EXHIBIT 3
DEERE PARK EQUITIES, L.L.C.
000 XXXXXX XXXX, XXXXX 000
XXXXXXXXXX, XXXXXXXX 00000
August 19, 1997
Xx. Xxxxxx X. Xxxxxxxxx
Xx. Xxxxxxx X. Xxxxxxxxx
c/o Dominion Bridge Corporation
500 Notre Dame
Lachine (Quebec) CANADA H8S 2B2
Gentlemen:
The purpose of this letter is to set forth our agreement with respect to a
transaction involving certain shares of common stock, par value $0.001 per share
(the "DBC Common Stock"), in Dominion Bridge Corporation, a Delaware corporation
("DBC"), now owned by Deere Park Equities, L.L.C., an Illinois limited liability
company ("Deere Park"), and now owned or to be acquired by Xxxxxx X. Xxxxxxxxx
("Marengere"), Xxxxxxx X. Xxxxxxxxx ("Xxxxxxxxx"), Xxxxx Xxxxxxxxxxxxxx
("Xxxxxxxxxxxxxx"), Xxxxxxx Xxxxxxx ("Xxxxxxx"), J. Xxxxxx Xxxxxxx ("Xxxxxxx"),
Xxxxxx Xxxxxxxx ("Xxxxxxxx"), Xxxxxxx Xxxxxxx ("Xxxxxxx"), Xxxxxx Xxxxxx
("Xxxxxx"), Xxx Shtym ("Shtym"), Xxxxxxx Xxxxxxx ("Xxxxxxx"), Xxxxxxxxx
Prud'homme ("Prud'homme") and Xxxx Xxxxx ("Xxxxx") (collectively, the
"Management Stockholders"). Marengere and Xxxxxxxxx hereinafter referred to
as the "Executive Stockholders," and Deere Park and the Management Stockholders
are sometimes hereinafter referred to collectively as the "Parties."
1. CURRENT STOCK OWNERSHIP OR ENTITLEMENTS.
a. DEERE PARK. Deere Park currently owns:
i. 1,850,000 shares of DBC Common Stock which it acquired in a
private transaction at a purchase price of approximately $2.015
per share on August 7, 1997 (the "Private Deere Park Shares");
and
ii. 260,100 shares of DBC Common Stock which it acquired in open
market purchases (the "Market Deere Park Shares").
Messrs. Marengere and Xxxxxxxxx
Dominion Bridge Corporation
August 19, 1997
Page 2
b. MANAGEMENT STOCKHOLDERS. The Management Stockholders currently own:
i. a total of 2,057,160 shares of DBC Common Stock (the "Current
Management Shares"), allocated among them as follows:
MANAGEMENT NUMBER OF CURRENT
STOCKHOLDER MANAGEMENT SHARES*
Marengere 1,659,792
Xxxxxxxxx 250,000
Xxxxxxxxxxxxxx 20,000
Xxxxxxx --
Xxxxxxx 20,000
Xxxxxxxx 20,000
Delorme 31,868
Jordan 20,000
Shtym 20,000
Xxxxxxx 15,500
Prud'homme --
Xxxxx --
* Certain of the Current Management Shares are held by
corporations controlled by the Management Stockholders,
but the Management Stockholders are the beneficial
owners of the Shares.
; and
ii. immediately exercisable options (the "Management Options") to
acquire an additional 2,380,000 shares of DBC Common Stock at an
exercise price of $2.00 per share (the "Management Option
Shares"), allocated among them as follows.
Messrs. Marengere and Xxxxxxxxx
Dominion Bridge Corporation
August 19, 1997
Page 3
MANAGEMENT NUMBER OF
STOCKHOLDER MANAGEMENT OPTIONS
Marengere 825,000
Matossian 400,000
Xxxxxxxxxxxxxx 225,000
Xxxxxxx 175,000
Gelinas 200,000
Xxxxxxxx 110,000
Delorme 120,000
Jordan 50,000
Shtym 50,000
Xxxxxxx 20,000
Prud'homme 105,000
Xxxxx 100,000
2. FORMATION OF NEWCO
a. AGREEMENT TO FORM. The Parties hereby agree to form a partnership or
similar entity ("Newco") for the purpose of holding title to, and
voting rights with respect to, certain of their shares of DBC Common
Stock. The Parties will mutually agree upon the jurisdiction of
formation of Newco and on the terms of the definitive documents
governing its operation (the "Newco Governing Documents"), subject to
the approval of the form of organization by their respective tax
advisers.
b. OWNERSHIP. The owners of Newco will be Deere Park and the Executive
Stockholders as follows: 50% to Deere Park and 50% to the Executive
Stockholders (25% each).
c. CAPITAL CONTRIBUTIONS. The owners will contribute to Newco the
following in return for their respective ownership interests:
i. in the case of Deere Park, the Private Deere Park Shares and the
Market Deere Park Shares; and
Messrs. Marengere and Xxxxxxxxx
Dominion Bridge Corporation
August 19, 1997
Page 4
ii. in the case of the Executive Stockholders, upon exercise of the
Management Options at funding of the Loan (as hereinafter
defined), the Management Option Shares.
