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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 13, 1998
Commission File Number 0-11688
AMERICAN ECOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-3889638
- ------------------------------------ ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
805 W. Idaho
Ste. 200
Boise, Idaho 83702-1779
- ------------------------------------------ ----------------------------------
(Address of principal executive offices) (Zip Code)
(208) 331-8400
----------------------------------------------------------
(Registrants telephone number, including area code)
Indicate by a check mark whether Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
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AMERICAN ECOLOGY CORPORATION FORM 8-K
SEC File Number 00-11688
Item 2. Acquisition or Disposition of Assets.
On November 13, 1998, American Ecology Corporation (the "Company") closed a
multi-part transaction with its bank, Chase Bank of Texas (the "Bank"),
eliminating substantially all of the Company's long-term debt and all of its
$41.9 million debt to the Bank. The essential terms of the transaction included:
(1) the payment of approximately $4.2 million of cash to the Bank; (2) the sale
and assignment of an interest in the Company's Ward Valley, California project
and related litigation against the U.S. Department of Interior; and (3) warrants
to purchase common stock of the Company equal to 10% of the number of common
shares outstanding. The maximum amount the Bank can earn from its interest in
the Ward Valley project or from the litigation (or a combination of both) is
$29.6 million, and is subject to reduction by as much as $1.0 million for
attorneys' fees incurred in respect of the litigation after November 13, 1998.
The Company will account for the transaction on its balance sheet by reducing
the capitalized asset for its Ward Valley project from $55.1 million to $17.3
million, which is the difference between the $41.9 million debt owed and $4.2
million cash payment, resulting in the removal of the Company's $41.9 million
bank debt from its balance sheet. Although there is no longer any debt owed the
Bank, other long-term debt and capital lease obligations totaling approximately
$1.0 million will remain on the Company's balance sheet. Previously, the Company
assigned with recourse a federal income tax refund claim to the Bank for a
$740,000 advance on its revolving line of credit. The Company has collateralized
the recourse contingency with real property located in Smith County, Texas and
is purchasing 25% of the refund claim from the Bank in reduction of the
contingency.
The transaction reduces the balance sheet from $99.9 million to approximately
$58 million. Incorporated below under Item 7(b) is an unaudited comparative pro
forma balance sheet as of November 13, 1998.
The Warrant replaces an earlier warrant granted to the Bank and permits the Bank
to purchase up to 1,349,843 shares of the Company's common stock at $1.50 per
share. The Warrant is effective immediately and, unless earlier exercised,
terminates June 30, 2010. The Warrant will be adjusted pursuant to anti-dilution
provisions if the Company issues common stock or other securities convertible or
exercisable for common stock at a price less than the equivalent of $1.50 per
share of common stock. If the Bank receives a total of $35.0 million from its
interest in the litigation and Ward Valley project, the cash payment made
November 13, 1998, and a partial exercise of the Warrant, the Bank will have
thirty days to exercise the unexercised part of the Warrant or it expires.
The Ward Valley Interest Agreement and Assignment ("WV Agreement") assigns the
Bank an 85% interest in the cash generated by two of the five rate-base
components set by California regulatory authorities and charged to generators of
waste to be disposed at the Company's licensed Ward Valley low-level radioactive
waste disposal site. The two components are an annual amortization of 1/20 of
capital investment in the project prior to November 13, 1998 and the return
factor specified by the Company in the license application. The Bank will not
share in the depreciation, interest reimbursement or annual operating cost
rate-base components. As stated in the Company's annual reports, the project has
been effectively stalled by the Clinton administration's refusal to convey the
land on which the project is to be sited to the state of California. California
and the Company are engaged in two lawsuits against the United States and the
U.S. Department of Interior. The Company is claiming damages in excess of $70.0
million and suing for an order that the land be conveyed to California. If the
Company recovers damages from the United States, the damages, reduced by up to
$1.0 million of attorneys' fees, will be paid to the Bank under the WV Agreement
until it has received from the litigation and the Ward Valley project a maximum
amount of $29.6 million.
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Copies of the Settlement Agreement, the WV Agreement and the Warrant are
attached hereto and incorporated herein as exhibits.
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information.
A compressed pro forma balance sheet including changes to both asset and
liability accounts is presented below and reflects the Company's accounting for
the reported transactions.
