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As filed with the Securities and Exchange Commission on September 9, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
AMERICAN ECOLOGY CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 95-3889638
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
805 WEST IDAHO
SUITE 200
BOISE, IDAHO 83702-8916
(208) 331-8400
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
PHILLIP K. CHATTIN, ESQ.
GENERAL COUNSEL
AMERICAN ECOLOGY CORPORATION
805 WEST IDAHO
SUITE 200
BOISE, IDAHO 83702-8916
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COPIES TO:
Larry D. Blust, Esq.
Jenner & Block
One IBM Plaza
Chicago, Illinois 60611
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.[ ]
If any of the securities being registered on this form are to offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 162(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================================
TITLE OF EACH PROPOSED PROPOSED
CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITY TO TO BE AGGREGATE PRICE AGGREGATE REGISTRATION
BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rights ................................ $8,200,581 - - -
- ------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value per
share ............................... $8,200,581 $1.00 $8,200,581 $2,485.02
========================================================================================================================
</TABLE>
(1) Estimated solely for purposes of determining the registration fee.
-----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY THE EFFECTIVE DATE UNTIL THE REGISTRANT
FILES A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT BECOMES EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SECTION 8(a), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS WILL NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY NOR WILL THERE BE ANY SOLICITATION OF ANY
SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR
SALE WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION UNDER THE SECURITIES LAWS
OF ANY STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 9, 1997
PROSPECTUS
RIGHTS TO SUBSCRIBE FOR 8,200,581 SHARES OF
COMMON STOCK AND EXCHANGE AND CONVERSION
OF SERIES E REDEEMABLE CONVERTIBLE PREFERRED STOCK
IN CONJUNCTION THEREWITH
AMERICAN ECOLOGY CORPORATION
------------------------------
American Ecology Corporation (the "Company") is issuing to holders of shares
of its Common Stock, $.01 par value per share ("Common Stock"),
non-transferable rights (the "Rights") to subscribe for additional shares of
Common Stock (the "Rights Offering"). Each holder of Common Stock will receive
one Right for each share of Common Stock held of record as of 5:00 p.m.,
eastern time, on September 24, 1997 (the "Record Date") . Each Right will
entitle the holder to subscribe for one share of Common Stock at a subscription
price of $1.00 per share (the "Subscription Price"). The Subscription price is
payable in cash except that holders of the Company's Series E Redeemable
Convertible Preferred Stock (the "Series E Preferred Stock") may exchange one
share of Series E Preferred Stock for each 10 shares of Common Stock such
holder is entitled to purchase in the Rights Offering. The Rights will expire
at 5:00 p.m., eastern time, on ___________, 1997 (the "Expiration Date").
Rights not duly exercised on or prior to the Expiration Date will lapse and
will be void and without value. To the extent
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that less than 5,000,000 shares of Common Stock are subscribed for in the
Rights Offering, one share of Series E Preferred Stock will be converted on the
first business date following the Expiration Date into 10 shares of Common
Stock for each 10 shares or portion thereof of Common Stock less than 5,000,000
sold in the Rights Offering. To the extent that the purchase price of the
Common Stock sold in the Rights Offering plus the stated amount ($10 per share)
of the Series E Preferred Stock outstanding immediately after the Rights
Offering exceeds $5,000,000, the excess shall be used to redeem Series E
Preferred Stock at its stated amount. The Rights are represented by
non-transferable subscription certificates (the "Subscription Certificates")
which are being mailed together with this Prospectus to each holder of Common
Stock as of the Record Date. See "DESCRIPTION OF RIGHTS OFFERING."
The Common Stock is included for trading on the National Market System of
the Nasdaq Stock Market, Inc. ("Nasdaq") under the symbol "ECOL." The average
of the closing bid and sale prices of the Common Stock as of September 3, 1997
was $1.99. Application will be made to list on the Nasdaq National Market
System the shares of Common Stock issuable upon the exercise of the Rights.
SEE "RISK FACTORS" BEGINNING ON PAGE __ FOR A DISCUSSION OF CERTAIN RISKS
RELATED TO AN INVESTMENT IN THE COMMON STOCK
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
<TABLE>
<CAPTION>
PROCEEDS TO THE
SUBSCRIPTION COMPANY(1)
PRICE COMMISSIONS
<S> <C> <C> <C>
Per Share of Common Stock............... $ 1.00 N/A $ 1.00
Total .................................. $8,200,581 N/A $8,200,581
</TABLE>
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(1) Before deducting expenses of the offering, estimated as $141,485.
It is expected that certificates for the Common Stock subscribed for in this
offering will be available for delivery on or about the fifth business day
following the Expiration Date.
____________________, 1997
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the United States Securities
and Exchange Commission (the "Commission"). Such reports and other information
filed by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549-1004; and at the Commission's Regional Offices at 500
West Madison St., Suite 1400, Chicago, Illinois 60661- 2511 and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can also
be obtained at prescribed rates from the Public Reference Section of the
Commission at its principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission also maintains a web site (http://www.sec.gov) that
contains reports, proxy statements and other information regarding the
Company. Such reports and other information concerning the Company can also be
inspected at the offices of the Nasdaq Stock Market, Inc., 1735 K Street,
Washington, D.C. 20006, on which the Company's Common Stock is listed.
Reference is hereby made to the Registration Statement of which this Prospectus
is a part (the "Registration Statement") and to the exhibits thereto filed with
the Commission for further information with respect to the Company, the Common
Stock and the Rights. Statements contained herein concerning provisions of
documents are necessarily summaries of such documents, and each statement is
qualified in its entirety by reference to the copy of the complete document
filed with the Commission. As permitted by the rules and regulations of the
Commission, this Prospectus omits certain information contained in the
Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference in this Prospectus:
(a) The Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996;
(b) The Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1997 and June 30, 1997; and
(c) The Company's Proxy Statement pursuant to Section
14(a) of the Securities Exchange Act dated April 22, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of
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this Prospectus and prior to the termination of the offering made hereby will
be deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained
herein or in a report or document incorporated or deemed to be incorporated by
reference herein will be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed report or document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded will not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. The Company will provide without charge to each
person, including any beneficial owner of Common Stock to whom this Prospectus
is delivered, upon written or oral request of such person, a copy (without
exhibits) of any or all documents incorporated by reference in this Prospectus.
Requests for such copies should be made to Scott Peyron, (208) 388-3800.
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PROSPECTUS SUMMARY
The following is a summary only, the contents of which is necessarily
selective, and should be read in conjunction with the detailed information and
consolidated financial statements (including the notes thereto) appearing
elsewhere in this Prospectus or incorporated by reference herein.
THE COMPANY
The Company and its subsidiaries provide processing, packaging,
transportation, remediation and disposal services for generators of hazardous
waste and low-level radioactive waste ("LLRW"). Hazardous waste consists
primarily of industrial waste, including waste regulated under the Resource
Conservation and Recovery Act of 1976, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, and the Toxic Substance
Control Act. LLRW consists of materials contaminated with low levels of
radioactivity and is generated by nuclear power facilities, hospitals,
universities, laboratories and other research facilities. The mailing address
and phone number of the Company's principal executive offices are 805 West
Idaho, Suite 200, Boise, Idaho 83701-8916, (208) 331-8400.
THE RIGHTS OFFERING
ISSUE OF RIGHTS: The Company is issuing non-transferable rights
(the "Rights") to subscribe for up to 8,200,581
shares of the Company's Common Stock, $.01 par
value per share ("Common Stock"). Each holder of
the Company's Common Stock is entitled to receive
one Right for each share of Common Stock held of
record on the Record Date (as defined below).
Such holders are entitled to purchase one
additional share of Common Stock for each Right
held. In the event all holders of Common Stock
(8,200,581 shares outstanding as of the Record
Date) were to exercise all the Rights issued in
this offering, the Company would issue 8,200,581
additional shares of Common Stock for an aggregate
consideration of $8,200,581.
SUBSCRIPTION PRICE: $1.00 per share payable by the Expiration Date
(the "Subscription Price"). See "DESCRIPTION OF
THE RIGHTS OFFERING".
RECORD DATE: 5:00 p.m., eastern time, on September 24, 1997
(the "Record Date").
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EXPIRATION DATE: ___________, 1997 at 5:00 p.m., eastern time (the
"Expiration Date"). Rights not duly exercised by
such time will lapse and will be void and without
value.
NON-TRANSFERABILITY
OF RIGHTS: The Rights are non-transferable.
SUBSCRIPTION
PROCEDURES: The Rights are represented by non-transferable
subscription certificates (the "Subscription
Certificates") which are being mailed together
with this Prospectus to each holder of record on
the Record Date. Rights may be exercised in whole
or in part by a record holder of Common Stock by
filling in and signing the relevant forms on the
Subscription Certificate and mailing or delivering
the Subscription Certificate, together with
payment in full for the Common Stock subscribed
for, to the Subscription Agent (as defined below)
at the address set forth in the Subscription
Certificate. Record holders who hold shares of
Common Stock for the accounts of others must
follow the instructions of such beneficial owners
with respect to the Rights to which such
beneficial owners are entitled. See "DESCRIPTION
OF THE RIGHTS OFFERING -- Rights of Beneficial
Owners of Common Stock." A Right will not be
deemed exercised unless the Subscription Agent
receives payment and a duly executed Subscription
Certificate by 5:00 p.m., eastern time, on the
Expiration Date.
PAYMENT: Payment may be made in U.S. funds by certified
check, bank draft or money order payable to the
order of ChaseMellon Shareholder Services, L.L.C.
(the "Subscription Agent"). In lieu of making
payment in cash, holders of Series E Preferred
Stock may exchange one share of Series E Preferred
Stock for each 10 shares of Common Stock such
holder is entitled to purchase in the Rights
Offering by delivery to the Subscription Agent of
the requisite number of shares of Series E
Preferred Stock either endorsed in blank for
transfer or together with an assignment separate
from certificate executed in blank.
USE OF PROCEEDS: The purpose of the Rights Offering is to raise
permanent equity capital for the
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Company by (i) converting the $3,000,000 in stated
amount of Series E Preferred Stock to Common Stock
or redeeming the Series E Preferred Stock from the
proceeds of the Rights Offering and (ii) by
raising up to an additional $5,200,581 in working
capital for the Company before expenses of the
Rights Offering. To the extent that less than
5,000,000 shares of Common Stock are subscribed
for in the Rights Offering, one share of Series E
Preferred Stock will be converted into 10 shares
of Common Stock for each 10 shares or portion
thereof of Common Stock less than 5,000,000 sold
in the Rights Offering. To the extent that the
purchase price of the Common Stock sold in the
Rights Offering plus the stated amount of the
Series E Preferred Stock outstanding immediately
after the Rights Offering exceeds $5,000,000, the
excess shall be used to redeem Series E Preferred
Stock at its stated amount of $10.00 per share.
The result will be that a minimum of $3,000,000 in
permanent equity capital will be raised in the
Rights Offering by exchange or conversion of the
existing $3,000,000 in Series E Preferred Stock,
the Series E Preferred Stock will be eliminated no
matter how many Rights are exercised, and
$5,200,581 in additional working capital, before
expenses of the Rights Offering, will be raised
for the Company if all Rights are exercised. See
"USE OF PROCEEDS" and "DETERMINATION OF
SUBSCRIPTION PRICE".
RISK FACTORS
Prospective purchasers of shares of Common Stock should carefully consider
all of the information contained in this Prospectus, including the following
risk factors.
This Prospectus, including the information incorporated herein by reference,
contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 concerning, among other matters, the
prospects, developments and business strategies of the Company, all of which
are subject to risks and uncertainties. These forward-looking statements are
identifiable by the use of words and phrases such as "anticipates," "intends,"
"goal," "estimates,"
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"expects," "projects," "projections," "plans," "should," "believes,"
"scheduled" and similar words and phrases.
When a forward-looking statement includes a statement of the assumptions or
basis underlying the forward-looking statement, the Company cautions that,
while it believes such assumptions or basis to be reasonable, assumed facts or
basis almost always vary from actual results, and the differences between
assumed facts or basis and actual results can be material. Where, in any
forward-looking statement, the Company or its management expresses an
expectation or belief as to future results or events, such expectation or
belief is expressed in good faith and believed to have a reasonable basis, but
there can be no assurance that the expected results or events will be
accomplished or occur. The Company's actual results may differ significantly
from the results discussed in the forward-looking statements.
RISKS RELATING TO COMPANY AND COMMON STOCK
Recurring Losses From Operations. The Company has suffered recurring losses
from operations and continues experiencing difficulty paying its on-going
obligations as they become due. The Company had working capital deficits of
$15,678,000 and $19,786,000 as of June 30, 1997 and June 30, 1996,
respectively. See "SELECTED FINANCIAL DATA." Although the Company has taken
various actions intended to improve its financial condition, there can be no
assurance that these actions will be successful. The failure of the Company in
the future to improve its operating results would have a material adverse
effect on the Company's financial condition and could result in a cessation of
the Company's business operations.
Regulation. The environmental services industry is subject to extensive
regulation by federal, state and local authorities. In particular, the
regulatory process requires the Company to obtain and retain numerous
governmental permits or other authorizations to conduct various aspects of its
operations, any of which may be subject to revocation, modification or denial.
Adverse decisions by governmental authorities on permit applications submitted
by the Company may result in premature closure of facilities or restriction of
operations, which could have a material adverse effect on the Company's
operations and financial condition. In many cases, the Company's licenses and
permits govern what it can charge its customers and how much waste it can
dispose of and from which sources. The Company's business is heavily dependent
upon environmental laws and regulations which effectively require wastes to be
managed in facilities of the type owned and operated by the Company. Changes
in these laws and regulations could facilitate exemptions from hazardous waste
requirements for significant volumes of waste and alter the types of treatment
and disposal that will be required. If such changes are implemented, they
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could have a material adverse effect on the Company's operations and financial
condition. See "THE COMPANY - REGULATION".
Legal Proceedings. The Company's business inherently involves risks of
unintended or unpermitted discharge of materials into the environment. In the
ordinary course of conducting its business activities, the Company becomes
involved in judicial and administrative proceedings involving governmental
authorities and private plaintiffs. While the outcome of any particular
lawsuit or administrative proceeding cannot be predicted with certainty, due to
the Company's current financial condition, management is unable to conclude
that the ultimate outcome, if unfavorable, of the litigation and other matters
to which the Company is a party will not have a material adverse effect on the
operations or financial condition of the Company.
Dependence on Ability to Operate Ward Valley Site. The Company has a lease
and license from the State of California to develop and operate a LLRW disposal
facility to serve the Southwestern Compact in Ward Valley, California and has
expended and capitalized $45.9 million in costs and pre-operational interest as
of December 31, 1996 in regard to this site. This amount, plus unrecorded
interest on the Company's invested funds of $34.8 million, can only be recouped
once this site is operational. The lease and license become effective and
construction of the facility can only begin on conveyance of the land to the
State by the federal government. While the prior administration approved this
transfer, the current Secretary of the Interior opposes the transfer and a
number of opponents have sued to block the transfer. Additional legal
challenges and political delays are likely to at least postpone the opening of
the facility, which the Company believes will take eight to twelve months to
construct and start up once the land is transferred to the State of California.
It is not possible to assess the ultimate length of the delay at this time, nor
can there be any assurance that the land will ever be transferred. If the land
cannot be transferred and the Company is unable to recoup its investment
through legal recourse, the Company would suffer a loss that would have a
material adverse effect on its financial condition and would result in a
default under its present bank financing. See "THE COMPANY-LOW-LEVEL
RADIOACTIVE WASTE SERVICES-Disposal Services-Proposed Ward Valley, California
Facility".
Restrictions on Dividends in Bank Credit Agreement. The Third Amended and
Restated Credit Agreement dated October 31, 1996 (the "Credit Agreement")
between the Company and Texas Commerce Bank National Association (the "Bank")
prohibits the Company from paying dividends on its Common Stock so long as the
debt to the Bank has not been fully paid. This loan matures on December 31,
2000 and is unlikely to be fully paid before that date unless the Ward Valley
site is transferred to the State of
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California prior to such date. Consequently, no dividends are likely to be
paid on the Common Stock in the foreseeable future.
Other Restrictions in Credit Agreement. In addition to the preclusion of
dividends on Common Stock, the Credit Agreement contains covenants which
preclude (i) additional indebtedness except for limited exceptions and
unsecured indebtedness incurred in the ordinary course of business, (ii) sales
or transfers of Company assets, and (iii) mergers and consolidations and limits
the amount of capital assets which the Company may acquire. The Credit
Agreement requires that the Company maintain a minimum tangible net worth equal
to (i) 80% of the net worth shown on the Company's June 30, 1996 Form 10-Q less
(ii) any write-offs associated with the closure of the Winona Facility (see
"THE COMPANY - HAZARDOUS WASTE SERVICES - Stabilization and Disposal Services -
Winona, Texas Facility") and plus (iii) any proceeds of debt or equity
offerings (including the Rights Offering) and the Company's positive net
income. The Credit Agreement covenants also require minimum earnings before
interest, taxes, depreciation and amortization ("EBITDA") during 1997 of
$500,000 each quarter and during 1998 of $250,000 each month and $1,000,000
each quarter. The Company did not meet the EBITDA requirements for the first
quarter of 1997 and the Bank waived this default. The Company was in
compliance for the second quarter of 1997. There can be no assurance that the
Company will be able to meet the minimum net worth or EBITDA requirements of
the Credit Agreement in the future or that the Bank will waive such
requirements if not met. If the Bank declared a default for this reason or any
other and accelerated the approximately $36,000,000 in debt to the Bank, the
Company would likely be unable to pay such amount immediately and would likely
be forced to seek the protection of the bankruptcy laws. Such action could
eliminate or substantially impair the value of any Common Stock even if the
Company were able to successfully reorganize and refinance.
Payment Terms of Bank Debt. Interest on the debt to the Bank accrues and is
added to the principal balance until December 31, 1998 unless there is a
default. Thereafter, interest is due quarterly at a rate equal to the greater
of 10% per annum or the prime rate. In addition, a principal payment of
$5,000,000 is due on December 31, 1999 and quarterly principal payments of
$250,000 commence on March 31, 2000 or upon the earlier transfer of Ward Valley
to the State of California in a manner allowing The Company's operations to
commence at Ward Valley. The entire debt is due on December 31, 2000. There
can be no assurance that the Company will be able to make any of these
payments. Absent significant improvements in operations, the Company will not
be able to meet its interest obligations in 1999. Absent either the transfer
of Ward Valley to the State of California and the Company obtaining
satisfactory replacement financing on such transfer or the sale of Company
assets or operations, the Company is unlikely to be
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able to pay the principal amounts due on and after December 31, 1999.
Possible Dilution and Limitation on Stock Price Due to Outstanding Options.
Numerous options and rights to purchase the Company's Common Stock are
outstanding pursuant to the Stock Option Plans maintained by the Company,
pursuant to arrangements made with the purchasers of the Company's Series D and
Series E Preferred Stock, and pursuant to the Credit Agreement. Most of these
options and rights have exercise prices high enough that they are not likely to
be exercised or, if exercised, are not likely to be economically dilutive to
purchasers of Common Stock in the Rights Offering. No options or rights other
than the Rights are outstanding giving the holders the right to purchase Common
Stock at $1.00 per share. However, the purchasers of the Series E Preferred
Stock received warrants to purchase 3,000,000 shares of Common Stock at $1.50
per share, which warrants will become exercisable 30 days after the Expiration
Date. Depending on the price at which the Company's Common Stock is trading,
these warrants could either allow the purchase of Common Stock at a price
dilutive to the other holders thereof or provide a limit on any increase in the
value of the Company's Common Stock.