The shares of DBC Common Stock contributed to Newco are hereinafter
referred to as the "Newco Shares."
d. VOTING RIGHTS. In addition:
i. The Management Stockholders will grant to Newco proxies or
similar rights pursuant to which Newco will have the sole right
to vote all of the Current Management Shares.
ii. Each of the Parties will grant to Newco proxies or similar rights
pursuant to which Newco will have the sole right to vote any
shares of DBC Common Stock that they may acquire at any time
prior to or during the term of Newco's existence.
e. MANAGEMENT. Newco will be managed by Xxxxxxx Xxxxxxx, Xxxxxxx
Xxxxxxx, Marengere and Xxxxxxxxx, who will be required to vote
unanimously with respect to:
i. the voting of the Newco Shares;
ii. the voting of the proxies for shares of DBC Common Stock other
than the Newco Shares;
iii. the disposition of the Newco Shares under any circumstances other
than an uncured default under the Note (as hereinafter defined)
or termination of Newco; and
iv. all other matters respecting the business, operations and
management of Newco.
Messrs. Marengere and Xxxxxxxxx
Dominion Bridge Corporation
August 19, 1997
Page 5
f. TERM AND TERMINATION. Newco will have a five-year term expiring
August 31, 2002, but will terminate prior to the expiration of such
term in the event that:
i. there is an uncured default under the Note;
ii. the average closing market price of the DBC Common Stock on
NASDAQ for any 10 consecutive trading days is more than $5.00 per
share, unless the management of Newco otherwise unanimously
agrees;
iii. a majority of the shares of DBC owned by persons other than
Newco, Deere Park or the Management Stockholders are tendered to
a third party; or
iv. the management of Newco unanimously agrees to terminate Newco.
3. LOAN TO NEWCO.
a. THE LOAN. Deere Park will lend to the Executive Stockholders the sum
of $4,760,000 (the "Loan"), to be allocated among the Management
Stockholders in proportion to their respective Management Options as
set forth in paragraph 1.b. above. Assuming prompt satisfaction of
the conditions to funding of the loan set forth in paragraph 4 below,
the Loan will be funded not later than 3:00 p.m. New York time on
Wednesday, August 20, 1997. The proceeds of the Loan will be applied,
concurrently with funding of the Loan, to fund the exercise of the
Management Options, whereupon the Management Option Shares will
immediately be contributed to Newco.
b. NOTE. The Loan to each Executive Stockholder will be evidenced by a
promissory note (the "Note"). Upon contribution of the Management
Option Shares to Newco, the obligations of each Executive Stockholder
under the Note will be assumed by Newco. The Note will:
i. mature on August 31, 2002 (the "Maturity Date");
Messrs. Marengere and Xxxxxxxxx
Dominion Bridge Corporation
August 19, 1997
Page 6
ii. not bear interest prior to the Maturity Date but provide for a
default rate of interest of 12% per annum commencing on the date
of default and continuing through the default period;
iii. specify as events of default or acceleration any of the
following:
(a) various events of bankruptcy or insolvency affecting DBC,
Newco, Deere Park or the Executive Stockholders;
(b) average closing market price of the DBC Common Stock on
NASDAQ for 10 consecutive trading days being less than $1.00
per share;
(c) Deere Park at any time during the term of Newco having fewer
than two nominees on DBC's Board of Directors other than
temporary vacancies by reason of death or resignation; or
(d) either of the Executive Stockholders being removed as a
director or executive officer of DBC as the result of a
proxy contest;
iv. be subject to mandatory prepayments to the extent that margin
with respect to the Loan is less than required under Regulation T
promulgated by the Board of Governors of the Federal Reserve
System.
c. SECURITY AGREEMENT. The Note, when assigned to Newco, will be secured
pursuant to a pledge and security agreement (the "Security Agreement")
pursuant to which Newco will pledge to and grant Deere Park a security
interest in and to all of the Newco Shares.
d. GUARANTY. The Note will be subject to a limited recourse guaranty by
the Executive Stockholders (the "Guaranty"), which will be secured by
a pledge to Deere Park of 500,000 of the Current Management Shares
owned by them). Liability under the Guaranty will be limited to the
Messrs. Marengere and Xxxxxxxxx
Dominion Bridge Corporation
August 19, 1997
Page 7
500,000 pledged shares. The terms of the Security Agreement and the
Guaranty will require that, in the event of an uncured default under
the Note, the Note will be paid with Newco Shares in the manner
specified in paragraph 5.a. below.
