SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
Date of Report (Date of Earliest Event Reported) February 20,
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1998
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AMERICAN ECO CORPORATION
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(Exact name of registrant as specified in its charter)
ONTARIO, CANADA 0-10621 52-1742490
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
No.)
154 UNIVERSITY AVENUE
Toronto, Ontario M5H 3Y9
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code -
(416) 340-2727
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Not Applicable
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(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS.
On February 20, 1998, American Eco Corporation (the
"Company") and Dominion Bridge Corporation, a Delaware
corporation ("Dominion Bridge"), entered into a non-binding
letter of intent (the "Letter of Intent") which provides for (a)
the purchase of $5.0 million of Dominion Bridge common stock by
the Company (the "Dominion Bridge Stock Purchase"), (b) a working
capital loan facility (the "Dominion Bridge Loan Facility") of up
to $25.0 million to be provided by the Company to Dominion
Bridge, (c) the engagement of the Company to provide certain
management services to Dominion Bridge (the "Management
Arrangement"), and (d) the acquisition by the Company of the
business and assets of Dominion Bridge (the "Acquisition
Transaction" and, collectively, the "Transactions"). The
Dominion Bridge Stock Purchase was completed on February 20, 1998
and the Company and Dominion Bridge are currently negotiating the
terms of definitive agreements which are intended to implement
the other Transactions proposed in the letter of intent.
Dominion Bridge Stock Purchase
On February 20, 1998, the Company purchased in a private
placement 1,923,077 units at a purchase price of $2.60 per unit.
Each unit consisted of (a) one share of Dominion Bridge common
stock (a total of 1,923,077 shares of Dominion Bridge common
stock); and (b) 1/10 of a Dominion Bridge common stock purchase
warrant (the "Warrants") (a total of 192,308 shares of Dominion
Bridge common stock underlying the Warrants). Each whole Warrant
entitles the Company to purchase one additional share of Dominion
Bridge common stock at a purchase price of $3.00 per share
(subject to customary anti-dilution provisions), exercisable
through February 20, 2001. The Company has the right to require
Dominion Bridge to register the purchased shares of Dominion
Bridge common stock, as well as the shares of Dominion Bridge
common stock underlying the Warrants under the Securities Act of
1933, as amended (the "Securities Act"); provided, however that
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Dominion Bridge is not required to commence such registration
process unless and until the Company and Dominion Bridge
terminate their negotiations (or any definitive agreement) with
respect to the Acquisition Transaction.
Immediately following the consummation of the Dominion
Bridge Stock Purchase, Michael E. McGinnis, the Chairman,
President and CEO of American Eco, was elected to serve on
Dominion Bridge's Board of Directors for a term expiring in 1999
and on the Executive Committee thereof.
Dominion Bridge Loan Facility
Upon the execution of definitive agreements with respect to
the Dominion Bridge Loan Facility, the Company will provide
Dominion Bridge with a loan facility of up to $25.0 million. The
specific amount that may be borrowed by Dominion Bridge pursuant
to the Dominion Bridge Loan Facility will be determined by the
Company and the Executive Committee of the Dominion Bridge Board
of Directors based upon their mutual assessment of the working
capital requirements of Dominion Bridge; provided, however, that
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American Eco and Dominion Bridge have agreed that a minimum of
$10 million will be placed in trust by March 5, 1998 and funded
under the Dominion Bridge Loan Facility by March 23, 1998.
Outstanding borrowings under the Dominion Bridge Loan
Facility will bear interest monthly at the rate of 9% per annum.
As security for the loans to be made by the Company, Dominion
Bridge will grant the Company a pledge and security interest in
all of its properties and assets, subject only to the prior
pledge and security interest granted by Dominion Bridge to The
Bank of New York ("BNY") pursuant to Dominion Bridge's existing
loan with BNY. All fees and costs borne by the Company in
obtaining such funds will be passed-through to Dominion Bridge
and will be included in, and deducted from, the amounts to be
borrowed by Dominion Bridge under the Dominion Bridge Loan
Facility.