RISKS RELATING TO RIGHTS
Determination of Subscription Price. The Subscription Price for Common
Stock pursuant to the Rights Offering was arbitrarily determined by the Board
of Directors of the Company at the time the Series E Preferred Stock was
approved in October 1996 based on prices of the Common Stock at that time. The
issuance of Common Stock pursuant to the Rights Offering at this price was
ratified by the shareholders at the most recent annual meeting when they
approved the terms of the Series E Preferred Stock. See "DETERMINATION OF
SUBSCRIPTION PRICE". While the Subscription Price bore some relationship to
the market price of the Common Stock in October 1996, it does not necessarily
bear and is not intended to bear any relationship to the current market price
of the Common Stock, the Company's net worth, its results of operations or any
other generally accepted criterion of value. In addition, there can be no
assurance that the market price of the Common Stock will not decline during the
Rights Offering as a result thereof or for other reasons or that a shareholder
exercising the Rights received will be able to sell the Common Stock purchased
in the Rights Offering at a price equal to or greater than the Subscription
Price.
Possible Dilution by Failure to Exercise. Rights are being distributed to
each holder on the basis of the right to purchase one share of Common Stock for
each share of Common Stock held on the Record Date. Thus, were all holders to
exercise their Rights, all stockholders would have the same percentage interest
in the Company as such stockholders had prior to the Rights Offering. On the
other hand, if no shareholders exercised their
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Rights, the Series E Preferred Stock would be converted into 3,000,000 shares
of Common Stock causing the interests of the present holders of Common Stock to
decrease. The Series E Preferred Stock is presently held by four directors.
See "DETERMINATION OF SUBSCRIPTION PRICE." Consequently, these four directors
could materially increase their interests vis-a-vis other shareholders who fail
to exercise their Rights.
Rights Not Transferable; No Market for the Rights. The Rights are
non-transferable. Thus, there will be no market or other means for holders of
the Rights to directly realize any value associated with the Rights.
Accordingly, holders of Rights must exercise them and acquire Common Stock in
order to have an opportunity to realize any value of the Rights.
THE COMPANY
American Ecology Corporation and its subsidiaries (hereinafter collectively
referred to as the "Company" unless the context indicates otherwise) provide
processing, packaging, transportation, remediation and disposal services for
generators of hazardous waste and low-level radioactive waste. Hazardous waste
consists primarily of industrial waste, including waste regulated under the
Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA" or "Superfund"), and the Toxic Substance Control Act ("TSCA").
Low-level radioactive waste ("LLRW" or "low-level waste") consists of materials
contaminated with low-levels of radioactivity and is generated by nuclear power
facilities, industry, hospitals, universities, laboratories and other research
facilities. In 1996, 47% of the Company's revenues were derived from hazardous
waste services and 53% of the Company's revenues were derived from LLRW
services.
The Company generally performs its operations through its wholly owned
subsidiaries. The Company's material subsidiaries are: US Ecology, Inc., a
California corporation ("US Ecology"); Texas Ecologists, Inc., a Texas
corporation wholly owned by US Ecology ("Texas Ecologists"); American Ecology
Recycle Center, Inc., a Delaware corporation ("AERC"); American Ecology
Environmental Services Corporation, a Texas corporation ("AEESC"); and American
Liability and Excess Insurance Company, a Vermont corporation ("ALEX").
The Company and its predecessors have been in business since 1952. The
Company was originally incorporated in California in October 1983. In May
1987, the Company was reincorporated as a Delaware corporation by merger into a
newly formed wholly owned subsidiary incorporated in Delaware for that purpose.
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The Company incurred significant losses in its 1995 and 1996 fiscal years.
See "SELECTED FINANCIAL DATA". During the six months ended June 30, 1997,
there was a significant improvement in the results of operations from the prior
two years. Operating results were impacted by a greater percentage reduction
of operating costs than declining revenues as well as, to a lesser degree, a
decrease in selling, general and administrative costs. The Company realized
certain non- recurring gains which favorably impacted net income for the six
months ended June 30, 1997. Without the non-recurring gains, there would have
been a loss from operations during this six months. Several areas of concern
to management remain where there is uncertainty as to whether or not there will
be an adverse effect on the Company's operations and financial condition,
depending on the outcome of events and issues. Those areas of concern are
addressed in the following discussion of the Company's businesses and operating
sites. Because of liquidity issues, and the Company's current financial
condition, management is unable to conclude that the outcome of certain issues,
claims and disputes, and other matters described herein with respect to the
Company's operations and sites, will not have a material adverse effect on
operations or the financial position of the Company.
HAZARDOUS WASTE SERVICES
The Company provides a variety of hazardous waste management services to its
customers including stabilization, solid waste disposal, transportation, and
brokerage. The Company's customers are generally in the chemical, petroleum,
pharmaceutical, manufacturing, electronics and transportation industries.
The hazardous waste management services provided by the Company are
generally performed pursuant to non-exclusive service agreements that obligate
the Company to accept hazardous waste from the customer. Fees are determined
by such factors as the chemical composition and volume or weight of the wastes
involved, the type of transportation or processing equipment used and distance
to the processing or disposal facility. The Company periodically reviews and
adjusts the fees charged for its services.
Prior to performing services for a customer, the Company's specially trained
personnel review the waste profile sheet prepared by the customer which
contains information about the chemical composition of the waste. A sample of
the waste may be analyzed in a Company laboratory or in an independent
laboratory to enable the Company to recommend and approve the best method of
stabilization, transportation, treatment and disposal. Upon arrival at one of
the Company's facilities, and prior to unloading, a sample of the delivered
waste is analyzed to confirm that it conforms to the customer's waste profile
sheet.
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STABILIZATION AND DISPOSAL SERVICES
The Company operates two of the eighteen commercial hazardous waste landfill
sites in the United States. The facilities are located in Robstown, Texas and
Beatty, Nevada. In addition, until August 1996, the Company operated one of
the nation's nine commercial deepwell disposal facilities located in Winona,
Texas. As a result of political pressures, and those of the local community,
the Company sustained high legal fees and extraordinary costs to maintain the
Winona facility. In August 1996, the Company decided to suspend the Winona
facility operations as a result of the adverse impact on the business base
caused by inaccurate public statements and other actions of persons opposed to
the facility. The litigation strategy being pursued by persons opposed to the
facility includes numerous and duplicative lawsuits filed in several
jurisdictions. The Company believes the number of suits, as well as the
discovery and motion practices used in each, is designed to overwhelm the
financial resources of AEESC, the subsidiary of the Company which operated the
Winona facility. These operations primarily served the needs of hazardous
waste generators in the Gulf Coast and West Coast regions of the country.
Management closed the Winona facility March 17, 1997 and will comply with all
substantive environmental regulations for site closure.
The Robstown and Beatty facilities may dispose of only solid wastes, but
both facilities also have the ability to treat and stabilize waste prior to
disposal and operate transfer and staging facilities for delivery of
containerized waste for off-site disposals. Stabilization involves the mixing
of sludges and certain wet wastes with cement, lime or other solidifying and
stabilizing agents to prevent leaching under acidic conditions. These
facilities are sited, designed, constructed, operated and monitored to provide
long-term containment of the waste in accordance with regulatory requirements.
The Company also maintains two closed landfills in Sheffield, Illinois. See
"Closed Facilities" for more detailed information about these facilities. The
following sections describe the Company's active hazardous waste disposal
facilities.
Beatty, Nevada Facility. The Company's Beatty, Nevada hazardous waste
landfill site is located on 80 acres of land 11 miles southeast of Beatty,
Nevada in the Amargosa Desert, approximately 100 miles northwest of Las Vegas
and 8 miles northeast of Death Valley and the California border. The Company
leases the site from the State of Nevada pursuant to a 1977 lease which
provided for an initial 20-year term, with a 10-year option for renewal. The
Company recently renewed the lease for 10 years. The waste site is operated
under license from the State of Nevada. The State of Nevada charges waste fees
which are deposited in state maintained trust funds for closure, perpetual care
and maintenance. The Company does not control these two state funds, but the
Company understands from
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State of Nevada correspondence that these funds contained approximately $12.0
million and $2.5 million, respectively, as of June 30, 1997.
The facility has permitted capacity of more than 2.0 million cubic yards and
approximately 750,000 cubic yards of remaining constructed capacity. It is
currently positioned to compete much more aggressively in an overall depressed
market than it has been in a number of years. Reduced state fees have been
negotiated with state regulatory staff, but are not yet incorporated into
implementing regulations. State regulatory staff have reviewed and approved
revised closure cost estimates that result in a reduction in future closure
costs. Closure of the former low level radioactive waste disposal site will
allow the company to transfer custody of the occupied portion to the State
while transferring the unused portion of the site to the hazardous waste
facility, thereby extending the life of the facility. In 1996, 1995, and 1994,
71,000, 131,000, and 202,000 cubic yards of waste, respectively, were disposed
of at the facility. The hazardous waste site was opened in 1970 and operates
under authority from the Nevada Department of Conservation and Natural
Resources and the Environmental Protection Agency's ("EPA") Region IX. It is
also subject to regulations of the U.S. Department of Transportation ("DOT")
relating to methods of handling, packaging and transporting chemical waste.
Disposal operations at the Beatty site involve stabilization of certain wastes
to meet land disposal criteria, and the burial of chemical waste in secure
landfill cells which are engineered, constructed, operated and monitored so as
to provide for the long-term containment of the waste. During 1988, the Beatty
site received its RCRA Part B permit from the EPA and the State of Nevada. In
April, 1997, the State granted a five year permit renewal including approval to
construct a new cell with a capacity of 1.5 million cubic yards. The Company
is studying the future use of the production related assets at this former
facility and has not yet reached a decision as to their remaining value, if
any.
The Beatty site is one of seven landfill sites in the United States which
are authorized by the EPA under TSCA to receive and dispose of certain types of
solid polychlorinated biphenyls ("PCBs"). This authority was issued jointly to
the Company and the State of Nevada by EPA Region IX. The disposal of PCBs
accounted for approximately 31% and 22% of the Beatty site's total volumes in
1996 and 1995, respectively. In 1995, the Company was issued a five-year
renewal permit which allows the Company to continue to dispose of non-liquid
PCBs at the Beatty site. In 1990, the Company received written confirmation
from the EPA that the Beatty site was currently authorized to accept CERCLA
clean-up waste for disposal. The Beatty site also has all necessary air
permits for its disposal activities.
Robstown, Texas Facility. The Company owns 400 acres of land near Robstown,
Texas, located 15 miles west of Corpus
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Christi, and operates a hazardous waste disposal site on 240 acres of the land.
The site is operated under the regulations of, and a permit issued by, the
Texas Natural Resource Conservation Commission ("TNRCC"). In addition to TNRCC
regulation, the site is subject to EPA and DOT regulation. In 1988, the
Robstown site received its RCRA Part B permit. A proposed permit renewal is
expected to go to public hearing in the second half of 1997. Disposal
operations at the Robstown site involve the burial of hazardous waste in secure
landfill cells which are engineered, constructed, operated, and monitored so as
to provide for the long-term containment of the waste. The Company recently
completed development of a 89,000 cubic yard expansion to dispose of Class 1
non-hazardous waste which should greatly improve profit margins by allowing
disposal in less expensive cell space.
Groundwater at the Robstown site is monitored through the use of an
extensive well system. In 1978, an analysis of the non-potable aquifer
underlying the site showed the presence of chemical contamination. The Company
has no evidence that the contaminants have migrated beyond the permitted site
boundaries and continues to address corrective action plans in connection with
the permitting process. The Company is currently operating a non-commercial
deep-injection well at the facility for the disposal of contaminated
groundwater and leachate in order to comply with its groundwater cleanup
program.
The facility is currently the only operating commercial landfill in Texas
with a RCRA Part B hazardous waste disposal permit. The facility serves a wide
range of industries including refining, petrochemical, agricultural and
manufacturing. In operation since 1972, the facility has disposed of more than
873,000 cubic yards of hazardous waste and there is approximately 30,000 cubic
yards of remaining hazardous waste capacity in place and approximately 85,000
cubic yards of non-hazardous waste capacity. In 1996, 1995, and 1994, 41,000,
47,000, and 68,000 cubic yards of waste, respectively, were disposed of at the
facility. At the current fill rate, the hazardous waste capacity in place is
sufficient for only between 18 and 24 months. The Company has a permit
allowing construction of 450,000 cubic yards of future expansion, but expansion
is very costly. Accordingly, the Company has requested a permit modification
from the TNRCC to allow placement of hazardous waste vertically on top of
existing closed cells. Vertical stacking of waste will allow the Company to
obtain approximately 350,000 cubic yards of hazardous waste disposal space at
minimal cost, and would provide 15 years of disposal capacity. The permit
modification is pending.
Winona, Texas Facility. The Winona facility, now a closed facility, was a
620 acre fuels blending and solvent recycling facility with two hazardous waste
deep wells and waste brokerage services. In August of 1996, the Company made a
decision to suspend further receipts of waste at the Winona facility. This
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decision was made based on the adverse impact on the business base of the
Winona facility caused by inaccurate public statements and other actions of
persons opposed to the facility. The litigation strategy being pursued by
persons opposed to the facility includes numerous and duplicative lawsuits
filed in several jurisdictions. The Company believes that the number of suits
as well as the discovery and motion practices used in each is designed to
overwhelm the financial resources of AEESC, a wholly owned subsidiary of the
Company which operated The Winona facility.
During the period of discontinued waste receipts, the Company, primarily
through its Surecycle(R) division, has continued to broker waste materials to
other off-site disposal facilities. Based on the regulatory and litigation
morass under which the Winona facility was forced to operate, management
concluded that it was not economically feasible for the Winona facility to
continue to operate. Also during this period of discontinued waste receipt
AEESC removed from inventory all waste materials which it believed would
require the continued operation of the facility's ambient air monitoring system
and the thermal oxidizer air emission control equipment. The Company is
seeking approval of the regulatory authorities to discontinue the use of this
equipment.
On March 17, 1997, management agreed to a plan for closing the site under
RCRA rules. As part of its business closure activities, Company officials have
been meeting with State regulators to negotiate a mutually acceptable schedule
for environmental closure of the facility to fully satisfy substantive
environmental requirements. The cost for environmentally correct closure has
been estimated at $1,500,000.
TRANSPORTATION SERVICES
General. As a complement to its disposal operations, the Company also
offers hazardous waste transportation services to its customers. The Company's
waste transportation operations focus on the Gulf Coast market. The Company
transports both hazardous and non-hazardous solid and liquid wastes generally
by truck or trailer from a waste site to a disposal or treatment facility, such
as a landfill or incinerator. Hazardous waste is transported by the Company
primarily in specially-constructed vehicles designed to comply with applicable
regulations and specifications of the DOT. The Company's hazardous waste fleet
includes 45 trucks or tractors, 318 roll-off containers and 82 trailers.
Liquid waste is frequently transported in bulk, but also may be transported in
drums. Heavier sludges and bulk solids are transported in sealed roll-off
boxes or bulk trailers.
The Company operates a scheduled, packaged Class 1 non-hazardous and RCRA
hazardous waste collection service in the
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Gulf Coast, Dallas/Ft. Worth, and Tulsa, Oklahoma markets called Surecycle(R),
a division of AEESC. Surecycle(R), provides small quantity generators with
comprehensive waste management services that includes waste analysis, technical
advice, labeling, manifesting, collecting, transporting, treating and
disposing of hazardous wastes. An important feature of the Surecycle(R)
program is the use of intermediate bulk containers as a replacement for drums
in many applications. Surecycle also offers specialized 350 gallon waste
packages or "totes". These totes allow waste generators to accumulate up to
six drums worth of material in the same floor space required to store four
drums. The totes are reusable, therefore the customer also enjoys substantial
savings in avoided drum purchase costs.
LOW-LEVEL RADIOACTIVE WASTE SERVICES
Radioactive waste is generally classified as either high-level or low-level.
High-level radioactive wastes, such as spent nuclear fuel and waste generated
during the reprocessing of spent fuel from nuclear reactors, contain
substantial quantities of long-lived radioactive isotopes and require hundreds
or thousands of years to decay to safe levels.
Low-level radioactive waste consists primarily of solid materials containing
far less radioactive contamination, generally decaying to safe levels within
several decades to approximately 500 years. The Company's LLRW business
includes the packaging, transportation, disposal, treatment, recycling and
processing of low-level waste. Low-level waste is generated by nuclear power
facilities, industry, hospitals, universities, laboratories and other research
facilities. This waste consists generally of material such as contaminated
equipment, discarded glassware, tools, gloves and protective clothing,
radio-pharmaceuticals and other hospital wastes, and laboratory waste
materials. This waste generally requires minimal shielding for the protection
of the public or employees from radiation. It is packaged in metal containers
designed to protect the public during transportation and provide additional
long-term containment of the waste once it is placed in the permanent disposal
facility.
The LLRW services market is generally composed of three segments: (i)
disposal, including both commercial and government markets, (ii) commercial
processing and volume reduction, and (iii) government services. The Company
operates in all three of these segments. The Company's LLRW disposal
activities involve the operation of a landfill site on government owned land
near Richland, Washington. The Company's Recycle Center in Oak Ridge,
Tennessee has LLRW commercial processing and volume reduction services that
include both fixed base processing facilities and service capabilities as well
as on site service capabilities managed as an extension of the organization
located at Oak Ridge, Tennessee. The government services segment activities
includes acceptance, processing,
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volume reduction and disposal of federal government LLRW. The Recycle Center
is a well established commercial service provider and intends to pursue these
government markets.
THE COMPACT SYSTEM
The Low-Level Radioactive Waste Policy Act of 1980 and the Low-Level
Radioactive Policy Amendments of 1985 (collectively, the "Low-Level Act")
established the general framework for the management of commercial LLRW
disposal facilities. The Low-Level Act created incentives for states to form
formal regional alliances ("compacts") as ratified by the U.S. Congress, each
containing a designated landfill for use by member states. One state within
each compact is required to site and build a permitted disposal facility on a
rotating basis so that continuous disposal capacity for that compact can be
maintained.
The Low-Level Act also provides that any compact approved by Congress may
restrict the use of its disposal facility to low-level waste generated within
the member states, and may limit the export of waste from that compact as of
January 1, 1993. As a result, in 1992 the Company saw a marked increase in
LLRW volumes disposed because of this pending limitation of disposal space
availability. Since January 1, 1993, the State of Washington, through the
Northwest Compact (Washington, Oregon, Idaho, Montana, Utah, Wyoming, Alaska,
and Hawaii), has prohibited disposal of LLRW generated from outside the
Northwest Compact at the Company's Richland, Washington facility with the
following exception. The Northwest Compact entered into an inter-regional
contract with the Rocky Mountain Compact to accept waste generated by the Rocky
Mountain Compact (Nevada, Colorado, and New Mexico). As a result, the
implementation of the Low-Level Act has resulted in a reduction of waste
receipts at the Company's low-level waste disposal site in Richland,
Washington.
LLRW DISPOSAL SERVICES
The Company operates the only licensed LLRW disposal facility within the
regional compact system. The facility is located near Richland, Washington on
land within the Hanford Nuclear Reservation leased by the Department of Energy
("DOE") to the State of Washington and subleased to US Ecology. This facility
serves the LLRW disposal needs of the eight member states of the Northwest
Compact and the three member states of the Rocky Mountain Compact. The Company
is in the process of developing two additional LLRW disposal facilities for the
Southwest and Central states' compacts. The Company also maintains two closed
LLRW landfills in Sheffield, Illinois and Beatty, Nevada. (See "THE COMPANY -
CLOSED FACILITIES" for more detailed information about each of these closed
facilities). The following section describes the Company's active and proposed
LLRW disposal operations.