4. CONDITIONS TO FUNDING OF LOAN. The following will be conditions to funding
of the Loan:
a. DBC BOARD ACTION. The Company's current Board of Directors will have:
i. taken such actions as will be necessary, in the judgment of the
Parties and their respective counsel, to assure that none of the
transactions contemplated hereby will:
(a) trigger the exercise of any rights granted to holders of DBC
Common Stock under DBC's Rights Agreement dated as of
November 26, 1996;
(b) trigger any "change of control" provisions contained in the
service agreements of DBC's executive employees or DBC's
stock appreciation rights plan; or
(c) be subject to the restrictions on business combinations with
interested stockholders imposed by Section 203 of the
Delaware General Corporation Law; and
ii. appointed two nominees of Deere Park to the DBC Board of
Directors.
b. REGISTRATION OF MANAGEMENT OPTION SHARES. Deere Park and its counsel
will have verified that the Management Option Shares have been
registered with the Securities and Exchange Commission on a Form
S-3/S-8 Registration Statement and therefore may publicly be resold.
c. AUTHORITY OF EXECUTIVE STOCKHOLDERS. Deere Park and its counsel will
be reasonably satisfied as to the authority of the Executive
Stockholders to contribute the Management Option Shares to Newco.
Messrs. Marengere and Xxxxxxxxx
Dominion Bridge Corporation
August 19, 1997
Page 8
5. PAYMENT OF THE NOTE; ALLOCATION OF GAIN.
a. PAYMENT OF THE NOTE. The Note will be paid:
i. with the Management Option Shares; and
ii. if the Management Option Shares are insufficient to provide for
payment in full of the Note:
(a) first, with the Current Management Shares pledged as
collateral security for the Guaranty; and
(b) then, to the extent of any remaining insufficiency, with the
Private Deere Park Shares and the Market Deere Park Shares.
Any Management Option Shares, Currrent Management Shares, Private
Deere Park Shares or Market Deere Park Shares applied to payment of
the Note may be either transferred "in kind" to Deere Park or sold and
the net proceeds of sale paid to Deere Park.
b. ALLOCATION OF GAIN ON MANAGEMENT OPTION SHARES. Any Management Option
Shares (or the proceeds thereof) not used to pay the Note will be
allocated 30% to Deere Park and 70% to the Executive Stockholders (in
proportion to their contributions of Management Option Shares to
Newco).
c. ALLOCATION OF GAIN OR PRIVATE DEERE PARK Shares. Any Private Deere
Park Shares and Market Deere Park Shares (or the proceeds thereof) not
used to pay the Note will be allocated 60% to Deere Park and 40% to
the Executive Stockholders.
Messrs. Marengere and Xxxxxxxxx
Dominion Bridge Corporation
August 19, 1997
Page 9
d. IN-KIND DISTRIBUTIONS. In the event of the termination and
liquidation of Newco, subject to repayment of the Note, the Newco
Shares may be distributed "in kind" to the owners of Newco in
accordance with their respective interests in gain as described in
paragraphs 5.b. and 5.c. above based on the current market value of
the shares using a 10-day closing average.
6. SPECIAL COVENANTS.
a. OBLIGATION TO INFORM. The Executive Stockholders agree that, at all
times during the term of Newco while they are serving in executive or
managerial capacities with DBC, they will keep Newco's representatives
on the DBC Board of Directors fully informed of all material
developments affecting DBC and its business (it being understood that
such obligation is in no way intended to interfere with or abrogate
the Executive Stockholders' fiduciary responsibilities to DBC and its
other stockholders).
b. NO PARTICIPATION IN CERTAIN ACTIONS. Subject to performance by the
Management Stockholders of their obligations under this Agreement,
Deere Park agrees, on behalf of itself and its affiliates, to the
extent legally permissible, that it will not join in or initiate any
shareholder's derivative lawsuit naming any of the Management
Stockholders a defendant with respect to any actions or omissions
occurring prior to the date hereof, or initiate any proxy contest.
c. NO SHORT SALES. Deere Park agrees that during the term of the Note
neither it nor any of its affiliates will not effect any short sales
of DBC Common Stock.
7. DEFINITIVE DOCUMENTATION. The terms of this letter agreement, which is a
binding contract on the parties, supersede all prior agreements, whether
written or oral, among the parties with respect to the subject matter
hereof. However, this letter agreement will, as soon as practicable, be
superseded by definitive documentation mutually satisfactory to the
Parties and their respective
Messrs. Marengere and Xxxxxxxxx
Dominion Bridge Corporation
August 19, 1997
Page 10
counsel, including, without limitation, the Newco Governing Documents, the
Note, the Security Agreement and the Guaranty.
8. EXPENSES. Each party shall be responsible for the payment of its own legal
and other expenses related to the transaction contemplated hereby and the
preparation of all definitive documents relating thereto.
If the foregoing correctly states our agreement, please so acknowledge and
confirm by signing this letter in the space provided below and returning it to
the undersigned.
Very truly yours,
DEERE PARK EQUITIES, L.L.C.
By:
-------------------------
Xxxxxxx X. Xxxxxxx
Managing-Member
Messrs. Marengere and Xxxxxxxxx
Dominion Bridge Corporation
August 19, 1997
Page 11
AGREED, ACKNOWLEDGED AND CONFIRMED AS OF THE DATE WRITTEN ABOVE:
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XXXXXX X. XXXXXXXXX XXXXXXX X. XXXXXXXXX
