<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
AMERICAN ECOLOGY CORPORATION
(Name of Registrant as Specified In Its Charter)
.........
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
....................................................................
2) Aggregate number of securities to which transaction applies:
....................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
....................................................................
4) Proposed maximum aggregate value of transaction:
....................................................................
5) Total fee paid:
....................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
..................................................................
2) Form, Schedule or Registration Statement No.:
..................................................................
3) Filing Party: L. GARY DAVIS, CPA DIRECTOR OF AUDIT
..................................................................
4) Date Filed:
..................................................................
<PAGE> 2
AMERICAN ECOLOGY CORPORATION
805 W. IDAHO, SUITE 200
BOISE, IDAHO 83702-8916
(208) 331-8400
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 1997
The Annual Meeting of Stockholders of American Ecology Corporation (the
"Company") will be held on May 22, 1997, at 10:00 a.m. mountain time at the
Owyhee Plaza, Capitol Room, 1109 Main Street, Boise, Idaho.
The meeting is being held to consider and act upon the following
matters:
1. To elect eight directors of the Board of Directors;
2. To amend the Company's Restated Certificate of Incorporation to
increase the authorized common stock from 20,000,000 to 25,000,000 shares;
3. To ratify the selection of Balukoff, Lindstrom & Co., P.A. as the
Company's independent auditors for fiscal year 1997;
4. To ratify the November 13, 1996 issuance of Convertible Redeemable
Series E Preferred Stock and associated warrants;
5. Such other business as may properly come before the meeting or any
adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 16,
1997 as the record date for determining those stockholders who will be entitled
to vote at the meeting and any adjournments or postponements thereof.
Please sign and date the enclosed proxy and return it promptly in the
enclosed self-addressed pre-paid envelope. If you attend the meeting, you may
withdraw your proxy and vote your shares in person.
BY ORDER OF THE BOARD OF DIRECTORS
PHILLIP K. CHATTIN
Secretary
Boise, Idaho
April 22, 1997
<PAGE> 3
AMERICAN ECOLOGY CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 22, 1997
PROXY STATEMENT
---------------------
This Proxy Statement relates to the Annual Meeting of Stockholders of
American Ecology Corporation, a Delaware corporation (the "Company"), to be held
on May 22, 1997, at 10:00 a.m., mountain time, at the Owyhee Plaza, Capitol
Room, 1109 Main Street, Boise, Idaho, including any adjournments or
postponements thereof (the "Meeting"). This Proxy Statement, the accompanying
proxy card and the Company's Annual Report are first being mailed to
stockholders of the Company on or about April 23, 1997. THEY ARE FURNISHED IN
CONNECTION WITH THE SOLICITATION BY THE COMPANY OF PROXIES FROM THE HOLDERS OF
THE COMPANY'S COMMON STOCK, PAR VALUE $.01 PER SHARE ( "COMMON STOCK"), FOR USE
AT THE MEETING.
The principal solicitation of proxies is being made by mail; however,
additional solicitation may be made by telephone, telegraph, facsimile or
personal visits by directors, officers and regular employees of the Company and
its subsidiaries, who will not receive additional compensation therefore. The
Company has retained ChaseMellon Shareholder Services to aid in the solicitation
of proxies. Estimated fees expected to be incurred by the Company in this
connection should not exceed $10,000. The Company will reimburse brokerage firms
and others for their reasonable expenses in forwarding soliciting material.
All shares represented by duly executed proxies in the accompanying
form received prior to the Meeting will be voted in the manner specified
therein. Any stockholder granting a proxy may revoke it at any time before it is
voted by filing with the Secretary of the Company either an instrument revoking
the proxy or a duly executed proxy bearing a later date. Proxies may also be
revoked by any stockholder present at the Meeting who expresses a desire to vote
his shares in person. As to any matter for which no choice has been specified in
a duly executed proxy, the shares represented thereby will be voted FOR each
proposal listed herein and, in the discretion of the persons named in the proxy
in any other business that may properly come before the Meeting.
STOCKHOLDERS ARE URGED, WHETHER OR NOT THEY EXPECT TO ATTEND THE
MEETING TO COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE.
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1996 has been or is being furnished with this Proxy Statement to
stockholders of record on April 16, 1997. The Annual Report to Stockholders does
not constitute a part of the proxy soliciting material except as otherwise
provided by the rules of the Securities and Exchange Commission.
1
<PAGE> 4
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed April 16, 1997 as the
record date ("Record Date") for the determination of stockholders entitled to
notice of and to vote at the Meeting. On the Record Date there were X,XXX,XXX
shares of common stock issued and outstanding and entitled to vote. The Company
has no other voting securities outstanding. Each stockholder of record is
entitled to one vote per share held on all matters submitted to a vote of
stockholders, except that in electing directors, each stockholder is entitled to
cumulate his or her votes and give any one candidate an aggregate number of
votes equal to the number of directors to be elected (eight) multiplied by the
number of his or her shares, or to distribute such aggregate number of votes
among as many candidates as he or she wishes. For a stockholder to exercise his
or her cumulative voting rights, the stockholder must give notice of his or her
intention to cumulatively vote prior to the Meeting, or at the Meeting in
person, prior to voting. If any stockholder has given such notice, all
stockholders may cumulatively vote. The holders of proxies will have authority
to cumulatively vote and allocate such votes in their discretion to one or more
of the director nominees. The holders of the proxies solicited hereby do not, at
this time, intend to cumulatively vote the shares they represent, unless a
stockholder indicates his intent to do so, in which instance the proxy holders
intend to cumulatively vote all the shares they hold by proxy in favor of some
or all of the director nominees identified herein.
An affirmative vote of a majority of the shares present and voting at
the Meeting is required for approval of Proposal 1. Abstentions and broker
non-votes are each included in the determination of the number of shares
present. Abstentions are counted in tabulations of the votes cast on proposals
presented to stockholders, whereas broker non-votes are not counted for purposes
of determining whether a proposal has been approved.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
DIRECTORS. At the Annual Meeting of Stockholders, eight directors
are to be elected. If Proposal 1 is adopted, eight directors will be
elected to hold office until the next Annual Meeting of Stockholders or until
the election and qualification of his or her respective successor. It is the
intention of the persons named in the proxy to vote the proxies which are not
marked to the contrary for the election as directors of the persons named below
as nominees. If any such nominee refuses or is unable to serve as a director,
the persons named as proxies may in their discretion vote for any or all other
persons who may be nominated. The eight nominees receiving the greatest number
of votes cast will be elected directors.
2
<PAGE> 5
Director nominees standing for election to serve until the 1998 Annual Meeting
are:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY DIRECTOR SINCE
- ---- --- --------------------- --------------
<S> <C> <C> <C>
Jack K. Lemley 62 Director, Chairman, Chief Executive 1992
Officer and President
Paul F. Schutt 64 Director 1994
John J. Scoville 61 Director 1984
Patricia M. Eckert 49 Director 1995
Edward F. Heil 52 Director 1994
Rotchford D. Barker 60 Director 1996
Paul C. Bergson 52 Director 1996
Keith D. Bronstein 47 Director 1997
</TABLE>
Please see Item 10 on page 8 hereof, for a brief business biography of each
director-nominee.
PROPOSAL NO. 2
AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
AUTHORIZED COMMON STOCK
On April 11, 1997, the Board of Directors by unanimous vote of those
present, adopted a resolution approving and submitting to a vote of the
stockholders an amendment to Article Fourth of the Company's Restated
Certificate of Incorporation ("Certificate") to increase its authorized common
stock from 20,000,000 to 25,000,000 shares. The text of Article Fourth as
proposed to be amended is as follows:
"FOURTH: The total number of shares of stock which the corporation
shall have authority to issue is 25,000,000 shares of common stock, par
value $.01 per share (the "Stock") and 1,000,000 shares of preferred
stock, par value $.01 per share (the "Preferred Stock" or "Preferred
Shares")."
The proposed increase in the authorized common stock is recommended by
the Board of Directors to ensure the availability for the foreseeable future of
an adequate supply of authorized unissued shares for the planned shareholder
rights offering, stock options, the exercise of existing warrants and other
corporate purposes as may be decided by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
PROPOSED AMENDMENT TO INCREASE THE COMPANY'S AUTHORIZED COMMON STOCK. The
proposed amendment will be adopted if the votes cast in favor of the action at
the meeting exceed those cast opposing it, provided a quorum is present.
3
<PAGE> 6
PROPOSAL NO. 3
SELECTION OF AUDITORS
The Board of Directors has selected Balukoff, Lindstrom & Co., P.A.
("Balukoff, Lindstrom"), as independent auditors for the Company's 1997 fiscal
year. Balukoff, Lindstrom examined the financial statements of the Company for
its 1996 fiscal year. It is expected that representatives of Balukoff, Lindstrom
will be present at the stockholders meeting, will have the opportunity to make a
statement if they so desire, and will be available to respond to appropriate
questions.
Although this selection of auditors is not required to be submitted to
a vote of the stockholders, the Board of Directors has decided to ask the
stockholders to approve the selection and recommends that the stockholders vote
FOR approval. If a majority of shares of common stock represented at the meeting
does not vote to approve the selection, the Board will reconsider the selection.
PROPOSAL NO. 4
RATIFICATION OF ISSUANCE OF CONVERTIBLE REDEEMABLE
SERIES E PREFERRED STOCK AND ASSOCIATED WARRANTS
On October 31, 1996, the Board of Directors unanimously approved the
issuance of 300,000 new Series E Redeemable Convertible preferred stock and
associated warrants to two subscribing directors (Messrs. Barker and Heil) who
abstained from consideration and voting at the price of $10.00 per share. Each
share has a warrant associated with it allowing the holder to purchase ten
shares of the Company's common stock at the price of $1.50 per share on or after
July 1, 1997. The subscribing directors paid to the Company $3,000,000 for the
300,000 shares of Series E preferred.
At the time of the transaction, the Company, acting upon advice of
counsel, concluded that stockholder approval of the transaction was not required
by either Delaware law, the Company's Certificate of Incorporation, its bylaws,
or rules of the NASDAQ Stock Market, Inc., relating to stockholder approval of
issuance of listed securities. Subsequent to the issuance of the Series E
preferred, the NASDAQ Stock Market, in a letter to the Company, concluded that
the Company's issuance of the Series E preferred stock, without prior
stockholder approval, constituted a violation of the NASDAQ Stock Market's
continued listing rules. The Company has disputed, and continues to dispute, the
NASDAQ's interpretation of its rules. However, the Company believes it is in the
best interest of its stockholders to seek ratification of the issuance of the
Series E preferred stock. Copies of the share Purchase Agreement, Series E
Designation Certificate, and Form of Warrant issued in the transaction are
attached to this Proxy Statement as Exhibit A.
4
<PAGE> 7
Although the issuance of the Series E Redeemable Convertible preferred
stock and associated warrants is notin the Company's opinion, required to be
submitted to a vote of the stockholders, the Board has decided to ask the
stockholders to approve the transaction. THE BOARD OF DIRECTORS RECOMMENDS THAT
THE STOCKHOLDERS VOTE FOR APPROVAL. If a majority of the shares of common stock
represented at the annual meeting does not vote to approve the selection, the
Board will consider, what, if any, action it may lawfully take with respect to
the transaction.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS.
The Committees of the Board of Directors during 1996 were the
Nominating, Executive, Audit and Compensation Committees.
The members of the Nominating Committee are Messrs. Lemley, Heil and
Scoville. Mr. Scoville is chairman. The Nominating Committee searches for and
recommends to the Board of Directors, qualified and experienced individuals to
fill vacancies and new director seats, upon expansion of the board. The
Nominating Committee met twice during 1996.
The members of the Executive Committee are Messrs. Lemley, Barker,
Heil and Scoville. Mr. Lemley is chairman. Except certain powers which, under
Delaware law, may only be exercised by the full Board of Directors, the
Executive Committee may exercise all powers and authority of the Board of
Directors in the management of the business of the Company. The Executive
Committee did not meet in 1996.
The members of the Audit Committee are Messrs. Bergson, Schutt and Ms.
Eckert. Mr. Schutt is chairman. The Audit Committee reviews the proposed plan
and scope of the Company's annual audit as well as the result when it is
completed. The Committee reviews the services provided by the Company's
independent auditors and their fees. The Committee also meets with the Company's
financial personnel to assure the adequacy of the Company's accounting
principles, financial controls and policies. The Committee is also charged with
reviewing transactions which may present a conflict of interest on the part of
management or directors. The Audit Committee met three times in 1996.
The members of the Compensation Committee are Messrs. Barker, Bergson,
Heil and Schutt. Mr. Barker is chairman. The Compensation Committee reviews and
approves executive officer and key employee compensation and benefits. It also
administers the Company's employee stock option plan, approving the grant and
terms of stock options to executives and key employees of the Company. The
Compensation Committee met one time in 1996.
During 1996, the Board of Directors held twenty meetings. All directors
attended 80% or more of the meetings of the Board of Directors and Committees of
the Board on which they served.