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Richland, Washington Facility. This facility is located on 100 acres, 25
miles northwest of Richland, Washington on DOE's Hanford Nuclear Reservation
("Hanford"). The State of Washington leases the land from the federal
government and the Company subleases the land from the state for a period of 99
years. The Company has operated this facility since 1965. In 1990, the
Company exercised its option to renew its sublease for an additional 15 years.
Waste has been emplaced to date on approximately 40 acres of the site. Under
provisions of the Low-Level Act, the State of Washington has accepted
responsibility for disposal of waste generated in the Northwest Compact and has
entered into a contract agreement to provide disposal for the Rocky Mountain
Compact states. The combined 11 member states generate approximately 100,000
cubic feet of low-level radioactive waste per year which is available to be
disposed of at the Richland facility.
Under the terms of the sublease, the site is to be used for LLRW burial and
related activities. The primary disposal operations at the site are conducted
under a radioactive materials license issued by the Washington State Department
of Health. A timely application to renew the Company's 5 year license, which
terminated in May 1997, was submitted in February 1997, and is expected to be
approved by the state. The Company also holds a special nuclear materials
license ("the NRC License") issued by the U.S. Nuclear Regulatory Commission
("NRC") which permits burial of material containing certain radioactive
elements in amounts greater than those allowed under the license issued by the
State of Washington. Special nuclear material is LLRW which contains uranium
233, uranium 235 or plutonium. The NRC License is also in the process of
timely renewal.
The LLRW disposal rates charged at the Richland facility have been regulated
by the Washington Utilities and Transportation Commission (WUTC) since 1993.
Rate regulation is designed to set disposal rates sufficient to cover the costs
of operation and provide the Company with a reasonable profit margin. In May
1995 the Company filed a rate case to implement a new rate design and revenue
requirement for the years 1996 through 2001. The Company's filing, after
amendment by a settlement agreement signed by major site users, was approved by
the WUTC to establish a $5.6 million annual revenue requirement and a rate
designed to collect this revenue from site availability, per container, per
shipment, volume and dose rate at the container surface charges. These prices
are adjusted annually for inflation. The approved revenue requirement is
exclusive of taxes and fees. The State of Washington charges and collects fees
for burial, site surveillance, local economic development, rate regulation and
site use from low-level generators using the Richland facility. Revenues are
also contributed by generators to fund dedicated trust accounts, administered
by the Washington State Treasurer, for closure and long term care and
maintenance of the Richland
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site. As of December 31, 1996, $24.4 million was retained in the site closure
account and $24.4 million in the perpetual maintenance account.
The Richland facility is also permitted to accept naturally occurring and
accelerator produced radioactive materials (NARM) waste from throughout the
nation. During 1996 approximately 12,000 cubic feet of NARM waste supplemented
company revenues collected from the disposal of over 105,000 cubic feet of
low-level waste generated from Northwest and Rocky Mountain Compact states. In
1995, the State of Washington implemented a regulation to limit NARM volume to
8,600 cubic feet annually and any single generator to no more than 1,000 cubic
feet. The Company litigated this issue and executed a settlement agreement on
May 15, 1996. The agreement provides that the Washington Department of Health
promulgate revised regulations with a 100,000 cubic feet annual cap on NARM
waste disposal. Until new regulations are adopted, a court stay has mandated
that the 100,000 cubic feet limit will apply with the provision that any unused
allocation may be transferred to future years. Although NARM waste disposal
rates are not regulated by the WUTC, a portion of NARM revenue can be applied
to reduce the Company's annual LLRW revenue requirement.
On July 29, 1996, the Company submitted to the Washington Department of
Health a revised site stabilization and closure plan for the Richland facility.
This amended the closure plan submitted in December 1994. On March 29, 1996,
the Company also submitted to the Washington Department of Ecology ("WDOE") a
work plan for a comprehensive investigation of the Richland site to assess the
presence of hazardous waste constituents in the vadose zone beneath the
trenches within the facility with respect to the protection of the groundwater
from small amounts of hazardous material associated with some LLRW. The plan
received preliminary approval by WDOE and funding for the investigation is
expected to be provided from the dedicated site closure account after
authorization by the legislature. The Company has completed the installation
of two new monitoring wells consistent with this plan.
The WDOE determined in January, 1997, that an environmental impact statement
is required in regard to the renewals of the Company's radioactive materials
license, the Company's closure plan, and the regulations providing for a
100,000 cubic feet annual cap on NARM waste disposal. The Company submitted
its material for this statement in spring, 1997. The State is expected to
finalize this environmental impact statement by June, 1998.
Proposed Ward Valley, California Facility. In December 1985, the Company
was selected as the State of California's license designee to site, develop and
operate a LLRW disposal facility ("Ward Valley") in that state to serve the
Southwestern Compact (California, Arizona, North Dakota and South Dakota).
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In September 1993, the California Department of Health Services ("DHS")
certified its final environmental impact report, issued its Record of Decision
on the project, issued a license to the Company to construct and operate the
facility and executed a lease of the site with the Company. The license and
lease become effective and construction can only begin once the land for the
site is conveyed from the U.S. to the State of California. In connection with
the development of this LLRW facility, the Company has expended and capitalized
$45.9 million, including pre-operational interest, as of December 31, 1996.
Under its agreement with the State of California, the Company may earn interest
on the venture capital expended in developing the Ward Valley project. As of
December 31, 1996 the unrecorded interest component is $34.8 million.
Construction and operation of the facility has been delayed in large measure
because the federal government has not yet conveyed the land for the facility,
located in California's Ward Valley, to the State of California. In January
1993, former Secretary of the Interior, Manuel Lujan, announced the sale of the
Ward Valley site to the State of California. That sale was enjoined, however,
as a result of the lawsuits described below. Subsequently, the new Secretary
of Interior in the Clinton administration, Bruce Babbitt, purported to rescind
Secretary Lujan's land sale decision and decided to conduct additional federal
hearings before determining whether to convey the land. In August 1993,
Secretary Babbitt requested that California Governor Pete Wilson hold an
adjudicatory hearing on behalf of the U.S. Department of the Interior to
provide information that might be relevant to the Secretary's decision on the
land transfer, and in September 1993, the Governor agreed to hold such a
hearing. In November 1993, Secretary Babbitt sent a letter to Governor Wilson
that he was postponing further action on his proposed hearing in order to await
the final outcome of two state court lawsuits that had been filed against the
project in October 1993. In 1994, Secretary Babbitt asked the National Academy
of Sciences ("NAS") to conduct an independent review of certain geological
issues related to the suitability of the Ward Valley site. The NAS convened a
panel in 1994 and conducted hearings on the project in June and September 1994.
The NAS panel issued a May 1995 report which concluded that the project would
pose no significant threat to groundwater quality and no credible threat to the
quality of water in the Colorado River which is about twenty miles and a
mountain range away. Subsequently, Secretary Babbitt announced his intention
to transfer the land, subject to several specific conditions to California DHS.
Interior and DHS negotiated transfer conditions through the summer and fall of
1995. In the fall of 1995, when it became apparent that Interior would not
accept the State's good faith assurances, these negotiations were put on hold
and the State of California petitioned Congress for statutory transfer of the
land. Accordingly, legislation was introduced and attached to the Omnibus
Budget Reconciliation Act of 1995. This measure was vetoed by the President,
in part because of its
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provisions regarding the Ward Valley land transfer. Since then, new Ward
Valley land transfer legislation has been introduced in both the House and
Senate. Efforts to advance legislation were resisted by California's Senators
and were unsuccessful in 1996. Efforts at legislative resolution of this
matter will continue in 1997.
In February 1996, John Garamendi, Deputy Secretary of the Department of
Interior (DOI), announced that the DOI would not make a decision on
California's pending application for the purchase of the Ward Valley site until
after additional on-site testing is conducted. Mr. Garamendi also stated that
the results of this testing as well as several other issues would be presented
in a third supplement to the project's environmental impact statement, and that
Interior's decision on the sale probably would not be made for another year.
The testing at issue is that which the National Academy of Sciences recommended
in its May 1995 report could be performed during facility construction. The
Academy stated that the land transfer should not be delayed to conduct these
tests, and the State of California has already stated that the recommended
tests would be conducted after the land is transferred. Mr. Garamendi's
decision is therefore widely regarded as politically motivated. Throughout
1996, the Department of Interior did little to advance either site testing or
development of the third supplement to the environmental impact statement.
Two lawsuits challenging the 1993 decisions by DHS to issue a license and a
lease to the Company for the construction and operation of the Ward Valley
disposal site were filed in the California Superior Court for the County of Los
Angeles in October 1993. The plaintiffs in this litigation alleged that the
DHS violated various procedural and substantive requirements of the California
Radiation Control Law and the California Environmental Quality Act in reaching
its license decision and sought to have the facility's license invalidated. In
June 1994, the trial court ruled in favor of the DHS and the Company on all
issues with the exception of one. The trial court concluded that the Wilshire
report should be considered by the DHS in a "pre-approval setting", and
remanded the case to the DHS for reconsideration. In August 1995, the
California Appeals court ruled in favor of DHS on all counts, overturning the
trial court's determination regarding the Wilshire report. In January 1996,
the California Supreme Court refused to entertain project opponents' further
appeals. Therefore, all legal challenges to the license and the Environmental
Impact Statement at the state level have been successfully resolved.
In January 1993, a lawsuit was filed against the Secretary of the Interior,
Manuel Lujan, in federal district court for the Northern District of California
to enjoin the intended sale of the land for the Ward Valley site to the State
of California. The suit was filed on the grounds that the Secretary could not
sell the land until he had designated critical habitat for the
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desert tortoise, a threatened species under the Federal Endangered Species Act,
and that the 1990 U.S. Fish and Wildlife Service's ("FWS") biologic opinion,
which concluded that the project would not jeopardize the continued existence
of the desert tortoise, impermissibly failed to analyze the project's potential
radiological impacts on the desert tortoise. In February 1994, the U.S.
Department of Interior designated approximately 6,400,000 acres in the states
of California, Nevada, Utah and Arizona as critical habitat for the desert
tortoise. The designation includes the proposed Ward Valley site. Based on
these developments, the lawsuit was dismissed without prejudice. Inclusion of
the Ward Valley site as critical habitat requires the Bureau of Land
Management, the EPA and the FWS to consider and weigh several factors,
including whether the project would result in the destruction or adverse
modification of critical habitat. In August 1995, the U.S. Fish & Wildlife
Service issued an updated Biological Opinion which reaffirmed an opinion of "No
Jeopardy" to the desert tortoise, and further concluded that the project would
not result in the destruction or adverse modification of desert tortoise
critical habitat.
A second lawsuit was also filed in 1993 against the Secretary of Interior
which alleged violations of the National Environmental Policy Act by Secretary
Lujan in his decision to transfer the land to the State of California. Based
on Secretary Babbitt's decisions later in 1993 to rescind the land transfer and
supplement the project's Final Environmental Impact Statement, this action was
stayed by agreement of the parties, but technically is still pending in federal
district court and may be amended. The Company is not a defendant in this
matter.
In October 1995, the San Bernardino County Board of Supervisors passed an
emergency ordinance which prohibited the disposal in San Bernardino County of
LLRW not generated within its borders, and which imposed facility location and
design standards on any LLRW disposal facility established in the County which,
if valid, would have had the practical effect of prohibiting the establishment
of the Ward Valley facility as licensed by DHS. Several parties, including US
Ecology, brought suit in U.S. District Court for the Central District of
California to have the ordinance invalidated. In February 1996, the County
rescinded the Ordinance and the litigation has been stayed by agreement of the
parties. Technical discussions regarding the Ward Valley project are
continuing between the County and DHS. Recently, the County passed a
resolution and offered draft legislation which would invalidate the federal
LLRW Protection Act. The implications of this draft legislation have
far-reaching national impact and it is unlikely that it will supplant current
federal law.
Additional legal challenges and political delays could postpone the opening
of the facility for several years or more. Assuming the land is transferred
and all challenges and appeals
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to the land transfer and the facility license decision are favorably resolved,
the Company expects that the construction and start-up of the facility will
take approximately eight to twelve months. It is not possible to assess the
ultimate length of the delay at this time, nor can there be any assurance that
the land will be transferred. The Company expects to incur costs of
approximately $120,000 per month, excluding interest, until construction
begins. These costs are not currently reimbursable from the Southwestern
Compact or any other party and are being capitalized as project costs.
As a result of the continued inaction by DOI, the California Department of
Health Services brought suit against DOI in early 1997 seeking an immediate
land transfer citing Secretary Lujan's Record of Decision in 1993. This suit
claims DOI has acted in bad faith and abused its discretionary authority to
transfer the land for political purposes. US Ecology also filed a separate
suit against DOI seeking a writ of mandamus and injunctive relief ordering the
Secretary of the Interior to convey the land to the State of California in
accordance with Secretary Lujan's Record of Decision. US Ecology has also
filed a breach of contract action in the Court of Federal Claims seeking from
the federal government contract damages, including recoupment of the Company's
investment, interest and lost profits if the land is not transferred.
If the California LLRW facility cannot be established and if the Company is
unable to recoup its investment through legal recourse, the Company will suffer
a loss that would have a material adverse effect on its financial condition.
Proposed Butte, Nebraska Facility. In June 1987, the Company was designated
to develop and operate a LLRW disposal facility ("Butte") by the Central
Interstate Low-Level Radioactive Waste Compact Commission ("CIC"). In July of
1990, the Company submitted an application to the Nebraska Departments of
Environmental Quality and Health ("NDEQ" and "NDOH") for the necessary license.
The application has been under review and the anticipated project completion
date has been postponed several times. In 1996 the NDEQ, the lead license
review agency, removed anticipated task completion dates from its published
management plans. The last published management plan estimated the license
review would be completed, with publication of draft licensing documents and
preliminary licensing decisions, in July of 1996. The director of the NDEQ has
since estimated that stage of the licensing process would be reached in October
of 1997. However, the state has declined to provide the Company or the CIC
with a formal schedule. In August 1996, the CIC held a special meeting to
gather testimony on a review schedule that would be reasonable and enforceable
upon the state. That meeting resulted in a January 14, 1997 deadline for
completion of the review and the publication of draft documents and preliminary
decisions. The CIC schedule would have led to issuance of a license in
December 1997 and a
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facility operations start-up in December of 1999. In November, 1996 the state
filed a federal lawsuit against the CIC challenging its authority to enforce a
schedule and, in the alternative, seeks a determination that the schedule is
unreasonable. The Company is not a party to this lawsuit. The state has
subsequently failed to meet the CIC deadline and the CIC has taken preliminary
steps that could lead to a lawsuit against the state, alleging bad faith in
processing the license application. Although the Company is prepared to
proceed through construction and into operation under the accelerated schedule,
there can be no assurance the CIC will succeed in its efforts to enforce it.
Currently, the Company anticipates final license issuance in the fourth quarter
of 1999, with facility operations start-up in 2001 and an estimated total cost
of $154.3 million for licensing, design and construction. In addition the
Company is currently estimating the cost of a smaller facility in anticipation
of lesser waste volumes. However, there can be no assurance that the license
review process will result in the issuance of a license by Nebraska
authorities.
Project costs through 1996 totaled $80.3 million, substantially all of which
has been provided by the major low- level radioactive waste generators in the
CIC states (Nebraska, Kansas, Oklahoma, Arkansas and Louisiana). The Company
expects to incur expenses of approximately $600,000 per month for the remainder
of the pre-licensing phase. All these expenses are reimbursed monthly by the
CIC. Once the two year construction period commences, expenditures are
expected to be approximately $50 million, excluding interest. Under the
present contract with the CIC, this construction expense will be the Company's
responsibility. However, The CIC may provide construction financing under the
terms of its contract with the Company. Because of delays in the completion of
the license review, the Company anticipates that currently committed
pre-licensing funds will be insufficient for the completion of this phase of
its contract with the CIC. The Company is working with the CIC to renegotiate
contract amendments to provide adequate funding for the remainder of the
pre-licensing phase.
The Company's portion of the project costs through 1996, which have been
capitalized, totaled $7,146,000, and the Company anticipates no additional
investment in the project other than capitalized interest costs prior to
construction. From 1988 to January 1, 1997 unrecorded interest was earned on
the Company's contribution to the project costs at a rate of 20 percent. Under
the terms of the Company's revised contract with the CIC, unrecorded interest
computed after January 1, 1997 is calculated at prime rate plus 3 percent.
This interest rate will remain in effect until all currently authorized
pre-licensing funding is expended.
In January 1993, the directors of the NDEQ issued a Notice of Intent to Deny
the Company's license application based on
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their interpretation of an NRC regulatory requirement. The two agencies took
the position that the presence of wetlands within the proposed site boundaries,
even though not in the area to be used for waste disposal, precluded the
issuance of a license. Subsequently, the proposed site boundaries were
reconfigured to eliminate the presence of wetlands and the two agencies
withdrew the Intent to Deny. In addition, the NRC subsequently clarified its
regulations to allow small wetlands within a site's borders provided the U.S.
Army Corps of Engineers permitted mitigation of such wetlands on or off site.
In August 1994, the U.S. Army Corps of Engineers determined that a small
wetlands less than one acre in size exists on the reconfigured site. The
disposal of waste will not take place in the area determined to be a wetland by
the Corps. The State of Nebraska has taken no action against the Company's
license application as the result of the Corps' wetland determination.
However, the Company believes that resolution of the issue is prudent in order
to avoid any potential future adverse action by the state. Although the
Company disagreed with the Corps' wetland determination, the Company decided it
was more expeditious, efficient and publicly acceptable to obtain permits to
fill the disputed area and create a new wetland area off-site. The necessary
permits, which are valid through January of 1998, were obtained in August 1996.
Resolution of the issue, however, has been delayed by a state regulatory
interpretation that filling the disputed area would amount to a prohibited
prelicense initiation of project construction. The Company attempted to
resolve the issue through negotiations with the state, but negotiations did not
result in an agreement. The Company, as authorized by the CIC, commenced a
lawsuit in 1997, to resolve the issue.
Competition. The Company operates the only commercial low-level waste
disposal site operating within the regional compact system in the United
States. The Company's Richland, Washington facility operates as the exclusive
LLRW disposal site for the Northwest and Rocky Mountain Compacts. The other
United States LLRW disposal facility near Barnwell, South Carolina is operated
by Chem-Nuclear, a subsidiary of WMX Technologies, Inc., and is no longer a
part of the Southeast Compact.
A disposal facility located near Clive, Utah is licensed by the State of
Utah to accept NARM and certain other types of LLRW. This facility has not
been designated as a regional facility under the Low-Level Act. The Utah
facility accepts principally low-level radioactive contaminated soil from
clean-up sites.
LLRW PROCESSING AND RECYCLING SERVICES AT THE RECYCLE CENTER
The commercial processing and volume reduction segment of the LLRW services
market includes both fixed-based facilities
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and service capabilities performed at the radioactive waste generator sites.
The Company's processing and volume reduction services are conducted under the
auspices of its Recycle Center in Oak Ridge, Tennessee.