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED AND COMPRESSED BALANCE SHEETS
(UNAUDITED)
($ IN 000'S EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Pro Forma Actual Actual
November 13, September 30, December 31,
1998 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Total current assets $ 11,541 $ 10,141 $ 9,912
Cash and investment securities, pledged 6,851 12,411 14,287
Deferred site development costs 25,229 63,016 58,890
Other assets 14,349 14,349 15,342
---------- ---------- ----------
Total assets $ 57,970 $ 99,917 $ 98,431
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Total current liabilities $ 24,963 $ 24,963 $ 26,842
Long term debt, excluding current portion 787 42,734 39,872
Deferred site maintenance, excluding current portion 18,081 18,081 18,337
Commitments and contingencies
Shareholders' equity:
Series D cumulative convertible preferred stock, $.01 par value,
105,264 authorized, 105,264 shares issued and outstanding 1 1 1
Series E redeemable convertible preferred stock, $10.00 par value,
300,000 authorized, 300,000 shares converted and retired -- -- 3,000
Common stock, $.01 par value, 25,000,000 authorized, 13,498,429
and 8,462,533 shares issued and outstanding, respectively 135 135 85
Additional paid-in capital 52,647 52,647 47,701
Unrealized gain (loss) on securities available-for-sale -- -- --
Retained earnings (deficit) (38,644) (38,644) (37,407)
---------- ---------- ----------
Total shareholders' equity 14,139 14,139 13,380
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $ 57,970 $ 99,917 $ 98,431
========== ========== ==========
</TABLE>
The reported transaction did not affect the Company's earnings or cash flow.
Other than normal and regular business activity since September 30, 1998 the
Statement of Operations and Cash Flows is the same as disclosed in the Company's
Form 10-Q for the period ending September 30, 1998.
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(c) Exhibits.
99.8 Settlement Agreement
99.9 Ward Valley Interest Agreement and Assignment
99.10 Warrant
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN ECOLOGY CORPORATION
(REGISTRANT)
Date: November 19, 1998 By: /s/ JACK K. LEMLEY
-------------------------------------
Jack K. Lemley
Chief Executive Officer
Date: November 19, 1998 By: /s/ R. S. THORN
-------------------------------------
R. S. Thorn
Vice President of Administration
Chief Accounting Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
99.8 Settlement Agreement
99.9 Ward Valley Interest Agreement and Assignment
99.10 Warrant
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SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
EXHIBIT 99.8
SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement") is made and entered into this
12th day of November, 1998 by and between American Ecology Corporation, a
Delaware corporation ("Company") and each of its subsidiary companies as
identified herein (all of which are, where the context so requires, referred to
as "Subsidiaries") and Chase Bank of Texas, National Association ("Bank"), a
national banking association with its principal place of business in Houston,
Texas (f/k/a Texas Commerce Bank, National Association).
RECITALS:
WHEREAS, effective as of October 31, 1996, the Company, each of the
Subsidiaries as Guarantors, and the Bank entered into that certain agreement
known as the "Third Amended And Restated Credit Agreement" (hereinafter referred
to as the "Third Amended Credit Agreement");
WHEREAS, on August 21, 1998 the Company executed and delivered to the
Bank the Demand Promissory Note ("Demand Note") in the principal amount of
$160,000.00;
WHEREAS, on August 14, 1998 the Company, the Subsidiaries and the Bank
agreed to settle all existing obligations of the Company and the Subsidiaries to
the Bank, terminating the Third Amended Credit Agreement, in accordance with the
terms, covenants and conditions contained herein;
WHEREAS, the parties wish to execute this Agreement for the purpose of
evidencing the terms, covenants and conditions of this Agreement.
NOW THEREFORE, in consideration of the covenants, conditions and other
provisions hereof, the parties agree as follows:
1. DEFINITIONS
1.1 Definitions. Unless the context in which a defined term is used
clearly requires otherwise, as used in this Agreement, the following terms shall
have the following meanings:
"Assignment Agreement" means that certain Assignment entered into as of
August 21, 1998 by and between the Company and the Bank, a copy of which is
attached hereto as EXHIBIT 6.
"Agreement" has the meaning specified in the introduction to this
Agreement.
"Bank" shall mean Chase Bank of Texas, National Association, a
subsidiary of Chase Manhattan Corporation.
"Business Trading Day" means any day (other than a day which is a
Saturday, Sunday or legal holiday) on which the NASDAQ Stock Market, Inc. is
open for trading in securities listed thereon.
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"Cash Management and Lock Box Agreement" means that certain Cash
Management and Lock Box Agreement between the Bank and the Company dated
December 22, 1992, governing the Company's account number 00100354902 at Chase.
"Company" means American Ecology Corporation, a Delaware corporation.
"Default" means the occurrence of any event which with the giving of
notice or the passage of time or both could become an Event of Default.
"Demand Note" has the meaning set forth in the Recitals of this
Agreement.
