable exemption from the registration
requirements of the Act, or if the sale is not subject to the Act.
10. Survival of Representations and Warranties; Etc.
(a) The representations, warranties, covenants and agreements of each of
the parties hereto set forth in this Agreement shall survive the Effective Date
and any investigation made by or on behalf of the other party.
(b) All statements contained in any instrument delivered by or on behalf of
any party hereof pursuant to, or in connection with, the transactions
contemplated by this Agreement, shall be deemed representations and warranties
by that party.
(c) The representations, warranties, covenants and agreements herein
contained are and shall be binding upon and are and shall be for and shall inure
to the benefit of the parties hereto and their successors and assigns, and shall
not be binding upon or for or inure to the benefit of any other person.
11. Notices and Deliveries.
All notices, deliveries, requests and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered,
transmitted by facsimile or if mailed by certified or registered mail, pre-paid
to a party at the address set forth below to this agreement or at such other
address as shall be given in writing by either party to the other.
If to Delco:
Telefficiency Holding Corporation
0000 Xxxxxxxx Xxx, Xxxxxxxx 00
Xxxxxxxxxxx, Xxxxxxx X0X 0X0 Xxxxxx
Facsimile: (000) 000-0000
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If to Telefficiency:
Telefficiency Corporation
0000 Xxxxxxxx Xxx, Xxxxxxxx 00
Xxxxxxxxxxx, Xxxxxxx X0X 0X0 Xxxxxx
Facsimile: (000) 000-0000
If to a Telefficiency Shareholder:
To the address for such shareholder set forth on
Telefficiency's Shareholder Registry.
12. Modifications.
This Agreement represents the entire agreement of the parties hereto with
respect to the matters contemplated hereby except where reference is made
otherwise. This Agreement may be modified only by written agreement signed by
the parties hereto.
13. Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
14. Captions and Paragraph Headings.
Caption and Section headings used herein are for convenience only and are
not a part of this Agreement and shall not be used in construing it.
15. Choice of Law.
This Agreement will be governed by and construed and enforced in accordance
with the laws of the State of New York.
16. Succession.
This Agreement shall inure to the benefit of and be binding upon the
Telefficiency's heirs, executors, administrators, and legal representatives,
successors and assigns and Delco's successors and assigns.
17. Use of Pronouns.
The use of the masculine third person singular pronoun in this Agreement
shall be deemed to include the feminine and neuter third person singular
pronoun.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
TELEFFICIENCY HOLDING CORPORATION
By: _____________________________
TELEFFICIENCY CORPORATION
By: _____________________________
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