5
<PAGE> 8
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
During 1996, no member of the Directors Compensation Committee was an
officer or employee of the Company or any of its subsidiaries, or had any other
relationship requiring disclosure by the Company under Item 404 of SEC
Regulation S-K.
During 1996, no executive officer of the Company served as: (i) a
member of the compensation committee (or other board committee performing
equivalent functions) of an unrelated entity, one of whose executive officers
served on the Directors Compensation Committee of the Company, (ii) a director
of an unrelated entity, one of whose executive officers served on the Directors
Compensation Committee of the Company, or (iii) a member of the Compensation
Committee (or other board committee performing equivalent functions) of another
entity, one of whose executive officers served as a director of the Company.
REPORT OF COMPENSATION COMMITTEE.
The report of the Compensation Committee of the Board of Directors is
found at Item 11 on page 10 hereof.
Directors who are not employees of the Company or its subsidiaries
receive an annual fee of $16,000 payable monthly plus $1,333 for each special
meeting attended in person, which at the director's discretion is payable
quarterly in stock of the Company at its then market price. Directors who are
employees of the Company receive no additional compensation for their service as
directors. All directors are reimbursed for their travel and other expenses
involved in attendance at Board and committee meetings.
In addition, each director who at the time of his/her initial election
to the Board is not an employee of the Company is granted, a stock option to
purchase from the Company 7,500 shares of the Company's common stock. Each
director who at the time of each re-election to the Board after his initial
election is not an employee of the Company is also granted, a stock option to
purchase from the Company 7,500 shares of the Company's common stock.
EXECUTIVE OFFICERS AND COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES
EXCHANGE ACT.
Information concerning executive officers and compliance with Section
16(a) of the Securities Exchange Act of 1934 is found at Item 10 on page 8
hereof.
EXECUTIVE COMPENSATION.
Information concerning executive compensation is found at Item 11 on
page 10 hereof.
6
<PAGE> 9
STOCK PERFORMANCE GRAPH(1)
The following graph compares the most recent five year market-value
performance of the Company's common stock to the NASDAQ US and Foreign Stock
Index, and a hazardous waste industry peer group(2) which the Company believes
accurately reflects its competitors. The graph assumes that the value of the
investment in the common stock and each index was $100 at December 31, 1989.
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
American Ecology Corporation 300.0 234.0 204.0 175.9 78.8 30.4
NASDAQ US & Foreign Stock 135.7 157.4 181.1 175.3 243.6 267.2
Peer Group 104.9 104.5 69.1 56.3 64.8 66.5
</TABLE>
[GRAPHIC OMITTED]
- ------------------------
(1) Notwithstanding filings by the Company with the SEC that have incorporated
or may incorporate by reference other SEC filings (including this proxy
statement) in their entirety, this performance graph shall not be incorporated
by reference into such filings and shall not be deemed to be "filed" with the
SEC except as specifically provided otherwise or to the extent required by Item
402 of the Regulation S-K.
(2) The companies which make up the Company's peer group are: 3CI Complete
Compliance Corp., American Medical Tech, Inc., american Waste Services, Ametech,
Biomedical Waste Systems, Inc., Chemical Waste Management, WMX, Clean Harbors
Inc., Environmental Services of America, Inc., GNI Group, Metalclad Corp.,
Mobley Environmental Services, Safety Kleen Corp., and Security Environmantal
Systems.
7
<PAGE> 10
SECURITY OWNERSHIP BY DIRECTORS, NOMINEES FOR DIRECTORS AND EXECUTIVE OFFICERS.
Information concerning Security ownership of certain beneficial owners,
directors and executive officers is found at Item 12 on page 14 hereof.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information concerning certain relationships and related transactions
is found at Item 13 on page 17 hereof.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.
<TABLE>
<CAPTION>
OFFICE HELD AS OF
MARCH 24, 1997 NAME AGE CITY STATE DIRECTOR/OFFICER
- -------------- ---- --- ---- ----- ----------------
<S> <C> <C> <C> <C> <C>
Director, Chairman, Chief
Executive Officer and
President.................... Jack K. Lemley 62 Boise Idaho 1992
Executive Vice President and
Chief Operating Officer......
Joseph J. Nagel 54 Boise Idaho February 14, 1997
Vice President............... Richard F. Paton 47 Houston Texas 1995
Vice President............... Robert S. Thorn 74 Boise Idaho May 22, 1996
Treasurer.................... Ian P.F. Dorling 49 Boise Idaho March 27, 1996
Director..................... Patricia M. Eckert 49 San Francisco California 1995
Director..................... Paul F. Schutt 64 Norcross Georgia 1994
Director..................... John J. Scoville 61 Santa Rosa California 1984
Director..................... Rotchford Barker 60 Golf Illinois April 19, 1996
Director..................... Edward F. Heil 52 Downers Grove Illinois 1994
Director..................... Paul C. Bergson 52 Washington D.C. February 13, 1996
Director..................... Keith D. Bronstein 47 Phoenix Arizona January 23, 1997
</TABLE>
Jack K. Lemley is the Chairman of the Board, Chief Executive Officer and
President of the Company. Prior to February 1995, he was an independent business
consultant. From May 1989 through 1993, Mr. Lemley was Chief Executive Officer
of Transmanche-Link J.V. which designed and built the tunnel and related
transportation infrastructure to provide train service between England and
France. Prior to his position at Transmanche-Link, Mr. Lemley founded Lemley and
Associates, Inc. and was a management consultant to various clients in the
industry. Mr. Lemley is also a director of Idaho Power Company.
Paul F. Schutt has been the Chief Executive Officer and a director of
Nuclear Fuel Services Inc. for more than the past 5 years. Mr. Schutt also led
the formation of Advanced Recovery Systems, Inc., and NFS Radiation Protection
Systems, Inc., and serves as a director on the boards of those companies. Mr.
Schutt was a founding director in 1968 and President of Nuclear Assurance
Corporation, Senior Planning Analyst for Union Carbide (AECOP), Oak Ridge,
Tennessee, and held management positions in Marketing, Planning and Research and
Development for Babcock & Wilcox Co.
8
<PAGE> 11
John J. Scoville is President of J.J. Scoville & Associates, Inc., a
nuclear consulting firm. He was President of US Ecology, Inc., a subsidiary of
the Company, from April 1981 to May 1990 and became a director of the Company in
March 1984. Mr. Scoville was also a Vice President of the Company from May 1986
to May 1990.
Patricia M. Eckert, Director, is currently the owner of consultant and law
practice, Patricia M. Eckert & Associates. Ms. Eckert formerly served as the
President of the California Public Utilities Commission and served as a
Commissioner from 1989 to 1994.
Edward F. Heil has been the Chairman of the Board of American Environmental
Construction Company for more than the last five years. Mr. Heil is also a
director of Medi Net, Inc.
Rotchford Barker became a director in April 1996. Mr. Barker is an
independent business man and commodity trader. Mr. Barker has been a member of
the Chicago Board of Trade for more than thirty years and has served on the
board of directors of the exchange. Mr. Barker was the President of Agra
Trading, Inc. until that company was acquired by Gill & Duffus, a United Kingdom
holding company, in 1970. He has also served as a director of Agra Trading,
Inc., Colorado Beef, Inc. and the December Group.
Paul C. Bergson became a director of the Company in February 1996. Mr.
Bergson is a principal in Bergson & Company, a government relations consulting
firm serving a range of clients in tax, environmental and chemical matters. Mr.
Bergson is also a General in the U.S. Army Reserves, a member of the Board of
Advisers of the Far East Studies Institute and serves on the boards of several
philanthropic organizations.
Richard F. Paton has been employed by the Company or its subsidiaries in
various positions since 1986.
Ian P.F. Dorling accepted employment with the Company in February 1996, and
was appointed Treasurer in March 1996. Prior to that time, Mr. Dorling was the
manager of cash management of Morrison - Knudsen Corporation, a Boise, Idaho
based engineering and construction firm.
Robert S. Thorn served as a consultant to the Company from November 1995 to
May 1996 when he accepted the position of Vice President, Administration and
Chief Accounting Officer. Prior to that time, Mr. Thorn served as a consultant
with Lemley and Associates, Inc., a consulting engineering firm, from 1994 to
November 1995 and before that as U.K. Controls Director for Transmanche-Link,
J.V. which designed and built the tunnels and related transportation
infrastructure to provide train service between England and France.
9
<PAGE> 12
Keith D. Bronstein, a member of the Chicago Board of Trade and President of
Tradelink LLC, became a director in January 1997. Previously he has served as a
board member of the American Cancer Society, as lay board member of The
University of Wisconsin Medical School, as a member of the Wisconsin Health
Policy Board, and is a trustee member of Highland Park Hospital & Lakeland
Health Service. Mr. Bronstein was a co-founder of S'Lil Pharmaceuticals, a
bio-technology company involved in early-stage discovery and development of
drugs.
Joseph J. Nagel joined the Company in 1996 as Vice President for
Governmental and Regulatory Affairs. In February 1997, Mr. Nagel was appointed
Executive Vice President and Chief Operating Officer of the US Ecology unit.
Prior to that, Mr. Nagel spent six years as Administrator of the Idaho Division
of Environmental Quality.
There are no family relationships among the directors and executive
officers of the Company.
The Company is not aware of any involvement in legal proceedings by its
directors or executive officers during the past five years that are material to
an evaluation of the ability or integrity of such director or executive officer.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT.
Section 16 of the Securities Exchange Act of 1934 ("Section 16")
requires that reports of beneficial ownership of common stock and preferred
stock and changes in such ownership be filed with the Securities and Exchange
Commission (the "SEC") by Section 16 "reporting persons" including directors,
certain officers, holders of more than 10% of the outstanding common stock or
preferred stock, and certain trusts of which certain reporting persons are
trustees. The Company is required to disclose in this proxy statement each
reporting person whom it knows to have failed to file any required reports under
Section 16 on a timely basis. Based solely upon a review of copies of Section 16
reports furnished to the Company and written statements confirming that no other
reports were required, to the Company's knowledge, all Section 16 reporting
requirements applicable to known reporting persons, except for one Form 3 report
which was filed late by Mr. Thorn, were complied with during 1996.
ITEM 11 EXECUTIVE COMPENSATION.
Set forth below is information regarding the compensation of the
Company's Chief Executive Officer and the other most highly compensated
executive officers for 1996 (together with the Chief Executive Officer, the
"named officers"). In addition, information is included regarding the
compensation of two individuals who would have been included in the named
officers but for the fact they were not executive officers of the Company at
December 31, 1996.
10
<PAGE> 13
Summary Compensation Table. The summary compensation table set forth below
contains information regarding the compensation of each of the named officers
for services rendered in all capacities during 1994, 1995 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Name and Principal Annual Compensation Stock Options All Other
Position Year Salary Bonus (No. of Shares) Compensation(1)
------------------ ---- ------ ----- --------------- -------------
($) ($) (*) ($)
<S> <C> <C> <C> <C> <C
Jack K. Lemley......................... 1996 $150,000 -0- -0- $ 761.52
Chairman & CEO 1995 $167,017 -0- 250,000 $ 4,588.63
1994 -0- -0- 10,000 -0-
-0-
Richard F. Paton....................... 1996 $ 96,890 -0- -0- $ 3,197.74
Vice President 1995 $ 96,828 -0- 1,500 $ 3,919.32
1994 $ 94,853 $ 5,000 -0- $ 7,379.08
Edmund J. Gorman(2).................... 1996 $120,700 -0- -0- $ 3,785.92
President & COO 1995 $ 46,515 -0- 150,000 $ 1,793.43
1994 -0- -0- -0- -0-
Robert S. Thorn(3)..................... 1996 $ 59,558 -0- -0- $41,327.53
Vice President Administration 1995 -0- -0- -0- $12,880.00
1994 -0- -0- -0- -0-
</TABLE>
Option Grants. There were no options granted in 1996.
Option Exercises and 1996 Year-End Option Holdings. Shown below is
information with respect to unexercised options to purchase Common Stock granted
in prior years to the named officers and held by them at December 31, 1996. None
of the named officers exercised any stock options in 1996.
- --------------------------
(1) Includes the amount of premium paid by the Company for group term life
insurance for each named executive officer, car allowance and the amount of the
Company's matching contribution for each named executive officer under the
Company's 401(k) Savings Plan and the Company's Retirement Plan.
(2) Mr. Gorman left the Company effective October 11, 1996. His annual salary
was $175,000.
(3) Mr. Thorn became an employee May 1, 1996 with an annual salary of $95,000.
Prior to becoming an employee (November 26, 1995 - April 30, 1996), he was paid
$10,000 per month as a consultant.