As part of the Dominion Bridge Loan Facility, Dominion
Bridge will authorize the issuance to the Company of Warrants to
purchase up to 10% of the outstanding shares of Dominion Bridge
Common Stock as of the closing date of the Dominion Bridge Loan
Facility, with the number of Warrants to be issued to be based,
pro rata, upon the maximum amount of Dominion Bridge's
outstanding borrowings under the Dominion Bridge Loan Facility
during the term thereof, less pass-through costs.
The final terms of the Dominion Bridge Loan Facility are
subject to the outcome of discussions with BNY and the completion
of definitive loan documentation.
Management Arrangement
Upon the execution of definitive agreements with respect to
the Management Arrangement, the Company will provide Dominion
Bridge with management services in connection with its ongoing,
day-to-day operations. During the term of the Company's
engagement, the Company will, subject to the general supervision
and control of the Executive Committee of the Board of Directors
of Dominion Bridge, furnish Dominion Bridge with the following
management services: (i) financing and administrative support
services, including oversight of collection of accounts
receivable and payment of accounts payable; (ii) marketing
administration and support services; (iii) human resources
management; and (iv) oversight and administration of Dominion
Bridge's operating units. In order to facilitate the provision
of these services, the Chief Executive and Chief Financial
Officers of the Company will be given responsibilities within
Dominion Bridge's organization which are customarily performed by
a corporation's Chief Executive and Chief Financial Officers,
respectively.
As compensation for the management services to be rendered
by the Company to Dominion Bridge, Dominion Bridge will (i) pay
to the Company a management fee of $100,000 per month, and (ii)
reimburse the Company for all reasonable out-of-pocket expenses
and disbursements incurred in rendering such services; provided,
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however, that (a) such management fee will be increased to
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$250,000 if the parties will terminate their discussions (and any
definitive agreement) with respect to the Acquisition
Transaction, and (b) such out-of-pocket expenses and
disbursements will not include the hourly costs of the Company's
personnel when engaged in performing the management services.
Acquisition Transaction
Upon consummation of the Acquisition Transaction, a wholly-
owned subsidiary of the Company and Dominion Bridge will enter
into a merger or other mutually acceptable transaction providing
for the acquisition by the Company of the business and assets of
Dominion Bridge. As consideration for the Acquisition
Transaction, the Company will issue to the stockholders of
Dominion Bridge 7-1/2% convertible subordinated notes (the
"Convertible Notes") in the principal amount of $3.00 for each
outstanding share of Dominion Bridge common stock as of the
closing of the Acquisition Transaction, payable three years after
the closing date of the Acquisition Transaction.
The Convertible Notes will, at the option of the holder, be
convertible into American Eco Common Shares at a conversion rate
of $15.00 per share, subject to standard anti-dilution
provisions, as follows: (i) commencing 180 days following the
issuance date, one-third of each holder's Convertible Notes will
be convertible, (ii) commencing 360 days following the issuance
date, two-thirds of each holder's Convertible Notes will be
convertible, and (iii) commencing 540 days following the issuance
date, all of the Convertible Notes will be convertible. The
Company will have the right to force conversion at a rate of
$15.00 per share of American Eco Common Shares if the average
closing price of American Eco Common Shares on the Nasdaq
National Market will equal or exceed $16.00 per share for any
twenty consecutive-day trading period, and the Convertible Notes
are in good standing and not in arrears.
Both the Convertible Notes and the underlying shares of
American Eco Common Shares will be registered under the
Securities Act and will be listed on the Nasdaq National Market
or such national securities exchange or market system as such
shares are then listed or traded, prior to the closing of the
Acquisition Transaction.
In connection with the Acquisition Transaction, Michel L.
Marengere, the Chairman of the Board and Chief Executive Officer
of Dominion Bridge, Nicolas Matossian, the President and Chief
Operating Officer of Dominion Bridge, and Rene Amyot, a director
of Dominion Bridge, will enter into employment, consulting and
non-compete agreements which will provide for the retention of
their services and the payment of certain commissions and signing
bonuses upon consummation of the Acquisition Transaction and for
a period of three years thereafter, subject to certain
termination rights after six months as to Mr. Marengere. These
agreements will replace the severance agreements which are
currently in effect for Messrs. Marengere and Matossian.