"Events of Default" has the meaning specified in Section 10.01 of the
Third Amended Credit Agreement.
"Fees" means all amounts payable pursuant to Section 4.01 of the Third
Amended Credit Agreement.
"Guaranteed Obligations" has the meaning specified in Section 9.01 of
the Third Amended Credit Agreement.
"Guarantors" means the Company's subsidiaries which guaranteed the
Company's Obligations under the Third Amended Credit Agreement.
"Guaranty" means the guaranty of the Guarantors contained in Article IX
of the Third Amended Credit Agreement and includes any additional Guaranty.
"Indebtedness" means, without duplication (a) all indebtedness of the
Company and its Subsidiaries to the Bank for borrowed money, accrued and unpaid
interest, and fees imposed by contract in respect of the borrowed money; (b) all
guaranties or other contingent obligations of any kind of the Company and its
Subsidiaries in respect of the Indebtedness referred to in clause (a), above;
and (c) all Indebtedness of the type referred to in clause (a) or (b) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise to be secured by) any Lien upon or interest in property
owned by the Company and its Subsidiaries, even though they have not assumed or
become liable for the payment of such Indebtedness
"Letter of Credit" has the meaning provided in Section 3.01 of the
Third Amended Credit Agreement.
"Letter of Credit Collateral" means cash, securities issued by or
directly and fully guaranteed by the United States, deposits in the Bank or
other securities, which secure the Company's obligation to the Bank in the event
a Letter of Credit is drawn upon by the beneficiary thereof.
"Letter of Credit Termination Date" means the date that a Letter of
Credit expires by its terms.
"Lien" means, when used with respect to the Company and its
Subsidiaries, any Mortgage, lien, charge, pledge, security interest or
encumbrance of any kind (whether voluntary or involuntary and whether imposed or
created by operation of law or otherwise) upon, or pledge of, any of its
property or assets, whether now owned or hereafter acquired, or any lease
intended as security, any Capital Lease in the nature of the foregoing, any
conditional sale agreement or other title retention agreement, in each case,
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for the purpose, or having the effect, of protecting the Bank against loss and
of securing the payment or performance of the Obligations under the Third
Amended Credit Agreement.
"Loans" has the meaning provided in Section 2.03 of the Third Amended
Credit Agreement.
"Loan Documents" means the Third Amended Credit Agreement (including
the Guaranty), the Notes, the Letter of Credit, the Security Agreements, the
Pledge Agreements, the Mortgage and all other security documents granting Liens
in the Company's property, equipment, fixtures, cash and intangible assets,
including, without limitation, the Letter of Credit Collateral and all
amendments, waivers, agreements and other documents modifying, amending or
supplementing the Loan Documents and, to the extent the context requires, the
Original Agreement, the Prior Agreements and related documents.
"Material Adverse Effect" means, relative to any occurrence of whatever
nature (including any adverse determination in any litigation, arbitration or
governmental investigation or proceeding), (a) a material adverse effect on the
financial condition, business or operations of the Company and its Subsidiaries
taken as a whole; or (b) an event which materially impairs the ability of the
Company to perform its obligations hereunder or under the Notes or the right of
the Bank to enforce any of its remedies to collect any amounts owing under the
Loan Documents.
"Mortgage" means any Mortgage or Deed of Trust executed in connection
with the Third Amended Credit Agreement, or supplement to a prior Mortgage and
deed of trust executed by the Company or any of its Subsidiaries and granting a
Lien by the Company for the benefit of the Bank on certain real property owned
by the Company or any of its Subsidiaries as security for the Obligations.
"Notes" means the Revolving Credit Note, the Term Note and the Demand
Note.
"Obligations" means all the obligations of the Company and its
Subsidiaries under the Loan Documents, the Original Agreement, or the Prior
Agreements or any documents executed in connection therewith, whether for
principal, unpaid drawings on Letters of Credit, interest, fees, expenses,
indemnification or otherwise.
"Original Agreement" has the meaning set forth in the Recitals of the
Third Amended Credit Agreement.
"Pledge Agreements" mean those certain Amended and Restated Pledge
Agreements dated October 31, 1996 executed by the Company, American Ecology
Services Corporation and US Ecology, Inc., respectively, as security for the
Obligations, pledging to the Bank the stock owned by each of the three
above-referenced corporations, issued by their respective Subsidiaries
(including ALEX).
"Prior Agreements" has the meaning set forth in the Recitals of the
Third Amended Credit Agreement.
"Release Agreement" means the respective Release Agreements attached
hereto as EXHIBIT 3a AND 3b.
"Revolving Credit Note" has the meaning set forth in Section 2.05(a) of
the Third Amended Credit Agreement.