The Company acquired the Recycle Center from Quadrex Corp. in September
1994. Certain packaged but undisposed of waste existed at the Oak Ridge
facility when it was purchased. The State of Tennessee Department of
Environment and Conservation Division of Radiological Health wrote to the
Company in April of 1996 agreeing to the Company's proposed schedule for the
removal of this waste before December 31, 1997. The cost of disposal has been
estimated at $6.2 million. Due to cash flow and liquidity issues, the Company
has not yet been able to comply with the agreed schedule and is engaging in
discussions with the State regarding an extension of time.
The Recycle Center is equipped to process and recycle materials which are
contaminated with low levels of radioactivity. The Recycle Center provides
services primarily to nuclear power facilities, industrial radioactive waste
generators and the federal government. Historically, the Recycle Center's
customers have included a substantial number of public utilities. The Recycle
Center's principal services include the following:
NUCLEAR MATERIAL MANAGEMENT CENTER
LLRW Brokerage, Packaging and Transportation Services. The Company packages
and transports small quantities of LLRW from laboratories, hospitals,
universities and other commercial facilities to disposal facilities. The
Company may contract with low-level waste generators to pick up waste which is
shipped to commercial LLRW sites. The waste is either shipped by the Company
in its own vehicles or is shipped by common carriers under subcontract. The
Company supplies many of these customers with equipment and material for the
packaging, labeling and transportation of the LLRW material. The packaging and
transportation market is highly competitive, and the Company does not have a
significant presence in the market.
Metal Waste Decontamination. Radioactive contaminated metals exist
primarily in the form of large components such as pumps, valves, fuel racks,
and larger items such as condensers, heat exchangers, and other large
components. The Recycle Center can decontaminate these metals through an
abrasive process or chemical processing.
Dry Active Waste ("DAW") Processing. DAW processing services include volume
reduction and free release programs. This waste is primarily in the form of
wood, clothing, and paper products. The Recycle Center uses its
super-compactor to reduce the volume of this waste before it is shipped for
disposal. The
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Recycle Center facility differentiates itself in this service by baling waste
prior to supercompaction. The combination of baling, binding and
super-compacting accomplishes superior volume reduction. The Recycle Center
also sorts and segregates waste prior to supercompaction.
Green is Clean Program. In 1989, the Recycle Center initiated its free
release, or Green is Clean, program. Under this program, generators place
potentially contaminated waste in yellow bags and potentially clean material in
green bags. The bags are then shipped to the Recycle Center for scanning.
Waste certified as uncontaminated is disposed of in an industrial waste
landfill. Material that cannot be certified as clean is packaged for disposal
at a radioactive waste burial facility. This packaging includes
super-compaction to facilitate significant volume reduction.
Remedial Services. The Field Services Division of the Recycle Center offers
a full range of turnkey services including site characterization, verification,
on-site volume reduction, license termination, decontamination and
decommissioning. The Recycle Center's staff has been involved in conducting
radiological decontamination projects for over 20 years. This highly
experienced staff has implemented multiple projects on time and within budget.
NUCLEAR EQUIPMENT SERVICE CENTER (NESC)
The Nuclear Equipment Service Center ("NESC") provides refurbishment and
repair services for high value nuclear power plant electric motors and other
high value equipment. These services include decontamination, disassembly,
modifications, reassembly and testing to meet stringent client requirements for
safety and reliability. Additionally, the Company frequently provides field
services to nuclear power plants for removal, inspection, maintenance and
reinstallation of high value equipment.
Motors, valves, pumps and other components of nuclear power plants in the
United States require periodic maintenance which requires them to be
decontaminated before they can be refurbished. The Company can remove
contaminated winding insulation, decontaminate the motor stator and rotor, then
rebuild and test the motor with minimal outside service providers. The Company
believes that the NESC is the only major facility in the United States
providing a combination of all of these services.
Scaffolding and Lead Management Services. During maintenance periods,
nuclear utilities require the use of scaffolding and lead blankets. The
Recycle Center maintains an inventory of approximately two million pounds of
scaffolding and 350,000 pounds of lead blankets. The scaffolding and lead
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blankets are decontaminated, surveyed, refurbished, painted, and then rented to
the customer.
Competition. The Company's competitors in the commercial LLRW processing
and recycling market include Scientific Ecology Group (recently purchased by
GTS Duratech), Chem-Nuclear Systems, Inc., Allied Technology Group, Inc., Frank
Hake and Associates, Inc., Alaron, Inc., and Manufacturing Sciences Company.
CLOSED FACILITIES
Except for the Winona facility, which the Company is in the process of
environmentally closing as described in "THE COMPANY - HAZARDOUS WASTE SERVICES
- - Stabilization and Disposal Services - Winona, Texas Facility," the Company's
closed hazardous waste and LLRW disposal facilities are described below.
Sheffield, Illinois Facility. The Company previously operated two hazardous
waste disposal sites at Sheffield, Illinois. The sites are located on property
owned by the Company on 45 acres adjacent to a closed state-owned LLRW site
also previously operated by the Company. One hazardous waste site was opened
in 1974 and ceased accepting hazardous waste in 1983. A second closed
hazardous waste disposal site occupied less than five acres, and accepted
hazardous waste pursuant to Illinois authorization from 1968 through 1974. The
two sites were operated and are maintained under federal and state
environmental regulations.
The Company also maintains a 20-acre LLRW disposal facility three miles
southwest of Sheffield, Illinois located on land owned by the State of
Illinois. The Company has closed the facility, which last received low-level
waste in 1978, and is maintaining the site pursuant to a 1988 Agreed Order
settling long-standing litigation with the State of Illinois.
In 1984, the Company submitted for approval a closure and post-closure plan
for the hazardous waste disposal sites to the Illinois EPA and to the U.S. EPA.
The regulatory agencies have approved the Company's detailed program for
implementation and operation of comprehensive corrective action, but have not
approved the Company's closure and post- closure plan. The Company believes
that its closure and post-closure plan fully satisfies the health and safety
needs of the public and all regulatory requirements. The Company amended its
closure plan in 1996 to reflect up-to-date activities at the site. Review of
the plan by the Illinois EPA and the U.S. EPA is currently in progress.
In 1982, hazardous waste was detected in site-monitoring wells at one of the
two Sheffield facilities and, as a result, the Illinois EPA requested that the
Company conduct an investigation of the site. The Company completed, pursuant
to
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a 1985 Consent Order, a Remedial Investigation and Feasibility Study of the
Sheffield facility. Pursuant to that order, a final Corrective Measures
Implementation Plan was issued by the U.S. EPA in October 1990 and the Company
is in the process of implementing this plan. The Company completed its source
isolation programs in 1994. The Company is currently renegotiating the terms
of the Corrective Measures Implementation Plan for groundwater monitoring and
extraction programs. A pilot air sparging system has been approved by the U.S.
EPA.
RCRA regulations also require the Company to carry environmental impairment
insurance against sudden and accidental occurrences, as well as against
non-sudden occurrences such as subsurface migration. See "The Company --
Insurance". These coverages are not available for the Sheffield, Illinois site
due to its 1984 inclusion on the RCRA National Priorities List. Even though the
site was removed from the list as a result of the consent agreement between the
Company and U.S. EPA, and the site has not received waste for 20 years, the site
does not qualify for environmental impairment insurance. The State of Illinois
has threatened to sue the Company for failure to provide a financial assurance
bond of $1.9 million in regard to the Sheffield facility which the State claims
is required due to the decrease in the Company's net worth.
Maxey Flats, Kentucky Facility. Between 1963 and 1978, the Company operated
the Maxey Flats, Kentucky LLRW site, a facility that was owned, licensed and
maintained by the Commonwealth of Kentucky (the "Commonwealth"). In 1978, the
Commonwealth entered into an agreement with the Company to permanently close
the facility and the Commonwealth agreed, in part, to assume any and all
liabilities related to the facility and to exercise responsibility for
perpetual care and maintenance of the facility. The Commonwealth later filed a
lawsuit against the Company seeking to have that agreement declared invalid.
The Company then filed an action against the Commonwealth seeking cost recovery
and contribution and to enforce its rights under the agreement. After several
federal court decisions in favor of the Company on the issues, in July 1994,
the Commonwealth and the Company settled all pending litigation regarding the
Maxey flats facility. The Company and the Commonwealth also agreed to
cooperate in the resolution of any third party indemnification claims against
the Company from potentially responsible parties involved with the facility.
The Company estimates that the maximum amount of the Company's share of these
third party claims is less than $400,000, and the Company has recognized this
liability in its 1996 financial statements.
LLRW Portion of Beatty, Nevada Facility. In December 1992, the Governor of
Nevada, citing the federal Low-Level Act as authority, issued an executive
order for the Company's Beatty, Nevada LLRW disposal site to cease accepting
LLRW for disposal. In January 1993, the Company filed a lawsuit challenging
that
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order. In September 1993, the Company and the State of Nevada executed a
settlement agreement disposing of all pending litigation between the parties.
The settlement resulted in the dismissal of three lawsuits. Two of the
lawsuits had been filed by the Company challenging the authority of the Nevada
Environmental Commission to establish two new fees on disposal of waste at the
Beatty facility. The other suit dismissed was filed by Nevada seeking to
obtain a declaration from the court that it had the right to terminate the
lease agreement with the Company for the Beatty facility. The Company also
dismissed its claims against Nevada for damages associated with the Governor's
executive order closing the LLRW facility. Pursuant to the settlement
agreement, the parties also agreed that until December 31, 1996, regulatory,
statutory and lease fees for hazardous waste disposal would not exceed $40.20
per ton in the aggregate, though subject to decrease in certain events. The
settlement agreement also provides for the permanent closure of the Company's
LLRW disposal facility at Beatty, Nevada. The State of Nevada agreed to
accelerate the licensing process of the unused disposal acreage from the LLRW
site for use in the Company's hazardous waste disposal operations at Beatty.
The EPA has published a proposed permit for the unused land and the Health
Division has formally released it for other use. Release of this land will
roughly double the site's hazardous waste capacity. As a result of the above
order and settlement agreement, the Beatty facility accepted no LLRW for
disposal after January 1, 1993.
The State of Nevada maintains a perpetual care and maintenance trust fund
for the Beatty, Nevada LLRW and hazardous waste facilities which is funded by
the Company. Recently, analysis results by USGS indicating small amounts of
tritium and carbon-14 at this facility have been cited by opponents of Ward
Valley as evidence that the Ward Valley site is not suitable. The USGS in
their recent review of the Beatty data determined that "extrapolation of
results from Beatty to Ward Valley are too tenuous to have much scientific
value". These trace amounts are the result of operations or practices that
occurred in the early 1970's. This issue was thoroughly reviewed by the State
of Nevada and the NRC in 1976. Actions were implemented by the Company to
correct and upgrade disposal practices. Both California DHS and the U.S.
Geological Survey ("USGS") have stated that past disposal practices, not site
characteristics, contributed to the results at Beatty. Furthermore, the
results are not indicative of likely Ward Valley performance.
The USGS data is noteworthy from a research perspective, but has no health
and safety or regulatory significance. USGS has stated, however, that the
agency will propose and perform additional studies near Beatty. See "THE
COMPANY - HAZARDOUS WASTE SERVICES - Stabilization and Disposal Services -
Beatty, Nevada Facility".
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REGULATION
The environmental services industry is subject to extensive regulation by
federal, state and local authorities. In particular, the regulatory process
requires the Company to obtain and retain numerous governmental permits or
other authorizations to conduct various aspects of its operations, any of which
may be subject to revocation, modification or denial. Adverse decisions by
governmental authorities on permit applications submitted by the Company may
result in premature closure of facilities or restriction of operations, which
could have a material adverse effect on the Company's results of operation.
Because of the heightened public awareness of environmental issues,
companies in the environmental service business, including the Company, may in
the normal course of their business be expected periodically to become subject
to judicial and administrative proceedings. The Company may also be subject to
actions brought by private parties or special interest groups in connection
with the permitting or licensing of its operations, alleging violations of such
permits, licenses or environmental laws and regulations.
The Company's business is heavily dependent upon environmental laws and
regulations which effectively require wastes to be managed in facilities of the
type owned and operated by the Company. The Company makes a continuing effort
to anticipate regulatory, political and legal developments that might affect
its operations, but is not always able to do so. Federal, state and local
governments have from time to time proposed or adopted other types of laws or
regulations which significantly affect the environmental services industry.
These have included laws and regulations to ban or restrict the interstate
shipment of hazardous wastes, impose higher taxes on out-of-state hazardous
waste shipments than in-state shipments and to reclassify certain categories of
hazardous wastes as nonhazardous. In particular, the federal government
currently is considering several fundamental changes to laws and regulations
that define which wastes are hazardous, that establish treatment standards for
certain wastes that could lead to their reclassification as non- hazardous, and
that revise the nature and extent of responsible parties' obligations to
remediate contaminated property. While the outcome of these deliberations
cannot be predicted, it is possible that some of the changes under
consideration could facilitate exemptions from hazardous waste requirements for
significant volumes of waste and alter the types of treatment and disposal that
will be required. If such changes are implemented, the overall impact on the
Company's business is likely to be unfavorable. The Company cannot predict the
extent to which any legislation or regulation that may be enacted or enforced
in the future may affect its operations.
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Hazardous Waste Regulations. The Company is required to obtain federal,
state, local and foreign governmental permits for its hazardous waste
treatment, storage and disposal facilities. Such permits are difficult to
obtain, and in most instances extensive geological studies, tests and public
hearings are required before permits may be issued. In particular, the
Company's operations are subject to RCRA (as discussed below), the Safe
Drinking Water Act (which regulates deep well injection), TSCA (pursuant to
which the EPA has promulgated regulations concerning the disposal of PCBs), the
Clean Water Act (which regulates the discharge of pollutants into surface
waters and sewers by municipal, industrial and other sources) and the Clean Air
Act (which regulates emissions into the air of certain potentially harmful
substances). In its transportation operations, the Company is subject to the
jurisdiction of the Interstate Commerce Commission and is regulated by the DOT
and by state regulatory agencies. Employee safety and health standards under
the Occupational Safety and Health Act ("OSHA") are also applicable to the
Company's operations.
RCRA. Pursuant to RCRA, the EPA has established and administers a
comprehensive, "cradle-to-grave" system for the management of a wide range of
solid and "hazardous" wastes. States that have adopted hazardous waste
management programs with standards at least as stringent as those promulgated
by the EPA may be authorized by the EPA to administer their programs in lieu of
the EPA.
Under RCRA and federal transportation laws, all generators of hazardous
wastes are required to label shipments in accordance with detailed regulations
and prepare a detailed manifest identifying the material and stating its
destination before shipment off site. A transporter must deliver the hazardous
wastes in accordance with the manifest and generally only to a treatment,
storage or disposal facility having a RCRA permit or interim status under RCRA.
Every facility that treats or disposes of hazardous wastes must obtain a RCRA
permit from the EPA or an authorized state and must comply with certain
operating standards. The RCRA permitting process involves applying for interim
status and also for a final permit. The Company believes that each of its
facilities is in substantial compliance with the applicable requirements
promulgated pursuant to RCRA.
It is possible that the EPA may consider a number of fundamental changes to
its regulations under RCRA that could facilitate exemptions from hazardous
waste management requirements, including policies and regulations that could
implement the following changes: redefine the criteria for determining whether
wastes are hazardous; prescribe treatment levels which, if achieved, could
render wastes non-hazardous; encourage further recycling and waste
minimization; reduce treatment requirements for certain wastes to encourage
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alternatives to incineration; establish new operating standards for combustion
technologies; and indirectly encourage on-site remediation. Because many of
these initiatives are in various stages of development and implementation, the
Company cannot predict the final outcome of EPA decisions or the extent of
their impact on the Company's business.
Superfund. Superfund provides for immediate response and removal actions
coordinated by the EPA to releases of hazardous substances into the
environment, and authorizes the federal government either to clean up
facilities at which hazardous substances have created actual or potential
environmental hazards or to order persons responsible for the situation to do
so. Moreover, Superfund grants a right of recovery to private parties who
incur costs in response to the release or threatened release of hazardous
substances. Superfund has been interpreted as creating strict, joint and
several liability for costs of removal and remediation, other necessary
response costs and damages for injury to natural resources. Liability extends
to owners and operators of waste disposal facilities (and waste transportation
vehicles) from which a release occurs, persons who owned or operated such
facilities at the time the hazardous substances were disposed, persons who
arranged for disposal or treatment of a hazardous substance at or
transportation of a hazardous substance to such a facility, and waste
transporters who selected such facilities for treatment or disposal of
hazardous substances.
It is possible that the U.S. Congress could revise the Superfund statute in
the future. In addition to possible changes in the statute's funding
mechanisms and provisions for allocating cleanup responsibility, it is possible
that Congress could fundamentally alter the statute's provisions governing the
selection of appropriate site cleanup remedies, conclude not to continue
Superfund's current reliance on stringent technology standards issued under
other statutes to govern removal and treatment of remediation wastes or could
adopt new approaches such as national or site- specific risk based standards.
These and other potential policy changes could significantly affect the
stringency and extent of site remediation, the types of remediation techniques
that will be employed, and the degree to which permitted hazardous waste
management facilities will be used for remediation wastes.
LLRW Regulations. The LLRW services of the Company are also subject to
extensive governmental regulation. Various phases of the Company's LLRW
services are regulated by various state agencies, the NRC and the DOT.
Regulations applicable to the Company's operations include those dealing with
packaging, handling, labeling and routing of radioactive materials, and
prescribe detailed safety and equipment standards and requirements for
training, quality control and insurance, among other matters. Employee safety
and health standards under OSHA are also applicable to the Company's
operations.
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Financial Assurance and Site Maintenance. The Company operates its
hazardous waste disposal sites under RCRA permits. The LLRW sites are operated
under licenses from state and, in some cases, federal agencies. When one of
these facilities reach capacity, or on lease or license termination dates, the
facility must be closed and maintained for a period of time prescribed by law
or by license. In the case of the RCRA-permitted hazardous sites, federal
regulation requires that operators demonstrate the financial capability to
close sites on an immediate, unscheduled (worst-case) basis. The estimated
costs of such a closure are set forth in the operator's RCRA closure and
post-closure plan.
Financial assurance requirements for closure/post-closure plans may
generally be satisfied by various means, including insurance, letters of
credit, surety bonds, trust funds, a financial net worth test and/or a
corporate guarantee. The Company is currently satisfying such requirements
through a combination of certain of the various allowable methods. Cash and
investment securities totaling $16.4 million and $13.8 million at December 31,
1996 and 1995, respectively, have been pledged as collateral for the Company's
closure and post-closure obligations, performance of a Remedial Investigation
and Feasibility Study and performance of corrective action at the closed
Sheffield, Illinois facility, compliance with the TNRCC requirements related to
the Company's non-commercial use deepwell at its Robstown, Texas facility,
closure costs for the Beatty, Nevada LLRW site, closure costs for the Recycle
Center, closure costs for the Winona, Texas facility, test borings at the
proposed LLRW sites in Nebraska and California, settlement with generators of
waste at the Richland, Washington LLRW facility and other general performance
bonds.
INSURANCE
The nature of the Company's business exposes it to risk of accidental
release of harmful substances into the environment resulting in contamination,
the remediation cost of which could be substantial. The Company currently has
liability insurance coverage for non-nuclear related occurrences under
environmental impairment liability, primary casualty and excess liability
policies. Pursuant to RCRA, the Company is required to maintain environmental
impairment liability insurance coverage with specified minimum limits for
sudden and non-sudden accidental occurrences. The Company is in compliance
with required limits and coverage with the exception of the Sheffield, Illinois
site where such insurance is unavailable. See "THE COMPANY - CLOSED
FACILITIES". The Company covers radioactive risk through nuclear liability
insurance policies written to cover the operations of its facilities, suppliers
and transporters.