11
<PAGE> 14
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUES AT FISCAL YEAR END
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at In-the-Money Options
December 31, 1996 at December 31, 1996
Name Exercisable/Unexercisable Exercisable/Unexercisable(4)
---- ------------------------- -------------------------
<S> <C> <C>
Jack K. Lemley....................... 170,500/100,000 $0/$0
Richard F. Paton..................... 3,400/ 1,600 $0/$0
</TABLE>
COMPENSATION COMMITTEE REPORT. (5)
The Compensation Committee of the Board of Directors is composed
entirely of outside directors and is responsible for developing and making
recommendations to the Board with respect to the Company's executive
compensation policies. The Committee also approves the design of the Company's
compensation and benefit plans. This Compensation Committee Report sets forth
the components of the Company's executive officer compensation and describes the
basis on which the 1996 compensation determination were made by the Compensation
Committee with respect to the executive officers of the Company.
In maintaining its executive compensation programs, the Company follows
its belief that executive compensation should reflect the value created for
stockholders together with supporting the Company's strategic goals. The
following objectives are among those utilized by the Compensation Committee:
1. Executive compensation should be meaningfully related to the
long-term and short-term value created for stockholders.
2. Executive compensation programs should support the long-term and
short-term strategic goals and objectives of the Company.
3. Executive compensation programs should reflect and promote the
Company's overall value, business standards and reward individuals
for outstanding contributions to the Company's success.
4. Short and long term executive compensation play a critical role
in attracting and retaining well qualified executives.
- --------------------
(4) A stock option is considered to be "in-the-money" if price of the related
stock is higher than the exercise price of the option. The closed market price
of the Common Stock was $1.063 per share on the NASDAQ for December 31, 1996.
(5) Notwithstanding filings by the Company with the Securities and Exchange
Commission ("SEC") that have incorporated or may incorporate by reference other
SEC filings in their entirety, this Compensation Committee Report shall not be
incorporated by reference into such filings and shall not be deemed to be
"filed" with the SEC except as specifically provided otherwise or to the extent
required by Item 402 of the Regulation S-K.
12
<PAGE> 15
The Compensation Committee currently implements a compensation program
based on three components; a base salary, a related bonus program tied to
Company performance, and a stock option program. The Compensation Committee
regularly reviews the various components of the Company's executive compensation
to ensure that they are consistent with the Company's objectives.
BASE SALARY -- The Compensation Committee, in determining the
appropriate base salaries of its executive officers, generally considers the
level of executive compensation in similar companies in the industry. In
addition, the Compensation Committee takes into account (i) the performance of
the Company and the roles of the individual executive officers with respect to
such performance, and (ii) the particular executive officer's specific
experience and responsibilities, and the performance of such executive officer
in those areas of responsibility.
ANNUAL INCENTIVES -- The bonus program provides direct financial
incentives in the form of an annual cash bonus to executive officers to achieve
and exceed the Company's annual goals. The Committee awards cash bonuses based
on the performance of the Company relative to its budgeted net income for the
fiscal year and other pertinent absolute and relative criteria.
LONG-TERM INCENTIVES -- The stock option program is currently the
Company's primary long-term incentive plan for executive officers and key
employees. The Committee is reviewing other possible long-term incentive plans
and may implement such a plan as a supplement to the stock option program in the
future. The objectives of the stock option program are to align executive
officer compensation and shareholder return, and to enable executive officers to
develop and maintain a significant, long-term stock ownership position in the
Company's Common Stock. In addition, grants of stock options to the named
executive officers and others are intended to retain and motivate executives to
improve long-term corporate and stock market performance. Stock options are
granted at the prevailing market value and will only have value if the Company's
stock price increases. Generally, grants of stock options vest in equal amounts
over five years, and the executives must be employed by the Company at the time
of vesting in order to exercise the stock option.
Consistent with the Company's compensation program outlined above,
compensation for each of the named officers, as well as other senior executives,
consists of a base salary, bonus and stock options. The base salaries for 1996
were established by the Committee at levels believed to be at or somewhat below
competitive amounts paid to executives of companies in the environmental
industry with comparable qualifications, experience and responsibilities. The
Compensation Committee determined, after the end of 1996, not to pay cash
bonuses to the named officers of the Company, given the financial performance of
the Company which was below expectations.
During 1996, Jack K. Lemley, the chief executive officer of the Company
received a base salary of $150,000, which the Committee believes to be below the
average of the base salary for chief executive officers with comparable
qualifications, experience and responsibilities of other companies in the
environmental industry. Due to the Company's 1996 financial performance, Mr.
Lemley received no bonus for 1996.
13
<PAGE> 16
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information as of April 10, 1997 with
respect to the beneficial ownership of the Company's Common Stock by (i) each
director and nominee for director of the Company individually, (ii) each
executive officer of the Company, and (iii) all directors, nominees for director
and executive officers of the Company listed in the Summary Compensation Table
as a group. Unless otherwise indicated below, each of the named persons and
members of the group has sole voting and investment power with respect to the
shares shown.
<TABLE>
<CAPTION>
Options Shares Held
Voting and Exercisable Under Company Total
Investment Within 401(k) Plan or Beneficial Percent
Name of Beneficial Owner Power 60 Days Retirement Plan Ownership Of Class
------------------------ ----- ------- --------------- --------- --------
<S> <C> <C> <C> <C>
Rotchford D. Barker................. 74,589 0 0 74,589 *
Paul C. Bergson..................... 10,000 0 0 10,000 *
Patricia M. Eckert.................. 0 7,500 (1) 0 7,500 *
Edward F. Heil...................... 1,643,810 (2) 0 0 1,643,810 20.5%
Jack K. Lemley...................... 4,500 120,500 (3) 0 125,000 1.6%
Paul F. Schutt, Jr.................. 107,380 17,500 (6) 0 124,880 1.6%
John J. Scoville.................... 2,000 30,500 (4) 0 46,763.21 *
Richard F. Paton.................... 0 2,400 (5) 229.67 3,269.67 *
Robert S. Thorn..................... 600 0 0 0 0
Ian P.F. Dorling.................... 0 0 0 0 0
Joseph J. Nagel..................... 0 0 0 0 0
Keith D. Bronstein.................. 60,000 0 0 60,000 *
All directors, and executive
officers as a group (12 persons).... 2,282,670 28.88%
</TABLE>
- -----------------------
1. Ms. Eckert was granted options to purchase 7,500 shares of Common Stock
under the Company's 1992 Outside Director Stock Option Plan. Such options
were exercisable as of May 24, 1995 and are included in the above table.
- -----------------------
* Indicates less than one percent (1%)
* Indicates less than one percent (1%)
14
<PAGE> 17
2. Pursuant to a Schedule 13-D filing, Mr. Heil reported that 1,971,884.4
shares of Common Stock were beneficially owned individually by Mr. Heil and
314,730 shares of Common Stock were beneficially owned by Mr. Heil in his
capacity as trustee of a trust. Mr. Heil's Schedule 13-D also reported that
7,784 shares of Common Stock were beneficially owned individually by Thomas
W. McNamara, an attorney for Mr. Heil and 20,108 shares of Common Stock
were beneficially owned by Mr. McNamara in his capacity as trustee of a
trust. The Schedule 13-D stated that Mr. McNamara's shares are included in
the filing as a precautionary measure in the event that he and Mr. McNamara
were deemed to be a "group" under Section 13(d) (3) of the Securities
Exchange Act of 1934, as amended, but that such inclusion should not be
deemed an admission that they were acting as a group. Mr. McNamara's shares
are included in the total shown in the above table.
Mr. Heil was granted options to purchase 17,500 shares of Common Stock
under the Company's 1992 Outside Director Stock Option Plan. That plan
provides that options granted to a stockholder beneficially owning more
than 10% of the Company's Common Stock will not vest until such time as
approved by both the grantee and the Board of Directors of the Company or
until such stockholder no longer beneficially owns more than 10% of the
Company's Common Stock.
3. Mr. Lemley was granted 100,000 share options by the Board of Directors on
May 24, 1995 and the other 25,000 share options were granted under the
Company's 1992 Director's Plan.
4. Mr. John J. Scoville was granted options to purchase a total of 30,500
shares of Common Stock under the Company's 1992 Outside Director Stock
Option Plan. Mr. Harris resigned from the Board of Directors April
30, 1996.
5. Mr. Paton was granted options to purchase a total of 5,000 shares of
Common Stock under the Company's 1992 Stock Options Plan.
6. Mr. Schutt is the sole general partner with a 33% partnership interest
of a limited partnership which owns 100% of the capital stock of Nuclear
Fuel Services, Inc. ("NFS"). Mr. Schutt is the Chief Executive Officer
and a director of NFS. NFS is the record owner of 107,380 shares of
Common Stock as to which Mr. Schutt disclaims beneficial ownership.
Such shares are included in the above table.
15
<PAGE> 18
SECURITY OWNERSHIP OF 5% BENEFICIAL OWNERS
The following information is given with respect to the persons known by
the Company to own beneficially more than 5% of the outstanding shares of the
Common Stock as of December31, 1996. Unless otherwise noted, each shareholder
listed below has sole voting and investment power with respect to the shares
listed.
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent of
of Beneficial Owner Beneficially Owned Class
------------------- ------------------ ----------
<S> <C> <C>
Edward F. Heil (1)................................... 1,643,810 20.5%
2901 Centre Circle
Downers Grove, Illinois 60515
Harry J. Phillips, Jr. (2)........................... 2,065,166 25.8%
3 Riverway, Suite 170
Houston, Texas 77056
Fayez Sarofim (3).................................... 466,980 5.8%
2900 Two Houston Center
Houston, Texas 77010
</TABLE>
- ----------------------------------------
1. Pursuant to a Section 16 Form 4 filed on December 31, 1996, Mr. Heil
reported that 1,329,080 shares of Common Stock were beneficially owned
individually by Mr. Heil and 314,730 shares of Common Stock were
beneficially owned by Mr. Heil in his capacity as trustee of a trust.
2. Mr. Phillips beneficially owns 350,536 shares of Common Stock, and
1,110,206 shares of Common Stock owned of record by ECOL Partners II, Ltd.
("Ecol Partners II") and 2,352 shares owned of record by Phillips
Investments, Inc. As the sole shareholder of Phillips Investments, Inc.,
which is the corporate general partner of ECOL Partners II, Mr. Phillips
shares voting and investment power over the Common Stock owned by Phillips
Investments, Inc. and ECOL Partners II.
3. Pursuant to a Schedule 13-G filing on December 31, 1996, Mr. Fayez Sarofim
reported that as of December 31, 1996 he may be deemed to be the beneficial
owner of 413,328 shares of Common Stock. Mr. Sarofim reported sole voting
power with respect to 413,328 such shares, shared voting power with respect
to 46,742 of such shares, sole dispositive power with respect to 413,328
shares and shared dispositive power with respect to 53,652 such shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
John J. Scoville, a director of the Company, is President and
beneficial owner of J.J. Scoville and Associates, Inc., which received
$89,934.36 as of March 24, 1997, from the
16
<PAGE> 19
Company for consulting services. Such services were provided upon terms
substantially similar to those the Company would have effected with unrelated
parties.
In October 1996, the Company sold 300,000 shares of 11.25% Series E
Redeemable Convertible Preferred Stock in a private offering to a group
comprised principally of members of the Company's directors (the "Investing
Group") and received cash proceeds of $3,000,000. The Investing Group included
Edward Heil and Rotchford Barker.
For Details of the Series D and Series E Preferred Stock, refer to Note
8 to the 1996 financial statements of the Form 10-K.
STOCKHOLDER PROPOSALS AT THE NEXT
ANNUAL MEETING OF STOCKHOLDERS
Stockholder proposals submitted for inclusion in the Company's 1998
proxy materials and consideration at the 1998 annual meeting of stockholders
must be received by the Company no later than December 23, 1997. Stockholder
proposals should be submitted to the Secretary of American Ecology Corporation,
805 W. Idaho, Suite 200, Boise, Idaho 83702. Any such proposal should comply
with the Securities and Exchange Commission rules governing stockholder
proposals submitted for inclusion in proxy materials.
OTHER MATTERS
The management of the Company knows of no other matters which may come
before the Meeting. However, if any matters other than those referred to above
should properly come before the Meeting, it is the intention of the persons
named in the enclosed proxy to vote all proxies in accordance with their best
judgment.
April 22, 1997 American Ecology Corporation
<PAGE> 20
AMERICAN ECOLOGY CORPORATION
November 19, 1996
1996 Annual Shareholders Meeting
BALLOT
PROPOSAL: The undersigned hereby casts the following votes for the
election of the following persons as Directors of American Ecology Corporation:
FOR AGAINST
[ ] [ ]
To withhold authority, strike through name.
Rotchford Barker _________________
Paul Bergson _________________
Patricia M. Eckert _________________
Edward F. Heil _________________
Jack K. Lemley _________________
Paul F. Schutt _________________
John J. Scoville _________________
If you have previously voted by proxy, you do not need to vote on this ballot
unless you wish to withdraw your proxy, and change your vote.
Exact Number of Shares _________
----------------------------------------------
Please sign your name exactly as it appears on
your stock certificate
----------------------------------------------
Printed Name
Address: __________________________
__________________________
__________________________
[ ] CHECK HERE IF THIS BALLOT REVOKES A PREVIOUSLY SUBMITTED PROXY.