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"Security Agreements" mean those certain supplemental Security
Agreements dated as of the date hereof, executed by the Company and the
Guarantors, respectively, in favor of the Bank, pledging to the Bank a security
interest in all of the personal property and assets of each of the Loan Parties
as described therein and all proceeds thereof as security for the Obligations.
"Subrogation Agreement" means that certain Subrogation and Contribution
Agreement among the Company and the Guarantors entered into in connection with
the Third Amended Credit Agreement.
"Subsidiary" means and includes, the following corporations, more than
50% of whose stock voting control of which is owned directly or indirectly by
the Company: American Ecology Environmental Services Corporation; American
Ecology International, Inc.; American Ecology Management Corporation; American
Ecology Recycle Center, Inc.; American Ecology Services Corporation; American
Liability and Excess Insurance Company ("ALEX"); Texas Ecologists, Inc.;
Transtec Environmental, Inc.; US Ecology, Inc.; WPI Transportation, Inc.; and
WPI Waste Carriers, Inc.; Collectively in this Agreement, the Company's
subsidiaries are referred to as "Subsidiaries".
"Term Note" has the meaning set forth in Section 2.05(b) of the Third
Amended Credit Agreement.
"Third Amended Credit Agreement" means that certain Third Amended and
Restated Credit Agreement executed December 31, 1996, but dated effective as of
October 31, 1996, by, between and among American Ecology Corporation and its
Subsidiaries and Texas Commerce Bank National Association, now known as Chase
Bank of Texas, National Association, and includes the Schedules and Exhibits
thereto, and any and all subsequent written amendments, modifications, waivers,
releases, agreements and other documents modifying, amending or supplementing
the Third Amended Credit Agreement.
"Ward Valley Interest Agreement" means the Ward Valley Interest
Agreement attached hereto as EXHIBIT 2.
"Ward Valley Project" means the low-level radioactive waste disposal
facility to be constructed and operated by US Ecology, Inc., a Subsidiary of the
Company, in accordance with the license issued by the California Department of
Health Services and the leasehold interest of US Ecology which becomes effective
when the transfer to California from the U.S. Department of Interior of the land
located in Ward Valley, California takes place and includes, without limitation,
the Ward Valley Facility and the Ward Valley Site, as each are defined in the
Ward Valley Interest Agreement, and the interests conveyed to the Bank
thereunder.
"Warrant Agreement" means the Warrant Agreement attached hereto as
EXHIBIT 1.
"Warrant" has the meaning specified in the Warrant Agreement.
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2. PAYMENT OF LOANS
The Bank and the Company agreed on August 14, 1998 to the general terms
upon which the Company will settle its existing Obligations to the Bank, subject
to the Bank's acceptance of a business plan prepared by the Company and
detailing how it will survive for the next two (2) years. More specifically, the
Bank and the Company have agreed to the following:
2.1 Payment. At the closing, as provided in Section 5 hereof, the
Company shall pay, in readily available U.S. funds, the sum of $4,000,000.00 to
the Bank, or as directed in writing by the Bank. As of August 21, 1998 the
Demand Note has been funded by the Bank and the amount of such proceeds,
together with interest thereon, for the period of time they are outstanding,
shall be added to the $4,000,000.00 payment due at closing. The payment provided
for in this Section shall reduce the cumulative outstanding balance of the Notes
2.2 Ward Valley Project Interest. The Company's Subsidiary, US Ecology,
Inc., shall sell, assign and convey to the Bank an interest in and to the Ward
Valley Project to the maximum value of $29,600,000.00, which sum shall further
reduce the collective outstanding balance of the Notes. The $29,600,000.00 shall
be reduced by a maximum amount of $1,000,000.00 (50% of $2.0 million) of legal
fees and costs incurred by the Company and US Ecology in pursuing litigation
involving the Ward Valley Project, after November 13, 1998. The interest in the
Ward Valley Project shall be governed solely by the Ward Valley Interest
Agreement, attached hereto as EXHIBIT 2.
2.3 Warrants. In satisfaction of the remaining collective outstanding
balance of the Notes, the Company shall grant to the Bank a Warrant to purchase
up to 1,349,843 shares of the Company's common stock at any time beginning on
the date of closing up to and including June 30, 2010 at a price of $1.50 per
share provided that the Warrant shall expire and thereafter be of no force or
effect thirty (30) days from the date the Bank has received $35.0 million
resulting from the payments provided for herein and any partial exercise or sale
of the Warrant. The Warrant provided for in this Agreement replaces the October
31, 1996 Warrant, which is canceled. The Warrant shall be subject to the
anti-dilution provisions contained therein.