The consummation of the Acquisition Transaction will be
subject, among other things, to the approval of the acquisition
by the Board of Directors and shareholders of Dominion Bridge and
the receipt of all consents, approvals, clearances and other
authorizations necessary to consummate the acquisition, including
(i) compliance with the Hart-Scott-Rodino Antitrust Improvements
Act and the Australian Corporations Law; (ii) the consent of the
Province of Quebec Finance Administration; and (iii) clearance by
the U.S. Securities and Exchange Commission and any required
Canadian authorities of definitive proxy material for the
Dominion Bridge stockholders meeting and of the registration
statement for the Convertible Notes (including receipt of any
required valuation or fairness opinion); and (iv) the consent of
the respective lenders of the Company and Dominion Bridge.
Dominion Bridge currently owns 63% of the outstanding
capital stock of McConnell Dowell Corporation Limited, an
Australian corporation ("MDC"). Under the Australian
Corporations law, American Eco's proposed acquisition of Dominion
Bridge will be deemed to be an indirect downstream acquisition of
MDC, subject to the requirements of the Australian takeover law.
The Company has applied to the Australian Securities Commission
for relief from the requirements of the Australian Corporations
Law. Because the shares of MDC constitute a substantial part of
the assets of Dominion Bridge, the relief granted by the
Australian Securities Commission may be conditioned upon American
Eco making an offer for the shares of MDC which it does not
already own within a prescribed period after the completion of
its acquisition of Dominion Bridge.
The Letter of Intent provides that until April 6, 1998
(subject to the execution of definitive agreements for the
Dominion Bridge Loan Facility and the Management Arrangement by
March 23, 1998), Dominion Bridge will deal exclusively with
American Eco with respect to the sale of the business and assets
of Dominion Bridge. If Dominion Bridge fails to honor this
exclusivity arrangement, American Eco may, under certain
circumstances, be entitled to receive a fee of US $3.5 million.
The specific terms of the Acquisition Transaction between
Dominion Bridge and the Company will be included in a mutually
acceptable acquisition agreement which will contain the
provisions outlined above and such other terms, conditions and
provisions customary for such a transaction.
Effect of Letter of Intent
The Letter of Intent provides that the parties will commence
the negotiation of definitive agreements with respect to the
Transactions immediately, with a view to their execution as soon
as practicable, provided that if (a) any of the events set forth
in the time schedule attached to the letter of intent are not
completed by the deadlines provided for therein, (b) definitive
agreements with respect to the Loan Transaction and the
Management Arrangement are not executed on or prior to March 23,
1998, or (c) a definitive agreement with respect to the
Acquisition Transaction is not executed on or prior to April 6,
1998, or, in each case, by such later date or dates as shall be
mutually agreed to by the parties, the respective obligations of
the parties will terminate and the letter of intent will be of no
further force or effect, except with respect to certain specific
matters set forth therein.
The foregoing is a summary of the Transactions provided for
in the Letter of Intent. For more complete information,
reference is made to the exhibits hereto which include the Letter
of Intent, the Securities Purchase Agreement, the Warrant
Agreement and the Registration Rights Agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(C) EXHIBITS.
Exhibit
Number Description of Document
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10.1 Letter of Intent, dated February 20, 1998,
between American Eco Corporation and
Dominion Bridge Corporation.
10.2 Securities Purchase Agreement, dated as of
February 20, 1998, between American Eco
Corporation and Dominion Bridge Corporation.
10.3 Warrant Agreement, dated February 20, 1998,
issued by Dominion Bridge Corporation.
10.4 Registration Rights Agreement, dated as of
February 20, 1998, between American Eco
Corporation and Dominion Bridge Corporation.
99.1 Press Release, dated February 26, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
Date: February 27, 1998
AMERICAN ECO CORPORATION
By: /s/ Michael E. McGinnis
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Name: Michael E. McGinnis
Title: Chairman, President and CEO