<PAGE> 21
INDEX TO EXHIBITS
Exhibit
No. Description
------- -----------
99.5 Purchase Agreement dated and effective as of November 13, 1996 by
and among the Company and Edward F. Heil and Rotchford L. Barker.
99.6 Form of: Certificate of Designation, Preferences and Rights of
Series E Redeemable Convertible Preferred Stock of American Ecology
Corporation.
99.7 Form of: Warrant to Purchase Common Stock of American Ecology
Corporation.
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
EXHIBIT 99.5
PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is dated and effective as of
November 13, 1996, and is entered into by and among (i) American Ecology
Corporation, a Delaware corporation (the "Company"), (ii) Edward F. Heil
("Heil"), and (iii) Rotchford Barker ("Barker") (the individuals identified in
clauses (ii) through (iii) being herein referred to collectively as
"Purchasers" and severally as "Purchaser").
In consideration of the agreements and undertakings of the parties
hereinafter set forth, and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows.
1. Purchase and Sale of Securities. Subject to the terms and
conditions set forth in this Agreement the Company will issue and sell to each
Purchaser on the date hereof and each Purchaser will purchase from the Company
on the date hereof the number of shares of Series E Preferred Stock (as
hereinafter defined) specified on Schedule 1 and (b) the number of Warrants (as
hereinafter defined) specified on Schedule 1 of the Company (collectively the
Series E Preferred Stock, the Warrants and any common stock issued in respect
of the foregoing are sometimes referred to as the "Securities"). The aggregate
purchase price of each (i) one share of Series E Preferred Stock and (ii) ten
Warrants shall be $10.00, which shall be paid to the Company in cash. The
obligations of the respective Purchasers to purchase shares of Series E
Preferred Stock and Warrants pursuant to this Agreement are several, and not
joint. The purchase and sale of the shares of Series E Preferred Stock and
Warrants shall occur at the offices of Jenner & Block, Chicago, Illinois not
later than the close of business on the date hereof, or at such other time and
place as may be agreed to by all of the parties to this Agreement. As used in
this Purchase Agreement, the term "Series E Preferred Stock" means a series of
preferred stock of the Company established by the Certificate of Designation,
Preferences and Rights of Series E Redeemable Convertible Preferred Stock of
American Ecology Corporation (the "Certificate of Designation") attached hereto
as Exhibit A. As used in this Agreement, the term "Warrant" means a warrant to
purchase common stock of the Company in the form attached hereto as Exhibit B.
2. Representations of the Company. The Company represents and
warrants to each Purchaser as follows:
2.1 The Company has all requisite corporate power and
authority to enter into this Agreement and to perform all the obligations
required to be performed by the Company under this Agreement.
1
<PAGE> 2
2.2 This Agreement has been duly executed and delivered
by the Company, and, upon execution and delivery by the Purchasers, this
Agreement will be the valid and legally binding obligation of the Company,
enforceable as to the Company in accordance with its terms except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and equitable remedies.
2.3 All shares of Series E Preferred Stock being issued
shall be, all Warrants being issued shall be, and all shares of common Stock
issuable pursuant to such Warrants ("Underlying Common Shares") shall be upon
issuance of such Underlying Common Shares, duly authorized, validly issued,
fully paid and nonassessable and issued without violation of and not subject to
any preemptive right; and a number of shares of authorized and unissued Common
Stock of the Company equal to the number of such Underlying Common Shares shall
have been reserved for issuance on or before July 1, 1997.
3. Representations of Purchasers. Each Purchaser, severally and
not jointly, represents and warrants to the Company as to himself as follows:
3.1. Such Purchaser has all requisite authority to enter
into this Agreement and to perform all the obligations required to be performed
by such Purchaser under this Agreement. This Agreement has been duly executed
and delivered by such Purchaser, and, upon execution and delivery by the
Company and the other Purchasers, this Agreement will be the valid and legally
binding obligation of such Purchaser, enforceable as to such Purchaser in
accordance with its terms except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and equitable
remedies.
3.2. Neither the Company nor any person acting or
purporting to act on behalf of the Company has offered or sold any of the
Securities to such Purchaser by means of any form of general solicitation or
general advertising. Such Purchaser is acquiring the Securities to be
purchased by such Purchaser under this Agreement solely for his own beneficial
account, for investment purposes, and not with any view to, or for resale in
connection with, any distribution of any such Securities. Such Purchaser
understands that the Securities have not been registered under the Securities
Act of 1933, as amended (the "Act"), or any state securities laws, by reason of
specific exemptions under the provisions thereof which depend in part upon the
investment intent of such Purchaser and upon the accuracy of the other
representations made by such Purchaser in this Agreement. Such Purchaser
understands that the Company is relying upon the representations and agreements
contained in this Agreement for the purpose of determining that the
transactions contemplated by this Agreement meet the requirements
2
<PAGE> 3
for such exemptions. Such Purchaser is a director of the Company and an
"accredited investor" as defined in Regulation D pursuant to the Act.
4. Restrictive Legends.
4.1. Each certificate or other document representing any
of the Securities issued pursuant to this Agreement shall be stamped or
otherwise imprinted with a restrictive legend in the form set forth on the form
of the Warrant attached hereto as an exhibit (or, in the case of shares of
Series E Preferred Stock or shares of common stock issuable upon conversion
thereof or exercise of the Warrants, an equivalent legend appropriately
modified to refer to such Securities). In the event of any transfer or
reissuance of any such Security, the certificates or other instruments
representing such Securities shall continue to bear such legends.
4.2. The Company hereby agrees that it will promptly
deliver or cause to be delivered a new certificate or certificates or
instrument or instruments for any Securities, which certificate or certificates
or instrument or instruments will not bear the legends referred to above, upon
determination by the Company that such Securities have been held beneficially
by the holder for at least three years and that such holder is not and has not
been within the preceding three months an affiliate of the Company. All
determinations pursuant to the preceding sentence shall be made in accordance
with Rule 144(k) under the Act or any applicable successor rule. In the event
that a period shorter than specified above is permitted by reason of the
amendment or replacement of such Rule 144(k), then the Company shall impose no
greater restriction than the restriction imposed as the result of such
amendment or replacement.
5. Conditions to the Obligations of the Purchasers. The
obligations of each Purchaser to purchase the Securities to be purchased by
such Purchaser under this Agreement are subject to the satisfaction or waiver
by such Purchaser of the following conditions:
5.1. The Company shall, against receipt of payment
therefore as provided herein, deliver to the Purchaser the certificates or
other instruments evidencing such Securities in the form contemplated by this
Agreement; and
5.2. The representations of the Company set forth in
Section 2 of the Agreement shall be true and correct in all material respects
at the time of such purchase and sale of such Securities.
6. Conditions to the Obligations of the Company. The obligations
of the Company to issue and sell the Securities to be issued and sold by the
Company under this Agreement are subject to the satisfaction or waiver by the
Company of the following conditions:
3
<PAGE> 4
6.1. Each Purchaser shall have delivered payment as
provided herein against delivery to such Purchaser of the certificates or other
instruments evidencing such Securities in the form contemplated by this
Agreement; and
6.2. The representations of each Purchaser set forth in
Section 3 of this Agreement shall be true and correct in all material respects
at the time of such purchase and sale of such Securities; and
6.3. The Company shall have received such consents,
waivers and agreements from its secured bank lender as shall be required, in
the judgment of the Company, to permit the issuance and sale of such Securities
with the result that, upon consummation of such issuance and sale, the Company
shall not be in default (or shall be subject to a forbearance agreement
reasonably satisfactory to the Company with respect to any such default) under
the provisions of any agreement or instrument governing or evidencing any
obligations of the Company to its secured bank lender.
7. Registration Rights.
7.1. As used in this Section 7:
(a) The terms "register," "registered" and
"registration" refer to a registration effective by preparing and filing a
registration statement in compliance with the Act, and the declaration or
ordering of the effectiveness of such registration statement.
(b) The term "Registrable Securities" means: (i)
any common stock of the Company ("Common Stock") issued, or issuable, upon the
conversion of any Series E Preferred Stock regardless of whether such
conversion has taken place at any time; (ii) any Common Stock issued, or
issuable upon the conversion or exercise of any Warrant, regardless of whether
such exercise has taken place at any time, or any warrant, right or other
security which is issued as a dividend or other distribution with respect to,
or in exchange for or in replacement of, any Series E Preferred Stock or any
Warrant; and (iii) any Common Stock issued as a dividend on any Series E
Preferred Stock; excluding in all cases, however, any Registrable Securities
sold by a person in a transaction in which his rights under this Section 7 are
not assigned.
(c) The term "Holder" means any holder of
Registrable Securities who acquired such Registrable Securities in a
transaction or series of transactions not involving any public offering or any
sale pursuant to Rule 144 under the Act.
7.2. The Company hereby agrees that:
4
<PAGE> 5
(a) If at any time or from time to time, the
Company determines to register any of its securities, either for its own
account or the account of a security holder or holders, (other than a
registration solely to implement an employee benefit plan or a registration on
Form S-4 or a Rights Offering as such term is defined in the Certificate of
Designation), the Company will:
(i) promptly give to each Holder written
notice thereof (which will include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under the applicable blue
sky law or other state securities laws); and
(ii) include in such registration (and
any related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in any
written request or requests by any Holder received by the Company within twenty
days after such written notice is given and make its best efforts to qualify
all the Registrable Securities specified in such request under the blue sky or
other securities laws of any jurisdiction which said Holders may reasonably
request.
(b) If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company will so advise the Holders as a part of the written notice given
pursuant to Section 7.2(a)(i) above. In such event, the right of any Holder to
registration pursuant to this Section 7.2 will be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute Registrable Securities through such
underwriting (together with the Company and the other shareholders distributing
their securities through such underwriting) will enter into an underwriting
agreement in customary form, satisfactory to the Company, with the underwriter
or underwriters selected for such underwriting by the Company. Notwithstanding
any other provision of this Section 7.2, if the managing underwriter determines
in good faith that marketing factors require a limitation of the number of
shares to be underwritten for the accounts of Holders of Registrable Securities
and other securities of the Company entitled to registration pursuant to
agreements with the Company, the managing underwriter may limit the number of
Registrable Securities and other securities of the Company entitled to
registration pursuant to agreements with the Company to be included in the
registration. The Company will so advise all Holders of Registrable Securities
and all shareholders owning securities of the Company entitled to registration
pursuant to agreements with the Company and participating in such registration,
and the number of shares of Registrable Securities and such other securities
that may be included in the registration and underwriting will be allocated
among all Holders and other shareholders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities and such other
securities entitled to such registration held by such Holders and other
shareholders at the
5
<PAGE> 6
time of filing the registration statement. No Registrable Securities excluded
from the underwriting by reason of the underwriter's marketing limitation will
be included in such registration. If any Holder disapproves of the terms of
the underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. The Registrable Securities so withdrawn
will also be withdrawn from registration; provided, however, that, if by the
withdrawal of such Registrable Securities or any other securities entitled to
registration pursuant to agreements with the Company a greater number of
Registrable Securities held by Holders may be included in such registration (up
to the maximum of any limitation imposed by the managing underwriter) then the
Company will offer to all Holders and other shareholders who have included
Registrable Securities and such other securities in the registration the right
to include additional Registrable Securities or other securities in portion to
the amounts of their Registrable Securities and such other securities so
included.
(c) The Company shall cooperate and communicate
with all Holders wishing to participate in any registration pursuant to this
Section 7.2 so as to permit them a reasonable and effective opportunity to
participate, including providing prompt notice of any stop orders and copies of
all registration statements and prospectuses filed with the Securities and
Exchange Commission, including any amendments, and any such other materials and
information that is provided to other participating securities holders. The
Company will bear all expenses of any registration, including filing fees, blue
sky fees and expenses, accounting and legal fees and expenses, printing and
mailing costs and other similar expenses, but will not bear any expenses
(including fees of legal counsel) incurred by participating Holders and will
not bear any underwriting discount or concession or similar sale costs with
respect to Registrable Securities offered and sold by or for participating
Holders. The Company and the participating Holders will agree to indemnify
each other or to contribute to one another on reasonable and customary terms.
8. Selection of Shares to be Redeemed or Converted. If less than
all the Series E Preferred Stock is required to be redeemed or converted
pursuant to Subsections 5(a) or 6(a) of the Certificate of Designation, the
shares to be redeemed or converted shall be determined by written agreement of
the Purchasers or, if the Purchasers fail to tender a written agreement to the
Company prior to the time for redemption or conversion, the shares to be
redeemed or converted shall be determined as follows:
8.1. The first 100,000 shares of Series E Preferred Stock
redeemed pursuant to Subsection 5(a) of the Certificate of Designation shall be
redeemed from those shares purchased by Barker and any remaining shares
redeemed shall be redeemed ratably from the balance of the Series E Preferred
Stock purchased by each Purchaser after deducting therefrom any Series E
Preferred Stock tendered by the Purchaser to pay for Common Stock purchased in
a Rights Offering pursuant to Subsection 5(b) of the Certificate of
Designation.