In 1987, the Company organized and funded ALEX as a wholly-owned subsidiary
to reinsure financial assurance insurance for the Company's closure and
post-closure responsibilities at
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certain of its sites, and to provide a source of insurance for the Company in
the event that traditional third party insurance becomes unavailable. ALEX is
currently reinsuring financial assurance for closure and post-closure of the
Company's facilities, and underwriting a performance bond for one of the
Company's subsidiaries. Traditional third party insurance is utilized for
other lines of coverage. ALEX has funded cash reserves representing the
approximate present value of the closure or post-closure obligation being
insured. As of June 30, 1997, the ALEX investment portfolio was approximately
$8.6 million.
During the first six months of 1997, the Company borrowed $300,000 from
ALEX. The State of Vermont, which regulates ALEX as a captive insurance
company, objected to the loan as being a violation of regulatory provisions.
In August 1997, the Company repaid $180,000 of the loan.
CUSTOMERS
Revenues resulting from the cost reimbursement contract with the CIC were
approximately $5,711,000 in 1996, or 11% of the Company's consolidated
revenues. No other single customer accounted for 10% of the Company's
consolidated revenues for 1996.
PERSONNEL
The Company had a total of 306 employees as of June 30, 1997. The number of
total Company employees has been essentially stable since March, 1997. The
Company has collective bargaining agreements which cover 10 employees at its
Richland, Washington facility, 2 employees at its Winona, Texas facility, and
58 employees at its Oak Ridge, Tennessee facility. The Company believes that
its relationship with its employees is good.
In November 1996, the Company changed to a new 401(k) and Retirement Plan
Administrator. After soliciting bids from various providers, the Company
selected Manulife as the new primary trustee and Pihl, Gutierrez, Garretson &
Roberts ("PGG&R") as the new plan administrators. Manulife allows the
Company's 401(k) and Retirement Plan participants greater benefit flexibility.
PGG&R is dedicated to providing Company employees with excellent service in
processing timely statements, distributions, and loans.
Employee benefits have also been enhanced as of January 1997. The Company
selected Idaho Employers Council to administer the medical/dental plan.
Scriptcard was chosen as the new pharmaceutical provider. Also, the Company
chose Benefit America to administer a new "cafeteria" flexible benefit program
that allows employees to set aside medical and dependent care funds on a
pre-tax basis. The Company allowed Colonial
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Life and Accident Insurance to provide several supplemental programs such as
cancer, intensive care and hospitalization coverage. The Company chose
Northwestern Life (Reliastar) to offer supplemental spouse/dependent life
insurance and continue with their existing services. The Company selected
Business Psychology Associates to provide an employee assistance program that
allows employees and his/her family enrolled in the medical/dental plan, to
attend three counseling sessions per incident at no cost to the employee.
PROPERTIES
The Company believes that its property and equipment are well-maintained, in
good operating condition and adequate for the Company's present needs. The
Company's headquarters are located in Boise, Idaho in leased office space. The
Company also leases sales and administrative offices in Washington, California,
Nebraska, Illinois, Nevada, Texas, and Kentucky.
The following table sets forth certain information regarding the principal
operating, treatment, processing or disposal facilities owned or leased by the
Company.
<TABLE>
<CAPTION>
LOCATION FUNCTION ACREAGE OWN/LEASE
<S> <C> <C> <C>
Beatty, Nevada Hazardous Waste Disposal Facility 80 acres Lease
Houston, Texas Westheimer Office vacated March 1996 33,800 sq. ft. Lease
Houston, Texas Katy Freeway Office Vacated May 1997 11,000 sq. ft. Lease
Oak Ridge, Tennessee LLRW Processing Facility 16 acres Own
Pasadena, Texas Transportation Facility 3 acres Own
Richland, Washington LLRW Disposal Facility 100 acres Lease
Robstown, Texas Transportation Facility 1 acre Own
Robstown, Texas Hazardous and Class 1 Non- 400 acres Own
Hazardous Waste Disposal Facility
Winona, Texas Closed facility March 17, 1997 620 acres Own
</TABLE>
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<PAGE> 43
RECENT DEVELOPMENTS
SETTLEMENT OF ALLY CAPITAL LITIGATION
As a result of litigation with Ally Capital Corporation, the Company
renegotiated in July 1997 a capital equipment lease at the Recycle Center
extending the term, reducing the end of lease residual payment and reducing
monthly payments. The Company is currently reviewing the proper accounting
treatment for the renegotiated lease because the extended term is beyond the
useful life of the equipment for accounting purposes. The total lease payments
over the next four years in regard to the renegotiated lease is $618,000.
THREATENED SHEFFIELD LITIGATION
The State of Illinois has threatened to sue the Company for failing to
provide a $1.9 million financial assurance bond in regard to the Company's
closed Sheffield, Illinois facility. See "THE COMPANY - CLOSED FACILITIES -
Sheffield Illinois Facility".
ADDITIONAL INCENTIVE COMPENSATION
On August 12, 1997, pursuant to a recommendation of the Compensation
Committee, the Company's Board of Directors approved additional compensation
for Jack R. Lemley, the Company's President and Chief Executive Officer in the
form of: (i) the immediate issuance of 25,000 shares of the Company's Common
Stock as compensation for past services, (ii) the grant of immediately vested
and exercisable options under the Company's 1992 Stock Option Plan to purchase
150,000 shares of the Company's Common Stock at $1.81 per share, the fair
market value of the Company's Common Stock on the date of grant, and (iii) the
grant within 10 business days following the Expiration Date of the Rights
Offering of vested options under the Company's 1992 Stock Option Plan to
purchase shares of the Company's Common Stock constituting (with the shares
issued pursuant to (i) and the options issued pursuant to (ii)) 5% of the
Company's outstanding Common Stock after the Rights Offering at a purchase
price equal to the fair market value of a share of Common Stock on the date of
grant. Mr. Lemley exercised ______________ of the options referred to in (ii)
prior to the Record Date.
On September 4, 1997, pursuant to a recommendation of the Compensation
Committee, the Company's Board of Directors approved the grant to Robert S.
Thorn, the Company's Vice President and chief accounting officer, and Joseph J.
Nagel, a Company Vice President, of immediately vested and exercisable options
under the Company's 1992 Stock Option Plan to each
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<PAGE> 44
purchase 10,000 shares of the Company's Common Stock for $2.00 per share, the
fair market value of the Company's Common Stock on the date of grant. Mr.
Thorn and Mr. Nagel exercised options to purchase _____ and _____ shares of
Common Stock respectively prior to the Record Date.
OTHER OPTION EXERCISES PRIOR TO RECORD DATE
In addition to Mr. Lemley, Mr. Thorne and Mr. Nagel, the following officers
and directors of the Company exercised options and purchased Common Stock
entitling them to participate in the Rights Offering subsequent to June 30,
1997, and prior to the Record Date:
<TABLE>
<CAPTION>
Individual Shares Purchased
---------- ----------------
<S> <C>
--------------------- ---------------------
--------------------- ---------------------
</TABLE>
-44-
<PAGE> 45
SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data of the
Company and has been derived from, and should be read in conjunction with, the
audited financial statements of the Company, including the notes thereto, as of
and for the fiscal years ended December 31, 1996, 1995, 1994, 1993, and 1992
and the unaudited interim consolidated financial statements of the Company,
including notes thereto, for the six months ended June 30, 1997 and 1996.
(Dollars in Thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Six
Months Ended
June 30, For the Fiscal Years Ended December 31,
----------------------- ---------------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $ 20,331 $ 26,188 $ 49,972 $ 67,895 $ 71,891
% Increase (decrease) in revenues (22.4)% (30.5)% (26.4)% (5.6)% 19.2%
from prior year
Net income (loss) (1) $ 413 $ (2,645) $ (11,407) $ (48.903) $ 3,850
Net income (loss) per share $ .01 $ (.36) $ (1.50) $ (6.26) $ .49
Shares used to compute income (loss) per share (000's) $ 8,076 7,857 7,896 7,822 7,851
Working capital (deficit) $ (15,678) $ (19,786) $ (16,693) $ (16,115) $ 1,563
Total assets $ 97,036 $ 109,777 $ 99,027 $ 114,125 $ 155,439
Long-term debt, net of current portion $ 36,660 $ 28,533 $ 36,202 $ 28,357 $ 33,493
Shareholders' equity $ 14,331 $ 19,789 $ 13,604 $ 22,024 $ 67,045
Long-term debt to total capitalization as a percentage 71.9% 59.0% 72.7% 56.3% 33.3%
Current ratio (current assets divided by current 0.4:1 0.5:1 0.4:1 0.6:1 1.0:1
liabilities)
Return on average equity 3.0% (12.6)% (64.0)% (109.8)% 5.9%
Dividends declared per common share $ -- $ -- $ -- $ .025 $ .10
Capital spending, including capital expenditures and site
development costs (2) $ 1,978 $ 3,374 $ 5,659 $ 8,445 $ 8,035
Depletion, depreciation and amortization expense $ 1,877 $ 2,195 $ 5,383 $ 7,319 $ 6.279
</TABLE>
<TABLE>
<CAPTION>
For the Fiscal Years Ended December 31,
--------------------------------------
1993 1992
--------- ---------
<S> <C> <C>
Revenues $ 60,312 $ 70,940
% Increase (decrease) in revenues (15.0)% 27.1%
from prior year
Net income (loss) (1) $ 4,744 $ 12,556
Net income (loss) per share $ .60 $ 1.51
Shares used to compute income (loss) per share (000's) 8.097 8,568
Working capital (deficit) $ 4,771 $ 14,078
Total assets $ 108,122 $ 104,166
Long-term debt, net of current portion $ -- $ --
Shareholders' equity $ 63,564 $ 54,730
Long-term debt to total capitalization as a percentage --% --%
Current ratio (current assets divided by current 1.2:1 1.7:1
liabilities)
Return on average equity 8.0% 26.4%
Dividends declared per common share $ -- $ --
Capital spending, including capital expenditures and site
development costs (2) $ 12, 558 $ 9,582
Depletion, depreciation and amortization expense $ 4,356 $ 4,173
</TABLE>
(1) 1996 expenses include $7,451 in impairment losses on long-lived assets for
the Winona facility and 1995 includes $33,048 in impairment losses on
long-lived assets for the Recycle Center, WPI Waste Processors and the Winona
facility. See Note 4 to the Financial Statements. (2) Excludes capitalized
interest.
DESCRIPTION OF RIGHTS OFFERING
ISSUE OF RIGHTS
The Company is issuing to holders of its Common Stock non-transferable
Rights to subscribe for up to 8,200,581 additional shares of Common Stock.
Each holder of Common Stock is entitled to receive one Right for each share of
Common Stock held of record at 5:00 p.m., eastern time, on the Record Date.
All such holders are entitled to purchase, at the Subscription Price, one share
of Common Stock for each Right held. In the event all holders of Common Stock
(8,200,581 shares outstanding
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<PAGE> 46
as of the Record Date) were to exercise all of the Rights, the Company would
issue 8,200,581 additional shares of Common Stock for an aggregate
consideration of $8,200,581. No Rights are currently outstanding. The Company
will bear all of the costs and expenses of issuing the Rights and Common Stock
offered hereby.
The Company has filed a Registration Statement, of which this Prospectus is
a part, with the Commission with respect to the Rights and the Common Stock
issuable upon exercise of the Rights.
SUBSCRIPTION CERTIFICATES
The Rights are represented by non-transferable Subscription Certificates,
evidencing the total number of Rights to which the holder is entitled. A
Subscription Certificate representing Rights to acquire shares of Common Stock
will be sent to each record holder of Common Stock on the Record Date.
Possession of a Subscription Certificate does not constitute the holder
thereof to be a holder of the Common Stock to which such Subscription
Certificate relates unless and until such holder subscribes for and is issued
such Common Stock.
EXPIRATION DATE
The Rights represented by the Subscription Certificates will expire on the
Expiration Date at 5:00 p.m., eastern time. RIGHTS NOT EXERCISED BY THE
EXPIRATION DATE WILL LAPSE AND BE VOID AND WITHOUT VALUE.
SUBSCRIPTION AGENT
The Subscription Agent for this offering is ChaseMellon Shareholder
Services, L.L.C.
INFORMATION AGENT
Investors who desire additional copies of this Prospectus or additional
information should contact Mr. Scott Peyron at (208) 388-3800. Scott Peyron
and Associates is acting as information agent pursuant to its existing monthly
retainer arrangement for public relations and shareholder relations work.
SUBSCRIPTION FOR COMMON STOCK
Rights may be exercised in whole or in part by a record holder of Common
Stock by filling in and signing the relevant forms on the Subscription
Certificate and mailing or delivering the Subscription Certificate, together
with payment in full for the Common Stock subscribed for, to the Subscription
Agent at the address set forth in the Subscription Certificate. EXCEPT AS
PROVIDED BELOW, A RIGHT WILL NOT BE DEEMED EXERCISED UNLESS
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<PAGE> 47
THE SUBSCRIPTION AGENT RECEIVES BOTH PAYMENT OF THE SUBSCRIPTION PRICE AND A
DULY EXECUTED SUBSCRIPTION CERTIFICATE BY 5:00 P.M., EASTERN TIME, ON THE
EXPIRATION DATE.
Any exercise of Rights pursuant to this offering will be irrevocable and
will not be subject to withdrawal.
If the recipient of a Subscription Certificate wishes to exercise the Rights
represented thereby, but time will not permit the holder to deliver the
Subscription Certificate to the Subscription Agent prior to the Expiration
Date, the Rights may nevertheless be exercised if all the following conditions
are met:
1. The holder has caused payment in full of the Subscription
Price for the shares of Common Stock being subscribed for pursuant to the
Rights to be made (in the form prescribed below under "PAYMENT OF
SUBSCRIPTION PRICE") to the Subscription Agent prior to the Expiration Date.
2. The Subscription Agent receives, prior to the Expiration
Date, a guarantee notice (a "Notice of Guaranteed Delivery"), substantially
in the form delivered with the Subscription Certificate, from a financial
institution having an office or correspondent in the United States, or a
member firm of any registered United States national securities exchange or
of the National Association of Securities Dealers, Inc. (each an "Eligible
Institution"), stating the certificate number of the Subscription
Certificate relating to the Rights, the name and address of the exercising
stockholder, the number of Rights represented by the Subscription
Certificate held by such exercising stockholder, the number of shares of
Common Stock being subscribed for pursuant to the Rights and guaranteeing
the delivery to the Subscription Agent of the Subscription Certificate
evidencing such Rights within three Nasdaq trading days following the date
of the Notice of Guaranteed Delivery.
3. The properly completed Subscription Certificate evidencing
the Rights being exercised is received by the Subscription Agent within
three Nasdaq trading days following the date of the Notice of Guaranteed
Delivery relating thereto.
The Notice of Guaranteed Delivery must be delivered to the Subscription
Agent at the address set forth in the Subscription Certificate or may be
transmitted to the Subscription Agent by facsimile transmission (telecopy no.
(201) 329-8936). Additional copies of the Notice of Guaranteed Delivery are
available upon request from the Subscription Agent.
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<PAGE> 48
RIGHTS OF BENEFICIAL OWNERS OF COMMON STOCK
Record holders of Common Stock, such as brokers, trustees or securities
depositaries, who hold shares of Common Stock for the accounts of others should
notify such beneficial owners of this offering as soon as possible and obtain
instructions with respect to the Rights to which such beneficial owners are
entitled. If such a beneficial owner of Rights so instructs, the record
holder should complete the Subscription Certificate, including the amount of
Common Stock each beneficial owner elects to purchase, and submit it to the
Subscription Agent with the proper payment, in accordance with the terms of
this offering. In addition, beneficial owners of Common Stock held through
record holders should contact such record holders and request that they effect
transactions in accordance with such beneficial owner's instructions.
Record holders who exercise the Rights on behalf of beneficial owners of
Common Stock will be required to certify to the Subscription Agent and the
Company, in connection with the exercise of the Rights, as to (i) the number of
shares of Common Stock owned by each such beneficial owner and (ii) the number
of shares of Common Stock to which such beneficial owner subscribed pursuant to
that person's exercise of the Rights.
THE METHOD OF DELIVERY TO THE SUBSCRIPTION AGENT OF A SUBSCRIPTION
CERTIFICATE AND PAYMENT OF THE SUBSCRIPTION PRICE IS AT THE ELECTION AND RISK
OF EACH STOCKHOLDER. SUBSCRIPTION CERTIFICATES, TOGETHER WITH PAYMENT OF THE
SUBSCRIPTION PRICE, SHOULD BE SENT WITH SUFFICIENT TIME TO ALLOW FOR DELIVERY
PRIOR TO THE EXPIRATION DATE. IF DELIVERY IS MADE BY REGULAR MAIL SERVICE, THE
USE OF REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED.
COMPLETED SUBSCRIPTION CERTIFICATES AND PAYMENTS SHOULD BE MAILED OR
DELIVERED TO THE SUBSCRIPTION AGENT AND NOT TO THE COMPANY. QUESTIONS SHOULD
BE DIRECTED TO THE INFORMATION AGENT.
PAYMENT OF SUBSCRIPTION PRICE
The total Subscription Price for the Common Stock subscribed for must be
paid to the Subscription Agent in U.S. funds by certified check, bank draft or
money order payable at par (without deduction for bank service charges or
otherwise) to the order of the Subscription Agent. All funds received in
payment of the Subscription Price under the Rights Offering will be promptly
remitted by the Subscription Agent to the Company. In lieu of making payment
in cash, holders of Series E Preferred Stock may exchange one share of Series E
Preferred Stock for each 10 shares of Common Stock such holder is entitled to
purchase in the Rights Offering by delivery to the Subscription Agent of the
requisite number of shares of Series E Preferred Stock either endorsed in blank
for transfer or together with an
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<PAGE> 49
assignment separate from certificate executed in blank by the registered holder
thereof.
DELIVERY OF STOCK CERTIFICATES
Certificates for shares of Common Stock duly subscribed and paid for will be
mailed to the subscriber by the Subscription Agent as soon as practicable
(which is anticipated to be the fifth business day after the Expiration Date)
at the subscriber's registered address on the books of the Company.
SIGNATURES
Whenever any of the forms on a Subscription Certificate are signed, the
signature must correspond in every particular with the name of the holder as it
appears on the face of the Subscription Certificate. If the Subscription
Certificate is signed by a trustee, executor, administrator, guardian, attorney
or officer of a corporation or any person acting in fiduciary or representative
capacity, the person so signing should give his full title in such capacity
and, on request, satisfactory evidence of authority to act must be furnished.
DETERMINATION AS TO VALIDITY OF SUBSCRIPTIONS
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of any subscription will be determined by the Company,
in its sole discretion, which determination will be final and binding. The
Company reserves the absolute right to reject any subscription if it is not in
proper form or if the acceptance thereof or the issuance of the Common Stock
pursuant thereto could be deemed unlawful. The Company also reserves the right
to waive any defect with regard to any particular subscription or request for
transfer. The Company and the Subscription Agent will not be under any duty to
give notification of any defects or irregularities in subscriptions, nor will
either of them incur any liability for failure to give such notification.
Subscriptions will not be deemed to have been made until any such defects or
irregularities have been cured or waived within such time as the Company will
determine. Subscriptions with defects or irregularities which have not been
cured or waived will be returned by the Subscription Agent to the appropriate
holder of the Rights as soon as practicable.