2.4 Mutual Releases. The Company and the Bank shall enter into release
agreements for the purpose of releasing each other and their respective
Subsidiaries and affiliates, officers, directors, employees and attorneys, from
all liability of any kind, whether existing, accrued or which might arise from
or be incurred in respect of the Third Amended Credit Agreement, the Loan
Documents, the Indebtedness of the Company to the Bank, and any action or
inaction taken by either party in regard to such documents and the underlying
transactions prior to the closing. The releases shall not extend to or operate
to excuse performance of any obligations undertaken in accordance with this
Agreement, the Warrant Agreement, the Ward Valley Interest Agreement, the
Assignment Agreement and Section 11.05(a) of the Third Amended Credit Agreement.
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2.5 Business Plan. The Company shall prepare and provide the Bank with
a 2-year forward looking business plan based on reasonable assumptions and
future projections of the Company's operating results and periodic capital
structure. The assumptions used and basis for financial projections shall be
described with sufficient clarity to enable the Bank to reach a reasonable
conclusion that the Company has a reasonable plan and chance to survive for the
period covered by the business plan and to accept the plan. The Bank agrees it
will not arbitrarily or capriciously reject the plan and that it will specify in
writing the part or parts of the plan which caused the Bank to conclude the
Company cannot survive for the period covered by the plan. Thereafter, the
Company may submit additional or clarifying information to the Bank in order for
the Bank to reconsider its decision and accept the plan. If the Bank, upon
reconsideration, fails or refuses to accept the plan, then all of the
obligations of the Company and the Bank undertaken by this Agreement, and all
exhibits hereto, including, without limitation, the Release Agreement, shall no
longer be binding .
2.6 Release of Liens. The Bank shall, at the Company's expense, prepare
such documentation as may be necessary or convenient to release all Liens and
encumbrances held by the Bank with regard to the Company's property, equipment,
fixtures, cash, furnishings and intangible property; it being the intent of the
parties that upon consummation of the transactions provided for herein, the Bank
shall have no Lien, encumbrance or other interest of any kind in any of the
property of the Company or its Subsidiaries, except as is provided in EXHIBITS 1
AND 2 and Section 2.12 of this Agreement.
2.7 Extinguishment of Indebtedness. Upon the payment as provided for in
Section 2.1 hereof, the granting of an interest in the Ward Valley Project as
provided for in Section 2.2 hereof, and the granting of the Warrant as provided
for in Section 2.3 hereof, any and all Indebtedness of the Company and each of
its Subsidiaries shall be deemed to have been fully paid, discharged,
extinguished or forgiven, as the case may be, with the effect that the Bank
shall have no claim of any sort for money lent or interest thereon, against the
Company or any of its Subsidiaries, whether individually or collectively, except
as provided in Section 2.12 hereof.
2.8 Termination of Loan Documents. Upon the Company's performance of
its obligations under Sections 2.1, 2.2, 2.3, 2.4 and 2.5 hereof, the Loan
Documents, except the modified deed of trust provided for in Section 2.12 and
3.2 (d) hereof, shall be deemed fully performed and any and all Obligations of
the Company and its Subsidiaries, whether as Guarantors thereof or otherwise,
shall be fully performed and discharged. The Loan Documents shall be of no
further force or effect for any purpose whatever. At the closing, the Bank shall
return all collateral held by the Bank in securing the Indebtedness, including,
without limitation, all cash, securities (except as provided in Section 2.9
hereof), and the original stock certificates issued to the Company by the direct
and indirect Subsidiaries of the Company.
2.9 Letter of Credit. On or about October 31, 1998, the Bank issued for
the benefit of Zurich Insurance Company, its Letter of Credit No. I-474394 in
the face amount of $674,575.00 (the "Letter of Credit"). The Letter of Credit
expires October 31, 1999 and is secured by cash or other securities in the
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approximate amount of the face amount of the Letter of Credit. The Bank agrees
that it shall immediately wire transfer, at the direction of the Company, or
otherwise deliver to the Company or its designee, the cash or securities held as
the Letter of Credit Collateral, together with any earnings or interest thereon
when the original Letter of Credit is returned (or certified lost) to the Bank
by the beneficiary, accompanied by a letter from the beneficiary requesting its
cancellation, regardless of whether the closing has yet occurred.
2.10 Transition to New Bank. The Company and the Bank understand and
agree that one of the purposes of this Agreement is to terminate all
relationships between the Company, its Subsidiaries and the Bank, except the
continuing relationship provided for in EXHIBITS 1 AND 2 and Section 2.9 hereof.