6
<PAGE> 7
8.2. Any Series E Preferred Stock converted pursuant to
Subsection 6(a) of the Certification of Designation shall come ratably from the
Series E Preferred Stock purchased by each Purchaser after deducting therefrom
any Series E Preferred Stock tendered by the Purchaser to pay for Common Stock
purchased in a Rights Offering pursuant to Subsection 5(b) of the Certificate
of Designation.
8.3. Should either or both Purchasers transfer all or any
part of their Series E Preferred Stock, the shares transferred shall be treated
for purposes of the computations in this Section 8 as still owned by the
transferring Purchaser and a pro rata portion of any shares required to be
redeemed or converted from the shares originally purchased by the Purchaser
shall be converted or redeemed from those transferred. The Purchasers shall
notify each transferee of the restrictions in this Agreement and shall require
that each transferee notify any transferee from it of such restrictions.
9. Miscellaneous.
9.1. Remedies Not Exclusive. No remedy conferred by any
of the specific provisions of this Agreement is intended to be exclusive of any
other remedy, and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or otherwise. The election of any one or more
remedies by any party hereto shall not constitute a waiver of the right to
pursue other available remedies.
9.2. Parties Bound. Except to the extent otherwise
expressly provided herein, this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, representatives,
administrators, guardians, successors and assigns; and no other person shall
have any right, benefit or obligation hereunder.
9.3. Notices. All notices, reports records or other
communications that are required or permitted to be given to the parties under
this Agreement shall be sufficient in all respects if given in writing and
delivered in person, by telecopy, by overnight courier or by registered or
certified mail, postage prepaid, return receipt requested, to the receiving
party at the following address:
If to a Purchaser, to him at the most recent address furnished by him to the
Company;
If to the Company, to the Company's main office;
or to such other address as such party may have given to the other parties by
notice pursuant to this Section 9.3. Notice shall be deemed given on the date
of delivery, in the case of personal delivery or telecopy, or on the delivery
or refusal date, as specified on the return receipt, in the case of overnight
courier or registered or certified mail.
7
<PAGE> 8
9.4. Choice of Law. This Agreement shall be construed,
interpreted, and the rights of the parties determined in accordance with, the
laws of the State of Delaware, without giving effect to any conflicts of laws
principles.
9.5. Entire Agreement; Amendments and Waivers; Assignment.
This Agreement, together with all exhibits and schedules hereto, constitutes
the entire agreement between the parties pertaining to the subject matter
hereof and supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties. Except
as set forth herein, there are no warranties, representations or other
agreements between the parties in connection with the subject matter hereof.
No supplement, modification or waiver of this Agreement shall be binding unless
it shall be specifically designated to be a supplement, modification or wavier
of this Agreement and shall be executed in writing by each party to be bound
thereby. No wavier of any of the provisions of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any
of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided. In
the event of any permitted transfer of any Securities, any rights of the holder
thereof pursuant to Section 7 shall be transferred automatically. Except as
set forth in the preceding sentence and except as provided in Section 8 hereof,
this Agreement may not be assigned by operation of law or otherwise.
9.6. Further Assurances. From time to time hereafter and
without further consideration, each of the parties hereto shall execute and
deliver such additional or further instruments of conveyance, assignment and
transfer and take such actions as any of the other parties hereto may
reasonably request in order to more effectively consummate the transactions
contemplated by this Agreement or as shall be reasonably necessary or
appropriate in connection with the carrying out of the parties' respective
obligations hereunder or the purposes of this Agreement.
9.7. Multiple Counterparts. This Agreement may be
executed in or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
9.8. Headings. The headings of the several Sections
herein are inserted for convenience of reference only and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of November 13, 1996.
AMERICAN ECOLOGY CORPORATION
By: /s/ Jack L. Lemley
-----------------------------------
Jack K. Lemley
Chairman & CEO
/s/ Edward F. Heil
---------------------------------------
Edward F. Heil
/s/ Rotchford Barker
---------------------------------------
Rotchford Barker
9
<PAGE> 10
SCHEDULE 1
<TABLE>
<CAPTION>
Aggregate Purchase
Price of Series D
Number of Shares Preferred Stock
of Series D Number of Shares and Warrants
Purchaser Preferred Stock Warrants to be Purchased
- --------- --------------- -------- ---------------
<S> <C> <C> <C>
Rotchford Barker 200,000 2,000,000 $2,000,000
Edward F. Heil 100,000 1,000,000 $1,000,000
</TABLE>
10
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
EXHIBIT 99.6
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF SERIES E
REDEEMABLE CONVERTIBLE PREFERRED STOCK
OF
AMERICAN ECOLOGY CORPORATION
American Ecology Corporation, a corporation organized and existing
under the Delaware General Corporation Law, (the "Corporation") DOES HEREBY
CERTIFY:
That, effective October 31, 1996, pursuant to the authority conferred
upon the Board of Directors by the Amended and Restated Certificate of
Incorporation of the Corporation and pursuant to the provisions of Section
151(a) and other applicable provisions of the Delaware General Corporation Law,
the Board of Directors (or, as and to the extent authorized pursuant to
applicable law, a committee acting with the authority of the Board of
Directors) duly adopted, by all necessary action on the part of the
Corporation, the following resolution creating a series of 300,000 shares of
preferred stock designated as Series E Redeemable Convertible Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its Amended
and Restated Certificate of Incorporation, a series of preferred stock of the
Corporation be and it hereby is created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as follows:
Series E Redeemable Convertible Preferred Stock.
1. Designation. The series shall be designated as the "Series E
Redeemable Convertible Preferred Stock" (the "Series E Preferred Stock").
2. Number. The number of shares of the Series E Preferred Stock
authorized to be issued is 300,000.
3. Dividends.
1
<PAGE> 2
(a) The Corporation shall pay to the holders of the
Series E Preferred Stock, a mandatory quarterly dividend at an annual rate of
11.25% of the Stated Amount (as such term is defined in Section 4 below)
payable solely in the form of Common Stock of the Corporation, subject only to
the Corporation being able to lawfully pay such dividend in accordance with
applicable law. Dividends on the Series E Preferred Stock shall commence to
accrue and are cumulative (whether or not declared) from the date on which such
shares shall have been issued until the date on which such shares are redeemed,
converted or exchanged. Such dividends shall be mandatorily payable as stated
above, in Common Stock of the Corporation at its Current Market Price (as
defined below) on the date of payment, in equal quarterly payments in arrears
on the last day of each fiscal quarter of the Corporation of each year or such
earlier date on which a share of Series E Preferred Stock is redeemed,
converted or exchanged (each such date being referred to herein as a "Dividend
Payment Date"), commencing December 31, 1996, or if not paid on such Dividend
Payment Date by reason of a prohibition against such payment pursuant to the
first sentence of this Subsection (a) (a "Payment Prohibition"), then promptly
when and to the extent no such Payment Prohibition continues to apply;
provided, however, that the dividend payable in respect of the quarter ended on
the first dividend payment date after the date on which such shares shall have
been issued and in respect of any other quarter in which some or all of the
Series E Preferred Stock was not outstanding for the entire quarter shall be
reduced in proportion to the portion of such quarterly period in which such
shares were not outstanding; and provided further, however, that if and to the
extent that, at any dividend payment date, the Corporation shall fail to make
any quarterly dividend payment on the Series E Preferred Stock (which failure
shall only be permitted to the extent a Payment Prohibition applies), such
unpaid dividend amount shall accumulate without interest until paid. Such
dividends shall be paid to the Series E Preferred Stock stockholders of record
on the last business day immediately preceding the date of payment. All
partial dividends paid with respect to shares of the Series E Preferred Stock
shall be paid pro rata to the holders entitled thereto in proportion to the
total amount of dividends to which each is entitled. The "Current Market
Price" of the Corporation's Common Stock on any given day shall be: (i) if the
Common Stock is listed or admitted to unlisted trading privileges on any
exchange registered with the Securities and Exchange Commission as a "national
securities exchange" under the Securities Exchange Act of 1934 (a "National
Securities Exchange"), the arithmetic average of the last sales price of the
shares of Common Stock on the National Securities Exchange in or nearest the
City of New York on which the shares of Common Stock shall be listed or
admitted to unlisted trading privileges (or the quoted closing bid if there be
no sales on such National Securities Exchange) on the ten most recently
completed trading days prior to such day; or (ii) if the Common Stock is not so
listed or admitted, the arithmetic average of the closing sales price of a
share of Common Stock as quoted in The Nasdaq Stock Market on the ten most
recently completed trading days prior to the day in question; or (iii) if the
Common Stock is not
2
<PAGE> 3
so quoted, the arithmetic average of the mean between the high and low bid
prices of a share of Common Stock in the over-the-counter market on the ten
most recently completed trading days prior to the day in question as reported
by National Quotation Bureau Incorporated or a similar organization.
(b) So long as any shares of the Series E Preferred Stock are
outstanding, unless all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series E Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) pay or declare any dividends, or make any
other distributions, on any shares of stock ranking junior to the Series E
Preferred Stock in respect of dividends or distribution of assets upon any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary (a "Liquidation");
(ii) pay or declare any dividends, or make any
other distributions, on any shares of stock ranking on a parity to the Series E
Preferred Stock in respect of dividends or distribution of assets upon
Liquidation, except dividends paid ratably on the Series E Preferred Stock and
all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are
then entitled; or
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior to the Series E Preferred
Stock in respect of dividends or distribution of assets upon Liquidation,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for shares of any stock of
the Corporation raking junior to the Series E Preferred Stock in respect of
dividends or distribution of assets upon Liquidation.
Except as otherwise provided in this Subsection (b), the Board of
Directors may declare and the Corporation may pay or set apart for payment
dividends and other distributions on the common stock (the "Common Stock") and
the preferred stock (the "Preferred Stock") of the Corporation ranking junior
to or on a parity with the Series E Preferred Stock in respect of dividends or
distributions of assets upon Liquidation, and may redeem, purchase, retire or
otherwise acquire for consideration shares of Common Stock or Preferred Stock
ranking junior to or on a parity with the Series E Preferred Stock in respect
of dividends or distributions of assets upon Liquidation, and the holders of
the Series E Preferred Stock shall not be entitled to share therein.
(c) In the event the Corporation, not being in violation
of the provisions of the preceding paragraph, shall distribute to all holders
of its Common Stock (x) evidences of indebtedness or assets and property other
than cash, (y) capital stock of the Corporation other than Common Stock, or (z)
rights to purchase only (i)
3
<PAGE> 4
Common Stock (except in a Rights Offering as defined in Subsection 5(b) below)
or (ii) units consisting of shares of Common Stock and warrants to purchase
shares of Common Stock (all of such distributions collectively hereinafter
called "Shared Distributions"), then the holders of the Series E Preferred
Stock shall participate in such Shared Distributions as if immediately prior to
the record date for determination of stockholders entitled to receive such
Shared Distribution such holders had converted their shares of the Series E
Preferred Stock in to shares of Common Stock.
4. Liquidation Rights. In the event of the Liquidation of the
Corporation, the holders of the Series E Preferred Stock shall be entitled to
have paid to them out of the assets of the Corporation, before any distribution
is made to or set apart for the holders of Common Stock or of any other class
or series of stock of the Corporation ranking junior to the Series E Preferred
Stock in respect of distribution of assets upon Liquidation, an amount equal to
$10. 00 per share (the " Stated Amount"), plus unpaid dividends and Shared
Distributions which have accrued but have not been paid on or prior to the date
of final distribution to holders of the Series E Preferred Stock, and no more.
The liquidation payment with respect to each outstanding fractional share of
the Series E Preferred Stock shall be equal to a ratably proportionate amount
of the liquidation payment with respect to each outstanding share of the Series
E Preferred Stock.
If upon any Liquidation of the Corporation the assets of the
Corporation or proceeds thereof distributable among the holders of shares of
the Series E Preferred Stock and the holders of any stock on a parity with the
Series E Preferred Stock shall be insufficient to pay in full the preferential
amounts payable to such holders, then such assets or the proceeds thereof shall
be distributed among such holders ratably in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon
were paid in full.
For purposes of this Section 4, the voluntary sale, lease, exchange or
transfer (for cash, shares of stock, securities or other consideration) of all
or substantially all of the property or assets of the Corporation to, or a
consolidation or merger of the Corporation with, one or more corporations shall
not be deemed to be a Liquidation.