DETERMINATION OF SUBSCRIPTION PRICE
The Subscription Price for Common Stock pursuant to the Rights Offering does
not and was not intended to bear any relationship to the current market price
of the Common Stock, the Company's net worth, its results of operations or any
other generally accepted criterion of value. Instead, it was determined in
conjunction with the terms of the Series E
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<PAGE> 50
Preferred Stock unanimously approved by the Company's Board of Directors on
October 31, 1996 and ratified by the Company's shareholders on May 22, 1997.
The purpose of the Rights Offering is to allow all the Company's shareholders
to participate on an equal basis in the provision of equity required by the
Bank in regard to the Credit Agreement.
In early 1996 the Company was in a state of financial crisis. In the
mid-1990s the Company had made several acquisitions in order to strengthen its
position in its businesses. The capital requirements of the acquired
businesses together with those of the Company's prior businesses greatly
exceeded the Company's capital resources and borrowing capacity. The Company
wrote off approximately $33.0 million in capitalized costs in 1995 and incurred
a loss of $48.9 million in 1995 versus net income in 1994 of $3.8 million. The
market price of the Company's Common Stock fell from a 1994 high of $12.50 per
share to the $1.00 per share range in 1996, the Company's line of credit from
the Bank went into default and the Bank refused to advance additional funds.
As a result, the Company was reorganized outside of bankruptcy in 1996 and the
existing Credit Agreement was negotiated with the Bank extending the maturity
of the Bank debt to December 31, 2000 and deferring principal amortization and
interest payments until 1999. As a condition to renegotiating the loan terms,
the Bank required that there be an immediate infusion of $3.0 million in new
equity and that the Company use its best efforts to raise an additional $2.0
million in equity in 1997.
An equity offering to all the Company's shareholders was not feasible to
meet the timetable required by the Bank and necessitated by the Company's
immediate cash needs. Two Company directors, Rotchford Barker and Edward F.
Heil, agreed to provide the $3.0 million in equity immediately required by
purchasing 300,000 shares of Series E Preferred Stock at $10 per share or an
aggregate purchase price of $3,000,000. In order to give all Company
shareholders the right to participate in the required $3.0 million of new
equity and to satisfy the Company's obligations to the Bank to use its best
efforts to raise an additional $2.0 million in equity, Mr. Heil and Mr. Barker
required that the Company register with the Commission an offering giving all
holders of Common Stock the right to purchase for $1.00 a share of Common Stock
for each share of Common Stock held. To the extent the Rights Offering
generates less than $5.0 million in proceeds, the Series E Preferred Stock will
be automatically converted into Common Stock at the rate of 10 shares of Common
Stock for each share of Series E Preferred Stock. To the extent that the sum
of the amount of stock sold in the Rights Offering plus the stated amount of
any Series E Preferred Stock not converted into or exchanged for Common Stock
in the Rights Offering is in excess of $5.0 million, the Series E Preferred
Stock will be redeemed at its stated value of $10.0 per share from such excess
proceeds. Because of the redemption and mandatory conversion terms, the
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<PAGE> 51
Series E Preferred Stock will be either redeemed or converted into Common Stock
as a result of the Rights Offering. In order to allow this to happen, the
Subscription Price in the Rights Offering could not fluctuate with the market
price for the Company's Common Stock over time. Consequently, the Subscription
Price was fixed at $1.00 per share which was the approximate market price for a
share of Common Stock when the Series E Preferred Stock was approved in October
1996.
USE OF PROCEEDS
The purpose of the Rights Offering is to raise working capital for the
Company to use in its day to day operations. See "DETERMINATION OF
SUBSCRIPTION PRICE". This will be accomplished by either converting the
existing $3,000,000 in stated amount of Series E Preferred Stock to Common
Stock or redeeming the Series E Preferred Stock from the proceeds of the Rights
Offering and by raising up to an additional $5,200,581 in working capital for
the Company. To the extent that less than 5,000,000 shares of Common Stock are
subscribed for in the Rights Offering, one share of Series E Preferred Stock
will be converted into 10 shares of Common Stock for each 10 shares or portions
thereof of Common Stock less than 5,000,000 sold in the Rights Offering. To
the extent that the purchase price of the Common Stock sold in the Rights
Offering plus the stated amount of the Series E Preferred Stock outstanding
immediately after the Rights Offering exceeds $5,000,000 the excess shall be
used to redeem Series E Preferred Stock at its stated amount of $10.00 per
share. The result will be that a minimum of $3,000,000 in permanent working
capital will be raised in the Rights Offering by exchange or conversion of the
existing Series E Preferred Stock, the Series E Preferred Stock will be
eliminated no matter how many Rights are exercised, and $5,200,581 in
additional working capital will be raised if all Rights are exercised.
LEGAL MATTERS
The validity of the Common Stock to be issued upon the exercise of the
Rights will be passed upon by Jenner & Block, Chicago, Illinois, counsel for
the Company.
EXPERTS
The consolidated financial statements and schedules of the Company
incorporated by reference in this Prospectus from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996 have been audited by
Balukoff, Lindstrom & Company, independent auditors, as set forth in their
report thereon and incorporated herein by reference. Such consolidated
financial statements and schedules have been incorporated hereby by reference
in reliance upon such report given upon the authority of such firm as experts
in accounting and auditing.
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<PAGE> 52
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER WILL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFERING IN SUCH JURISDICTION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION ....................................
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ...........
PROSPECTUS SUMMARY.........................................
RISK FACTORS ..............................................
THE COMPANY ...............................................
RECENT DEVELOPMENTS .......................................
SELECTED FINANCIAL DATA ...................................
DESCRIPTION OF RIGHTS OFFERING ............................
DETERMINATION OF SUBSCRIPTION PRICE .......................
USE OF PROCEEDS ...........................................
LEGAL MATTERS..............................................
EXPERTS ...................................................
</TABLE>
RIGHTS TO SUBSCRIBE FOR $8,200,581 SHARES OF COMMON STOCK AND
EXCHANGE AND CONVERSION OF SERIES E REDEEMABLE PREFERRED
STOCK IN CONJUNCTION THEREWITH
AMERICAN ECOLOGY CORPORATION
Prospectus
SEPTEMBER 9, 1997
<PAGE> 53
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the issuance and distribution of
the securities being registered are:
<TABLE>
<S> <C>
SEC Filing Fees ......................... $ 2,485
Legal Fees and Expenses ................. 40,000
Accounting Fees and Expenses ............ 6,500
Printing and Engraving Fees ............. 13,000
Registrar, Subscription Agent and Infor-
mation Agent Fees and Distribution Costs 50,000
Stock Exchange Listing Fees ............. 17,500
Miscellaneous ........................... 12,000
Total Expenses ................. $141,485
=======
</TABLE>
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides for
indemnification of directors and officers against claims and liabilities
against them in their capacities as such. Article Seventh of the Restated
Certificate of Incorporation of the Company provides for indemnification of the
Company's officers and directors to the fullest extent allowed by Delaware law.
Item 16. EXHIBITS
The exhibits listed on the Exhibit Index on page II-_ of this Registration
Statement have been previously filed, are filed herewith, will be filed by
amendment or are incorporated herein by reference to other filings.
Item 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act;
II-1
<PAGE> 54
(ii) to reflect in the prospectus any facts or events
which, individually or together, represent a fundamental change in
the information in the registration statement; and
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement; provided, however, that paragraphs
(a)(1)(i) and (a)(1)(ii) do not apply if the information required
to be included in a post-effective amendment by those paragraphs in
contained in the periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference
herein.
(2) That, for purposes of determining any liability under the
Securities Act of 1933, each such post- effective amendment will be deemed
to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time will be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in this Registration Statement will
be deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time will be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is
II-2
<PAGE> 55
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of the appropriate jurisdiction the question whether such indemnification by it
is against public policy as expressed by the Securities Act and will be
governed by the final adjudication of such issue.
II-3
<PAGE> 56
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that is has reasonable grounds to believe it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boise, State of Idaho, on September
9, 1997.
AMERICAN ECOLOGY CORPORATION
By:/s/ Jack K. Lemley
-----------------------
Jack K. Lemley
Chairman of the Board,
Chief Executive Officer
and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Jack K. Lemley Chairman of the Board, Chief September 9, 1997
------------------------------ Executive Officer, President
Jack K. Lemley and Director
/s/Robert S. Thorn Chief Accounting Officer September 9, 1997
------------------------------
Robert S. Thorn
* Director September 9, 1997
------------------------------
Rotchford L. Barker
* Director September 9, 1997
------------------------------
Paul C. Bergson
* Director September 9, 1997
------------------------------
Keith D. Bronstein
* Director September 9, 1997
------------------------------
Edward F. Heil
* Director September 9, 1997
------------------------------
Paul F. Schutt
* Director September 9, 1997
------------------------------
John J. Scoville
*By:/s/ Phillip K. Chattin
--------------------------
Phillip K. Chattin,
Attorney in Fact
</TABLE>
II-4
<PAGE> 57
LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
4.1 Specimen Common Stock Certificate
4.2 Form of Subscription Certificate
4.3 Form of Subscription Agent Agreement
5.1 Form of Opinion of Jenner & Block as to legality of
Common Stock being registered
23.1 Consent of Balukoff, Lindstrom & Co., P.A.
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Jenner & Block (incorporated in opinion
filed as Exhibit 5.1)
24.1 Power of Attorney
99.1 Instructions to Shareholders re Subscription Certificate
</TABLE>
<PAGE> 1
EXHIBIT 4.1
COMMON STOCK
AMERICAN ECOLOGY CORPORATION
SHARES
------------
Number ------------
- --------
NY
- --------
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 025533 10 0
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE IN THE CITIES OF NEW YORK OR SEATTLE
- --------------------------------------------------------------------------------
This Certifies that
SPECIMEN
is the owner of
- --------------------------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE, OF
________________________ AMERICAN ECOLOGY CORPORATION _________________________
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned by the Transfer
Agent and registered by the Registrar.
WITNESS the seal of the Corporation and the signatures of its duly
authorized officers.
Dated:
[Seal]
General Counsel and Secretary Chairman and Chief Executive Officer
COUNTERSIGNED AND REGISTERED
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
AUTHORIZED SIGNATURES
<PAGE> 2
AMERICAN ECOLOGY CORPORATION
The Company is authorized to issue Common Stock and Preferred Stock.
The Board of Directors of the Company has authority to fix the number of shares
and the designation of any series of Preferred Stock and to determine or alter
the rights, preferences, privileges, and restrictions granted to or imposed
upon any unissued shares of Preferred Stock.
A statement of the rights, preferences, privileges and restrictions
granted to or imposed upon the respective classes or series of shares and upon
the holders thereof as established, from time to time, by the Articles of
Incorporation of the Corporation and by any certificate of determination, and
the number of shares constituting each class and series and the designations
thereof, may be obtained by the holder hereof upon written request and without
charge from the Secretary of the Corporation at its corporate headquarters.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- .............. Custodian ..............
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act...................................
in common (State)
UNIF TRF MIN ACT -- ...............Custodian (until age.......)
...............under Uniform Transfers
(Minor)
to Minors Act..........................
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ----------------------------------
- ----------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney to transfer
- -----------------------------------------------------------
the said stock on the books of the within named Corporation with full power of
substitution in the premises.
Dated X
---------------------------------- --------------------------------
X
--------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S)
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER
Signature(s) Guaranteed
By
-------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17AD-15.
<PAGE> 1
EXHIBIT 4.2
<TABLE>
<S> <C> <C> <C>
- ---------- ----------- -------------------- ----------------
SEQUENCE # ACCOUNT KEY SUBSCRIPTION RIGHT # NUMBER OF RIGHTS
</TABLE>
<TABLE>
<S> <C> <C>
CUSIP: AMERICAN ECOLOGY CORPORATION ------------------
SUBSCRIPTION CERTIFICATE RECORD DATE SHARES
</TABLE>
The below named shareholder has the right to purchase the number of
fully paid and nonaccessible shares of common stock, $.01 par value ("Common
Stock") of American Ecology Corporation (the "Company") equal to the Number of
Rights stated above at $1.00 per share offered by the Company pursuant to and
subject to the terms and conditions of the prospectus dated _____________, 1997
(the "Prospectus"). You should read the Prospectus for a more complete
explanation of the Rights Offering and for information about the Company.
Capitalized terms not defined herein are defined in the Prospectus. By
executing this Subscription Certificate, the undersigned acknowledges having
received and read the Prospectus. To exercise your Rights, you must complete
and sign the back of this Certificate and send the completed Subscription
Certificate or a Notice of Guaranteed Delivery and payment in full of the
Subscription Price to ChaseMellon Shareholder Services, L.L.C. (the
"Subscription Agent") at the address on the back of this Certificate. The
Subscription Price must be paid in U.S. dollars by check or money order payable
to ChaseMellon Shareholder Services, L.L.C., except that, in lieu of payment in
cash, holders of the Company's Series E Redeemable Convertible Preferred Stock
(the "Series E Preferred Stock") may exchange one share of Series E Preferred
Stock for each ten shares of Common Stock subscribed for by delivery to the
Subscription Agent of certificates for the requisite number of shares of Series
E Preferred Stock either endorsed in blank for transfer or together with an
assignment separate from certificate executed in blank by the registered holder
thereof. The Subscription Agent must receive these documents and full payment
on or before the Expiration Date set forth below.
Your Rights are nontransferable except by operation of law (e.g.,
death or dissolution). Should a transfer occur by operation of law, please
contact the Subscription Agent by phone for appropriate instructions. This
Subscription Certificate is not valid unless signed by the Subscription Agent.
Shareholder:
By ChaseMellon Shareholder Services, L.L.C.
as Subscription Agent
THE SHAREHOLDER RIGHTS EXPIRE AT 5:00 P.M.
EASTERN TIME, ON __________, 1997, (THE
"EXPIRATION DATE") UNLESS EXTENDED BY THE
COMPANY.
<PAGE> 2
SUBSCRIPTION TO PURCHASE SHARES OF COMMON STOCK
OFFERED BY AMERICAN ECOLOGY CORPORATION
RETURN TO: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
By Mail: By Hand Delivery: By Overnight Delivery:
------- ---------------- ---------------------
<S> <C> <C>
ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder
Services, L.L.C. Services, L.L.C. Services, L.L.C.
Post Office Box 3305 120 Broadway, 13th Floor 85 Challenger Road
South Hackensack, NJ 07606 New York, NY 10271 Mail Drop - Reorg.
Attn: Reorganization Dept. Attn: Reorganization Dept. Ridgefield Park, NJ 07660
Attn: Reorganization Dept.
</TABLE>
Upon the terms and subject to the conditions specified in the Prospectus, the
undersigned hereby irrevocably exercises Rights to purchase Common Stock as
indicated below:
NUMBER OF SHARES OF COMMON STOCK SUBSCRIBED FOR: ____________
PURCHASE PRICE FOR SHARES OF COMMON STOCK SUBSCRIBED FOR: $___________ ($1.00
per share purchased)(1)
CHECK OR MONEY ORDER(2) IN THE AMOUNT OF $_________________________ PAYABLE TO
"CHASEMELLON SHAREHOLDER SERVICES, L.L.C." IS ENCLOSED AND/OR CERTIFICATES FOR
____________(3) SHARES OF SERIES E PREFERRED STOCK ENDORSED FOR TRANSFER IS
ENCLOSED. A PRE-ADDRESSED POSTAGE PAID ENVELOPE IS ENCLOSED.
Acceptance or rejection by the Company of this subscription shall be
effective in accordance with the terms set forth in the Prospectus. Exercise of
the Rights represented hereby shall not be deemed complete, you shall have no
binding right to become the legal or beneficial owner of the Common Stock
covered hereby, and there shall be no obligation of the Company to deliver the
Common Stock covered hereby to you, unless and/or until (i) the Expiration Date
occurs, and (ii) the other conditions to exercise described in the Prospectus
are satisfied. All questions concerning the timeliness, validity, form and
eligibility of any exercise of Rights will be determined by the Company, whose
determinations shall be final and binding.
Shares of Common Stock will be issued promptly upon the valid exercise
of Rights. Such shares will be registered in the same manner set forth on the
face of this Subscription Certificate. If your shares are held in joint
ownership, all joint owners must sign. When signing as fiduciary,
representative or corporate officer, give full title as such.
<TABLE>
<S> <C> <C> <C> <C>
Date: Day Phone: ( )
--------------------- ------------------------------------- ---------------------
Signature Eve Phone: ( )
---------------------
Date: Day Phone: ( )
--------------------- ------------------------------------- ---------------------
Signature Eve Phone: ( )
---------------------
</TABLE>
- -------------------------------
(1) If the amount enclosed is not sufficient to pay the Subscription Price
for all shares that are subscribed for, or if the number of shares subscribed
for is not specified, the number of shares purchased will be assumed to be the
maximum number that could be purchased upon payment of the amount enclosed. Any
amount remaining will be returned to the purchaser.
(2) Arrangements may be made directly with the Subscription Agent for wire
transfers
(3) In lieu of cash, one share of Series E Preferred Stock may be delivered
for each ten shares of Common Stock subscribed for. If Series E Preferred Stock
represented by the certificate(s) delivered herewith exceeds the number inserted
in this blank, a new certificate for the balance of the Series E Preferred Stock
remaining after payment for the Common Stock purchased will be registered in the
name of and delivered to the shareholder named herein.
<PAGE> 1
EXHIBIT 4.3
SUBSCRIPTION AGENT AGREEMENT
Date: ____________________
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Rd.
Ridgefield Park, NJ 07660
Attn: Reorganization Department
Gentlemen:
American Ecology Corporation, a Delaware corporation (the "Company")
is making an offer to issue (the "Subscription Offer") to the holders of record
of its outstanding shares of Common Stock par value $.01 per share (the "Common
Stock"), at the close of business on __________ (the "Record Date"), the right
to subscribe for and purchase (each a "Right") shares of Common Stock (the
"Additional Common Stock") at a purchase price of $1.00 per share of Additional
Common Stock (the "Subscription Price"), payable by cashier's or certified
check, upon the terms and conditions set forth herein, or payable by delivery
of a certificate for one share of the Company's Series E Redeemable Preferred
Stock (the "Preferred Stock") duly endorsed in blank for transfer for each 10
shares of Additional Common Stock. The term "Subscribed" shall mean submitted
for purchase from the Company by a stockholder in accordance with the terms of
the Subscription Offer, and the term "Subscription" shall mean any such
submission. The Subscription Offer will expire at 5:00 p.m., New York City
Time, on ____________________ (the "Expiration Time"), unless the Company shall
have extended the period of time for which the Subscription Offer is open, in
which event the term "Expiration Time" shall mean the latest time and date at
which the Subscription Offer, as so extended by the Company from time to time,
shall expire.
The Company filed a Registration Statement relating to the Additional
Common Stock with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, on ____________________. Said Registration Statement
was declared effective on ____________________. The terms of the Additional
Common Stock are more fully described in the Prospectus forming part of the
Registration Statement as it was declared effective, and the accompanying
Letter of Instruction. Copies of the Prospectus, the Letter of Instruction and
the Notice of Guaranteed Delivery are annexed hereto as Exhibit 1, Exhibit 2
and Exhibit 3, respectively. All terms used and not defined herein shall have
the same meaning as in the Prospectus. Promptly after the Record Date, the
Company will provide you with a list of holders of Common Stock as of the
Record Date (the "Record Stockholders List").