The Company and the Bank understand and agree that the Company shall close all
of its accounts identified on EXHIBIT 5 attached hereto and incorporated herein
by reference, in an orderly manner; provided, however that the Bank and the
Company agree to maintain its lock box account in accordance with the Cash
Management and Lock Box Agreement, for a reasonable transition period of time so
that the Company may direct its customers to forward invoice payments to its new
bank. Upon completion of the transition period, the Cash Management and Lock Box
Agreement shall be terminated by the parties thereto. The Company and the Bank
agree to cooperate with one another and the Company's new bank during the
transition from the Bank to the Company's new bank. Except in the event of its
gross negligence or willful misconduct, the Bank shall not be liable for
operation of the Cash Management and Lock Box Agreement or other Company
accounts during the transition period.
2.11 Tax Reporting. Although the Company believes the total
consideration paid in accordance with this Agreement exceeds the total
outstanding balance of the Notes, and the Bank is uncertain as to the total
value, accordingly, the Bank may, if it so chooses, file a Form 1099-C report
with the Internal Revenue Service with the following language inserted:
"The total principal owed as of November 13, 1998 is $31,494,330.97. In
exchange for a release of liability for this debt , Chase Bank received
$4,163,682.19 in cash, warrants equal to 10.0% of American Ecology
Corporation's (`AEC') outstanding common stock, and an interest in
certain rights to receive payments from the Ward Valley, California
low-level radioactive waste disposal facility being developed by an AEC
subsidiary. AEC values the total consideration as exceeding the
principal amount of the debt discharged. Chase Bank is unable to
determine the value of the non-cash payments."
2.12 Assignment Agreement and Collateral. To provide reasonable
assurance to the Bank that it can honor its endorsement liability as provided in
the Assignment Agreement, the Company agrees to grant the Bank a security
interest in that certain real property of the Company located near Winona, Texas
and the Company shall repurchase twenty-five percent (25%) of the repurchase
obligation by paying the Bank $8,000 monthly for twenty-three months beginning
December 1, 1998 and ending October 1, 2000. Failure to make such payments shall
constitute a default hereunder and shall allow the Bank to take all
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remedies available to it at law or in equity. With the Bank's consent, which
shall not be unreasonably withheld, the Company may from time to time substitute
other collateral for that at the Winona, Texas location. The Company shall have
the right at any time to repurchase at face value the entire balance of the
interest assigned under the Assignment Agreement and not already repurchased as
provided for in this Section 2.12. Interest paid by the Internal Revenue Service
with respect to the income tax refund claim previously assigned to the Bank
under the Assignment Agreement shall be distributed to the Bank and the Company
in accordance with their respective ownership of the income tax refund claim at
the time the interest accrued to the claim.
3. CONDITIONS PRECEDENT
3.1 Conditions to Company's Obligations. The obligations of the Company
and its Subsidiaries under this Agreement are subject to the following
conditions:
(a) Satisfaction of Covenants. Prior to the closing, the Bank shall
have fully performed, satisfied and fulfilled each of the obligations
imposed upon the Bank pursuant to the terms of this Agreement;
(b) Approval of the Company's Directors. The Company and each of its
subsidiaries shall have obtained the approval of a majority of its
directors to enter into and perform this Agreement;
(c) Financing. The Company shall have obtained satisfactory financing
to perform its obligations pursuant to this Agreement;
(d) Default Waiver. The Bank shall have waived any Default or Event of
Default occurring between August 14, 1998 and the closing date, if not
previously waived, provided that such Default or Event of Default has
not caused or resulted in a Material Adverse Effect on the Company and
its Subsidiaries when taken together as a whole.
(e) Letter of Credit Collateral. The Bank shall have transferred, as
the Company so directed, the Letter of Credit collateral securing the
Letter of Credit referred to in Section 2.9 hereof.
(f) Business Plan. The Bank shall have accepted the Company's future
business plan, as provided in Section 2.5 hereof.
3.2 Conditions to Bank's Obligations. The obligations of the Bank under
this Agreement are subject to the following conditions:
(a) Satisfaction of Covenants. The Company and its
Subsidiaries shall have satisfied and fulfilled each of the obligations
imposed upon them pursuant to the terms of this Agreement.
(b) Business Plan. The Company shall have prepared and
provided to the Bank its future business plan which shall have been
accepted by the Bank, as described in Section 2.5 hereof.
(c) Intentionally Left Blank.
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(d) Deed of Trust Modification. The Company shall have
delivered to the Bank a modification of the deed of trust encumbering
the Company's Smith County, Texas real property, in accordance with
Section 2.12 hereof.