5. Redemption.
(a) Shares of the Series E Preferred Stock shall be redeemed by
the Corporation on the first business day (the "Redemption Date") following
the issuance of Common Stock in a Rights Offering (as defined in Subsection
5(b) below) from the proceeds of such Rights Offering at the Stated Amount of
such Series E Preferred Stock (in addition to the payment in Common Stock
pursuant to Subsection 1 (a) above of dividends to the Redemption Date on the
Series E Preferred Stock redeemed) to the extent that the purchase price of the
Common Stock sold in the
4
<PAGE> 5
Rights Offering plus the Stated Amount of the Series E Preferred outstanding on
the Redemption Date is in excess of $5,000,000. If less than all of the Series
E Preferred Stock outstanding is redeemed, the Series E Preferred Stock to be
redeemed shall be determined pursuant to the agreement for the initial purchase
of the Series E Preferred Stock. Except as provided in the Subsection 5(a),
the Series E Preferred Stock shall not be subject to redemption. Any Series E
Preferred Stock called for redemption pursuant to this Subsection 5(a) but not
tendered by the holder thereof for redemption shall be deemed cancelled and
shall no longer be treated as outstanding and no dividends or Shared
Distributions thereon or interest on the redemption price shall be paid in
regard to the period on or after the Redemption Date.
(b) The term "Rights Offering" shall refer to any
offering of rights to acquire the Corporation's Common Stock made after October
31, 1996 and prior to June 30, 1997. The Corporation shall not make a Rights
Offering without the consent of all the holders of the Series E Preferred Stock
except on the terms set forth in this Subsection 5(b). Any Rights Offering
shall be an offer, to all holders of record of the Corporation's Common Stock
on or about the second business day preceding the date the registration of the
Rights Offering is declared effective by the Securities and Exchange
Commission, to purchase one share of Common Stock for each share of Common
Stock held of record on such date at a purchase price of $1.00 per share
payable, within 30 days after the effective date of such Rights Offering,
either in cash or by tender of Series E Preferred Stock for exchange for such
Common Stock at the Stated Amount of such Series E Preferred Stock. Any Series
E Preferred Stock tendered in payment of the purchase price of Common Stock in
the Rights Offering at its Stated Amount shall be cancelled but dividends in
Common Stock shall be paid thereon pursuant to Section l(a) to the date of
exchange. Nothing herein or in any other document shall obligate the
Corporation to make any Rights Offering. Other than pursuant to a Rights
Offering or to options, warrants, or other rights outstanding prior to November
1, 1996, the Corporation shall not issue any shares of Common Stock in addition
to these outstanding on October 3 1, 1996 prior to July 1, 1997.
6. Conversion Rights.
(a) If there is a Rights Offering and less than 5,000,000
shares of Common Stock are sold pursuant to the Rights Offering, one share of
Series E Preferred Stock shall be converted into 10 shares of fully paid and
nonassessable Common Stock for each 10 shares or portion thereof of Common
Stock less than 5,000,000 sold in the Rights Offering. Such conversion shall
occur on the first business day (the "Mandatory Conversion Date") immediately
following the expiration of the Rights Offering. If less than all of the
Series E Preferred Stock is required to be converted, the Series E Preferred
Stock to be converted shall be determined pursuant to the agreement for the
initial purchase of the Series E Preferred Stock. Any Series E Preferred Stock
required to be converted pursuant to this Subsection 6(a) but not tendered for
conversion shall
5
<PAGE> 6
be deemed cancelled on the Mandatory Conversion Date and shall no longer be
treated as outstanding. Dividends accrued to the Mandatory Conversion Date
shall be paid pursuant to Subsection l(a) on the Series E Preferred Stock
converted but no dividends or Shared Distributions thereon shall be paid in
regard to the period on and after the Mandatory Conversion Date. For all
purposes the holders of record of the Series E Preferred Stock required to be
converted on the Mandatory Conversion Date shall be deemed to have become the
record holder or holders of the Common Stock in to which such Series E
Preferred Stock is convertible on the Mandatory Conversion Date.
(b) Subject to the provisions for adjustment hereinafter
set forth, shares of Series E Preferred Stock may be converted, at the option
of the holder thereof, at any time or from time to time after June 30, 1997
into fully paid and nonassessable whole shares of Common Stock at rate of 10
shares of Common Stock for each share of the Series D Preferred Stock duly
surrendered for conversion. Dividends accrued to the Date of Conversion (as
defined below), shall be paid pursuant to Subsection 1(a) on the Series E
Preferred Stock converted but no dividends or Shared Distributions with respect
to the shares of Series D Preferred Stock converted shall be paid in regard to
the period on and after the Date of Conversion.
(c) Each holder of the Series E Preferred Stock desiring to
exercise such holder's right of conversion pursuant to Subsection 6(b) shall
deliver written notice of election to convert, stating the names and addresses
of the persons to whom the Common Stock is to be issued, and shall surrender
the certificate or certificates for the shares of Series E Preferred Stock to
be converted, duly endorsed or accompanied by proper instruments of transfer
(unless such endorsement or instruments are waived by the Corporation) to the
Corporation during usual business hours at the office of the transfer agent of
the Corporation for the transfer of its Common Stock in Dallas, Texas (or such
other place as may be designated by the Corporation upon written notice to all
holders of the Series E Preferred Stock). Upon receipt by the Corporation of
any such notice of election to convert shares of the Series E Preferred Stock,
and upon surrender of the certificate or certificates therefor, the Corporation
shall execute and deliver, as soon as practicable, to the converting holder, or
to such holder's nominee or nominees, a certificate or certificates for the
number of shares of Common Stock resulting from such conversion, together with
any cash adjustment in lieu of fractional shares as provided in Subsection (e).
For all purposes, the rights of a converting holder, as such, shall cease, and
the person or persons in whose name or names the certificate or certificates
for Common Stock issuable upon such conversion are to be issued shall be deemed
to have become the record holder or holders of such Common Stock at the close
of business on the day (the "Date of Conversion") on which delivery of such
notice or the surrender of the certificate or certificates for such shares
(whichever shall later occur) shall be made.
6
<PAGE> 7
(d) The Corporation shall pay all issue costs, if any,
incurred in respect to the Common Stock delivered on conversion; provided,
however, that the Corporation shall not be required to pay transfer or other
taxes, if any, incurred by reason of the issuance or delivery of such Common
Stock in names other than those in which the shares surrendered for conversion
are registered, and no delivery of certificates for such Common Stock shall be
made unless and until there has been paid to the Corporation the amount of any
such taxes, or there shall have been established to the satisfaction of the
Corporation that such taxes have been or are not required to be paid. The
Corporation shall not close its books against the transfer of Series E
Preferred Stock or of Common Stock issued or issuable upon conversion of Series
E Preferred Stock in any manner which interferes with the timely conversion of
Series E Preferred Stock. The Corporation shall assist and cooperate with any
holder of shares of Series E Preferred Stock required to make any required
governmental filings or obtain any governmental approval prior to or in
connection with any conversion of such shares hereunder (including, without
limitation, making any filings required to be made by the Corporation). All
shares of Common Stock which are so issuable shall, when issued, be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges. The Corporation shall take all such actions as may be necessary to
assure that all such shares of Common Stock may be so issued without violation
of any applicable law or governmental regulation or any requirements of any
domestic securities exchange upon which shares of Common Stock may be listed
(except for official notice of issuance which shall be immediately delivered by
the Corporation upon each such issuance).
(e) The Corporation shall not be required to issue
fractional shares of Common Stock upon conversion of shares of the Series E
Preferred Stock. If more than one share of the Series E Preferred Stock shall
be surrendered for conversion at one time by the same holder, the number of
full shares of Common Stock issuable upon conversion thereof shall be computed
on the basis of the aggregate number of shares so surrendered. If any
fractional interest in a share of Common Stock would be deliverable upon the
conversion of any shares, the Corporation shall, in lieu of delivering such
fractional share, make a cash payment, as an adjustment in respect of such
undelivered fraction of a share, in an amount equal to the same fraction of the
Current Market Price of one share of the Common Stock on the last business day
before the Date of Conversion.
(f) The number of shares of Common Stock into which each
share of the Series E Preferred Stock is convertible (the "Conversion Rate")
shall be subject to adjustment from time to time as follows:
(i) In case the Corporation shall (A) pay a
dividend in or make a distribution of Common Stock on outstanding Common Stock,
(B) subdivide outstanding Common Stock into a larger number of shares of Common
Stock by
7
<PAGE> 8
reclassification or otherwise, or (C) combine outstanding Common Stock into a
smaller number of shares of Common Stock by reclassification or otherwise, the
Conversion Rate in effect immediately prior thereto shall be adjusted
proportionately so that the holder of a share of the Series E Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number
of shares of Common Stock that such holder would have owned after the happening
of any of the events described above had such share been converted immediately
prior to the happening of such event. An adjustment made pursuant to this
subparagraph (i) shall become effective retroactively to immediately after the
record date in the case of a share dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision or
combination.
(ii) In case of any capital reorganization or
reclassification of the shares of Common Stock (except as provided in
subparagraph (i) above), or in case of any consolidation or merger to which the
Corporation is a party (other than a merger in which the Corporation is the
surviving corporation and which does not result in any capital reorganization
or reclassification of Common Stock), or in case of any sale or conveyance to
another corporation of all or substantially all of the property and assets of
the Corporation, and if, in connection with any such consolidation, merger,
sale or conveyance, shares or other securities or property shall be issuable or
deliverable in exchange for shares of Common Stock, provision shall be made as
part of the terms of such capital reorganization or reclassification,
consolidation, merger, sale or conveyance that the holder of each share of the
Series E Preferred Stock thereafter surrendered for conversion shall have the
right to convert such share into the same kind and amount of stock and other
securities and property as would have been receivable upon such capital
reorganization or reclassification, consolidation, merger, sale or conveyance
by a holder of the number of shares of Common Stock into which such share might
have been converted immediately prior thereto. In any such case, appropriate
provision (as determined to be equitable in the business judgment of the Board
of Directors) shall be made for the application of Section 6 with respect to
the rights and interest thereafter of the holders of the Series E Preferred
Stock to the end that such Section (including adjustments of the Conversion
Rate) shall be reflected thereafter, as nearly as reasonably practicable, in
all subsequent conversions of the Series E Preferred Stock. The Corporation
shall not effect any such consolidation, merger or sale, unless prior to the
consummation thereof, the successor corporation (if other than the Corporation)
resulting from consolidation or merger or the corporation purchasing such
assets assumes by written instrument (in a manner determined to be equitable in
the business judgment of the Board of Directors to the holders of the Series E
Preferred Stock then outstanding), the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
8
<PAGE> 9
(iii) In case the Corporation shall issue, other
than pursuant to a Rights Offering, pro rata to the holders of shares of its
Common Stock rights or warrants entitling them, during a period not exceeding
30 days after the record date mentioned below, to subscribe for or purchase
only shares of its Common Stock at a price per share less than the average of
the Current Market Price (as defined above) of the Common Stock determined as
of such record date, the number of shares of its Common Stock into which each
share of the Series E Preferred Stock shall be convertible thereafter shall be
determined by multiplying the number of shares of Common Stock into which each
such share was convertible theretofore by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding immediately prior to
such record date plus the number of additional shares of Common Stock offered
for subscription or purchase, and of which the denominator shall be the number
of shares of Common Stock outstanding immediately prior to such record date
plus the number of shares of Common Stock which the aggregate offering price of
the total number of shares being offered would purchase at such Current Market
Price. Such adjustment shall be made whenever such rights or warrants are
issued and shall become retroactively effective immediately after the record
date for the determination of the stockholders entitled to receive such rights
or warrants. To the extent that shares of Common Stock are not delivered after
the expiration of such rights or warrants, the Conversion Rate shall be
readjusted to the Conversion Rate that would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made upon
the basis of delivery of only the number of shares of Common Stock actually
delivered.
(iv) In case the Corporation shall issue, other
than pursuant to a Rights Offering, pro rata to the holders of shares of its
Common Stock rights or warrants to subscribe for or purchase only (A) shares of
its Common Stock except as described in subparagraph (iii) above, or (B) units
consisting of shares of Common Stock and warrants to purchase shares of Common
Stock, the number of shares of its Common Stock into which each share of the
Series E Preferred Stock shall be convertible thereafter shall be determined by
multiplying the number of shares of Common Stock into which each such share was
convertible theretofore by a fraction, of which the numerator shall be the
Current Market Price for a share of Common Stock determined as of the record
date mentioned below, and of which the denominator shall be such Current Market
Price less the fair market value (as determined in the business judgment of the
Board of Directors) as of such record date of the rights or warrants
distributed pro rata to one of the outstanding shares of Common Stock. Such
adjustment shall be made whenever such distribution is made and shall become
retroactively effective immediately after the record date for the determination
of stockholders entitled to receive such rights or warrants.