The Rights are evidenced by nontransferable subscription certificates
(the "Certificates"), a copy of the form of which is annexed hereto as Exhibit
4. The Certificates entitle the holders to subscribe, upon payment of the
Subscription Price, for shares of Additional Common Stock at the rate of 1
share for each share of Common Stock held on the Record Date.
<PAGE> 2
The Company hereby appoints you as Subscription Agent (the
"Subscription Agent") for the Subscription Offer and agrees with you as
follows:
1) As Subscription Agent, you are authorized and directed to:
(A) Issue the Certificates in accordance with this Agreement in
the names of the holders of the Common Stock of record on the Record Date, keep
such records as are necessary for the purpose of recording such issuance, and
furnish a copy of such records to the Company. The Certificates may be signed
on behalf of the Subscription Agent by the manual or facsimile signature of a
Vice President or Assistant Vice President of the Subscription Agent, or by the
manual signature of any of its other authorized officers.
(B) Promptly after you receive the Record Stockholders List:
(a) mail or cause to be mailed, by first class mail, to each
holder of Common Stock of record on the Record Date whose address of
record is within the United States and Canada, (i) a Certificate
evidencing the Rights to which such stockholder is entitled under the
Subscription Offer, (ii) a copy of the Prospectus, (iii) the Company's
second quarter 10-Q filing, (iv) a Letter of Instruction, (v) a Notice
of Guaranteed Delivery and (vi) a return envelope addressed to the
Subscription Agent; and
(b) mail or cause to be mailed, by air mail, to each holder of
Common Stock of record on the Record Date whose address of record is
outside the United States and Canada, or is an A.P.O. or F.P.O.
address (i) a copy of the Prospectus, (ii) the Company's second
quarter 10-Q filing, (iii) a Notice of Guaranteed Delivery and (iv) a
Letter of Instruction (different from the Letter of Instruction sent
to stockholders whose address of record is within the United States
and Canada). You shall refrain from mailing Certificates issuable to
any holder of Common Stock of record on the Record Date whose address
of record is outside the United States and Canada, or is an A.P.O. or
F.P.O. address, and hold such Certificates for the account of such
stockholder subject to such stockholder making satisfactory
arrangements with the Subscription Agent for the exercise or other
disposition of the Rights evidenced thereby, and follow the
instructions of such stockholder for the exercise, sale or other
disposition of such Rights if such instructions are received at or
before 11:00 a.m., New York City Time, on ________________, 1997.
(C) Accept Subscriptions upon the due exercise (including payment
of the Subscription Price) on or prior to the Expiration Time of Rights in
accordance with the terms of the Certificates and the Prospectus.
(D) Subject to the next sentence, accept Subscriptions from
stockholders whose Certificates are alleged to have been lost, stolen or
destroyed upon receipt by you of an affidavit of theft, loss or destruction and
a bond of indemnity in form and substance satisfactory to you, accompanied by
payment of the Subscription Price for the total number of shares of Additional
Common Stock Subscribed for. Upon receipt of such affidavit and bond of
indemnity and compliance with any other applicable requirements, stop orders
shall be placed on said Certificates and you shall withhold delivery of the
shares of Additional Common Stock Subscribed for until after the Certificates
have expired and it has been determined that the Rights
-2-
<PAGE> 3
evidenced by the Certificates have not otherwise been purported to have been
exercised or otherwise surrendered.
(E) Accept Subscriptions, without further authorization or
direction from the Company, without procuring supporting legal papers or other
proof of authority to sign (including without limitation proof of appointment
of a fiduciary or other person acting in a representative capacity), and
without signatures of co-fiduciaries, co-representatives or any other person:
(a) if the Certificate is in the name of a fiduciary and is
executed by and the Additional Common Stock is to be issued in the
name of such fiduciary;
(b) if the Certificate is in the name of joint tenants and is
executed by one of the joint tenants, provided the certificate
representing the Additional Common Stock is issued in the names of,
and is to be delivered to, such joint tenants;
(c) if the Certificate is in the name of a corporation and is
executed by a person in a manner which appears or purports to be done
in the capacity of an officer, or agent thereof, provided the
Additional Common Stock is to be issued in the name of such
corporation; or
(d) if the Certificate is in the name of an individual and is
executed by a person purporting to act as such individual's executor,
administrator or personal representative, provided, the Additional
Common Stock is to be registered in the name of the subscriber as
executor or administrator of the estate of the deceased registered
holder and there is no evidence indicating the subscriber is not the
duly authorized representative that he purports to be.
(F) Accept Subscriptions not accompanied by Certificates if
submitted by a firm having membership in the New York Stock Exchange or another
national securities exchange or by a commercial bank or trust company having an
office in the United States together with the Notice of Guaranteed Delivery and
accompanied by proper payment for the total number of shares of Additional
Common Stock Subscribed for.
(G) Refer to the Company for specific instructions as to
acceptance or rejection, Subscriptions received after the Expiration Time,
Subscriptions not authorized to be accepted pursuant to this Paragraph 1, and
Subscriptions otherwise failing to comply with the requirements of the
Prospectus and the terms and conditions of the Certificates.
(H) Upon acceptance of a Subscription:
(a) hold all monies received in a special account for the benefit
of the Company. Promptly following the Expiration Time you shall
distribute to the Company the funds in such account and issue
certificates for shares of Additional Common Stock issuable with
respect to Subscriptions which have been accepted.
(b) advise the Company daily by telecopy and confirm by letter to
the attention of Phillip K. Chattin (the "Company Representative"), as
to the total number of shares of
-3-
<PAGE> 4
Additional Common Stock Subscribed for, the amount of funds received,
and the number of shares of Preferred Stock exchanged with cumulative
totals for each;
(c) transfer all certificates for Preferred Stock received in
exchange for Additional Common Stock together with a statement as to
how many Additional Shares of Common Stock the Preferred Stock
certificate received was exchanged for to the Company Representative,
who shall be responsible for cancelling certificates of Preferred
Stock and, when required, issuing new Preferred Stock certificates for
any shares of Preferred Stock represented by the Preferred Stock
certificate received which was not exchanged for Additional Common
Stock; and
(d) as promptly as possible but in any event on or before 3:30 p.m.,
New York City Time, on the first full business day following the
Expiration Time, advise the Company Representative in accordance with
(b) above of the number of shares Subscribed for, the amount of funds
received, and the number of shares of Preferred Stock exchanged.
(I) Upon completion of the Subscription Offer, you shall requisition
certificates from the Transfer Agent for the Common Stock for shares
of Additional Common Stock Subscribed for.
2) (a) The Certificates shall be issued in registered form only.
You shall be the Transfer Agent and Registrar for the Certificates and shall
keep books and records of the registration and transfers and exchanges of
Certificates (such books and records are hereinafter called the "Certificate
Register").
(b) All Certificates issued upon any registration of transfer
or exchange of Certificates shall be the valid obligations of the Company,
evidencing the same obligations, and entitled to the same benefits under this
Agreement, as the Certificates surrendered for such registration of transfer or
exchange.
(c) Certificates are nontransferable. Consequently, you shall
only recognize transfers by operation of law such as by death or decree of
court supported by appropriate documentation. You will refer all questions in
regard to transfer of Certificates to the Company Representative and take such
action in regard thereto as the Company directs in writing. Until such
transfer is registered in the Certificate Register, the Company and you may
treat the registered holder thereof as the owner for all purposes.
3) You will follow your regular procedures to attempt to
reconcile any discrepancies between the number of shares of Additional Common
Stock that any Certificate may indicate are to be issued to a stockholder and
the number that the Record Stockholders List indicates may be issued to such
stockholder. In any instance where you cannot reconcile such discrepancies by
following such procedures, you will consult with the Company for instructions
as to the number of shares of Additional Common Stock, if any, you are
authorized to issue. In the absence of such instructions, you are authorized
not to issue any shares of Additional Common Stock to such stockholder.
-4-
<PAGE> 5
4) You will examine the Certificates received by you as
Subscription Agent to ascertain whether they appear to you to have been
completed and executed in accordance with the applicable Letter of Instruction.
In the event you determine that any Certificate does not appear to you to have
been properly completed or executed, or where the Certificates do not appear to
you to be in proper form for Subscription, or any other irregularity in
connection with the Subscription appears to you to exist, you will follow,
where possible, your regular procedures to attempt to cause such irregularity
to be corrected. You are not authorized to waive any irregularity in
connection with the Subscription, unless you shall have received from the
Company a written statement that any irregularity in such Certificate has been
cured or waived and that such Certificate has been accepted by the Company. If
any such irregularity is neither corrected nor waived, you will return to the
subscribing stockholder (at your option by either first class mail under a
blanket surety bond or insurance protecting you and the Company from losses or
liabilities arising out of the non-receipt or nondelivery of Certificates or by
registered mail insured separately for the value of such Certificates) to such
stockholder's address as set forth in the Subscription any Certificates
surrendered in connection therewith and any other documents received with such
Certificates, and a letter of notice to be furnished by the Company explaining
the reasons for the return of the Certificates and other documents.
5) Each document received by you relating to your duties
hereunder shall be dated and time stamped when received.
6) (a) For so long as this Agreement shall be in effect, the
Company will reserve for issuance and keep available free from preemptive
rights a sufficient number of shares of Additional Common Stock to permit the
exercise in full of all Rights issued pursuant to the Subscription Offer.
Subject to the terms and conditions of this Agreement, you will request the
Transfer Agent for the Common Stock to issue certificates evidencing the
appropriate number of shares of Additional Common Stock as required from time
to time in order to effectuate the Subscriptions.
(b) The Company shall take any and all action, including without
limitation obtaining the authorization, consent, lack of objection,
registration or approval of any governmental authority, or the taking of any
other action under the laws of the United States of America or any political
subdivision thereof, to insure that all shares of Additional Common Stock
issuable upon the exercise of the Certificates at the time of delivery of the
certificates therefor (subject to payment of the Subscription Price) will be
duly and validly issued and fully paid and nonassessable shares of Common
Stock, free from all preemptive rights and taxes, liens, charges and security
interests created by or imposed upon the Company with respect thereto.
(c) The Company shall from time to time take all action necessary
or appropriate to obtain and keep effective all registrations, permits,
consents and approvals of the Securities and Exchange Commission and any other
governmental agency or authority and make such filings under Federal and state
laws which may be necessary or appropriate in connection with the issuance,
sale, transfer and delivery of Certificates or Additional Common Stock issued
upon exercise of Certificates.
7) If certificates representing shares of Additional Common Stock
are to be delivered by you to a person other than the person in whose name a
surrendered Certificate is registered,
-5-
<PAGE> 6
you will issue no certificate for Additional Common Stock until you have
received appropriate evidence that a transfer by law has occurred and the
person requesting such exchange has paid any transfer or other taxes or
governmental charges required by reason of the issuance of a certificate for
Additional Common Stock in a name other than that of the registered holder of
the Certificate surrendered, or has established to your satisfaction that any
such tax or charge either has been paid or is not payable.
8) Should any issue arise regarding federal income tax reporting
or withholding, you will take such action as the Company instructs you in
writing.
9) The Company may terminate this Agreement at any time by so
notifying you in writing. You may terminate this Agreement upon 30 days' prior
notice to the Company. Upon any such termination, you shall be relieved and
discharged of any further responsibilities with respect to your duties
hereunder. Upon payment of all your outstanding fees and expenses, you will
forward to the Company or its designee promptly any Certificate or other
document relating to your duties hereunder that you may receive after your
appointment has so terminated. Sections 11, 13, and 14 of this Agreement shall
survive any termination of this Agreement.
10) As agent for the Company hereunder you:
(a) shall have no duties or obligations other than those
specifically set forth herein or as may subsequently be agreed
to in writing by you and the Company;
(b) shall have no obligation to issue any shares of Additional
Common Stock unless the Company shall have provided a
sufficient number of certificates for such Additional Common
Stock;
(c) shall be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value, or
genuineness of any Certificates surrendered to you hereunder
or shares of Additional Common Stock issued in exchange
therefor, and will not be required to or be responsible for
and will make no representations as to, the validity,
sufficiency, value or genuineness of the Subscription Offer;
(d) shall not be obligated to take any legal action hereunder; if,
however, you determine to take any legal action hereunder, and
where the taking of such action might, in your judgment,
subject or expose you to any expense or liability you shall
not be required to act unless you shall have been furnished
with an indemnity satisfactory to you;
(e) may rely on and shall be fully authorized and protected in
acting or failing to act upon any certificate, instrument,
opinion, notice, letter, telegram, telex, facsimile
transmission or other document or security delivered to you
and believed by you to be genuine and to have been signed by
the proper party or parties;
(f) shall not be liable or responsible for any recital or
statement contained in the Prospectus or any other documents
relating thereto;
-6-
<PAGE> 7
(g) shall not be liable or responsible for any failure on the part
of the Company to comply with any of its covenants and
obligations relating to the Subscription Offer, including
without limitation obligations under applicable securities
laws;
(h) may rely on and shall be fully authorized and protected in
acting or failing to act upon the written, telephonic or oral
instructions with respect to any matter relating to you acting
as Subscription Agent covered by this Agreement (or
supplementing or qualifying any such actions) of officers of
the Company;
(i) may consult with counsel satisfactory to you, and the advice
of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered, or
omitted by you hereunder in good faith and in accordance with
the advice of such counsel;
(j) may perform any of your duties hereunder either directly or by
or through agents or attorneys and you shall not be liable or
responsible for any misconduct or negligence on the part of
any agent or attorney appointed with reasonable care by you
hereunder; and
(k) are not authorized, and shall have no obligation, to pay any
brokers, dealers, or soliciting fees to any person.
11) In the event any question or dispute arises with respect to
the proper interpretation of the Subscription Offer or your duties hereunder or
the rights of the Company or of any stockholders surrendering Certificates
pursuant to the Subscription Offer, you shall not be required to act and shall
not be held liable or responsible for your refusal to act until the question or
dispute has been judicially settled (and, if appropriate, you may file a suit
in interpleader or for a declaratory judgment for such purpose) by final
judgment rendered by a court of competent jurisdiction, binding on all parties
interested in the matter which is no longer subject to review or appeal, or
settled by a written document in form and substance satisfactory to you and
executed by the Company and each such stockholder and party. In addition, you
may require for such purpose, but shall not be obligated to require, the
execution of such written settlement by all the stockholders and all other
parties that may have an interest in the settlement.
12) Any instructions given to you orally, as permitted by any
provision of this Agreement, shall be confirmed in writing by the Company as
soon as practicable. You shall not be liable or responsible and shall be fully
authorized and protected for acting, or failing to act, in accordance with any
oral instructions which do not conform with the written confirmation received
in accordance with this Section.
13) Whether or not any Certificates are surrendered to you, for
your services as Subscription Agent hereunder, the Company shall pay to you
compensation in accordance with the fee schedule attached as Exhibit A hereto,
together with reimbursement for out-of-pocket expenses, including reasonable
fees and disbursements of counsel.
14) The Company covenants to indemnify and hold you and your
officers, directors, employees, agents, contractors, subsidiaries and
affiliates harmless from and against any loss,
-7-
<PAGE> 8
liability, damage or expense (including without limitation any loss, liability,
damage or expense incurred for accepting Certificates tendered without a
signature guarantee and the fees and expenses of counsel) incurred (a) without
gross negligence or bad faith or (b) as a result of your acting or failing to
act upon the Company's instructions, arising out of or in connection with the
Subscription Offer, this Agreement or the administration of your duties
hereunder, including without limitation the costs and expenses of defending and
appealing against any action, proceeding, suit or claim in the premises. You
shall notify the Company by letter, or by telex or facsimile transmission
confirmed by letter, of the written assertion of any action, proceeding, suit
or claim made or commenced against you reasonably promptly after you shall have
been served with the summons or other first legal process or have received the
first written assertion giving information as to the nature and basis of the
action, proceeding, suit or claim, but failure so to notify the Company shall
not release the Company from any liability which it may otherwise have on
account of this Agreement. The Company shall be entitled to participate at its
own expense in the defense of any such action, proceeding, suit or claim.
Anything in this agreement to the contrary notwithstanding, in no event shall
you be liable for special, indirect or consequential loss or damages of any
kind whatsoever (including but not limited to lost profits), even if you have
been advised of the likelihood of such loss or damage and regardless of the
form of action.
15) If any provision of this Agreement shall be held illegal,
invalid, or unenforceable by any court, this Agreement shall be construed and
enforced as if such provision had not been contained herein and shall be deemed
an Agreement among us to the full extent permitted by applicable law.
16) The Company represents and warrants that (a) it is duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, (b) the making and consummation of the
Subscription Offer and the execution, delivery and performance of all
transactions contemplated thereby (including without limitation this Agreement)
have been duly authorized by all necessary corporate action and will not result
in a breach of or constitute a default under the certificate of incorporation
or bylaws of the Company or any indenture, agreement or instrument to which it
is a party or is bound, (c) this Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid, binding and enforceable
obligation of it, (d) the Subscription Offer will comply in all material
respects with all applicable requirements of law and (e) to the best of its
knowledge, there is no litigation pending or threatened as of the date hereof
in connection with the Subscription Offer.
17) In the event that any claim of inconsistency between this
Agreement and the terms of the Subscription Offer arise, as they may from time
to time be amended, the terms of the Subscription Offer shall control, except
with respect to the duties, liabilities and rights, including compensation and
indemnification of you as Subscription Agent, which shall be controlled by the
terms of this Agreement.
18) Set forth in Exhibit B hereto is a list of the names and
specimen signatures of the persons authorized to act for the Company under this
Agreement. The Secretary of the Company shall, from time to time, certify to
you the names and signatures of any other persons authorized to act for the
Company under this Agreement.
-8-
<PAGE> 9
19) Except as expressly set forth elsewhere in this Agreement, all
notices, instructions and communications under this Agreement shall be in
writing, shall be effective upon receipt and shall be addressed, if to the
Company, to its address set forth beneath its signature to this Agreement, or,
if to the Subscription Agent, to ChaseMellon Shareholder Services, L.L.C., 450
West 33rd Street, New York, New York 10001, Attention: Reorganization
Department, or to such other address as a party hereto shall notify the other
parties.
20) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflict of laws rules or principles, and shall inure to the benefit of and be
binding upon the successors and assigns of the parties hereto; provided that
this Agreement may not be assigned by any party without the prior written
consent of all other parties.
21) No provision of this Agreement may be amended, modified or
waived, except in a written document signed by both parties.
Please acknowledge receipt of this letter and confirm your agreement
concerning your appointment as Subscription Agent, and the arrangements herein
provided, by signing and returning the enclosed copy hereof, whereupon this
Agreement and your acceptance of the terms and conditions herein provided shall
constitute a binding Agreement between us.