4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company. In order to induce
the Bank to enter into this Agreement and to perform its Obligations hereunder,
the Company, and each of its Subsidiaries to the extent applicable and relevant,
make the following Representations and Warranties to the Bank:
(a) Organization and Qualification. The Company and each of
its Subsidiaries is a corporation duly organized, validly existing
under the laws of the state of its incorporation, has the corporate
power and authority to own its property and to carry on its business as
now conducted. Each of the Company's directly owned Subsidiaries are
wholly owned subsidiaries and each indirect Subsidiary is wholly owned
by a direct Subsidiary of the Company.
(b) US Ecology License. US Ecology, Inc., a direct Subsidiary
of the Company, is the licensee of the State of California which status
affords it the sole right to develop and operate a low-level
radioactive waste disposal site at Ward Valley, California in
accordance with the Low Level Radioactive Waste Policy Act, as amended.
(c) Ward Valley Litigation. US Ecology is a plaintiff in two
pending court cases concerning the Ward Valley Project. The cases are
styled as: (i) US Ecology, Inc. v United States of America, United
States Court of Federal Claims, Case No. 97-65C; and (ii) US Ecology,
Inc. v U.S. Department of the Interior, et al, U.S. District Court,
District of Columbia, Case No. 1:97CV00365, each of which is more
particularly described on EXHIBIT 4 attached hereto and incorporated
herein.
(d) Authorization and Validity. The Company and each of its
Subsidiaries executing this Agreement have all requisite corporate
power and authority to execute, deliver this Agreement and to perform
their respective obligations hereunder, and under the Warrant, the Ward
Valley Interest Agreement, and the Release, and all such actions have
been duly authorized by all necessary proceedings. When it has been
duly executed and delivered by the Company and its Subsidiaries to the
Bank, this Agreement will constitute a valid and legally binding
agreement of the Company and its Subsidiaries enforceable in accordance
with its terms. The Warrant, the Ward Valley Interest Agreement, and
the Release will, upon the execution and delivery thereof, constitute
valid and legally binding obligations of the Company and its
Subsidiaries enforceable in accordance with the respective terms
thereof. The enforceability of this Agreement, the Warrant and the
Release may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws relating to or
affecting the enforcement of contract rights generally, and by general
principles of equity.
13
<PAGE> 10
(e) Governmental Consents. No authorization, consent,
approval, license or exemption of or filing or registration with any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is necessary for the valid
execution, delivery or performance by the Company or its Subsidiaries
of this Agreement, the Warrant, the Ward Valley Interest Agreement, and
the Release.
4.2 Representations and Warranties of the Bank. In order to induce the
Company to enter into this Agreement and to perform its Obligations hereunder,
the Bank makes the following representations and warranties to the Company and,
to the extent applicable and relevant, to the Company's Subsidiaries:
(a) Organization and Qualification. The Bank is a national
banking association duly organized, validly existing and in good
standing under the laws of the United States, has the corporate power
and authority to carry on its business as now conducted and is duly
qualified to enter into and perform the obligations undertaken by this
Agreement.
(b) Authorization and Validity. The Bank has all requisite
corporate power and authority to execute, deliver this Agreement and
perform its obligations under this Agreement, the Ward Valley Interest
Agreement and the Release, and all such action has been duly authorized
by all necessary proceedings on its part. When it has been duly
executed and delivered by the Bank to the Company, this Agreement will
constitute a valid and legally binding agreement of the Bank,
enforceable in accordance with its terms. The Ward Valley Interest
Agreement and the Release will, when duly executed and delivered,
constitute valid and legally binding agreements of the Bank,
enforceable in accordance with the respective terms thereof. The
enforceability of this Agreement and the Release may be limited by
insolvency, receivership, fraudulent transfer or other similar laws
relating to or affecting the enforcement of claims against a national
banking association.
(c) Governmental Consent. No authorization, consent, approval,
charter, memorandum of understanding or other agreement with any state
or federal bank regulatory authority or order of any court or
governmental agency or instrumentality is necessary for the valid
execution, delivery or performance by the Bank of this Agreement, the
Ward Valley Interest Agreement and the Release.