(v) In case the Corporation shall issue or sell
any shares (including treasury shares) of Common Stock ("Additional Shares of
Common Stock"),
9
<PAGE> 10
whether or not subsequently reacquired or retired by the Corporation, other
than shares of Common Stock issued (A) upon exercise of warrants to purchase
shares of Common Stock issued prior to or substantially simultaneously with the
first issuance of shares of the Series E Preferred Stock, (B) pursuant to any
stock option plan or other stock incentive or stock ownership plan for
employees or management of the Corporation, (C) pursuant to a Rights Offering,
or (D) in payment of dividends on the Series E Preferred Stock, for a cash
purchase price per share that is less than the quotient of $10.00 divided by
the number of shares of Common Stock into which each share of Series E
Preferred Stock was theretofore convertible (such quotient, the "Conversion
Price"), the number of shares of Common Stock into which each share of the
Series E Preferred Stock shall be convertible thereafter shall be determined by
multiplying the number of shares of Common Stock into which each such share was
convertible theretofore by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding immediately after such issuance or
sale, and of which the denominator shall be the number of shares of Common
Stock outstanding immediately prior to such issuance or sale plus the number of
shares of Common Stock that the aggregate consideration received by the
Corporation for such Additional Shares of Common Stock so issued or sold would
purchase at the Conversion Price. Such adjustment shall be made whenever any
such Additional Shares of Common Stock are so issued or sold.
The foregoing provisions for adjustment of the Conversion Rate shall
apply in each successive instance in which an adjustment is required thereby.
No adjustment in the Conversion Rate resulting from the application of the
foregoing provisions is to be given effect unless, by making such adjustment,
the Conversion Rate in effect immediately prior to such adjustment would be
changed thereby by 1% or more, but any adjustment that would change the
Conversion Rate by less than 1% is to be carried forward and given effect in
making future adjustments; provided, however, that each adjustment of the
conversion Rate shall in all events be made not later than three years from the
date such adjustment would have been required to be made except for the
provisions of this sentence. All calculations under this Section 6 shall be
made to the nearest one-hundredth (1/100th) of a share. Shares of Common Stock
owned by or held for the account of the Corporation shall not be deemed to be
outstanding for the purposes of any computation made under this Section 6.
Whenever the number of shares of Common Stock deliverable upon the
conversion of shares of the Series E Preferred Stock shall be adjusted pursuant
to the provisions hereof, the Corporation shall forthwith file at its principal
office and with any transfer agent for the Series E Preferred Stock and for the
Common Stock a statement, signed by the President or one of the Vice-Presidents
of the Corporation and by its Treasurer or one of its Assistant Treasurers,
stating the adjusted number of shares of Common Stock deliverable per share of
the Series E Preferred Stock and setting forth in reasonable detail, the method
of calculation and the facts requiring such adjustment
10
<PAGE> 11
and upon which such calculation is based, and shall mail a notice of such
adjustment to each holder of record of the Series E Preferred Stock. Each
adjustment shall remain in effect until a subsequent adjustment hereunder is
required.
In the event:
(x) of the occurrence of any of the events referred to in
subparagraphs (i), (ii), (iii) and (iv) above; or
(y) of the Liquidation of the Corporation;
then the Corporation shall cause to be mailed to any transfer agent for the
Series E Preferred Stock and to the holders of record of the outstanding shares
of the Series E Preferred Stock at least 20 days prior to the applicable date
hereinafter specified, a notice describing the event and stating the effect, if
any, that such event will have upon the Conversion Rate, and (A) the date on
which a record is to be taken for the purpose of a distribution referred to in
subparagraphs (i), (iii) or (iv) above, or, if a record is not to be taken, the
date as of which the holders of Common Stock of record to be entitled to such
distribution are to be determined, or (B) the date on which any subdivision,
combination or other capital reorganization or reclassification or any
consolidation, merger, sale or conveyance referred to in subparagraphs (i) or
(ii) above or such Liquidation is expected to become effective.
The Corporation will at all times reserve and keep available for
issuance upon conversion of the Series E Preferred Stock the number of shares
of Common Stock that is equal to the number of shares of the Series E Preferred
Stock outstanding multiplied by the Conversion Rate; provided, however, that
nothing contained herein shall be construed to preclude the Corporation from
satisfying its obligations in respect of the conversion of the outstanding
shares of the Series E Preferred Stock by delivery of shares of Common Stock
that are held in the treasury of the Corporation. The Corporation covenants
that all shares of Common Stock that shall be issued upon conversion of the
shares of the Series E Preferred Stock will, upon issue, be fully paid and
nonassessable and not subject to any preemptive rights.
The shares of Common Stock issuable upon conversion of the shares of
the Series E Preferred Stock when the same shall be issued in accordance with
the terms of the Series E Preferred Stock are hereby declared to be and shall
be fully paid nonassessable shares of Common Stock and not liable to any calls
or assessments thereon, and the holders thereof shall not be liable for any
further payments in respect thereof.
"Common Stock" when used in Section 6 with reference to the Common
Stock into which the Series E Preferred Stock is convertible and when used in
Section 8 below, shall mean only Common Stock as authorized by the Restated
Certificate of
11
<PAGE> 12
Incorporation of the Corporation, as amended to the date hereof, and any shares
into which such Common Stock may thereafter have been changed, and, when
otherwise used in Section 6 and when used in Section 3, shall also include
shares of the Corporation of any other class or series, whether now or
hereafter authorized, that ranks or is entitled to participation, as to payment
of assets upon Liquidation and payment of dividends, substantially on a parity
with such Common Stock or other class of shares into which such Common Stock
may have been changed.
The Corporation will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 6
and in the taking of all such action as may be necessary or appropriate in
order to protect the conversion privilege of the holders of the Series E
Preferred Stock against dilution or other impairment. Without limiting the
generality of the foregoing, the Corporation (1) will not increase the par
value of any shares of stock receivable upon conversion of the Series E
Preferred Stock above the Conversion Price then in effect, and (2) will take
all such actions as may be necessary or appropriate in order that the
Corporation may validly and legally issue fully paid and nonassessable shares
of stock upon the conversion in full of all Series E Preferred Stock from time
to time outstanding.
7. Voting Rights. Except as otherwise required by applicable
law, the holders of the Series E Preferred Stock shall have no voting rights or
powers.
8. Ranking. The Series E Preferred Stock shall rank senior to
the Common Stock (as defined in Section 6) and to all other series of the
Corporation's preferred stock as to the payment of dividends and Shared
Distributions, and as to the distribution of the Corporation's assets, unless
the terms and designations of any such series of preferred stock shall provide
otherwise, provided, however, that in no event shall the Series E Preferred
Stock rank junior to any other class or series of the Corporation's capital
stock.
9. Other Rights. The holders of the Series E Preferred Stock
shall not have any other preferences or special rights.
10. Registration of Transfer. The Corporation shall keep at its
principal office a register for the registration of Series E Preferred Stock.
Upon the surrender of any certificate representing Series E Preferred Stock at
such place, the Corporation shall, at the request of the record holder of such
certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefor representing in the aggregate
the number of shares of Series E Preferred Stock
12
<PAGE> 13
represented by the surrendered certificate. Each such new certificate shall be
registered in such name (upon satisfactory compliance with all applicable
securities laws) and shall represent such number of Shares as is requested by
the holder of the surrendered certificate and shall be substantially identical
in form to the surrendered certificate, and dividends shall accrue on the
Series E Preferred Stock represented by such new certificate from the date to
which dividends have been fully paid on such Series E Preferred Stock
represented by the surrendered certificate.
11. Replacement. Upon receipt of evidence reasonably satisfactory
to the Corporation (an affidavit of the registered holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation
of any certificate evidencing shares of any class of Series E Preferred Stock,
and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Corporation (provided that the
holder's own agreement shall be satisfactory), or, in the case of any such
mutilation upon surrender of such certificate, the Corporation shall (at its
expense) execute and deliver in lieu of such certificate a new certificate of
like kind representing the number of shares of such class represented by such
lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on
the Series E Preferred Stock represented by such new certificate from the date
to which dividends have been fully paid on such lost, stolen, destroyed or
mutilated certificate.
12. Amendment and Waiver. Any amendment, modification or waiver
shall be binding or effective with respect to any provision of Sections 1 to 12
hereof with the prior written consent of all the holders of the Series E
Preferred Stock outstanding at the time such action is taken.
13
<PAGE> 14
IN WITNESS WHEREOF, the undersigned officers of the Corporation have
executed and subscribed this Certificate this _____ day of November, 1996.
AMERICAN ECOLOGY CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ATTEST:
- -----------------------------------
Name:
------------------------------
Title:
-----------------------------
14
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
EXHIBIT 99.7
Number: W
-------------------
NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY OTHER
SECURITIES STATUTE. NO SALE, TRANSFER OR OTHER DISPOSITION HEREOF OR THEREOF,
OR OF ANY INTEREST HEREIN OR THEREIN, MAY BE MADE OR SHALL BE RECOGNIZED UNLESS
IN THE OPINION OF COUNSEL TO OR REASONABLY SATISFACTORY TO THE COMPANY SUCH
TRANSACTION WOULD NOT VIOLATE OR REQUIRE REGISTRATION UNDER SUCH ACT OR OTHER
STATUTE.
WARRANT TO PURCHASE COMMON STOCK OF
AMERICAN ECOLOGY CORPORATION
THIS WARRANT CERTIFIES that, for value received, ___________________,
(the "Holder") is entitled to purchase from American Ecology Corporation, a
Delaware corporation (the "Company"), at a price of $1.50 per share, subject to
adjustment as provided in Section 4 hereof ("Purchase Price"), at any time after
June 30, 1997 up to and including June 30, 2003 (such period, the "Exercise
Period"), _________________ fully paid and non-assessable shares of the
Company's Common Stock, par value $.Ol per share ("Common Stock"), subject,
however, to the provisions and upon the terms and conditions hereinafter set
forth.
1. Exercise of Warrant. The rights represented by this Warrant
may be exercised by the holder hereof, at any time or from time to time during
the Exercise Period, on any day that is not a Saturday, Sunday or public
holiday under the laws of the State of Idaho (such day being hereinafter
referred to as a "Business Day"), for all or part of the number of shares of
Common Stock purchasable upon its exercise, by (i) delivery of a Subscription
Notice (in the form attached to this Warrant) of such holder's election to
exercise this Warrant, specifying the number of shares of Common Stock to be
purchased, (ii) payment of the Purchase Price for such shares by certified
check or bank draft payable to the order of the Company and (iii) surrender of
this Warrant (properly endorsed if required) at the Company's principal office
or such other office or agency of the Company as the Company may designate by
notice in writing to the holder hereof.
1
<PAGE> 2
In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of Common Stock so purchased shall be
delivered to the holder hereof as soon as reasonably practicable, but in any
event within twenty-one days, after the rights represented by this Warrant
shall have been so exercised, and unless this Warrant has expired, a new
Warrant representing the number of shares of Common Stock, if any, with respect
to which this Warrant shall not then have been exercised shall also be issued
to the holder hereof within such time. Each person in whose name any such
certificate for shares of Common Stock is issued shall for all purposes be
deemed to have become the holder of record of the Common Stock represented
hereby on the date on which this Warrant was surrendered and payment of the
Purchase Price was made, irrespective of the date of issue or delivery of such
certificate.
2. Transfer. The Company will maintain books for the
registration and transfer of the Warrants, and any such transfer will be
registrable thereon upon surrender of the transferred Warrant to the Company's
main office, together with a duly executed assignment thereof and funds
sufficient to pay any required stock transfer taxes. Upon such surrender and
payment, the Company shall, subject to Section 9, execute and deliver a new
Warrant or Warrants in the name of the assignees and in the number of shares of
Common Stock specified in the assignment and this Warrant shall promptly be
cancelled.
3. Certain Covenants of the Company. The Company covenants and
agrees that all shares of Common Stock that may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be fully paid and
non-assessable and free from all taxes, liens, charges and security interests
with respect to the issue thereof. The Company further covenants and agrees
that during the period within which the rights represented by the Warrant may
be exercised, the Company will at all times have authorized, and reserved free
of preemptive or other rights for the exclusive purpose of issue upon exercise
of the rights evidenced by this Warrant, a sufficient number of shares of its
Common Stock to provide for the exercise of the rights represented by this
Warrant. The Company shall take all such actions as may be necessary to assure
that all such shares of Common Stock may be issued upon the exercise of the
rights represented by this Warrant without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Common Stock may be listed (except for official notice of
issuance which shall be immediately delivered by the Company upon each such
issuance).