Very truly yours,
AMERICAN ECOLOGY CORPORATION
By:
---------------------------------
Name:
Title:
Address for notices:
-------------------
American Ecology Corporation
805 West Idaho, Suite 200
Boise, Idaho 83702
Accepted as of the date
above first written:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.,
AS SUBSCRIPTION AGENT
By:
----------------------------------
Name:
Title:
-9-
<PAGE> 10
Exhibit 1 Prospectus
Exhibit 2 Letter of Instruction
Exhibit 3 Notice of Guaranteed Delivery
Exhibit 4 Form of Certificate
<PAGE> 11
EXHIBIT A
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
Schedule of Fees
as
Subscription Agent
for
<TABLE>
<S> <C> <C>
I. Set Up and Administrative Fee $ 2,500
II. Processing Basic subscriptions, each $ 10.00
III. Transferring subscription certificates, split-ups, reissuing new
certificates, round-ups, each $ 7.50
IV. Issuing subscription certificates to record date holders, each
and follow-up mailings $7.50
V. Processing oversubscriptions, including proration and refunds, each $ 3.00
VI. Inapplicable
VII. Subscriptions requiring additional handling (window items,
defective presentations, correspondence items, legal items,
and items not providing a taxpayer identification number), each $ 10.00
VIII. Processing Guarantee of Delivery items, each $ 10.00
IX. Handling Selected Dealer payments, each $ 10.00
X. Inapplicable
XI. Special Services By Appraisal
XII. Out-of-pocket Expenses (including but not limited to
postage, stationery, telephones, overnight couriers,
messengers, overtime, dinners, transportation, shipping
and trucking Additional
XIII. Minimum Fee $ 10,000
</TABLE>
<PAGE> 12
EXHIBIT B
[Company Letterhead]
<TABLE>
<CAPTION>
Name Position Specimen Signatures
- ---- -------- -------------------
<S> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 5.1
______________, 1997
American Ecology Corporation
805 West Idaho
Suite 200
Boise, Idaho 83702
Gentlemen:
We have acted as counsel to American Ecology Corporation, a Delaware
corporation (the "Company"), in connection with the Registration Statement on
Form S-3 (the "Registration Statement") filed by the Company with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), relating to the offer and sale by
the Company of up to ____ shares of its Common Stock, par value $.01 per share
(the "Shares"). We have examined the Registration Statement as filed by the
Company with the Commission. We have additionally reviewed such other documents
and have made such further investigations as we have deemed necessary to enable
us to express the opinions hereinafter set forth.
Based on the foregoing, we hereby advise you that in our opinion the
Shares have been duly authorized by the Company and, when issued by the Company
in accordance with the terms and conditions described in the Registration
Statement, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
JENNER & BLOCK
By:
----------------------------
A Partner
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our firm included in or made a part of this
registration statement.
/s/BALUKOFF, LINDSTROM & CO., P.A.
Boise, Idaho
September 5, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Form S-3 Registration Statement of our
report dated April 11, 1996, included in the American Ecology Corporation's
1996 Form 10-K, and to all references to our firm included in this Registration
Statement.
/s/ARTHUR ANDERSEN LLP
Houston, Texas
September 5, 1997
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned duly elected
and qualified Director of American Ecology Corporation, a Delaware corporation
(the "Company") do hereby appoint and make Phillip K. Chattin, General Counsel
and Secretary of the Company, my true and lawful attorney-in-fact to act in my
place and stead, including, without limitation, the power and authority to
subscribe my name to the Company's Registration Statement under the Securities
Act of 1933, as intended to be filed on Form S-3 with the Securities and
Exchange Commission, and any amendments or undertakings thereto, as though I
manually signed the Registration Statement personally. Further, I authorize and
consent to the filing of this Power of Attorney as an exhibit to the
Registration Statement.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 4th
day of September, 1997.
/s/Rotchford D. Barker
----------------------------
Rotchford D. Barker
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned duly elected
and qualified Director of American Ecology Corporation, a Delaware corporation
(the "Company") do hereby appoint and make Phillip K. Chattin, General Counsel
and Secretary of the Company, my true and lawful attorney-in-fact to act in my
place and stead, including, without limitation, the power and authority to
subscribe my name to the Company's Registration Statement under the Securities
Act of 1933, as intended to be filed on Form S-3 with the Securities and
Exchange Commission, and any amendments or undertakings thereto, as though I
manually signed the Registration Statement personally. Further, I authorize and
consent to the filing of this Power of Attorney as an exhibit to the
Registration Statement.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 4th
day of September, 1997.
/s/Paul C. Bergson
----------------------------
Paul C. Bergson
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned duly elected
and qualified Director of American Ecology Corporation, a Delaware corporation
(the "Company") do hereby appoint and make Phillip K. Chattin, General Counsel
and Secretary of the Company, my true and lawful attorney-in-fact to act in my
place and stead, including, without limitation, the power and authority to
subscribe my name to the Company's Registration Statement under the Securities
Act of 1933, as intended to be filed on Form S-3 with the Securities and
Exchange Commission, and any amendments or undertakings thereto, as though I
manually signed the Registration Statement personally. Further, I authorize and
consent to the filing of this Power of Attorney as an exhibit to the
Registration Statement.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 4th
day of September, 1997.
/s/Keith D. Bronstein
----------------------------
Keith D. Bronstein
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned duly elected
and qualified Director of American Ecology Corporation, a Delaware corporation
(the "Company") do hereby appoint and make Phillip K. Chattin, General Counsel
and Secretary of the Company, my true and lawful attorney-in-fact to act in my
place and stead, including, without limitation, the power and authority to
subscribe my name to the Company's Registration Statement under the Securities
Act of 1933, as intended to be filed on Form S-3 with the Securities and
Exchange Commission, and any amendments or undertakings thereto, as though I
manually signed the Registration Statement personally. Further, I authorize and
consent to the filing of this Power of Attorney as an exhibit to the
Registration Statement.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 4th
day of September, 1997.
/s/Edward F. Heil
----------------------------
Edward F. Heil
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned duly elected
and qualified Director of American Ecology Corporation, a Delaware corporation
(the "Company") do hereby appoint and make Phillip K. Chattin, General Counsel
and Secretary of the Company, my true and lawful attorney-in-fact to act in my
place and stead, including, without limitation, the power and authority to
subscribe my name to the Company's Registration Statement under the Securities
Act of 1933, as intended to be filed on Form S-3 with the Securities and
Exchange Commission, and any amendments or undertakings thereto, as though I
manually signed the Registration Statement personally. Further, I authorize and
consent to the filing of this Power of Attorney as an exhibit to the
Registration Statement.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 4th
day of September, 1997.
/s/Paul F. Schutt
----------------------------
Paul F. Schutt
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned duly elected
and qualified Director of American Ecology Corporation, a Delaware corporation
(the "Company") do hereby appoint and make Phillip K. Chattin, General Counsel
and Secretary of the Company, my true and lawful attorney-in-fact to act in my
place and stead, including, without limitation, the power and authority to
subscribe my name to the Company's Registration Statement under the Securities
Act of 1933, as intended to be filed on Form S-3 with the Securities and
Exchange Commission, and any amendments or undertakings thereto, as though I
manually signed the Registration Statement personally. Further, I authorize and
consent to the filing of this Power of Attorney as an exhibit to the
Registration Statement.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 4th
day of September, 1997.
/s/John J. Scoville
----------------------------
John J. Scoville
<PAGE> 1
EXHIBIT 99.1
___________, 1997
Dear Shareholder:
I am pleased to announce that American Ecology Corporation (the
"Company") has begun a Rights Offering of up to 8,200,581 shares of its Common
Stock to its shareholders of record at the close of business September 24, 1997
(the "Record Date"). The shares are being offered pursuant to non-transferable
subscription rights ("Rights"). As a shareholder on the Record Date, you
receive one Right for each share of Common Stock you own. Each Right entitles
you to subscribe for and purchase one share of common stock at the price of
$1.00. The number of Rights you have is printed on the front of the
Subscription Certificate.
Enclosed for your review is the Prospectus, your Subscription
Certificate and instructions, and the Company's second quarter 10-Q report. To
subscribe for shares, please complete the Subscription Certificate and send it,
along with full payment, to the Company's Subscription Agent at the address on
the back of the Subscription Certificate.
The Rights Offering will expire at 5:00 p.m. Eastern time on October
___, 1997 unless extended by the Company. Any Rights not exercised by such time
will expire and have no monetary value.
Shareholders who do not subscribe will be diluted, depending on the
total subscription participation. Please see Page ___ of the enclosed
Prospectus for a discussion of dilution and other risk factors.
Any questions or requests for assistance regarding the Rights Offering
should be directed to Scott Peyron at (208) 388-3800. The Rights Offering is
being made pursuant to the Prospectus only, which sets forth detailed
information about the Company and the Rights Offering. Please read these
enclosed materials carefully. I sincerely hope you will participate in the
Rights Offering.
Sincerely,
Jack K. Lemley
Chairman and Chief Executive Officer
<PAGE> 2
INSTRUCTIONS AS TO USE OF AMERICAN ECOLOGY CORPORATION
SUBSCRIPTION CERTIFICATE
-------------------------------
CONSULT THE INFORMATION AGENT, OR YOUR BANK
OR BROKER AS TO ANY QUESTIONS
The following relates to a rights offering (the "Rights Offering") by
American Ecology Corporation, Inc. (the "Company") to the holders of its
outstanding Common Stock, $.01 par value per share (the "Common Stock").
Holders of record at the close of business on September 24, 1997 (the "Record
Date") are receiving one right ("Right") for each share of Common Stock held on
the Record Date. Rights holders may purchase one share of Common Stock for each
Right held at the subscription price per share of $1.00 (the "Subscription
Price"). There will be no adjustment to the Rights upon any dividend to or on
changes in the outstanding shares of Common Stock. Subscriptions, once
exercised, are irrevocable.
The number of Rights to which you are entitled is printed on the face of
your Subscription Certificate. You should indicate the use you wish to make of
your Rights by completing the appropriate form on the back of your Subscription
Certificate and returning the Certificate to the Subscription Agent in the
envelope provided.
IF YOU WISH TO EXERCISE YOUR RIGHTS, YOUR SUBSCRIPTION CERTIFICATE AND THE
RELATED PAYMENT MUST BE RECEIVED BY THE SUBSCRIPTION AGENT ON OR BEFORE 5:00
P.M., EASTERN TIME, ON _______________, 1997 (THE "EXPIRATION DATE"). AFTER THE
EXPIRATION DATE, THE RIGHTS WILL BE NULL AND VOID. THE COMPANY IS NOT OBLIGATED
TO HONOR ANY SUBSCRIPTIONS RECEIVED BY THE SUBSCRIPTION AGENT AFTER THE
EXPIRATION DATE, REGARDLESS OF WHEN SUCH SUBSCRIPTIONS WERE SENT. THE RISK OF
DELIVERY OF THE SUBSCRIPTION CERTIFICATE AND PAYMENT OF THE SUBSCRIPTION PRICE
IS ON SUBSCRIBERS, NOT THE COMPANY OR THE SUBSCRIPTION AGENT.
1. Subscription. Complete and execute the back and send your Subscription
Certificate, together with payment of the total Subscription Price, to the
Subscription Agent. DO NOT SEND SUBSCRIPTION CERTIFICATES OR PAYMENTS TO THE
COMPANY. Payment of the Subscription Price should be made in U.S. dollars by
certified check, check or bank draft drawn upon a state or nationally chartered
bank, savings bank, savings and loan association or credit union organized
under the laws of the U.S., or any state or postal, telegraphic or express
money order, payable to ChaseMellon Shareholder Services, L.L.C., the
Subscription Agent, for the full number of shares subscribed for. Payment may
also be made by wire transfer by arrangement with the Subscription Agent. In
lieu of cash, holders of the Company's Series E Redeemable Convertible
Preferred Stock (the "Series E Preferred Stock") may exchange one share of
Series E Preferred Stock for each ten shares of Common Stock subscribed for by
delivering to the Subscription Agent the requisite number of shares of Series E
Preferred Stock either endorsed in blank for transfer or together with an
assignment separate from certificate executed in blank by the registered holder
thereof.
<PAGE> 3
The Subscription Agent is ChaseMellon Shareholder Services L.L.C. The
addresses of the Subscription Agent are set forth on the back of the
Subscription Certificate.
The Information Agent is Scott Peyron. All questions or requests for
assistance should be directed to the Information Agent at the following
telephone number: 1-208-388-3800
2. Delivery of Stock Certificates, Etc. Certificates representing shares
of Common Stock issued pursuant to the exercise of Rights will be mailed to
subscribers as soon as practicable after the subscriptions have been accepted
by the Subscription Agent and the Company.
3. Execution by Registered Holders. The signature on the Subscription
Certificate must correspond with the name as it appears in the register for the
Rights maintained by the Subscription Agent in every particular without
alteration or any change whatsoever. Persons who sign the Subscription
Certificate in a representative or fiduciary capacity must indicate their
capacity when signing and, unless waived by the Subscription Agent in its sole
and absolute discretion, must present to the Subscription Agent satisfactory
evidence of their authority to so act.
4. Method of Delivery. The method of delivery of Subscription Certificates
and payment of the Subscription Price to the Subscription Agent will be at the
election and risk of the Rights holder, but if sent by mail, it is recommended
that they be sent by registered mail, properly insured, with return receipt
requested, and that a sufficient number of days be allowed to ensure delivery
to the Subscription Agent prior to the Expiration Date.
5. Late Delivery of Subscription Certificate. If, prior to the Expiration
Date, the Subscription Agent has received full payment for the total number of
shares of Common Stock subscribed for by a Rights holder, together with an
executed Notice of Guaranteed Delivery (in the form provided with the
Subscription Certificate and available from the Subscription Agent) from an
Eligible Institution stating the name of the subscriber, the number of Rights
represented by the Subscription Certificate and the number of shares of Common
Stock subscribed for and guaranteeing that the Subscription Certificate will be
delivered within three Nasdaq trading days after the Expiration Date to the
Subscription Agent, such subscription will be accepted. The certificates
representing the shares of Common Stock will be withheld by the Subscription
Agent until receipt of the duly completed and executed Subscription Certificate
THE RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN TIME,
ON ____________, 1997 AND WILL BE NULL AND VOID THEREAFTER
-2-
<PAGE> 4
INSTRUCTIONS AS TO AMERICAN ECOLOGY CORPORATION
RIGHTS OFFERING FOR RECORD HOLDERS
WITH ADDRESSES OUTSIDE THE UNITED STATES AND CANADA
The following relates to a rights offering (the "Rights Offering") by
American Ecology Corporation, Inc. (the "Company") to the holders of its
outstanding Common Stock, $.01 par value per share (the "Common Stock").
Holders of record at the close of business on September 24, 1997 (the "Record
Date") are receiving one right ("Right") for each share of Common Stock held on
the Record Date. Rights holders may purchase one share of Common Stock for each
Right held at the subscription price per share of $1.00 (the "Subscription
Price"). There will be no adjustment to the Rights upon any dividend to or on
changes in the outstanding shares of Common Stock. Subscriptions, once
exercised, are irrevocable.
The number of Rights to which you are entitled is printed on the face of
your Subscription Certificate, a copy of which is attached to these
instructions. The original of your Subscription Certificate is being held by
ChaseMellon Shareholder Services, L.L.C., for your account because your address
is outside of the United States and Canada.
IF YOU WISH TO EXERCISE YOUR RIGHTS, SATISFACTORY ARRANGEMENTS MUST BE
MADE WITH THE SUBSCRIPTION AGENT NO LATER THAN 11:00 A.M. NEW YORK CITY TIME ON
________________, 1997 (THE "EXPIRATION DATE") BY CALLING 001-207-329-8931 FOR
RELEASE OF YOUR SUBSCRIPTION CERTIFICATE AND PAYMENT OF THE SUBSCRIPTION PRICE.
AFTER THE EXPIRATION DATE, THE RIGHTS WILL BE NULL AND VOID. THE COMPANY IS NOT
OBLIGATED TO HONOR ANY SUBSCRIPTIONS RECEIVED BY THE SUBSCRIPTION AGENT AFTER
THE EXPIRATION DATE REGARDLESS OF WHEN SENT.
<PAGE> 5
NOTICE OF GUARANTEED DELIVERY
With Respect to Rights to Purchase
Common Stock of American Ecology Corporation
Expiring on ______________, 1997,
5:00 P.M. Eastern Standard Time
This form, or one substantially equivalent hereto, must be used by any
holder of Rights who wishes to subscribe for shares of Common Stock, $.01 par
value per share ("Common Stock"), who cannot deliver his or her Subscription
Certificate on or before 5:00 p.m. Eastern Standard Time on ______________,
1997 (the "Expiration Date"). This form, together with payment in full for the
shares of Common Stock subscribed for, may be delivered to the Subscription
Agent by mail or hand delivery and must be so delivered by the Expiration Date.
Unless otherwise defined herein, all capitalized terms used herein have the
same meaning as set forth in the Prospectus (the "Prospectus") dated
_______________, 1997, filed as part of the Registration Statement on Form S-3,
as amended. The name, address and fax number of the Subscription Agent are as
follows:
<TABLE>
<CAPTION>
By Mail: By Hand Delivery: By Overnight Delivery:
- ------- ---------------- ---------------------
<S> <C> <C>
ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder
Services, L.L.C. Services, L.L.C. Services, L.L.C.
Post Office Box 3305 120 Broadway, 13th Floor 85 Challenger Road
South Hackensack, NJ 07606 New York, NY 10271 Mail Drop - Reorg.
Attn: Reorganization Dept. Attn: Reorganization Dept. Ridgefield Park, NJ 07660
Attn: Reorganization Dept.
</TABLE>
The undersigned hereby represents that the undersigned is the holder of a
Subscription Certificate representing ______ Rights and that such Subscription
Certificate cannot be delivered to the Subscription Agent on or before the
Expiration Date. The undersigned hereby elects to exercise Rights to purchase
______ shares of Common Stock. The undersigned hereby tenders $___________
($1.00 per share of Common Stock subscribed for) and/or certificates for ______
shares of Series E Preferred Stock of the Company (1 share for each 10 shares
of Common Stock subscribed for) endorsed for transfer in full payment for the
shares of Common Stock subscribed for.
---------------------------------------
Signature(s)
---------------------------------------
Name(s) (Please Print)
---------------------------------------
Address
---------------------------------------
Area Code and Telephone Number
Date: ___________________, 1997
<PAGE> 6
GUARANTEE
The undersigned, a firm which is a member of a registered national
securities exchange or the National Association of Securities Dealers, Inc., or
is a commercial bank, or trust company having an office or correspondent in the
United States, guarantees that the above named person(s) (a) own(s) the Rights
exercised hereby and (b) that such firm shall deliver to the Subscription Agent
the Subscription Certificate representing the Rights described above by 5:00
p.m., Eastern Standard Time no later than three Nasdaq trading days following
the Expiration Date.
---------------------------------------
Name of Firm
---------------------------------------
Authorized Signature
---------------------------------------
Name of Authorized Signatory (Please Print)
---------------------------------------
Address of Firm
---------------------------------------
Area Code and Telephone Number of Firm
Date: ___________________, 1997
INSTRUCTIONS
1. Delivery of this Notice of Guaranteed Delivery. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery together with
payment in full, in United States dollars and/or certificates endorsed in blank
of Series E Preferred Stock of the Company, for the shares of Common Stock
subscribed for must be received by the Subscription Agent at its address set
forth on the cover page prior to the Expiration Date. The method of delivery of
this Notice of Guaranteed Delivery to the Subscription Agent is at the election
and risk of the holder of Rights but the delivery will be deemed made only when
actually received by the Subscription Agent. If such delivery is by mail, it is
recommended that the holder of Rights use insured, registered mail with return
receipt requested.
2. Signatures on this Notice of Guaranteed Delivery. The signature of this
Notice of Guaranteed Delivery must correspond with the name(s) of the
registered holder(s) of the Subscription Certificate(s) without alteration or
any change whatsoever. If this Notice of Guaranteed Delivery is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when singing, and, unless waived by the
Subscription Agent, evidence satisfactory to the Subscription Agent of his or
her authority so to act must be submitted with this Notice of Guaranteed
Delivery.
-2-