4. Adjustment of Purchase Price and Number of Shares.
The number of shares of Common Stock with respect to which this Warrant is
exercisable (the "Exercise Rate") shall be subject to adjustment from time to
time as follows:
2
<PAGE> 3
a. In case the Company shall (x) pay a dividend in or
make a distribution of Common Stock on outstanding Common Stock, (y) subdivide
outstanding Common Stock into a larger number of shares of Common Stock by
reclassification or otherwise, or (z) combine outstanding Common Stock into a
smaller number of shares of Common Stock by reclassification or otherwise, the
Exercise Rate in effect immediately prior thereto shall be adjusted
proportionately so that the holder of this Warrant thereafter exercised shall
be entitled to receive the number of shares of the Common Stock that such
holder would have owned after the happening of any of the events described
above had such warrant been exercised immediately prior to the happening of
such event. An adjustment made pursuant to this subparagraph (a) shall become
effective retroactively to immediately after the record date in the case of a
share dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination.
b. In case of any capital reorganization or
reclassification of the shares of Common Stock (except as provided in
subparagraph (a) above), or in case of any consolidation or merger to which the
Company is a party (other than a merger in which the Company is the surviving
corporation and which does not result in any capital reorganization or
reclassification of Common Stock), or in case of any sale or conveyance to
another corporation of all or substantially all of the property and assets of
the Company, and if, in connection with any such consolidation, merger, sale or
conveyance, shares or other securities or property shall be issuable or
deliverable in exchange for shares of Common Stock, provision shall be made as
part of the terms of such capital reorganization or reclassification,
consolidation, merger, sale or conveyance that the holder of this Warrant
thereafter exercised shall have the right upon such exercise to receive the
same kind and amount of stock and other securities and property as would have
been receivable upon such capital reorganization or reclassification,
consolidation, merger, sale or conveyance by a holder of the number shares of
Common Stock with respect to which such Warrant might have been exercised
immediately prior thereto. In any such case, appropriate provision (as
determined to be equitable in the business judgment of the Board of Directors)
shall be made for the application of Section 4 with respect to the rights and
interests thereafter of the holder of this Warrant to the end that such Section
(including adjustments of the Exercised Rate) shall be reflected thereafter, as
nearly as reasonably practicable, in all subsequent exercises of this Warrant.
The Company shall not effect any such consolidation, merger or sale, unless
prior to the consummation thereof, the successor corporation (if other than the
Company) resulting from consolidation or merger or the corporation purchasing
such assets assumes by written instrument (in a manner determined to be
equitable in the business judgment of the Board of Directors to the holder of
this Warrant), the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to acquire.
3
<PAGE> 4
c. In case the Company shall issue (other than pursuant
to a Rights Offering as defined in the Company's Certificate of Designation,
Preferences and Rights of Series E Redeemable Convertible Preferred Stock) pro
rata to the holders of shares of its Common Stock rights or warrants entitling
them, during a period not exceeding 30 days after the record date mentioned
below, to subscribe for or purchase only shares of its Common Stock at a price
per share less than the average of the Current Market Price (as defined in
Section 6) of the Common Stock for the 30 consecutive trading days commencing
45 days before such record date (the "Average Market Price"), the number of
shares of its Common Stock with respect to which this Warrant is exercisable
thereafter shall be determined by multiplying the number of shares of Common
Stock with respect to which this Warrant was exercisable theretofore by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to such record date plus the number of additional
shares of Common Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately prior to such record date plus the number of shares of Common Stock
which the aggregate offering pr ice of the total number of shares being offered
would purchase at such Average Market Price. Such adjustment shall be made
whenever such rights or warrants are issued and shall become retroactively
effective immediately after the record date for the determination of the
stockholders entitled to receive such rights or warrants. To the extent that
shares of Common Stock are not delivered after the expiration of such rights or
warrants, the Exercise Rate shall be readjusted to the Exercise Rate that would
then be in effect had the adjustments made upon the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares of
Common Stock actually delivered.
d. In case the Company shall issue (except pursuant to a
Rights Offering as defined in subparagraph (c) above) pro rata to the holders
of shares of its Common Stock rights or warrants to subscribe for or purchase
only (x) shares of its Common Stock except as described in subparagraph (c)
above, or (y) units consisting of shares of Common Stock and warrants to
purchase shares of Common Stock, the number of shares of its Common Stock with
respect to which this Warrant is exercisable thereafter shall be determined by
multiplying the number of shares of Common Stock with respect to which this
Warrant was exercisable theretofore by a fraction, of which the numerator shall
be the Average Market Price for a share of Common Stock determined as of the
record date mentioned below, and of which the denominator shall be such Average
Market Price less the fair market value (as determined in the business judgment
of the Board of Directors) as of such record date of the rights or warrants
distributed pro rata to one of the outstanding shares of Common Stock. Such
adjustment shall be made whenever such distribution is made and shall become
retroactively effective immediately after the record date for the determination
of stockholders entitled to receive such rights or warrants.
4
<PAGE> 5
The foregoing provisions for adjustment of the Exercise Rate shall
apply in each successive instance in which an adjustment is required thereby.
No adjustment in the Exercise Rate resulting from the application of the
foregoing provisions is to be given effect unless, by making such adjustment,
the Exercise Rate in effect immediately prior to such adjustment would be
changed thereby by 1% or more, but any adjustment that would change the
Exercise Rate by less than 1% is to be carried forward and given effect in
making future adjustments; provided, however, that each adjustment of the
Exercise Rate shall in all events be made no later than three years from the
date such adjustment would have been required to be made except for the
provisions of this sentence. All calculations under this Section 4 shall be
made to the nearest one-hundredth (1/100th) of a share. Shares of Common Stock
owned by or held for the account of the Company shall not be deemed to be
outstanding for the purposes of any computation made under this Section 4.
Whenever the number of shares of Common Stock deliverable upon the
exercise of this Warrant shall be adjusted pursuant to the provisions hereof,
the Company shall forthwith file at its principal office and with any transfer
agent for the Common Stock a statement, signed by the President or one of the
Vice-Presidents of the Company and by its Treasurer or one of its Assistant
Treasurers, stating the adjusted number of shares of Common Stock deliverable
with respect to this Warrant and setting forth in reasonable detail the method
of calculation and the facts requiring such adjustment and upon which such
calculation is based, and shall mail a notice of such adjustment to the holder
of record of this Warrant. Each adjustment shall remain in effect until a
subsequent adjustment hereunder is required.
In the event:
(x) of the occurrence of any of the events referred to in
subparagraphs (a), (b), (c) and (d) above; or
(y) of any liquidation, dissolution or winding up of the Company
(a "Liquidation");
then the Company shall cause to be mailed to the holder of record of this
Warrant at least 20 days prior to the applicable date hereinafter specified, a
notice describing the event and stating the effect, if any, that such event
will have upon the Exercise Rate, and (A) the date on which a record is to be
taken for the purpose of a distribution referred to in subparagraphs (a), (c)
or (d) above, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such distribution are to be
determined, or (B) the date on which any subdivision, combination or other
capital reorganization or reclassification or any consolidation, merger, sale
or conveyance referred to in subparagraphs (a) or (b) above or such Liquidation
is expected to become effective.
5
<PAGE> 6
The Company will at all times during the Exercise Period reserve and
keep available for issuance upon exercise of this Warrant the number of shares
of Common Stock that is equal to the Exercise Rate; provided, however, that
nothing contained herein shall be construed to preclude the Company from
satisfying its obligations in respect of the exercise of this Warrant by
delivery of shares of Common Stock that are held in the treasury of the
Company. The Company covenants that all shares of Common Stock that shall be
issued upon exercise of this Warrant will, upon issue, be fully paid and
nonassessable and not subject to any preemptive rights.
The shares of Common Stock issuable upon exercise of this Warrant when
the same shall be issued in accordance with the terms hereof are hereby
declared to be and shall be fully paid nonassessable shares of Common Stock and
not liable to any calls or assessments thereon, and the holders thereof shall
not be liable for any further payments in respect thereof.
"Common Stock" when used in Section 4 with reference to the Common
Stock with respect to which this Warrant is exercisable, shall mean only Common
Stock as authorized by the Restated Certificate of Incorporation of the
Company, as amended to the date hereof, and any shares into which such Common
Stock may thereafter have been changed, and, when otherwise used in Section 4,
shall also include shares of the Company of any other class or series, whether
now or hereafter authorized, that ranks or is entitled to participation, as to
payment of assets upon Liquidation and payment of dividends, substantially on a
parity with such Common Stock or other class of shares into which such Common
Stock may have been changed.
The Company will not, by amendment of its Certificate of Incorporation
or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 4 and in
the taking of all such action as may be necessary or appropriate in order to
protect the conversion privilege of the holders of this Warrant against
dilution or other impairment. Without limiting the generality of the
foregoing, the Company (1) will not increase the par value of any shares of
stock receivable upon exercise of this Warrant above the Purchase Price then in
effect, and (2) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of stock upon the exercise in full of this Warrant from
time to time outstanding.
5. Fractional Interests. The Company shall not be required to
issue fractional shares on the exercise of a Warrant. If any faction of a
share would be issuable on the exercise of a Warrant (or specified portion
thereof), the Company shall
6
<PAGE> 7
pay an amount in cash equal to the Current Market Price per share of Common
Stock (as defined in Section 6) multiplied by such fraction.
6. Definition of Current Market Value. The "Current Market
Price" on any given day shall be: (i) if the Common Stock is listed or admitted
to unlisted trading privileges on any exchange registered with the Securities
and Exchange Commission as a national securities exchange" under the Securities
Exchange Act of 1934 (a "National Securities Exchange"), the last sales price
of the shares of Common Stock on the National Securities Exchange in or nearest
the City of New York on which the shares of Common Stock shall be listed or
admitted to unlisted trading privileges (or the quoted closing bid if there be
no sales on such National Securities Exchange) on the most recently completed
trading day prior to such day; or (ii) if the Common Stock is not so listed or
admitted, the closing sales price of a share of Common Stock as quoted in The
Nasdaq Stock Market on the most recently completed trading day prior to the day
in question; or (iii) if the Common Stock is not so quoted, the mean between
the high and low bid prices of the shares of Common Stock in the
over-the-counter market on the most recently completed trading day prior to the
day in question as reported by National Quotation Bureau Incorporated or
similar organization.
7. Taking of Record; Stock and Warrant Transfer Books. In the
case of all dividends or other distributions by the Company to the holders of
its Common Stock with respect to which any provision of Section 4 refers to the
taking of a record of such holders, the Company will in each such case take
such a record and will take such record as of the close of business on a
Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise
or transfer of any Warrant.
8. Restrictions on Transferability. This Warrant was originally
issued in a transaction exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and neither this
Warrant nor any shares of Common Stock issuable upon the exercise hereof were
then registered under the Securities Act. Unless this Warrant or such shares
were subsequently registered under the Securities Act and sold by the holder
thereof in accordance with such registration, this Warrant or such shares, as
the case may be, may not be sold by the holder hereof or of such shares unless
this Warrant or such shares is or are subsequently registered under the
Securities Act or an exemption from such registration is available. The shares
of Common Stock issuable hereunder will bear an appropriate restrictive legend
as is required by the Securities Act or any state blue sky laws. The holder of
this Warrant, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section and represents to the Company that it is acquiring
the Warrant and the Common Stock issuable hereunder solely for its own account,
for the purpose of investment and not with a view to distributing or selling it
or any part thereof in violation of the Securities Act, but
7
<PAGE> 8
subject, nevertheless, to any requirement of law that the disposition of such
holder's property be at all times within its control.
9. Replacement. Upon receipt of evidence reasonably satisfactory
to the Company (an affidavit of the registered holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of this Warrant,
and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Company (provided that the holder's
own agreement shall be satisfactory), or, in the case of any such mutilation
upon surrender of this Warrant, the Company shall (at its expense) execute and
deliver in lieu of this Warrant a new warrant of like kind dated the date of
such lost, stolen, destroyed or mutilated Warrant.
10. Notice Generally. Any notice, demand or delivery pursuant to
the provisions hereof shall be sufficiently given or made if sent by first
class mail, postage prepaid, addressed to the holder of this Warrant or of the
Common Stock issued upon the exercise hereof at the holder's last known address
appearing on the books of the Company, or, except as herein otherwise expressly
provided, to the Company at its main office, Attention of the President, or
such other address as shall have been furnished to the party giving or making
such notice, demand or delivery.
11. Voting Rights, Dividends. This Warrant does not grant the
holder hereof any voting rights or other rights as a stockholder of the
Company. No dividends are payable or will accrue on this Warrant or the shares
purchasable hereunder until, and except to the extent that, this Warrant is
exercised.
12. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY THE
LAW OF THE STATE OF DELAWARE.
8
<PAGE> 9
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed this ______ day of November, 1996.
AMERICAN ECOLOGY CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
9
<PAGE> 10
SUBSCRIPTION NOTICE
(To be executed only upon exercise of Warrant)
_______________________________________, being the undersigned
registered owner of this Warrant irrevocably exercises this Warrant for and
purchases ______ shares of the Common Stock, par value $.Ol per share (the
"Common Stock"), of American Ecology Corporation, constituting all or part of
the shares of Common Stock purchasable with this Warrant, and herewith makes
payment therefor, all at the price and on the terms and conditions specified in
this Warrant and requests that certificates for the shares of Common Stock
hereby purchased (and any securities or other property issuable upon such
exercise) together with, if such certificates do not represent all the shares
of Common Stock purchasable with this Warrant, a new Warrant, identical to the
cancelled Warrant except with respect to the number of shares of Common Stock
evidenced thereby, for the remaining unsold shares of Common Stock, be issued
in the name of and delivered to the undersigned at the address set forth below.
Dated:
--------------------------- ---------------------------------------
Name of Warrant Holder
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
---------------------------------------
Street Address
---------------------------------------
City State Zip Code
10