(d) Extinguishment of Debt. Upon the performance by the
Company and US Ecology of their respective obligations undertaken in
Section 2.1, 2.2, 2.3, 2.4 and 2.5 of this Agreement, (i) except as
provided in subsection (ii) below, all Indebtedness of the Company and
its Subsidiaries to the Bank under the Notes, the Third Amended Credit
Agreement, all Loan Documents, all Prior Agreements and any amendments,
modifications, restatements, waivers, extensions or other agreements
related thereto, shall be fully paid, performed and discharged; and
(ii) upon the full and complete performance of this Agreement by the
Bank and the Company and its Subsidiaries, no contractual obligations
exist between the Bank and the Company and its Subsidiaries, except
14
<PAGE> 11
those undertaken in accordance with the Warrant, the Ward Valley
Interest Agreement, the Releases (including the indemnity provisions in
favor of the Bank retained and referenced therein), the Assignment
Agreement, the Letter of Credit and related collateral provided for in
Section 2.9 hereof, the collateral documents provided for in Section
2.12 hereof, and those identified in Section 6.1 of this Agreement.
5. CLOSING
5.1 Date and Location. On or about November 13, 1998 a closing shall be
held at the offices of the Bank in Houston, Texas at such time as is convenient
for the Bank and the Company.
5.2 Extension. One time only, AEC shall have the right to unilaterally
extend the closing for a period not to exceed ten (10) days from November 13,
1998 upon letter notification to the Bank. Thereafter, any extension of the
closing date may only be made with the consent of both parties to this
Agreement. Any extension of the closing shall not serve to enlarge, modify or
amend the obligations of the parties under this Agreement, unless otherwise
provided in writing.
5.3 Company's Closing Obligations. At the closing, as provided for
above, the Company and its relevant Subsidiaries shall:
(a) pay to the Bank in U.S. Dollars the exact amount calculated in
accordance with Section 2.1 hereof;
(b) execute and deliver to the Bank the Warrant, attached hereto as
EXHIBIT 1;
(c) execute and deliver to the Bank the Ward Valley Interest Agreement,
attached hereto as EXHIBIT 2;
(d) execute and deliver to the Bank the Release Agreement, attached
hereto as EXHIBIT 3A; and
(e) provide the Bank with two (2) copies of its business plan.
5.4 Bank's Closing Obligations. At the closing, as provided for above,
the Bank shall:
(a) deliver each of the original signed Notes to the Company;
(b) execute and deliver releases suitable for recording or filing, as
the case may be, of (i) Deeds of Trust; (ii) security interests; (iii)
the Guaranty Agreements; (iv) the Pledge Agreements; and (v) all other
Liens of the Bank;
(c) deliver to the Company all original stock certificates held by the
Bank of the Company's Subsidiaries;
(d) deliver to the Company the original unexercised Warrant dated
October 31, 1996;
(e) execute and deliver to the Company the Ward Valley Interest
Agreement attached hereto as EXHIBIT 2;
(f) execute and deliver to the Company the Release Agreement attached
hereto as EXHIBIT 3b;
15
<PAGE> 12
(g) execute and deliver to the Company a release from the Subrogation
Agreement; and
(h) wire transfer, as directed by the Company and its subsidiary,
American Liability and Excess Insurance Company, the $1,000,000.00 held
by the Bank in account number 295259, which serves as security for the
performance bond underwritten by American Liability and Excess
Insurance Company in favor of the Central Interstate Compact
Commission.
6. MISCELLANEOUS
The following provisions are an integral part of this Agreement:
6.1 Survival of Terms. Sections 2.6, 2.7, 2.8, 2.9, 2.10, 2.11, 2.12,
4.1(d), 4.1(e), 4.2(b) and 4.2(d) hereof, and all documents executed in
accordance with this Agreement, including without limitation, the Warrant, the
Ward Valley Interest Agreement and the Releases, shall survive the execution and
delivery hereof or thereof and the closing, and shall remain in full force and
effect thereafter.
6.2 Assignment. This Agreement may be assigned by a party only with the
prior written approval of the other party, which approval may not be
unreasonably withheld. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors or assigns, if any.
6.3 Entire Agreement. This Agreement together with the exhibits
attached hereto, constitutes the entire agreement of the parties. There are no
binding promises, terms or conditions other than those contained herein. This
Agreement shall supersede all previous communications, representations or
agreements, whether oral or written, between the parties.
6.4 Titles. Section titles or captions to this Agreement are for
convenience only and do not define, limit, augment, extend or describe the
content or scope of intent of this Agreement and shall not be deemed to be a
part hereof.
6.5 Gender. Whenever the context hereof shall so require, the singular
shall include the plural, the male gender shall include the female and neuter
genders, and vice versa.
6.6 Notices. Any notice required or permitted by this Agreement to be
given by a party to the other shall be deemed served, given and received when
personally delivered to an officer of such party, or in lieu of such personal
service or delivery, when deposited in the U.S. mail, registered or certified
mail, postage pre-paid, return receipt requested, and received, or three days
from the date of such mailing, whichever is earlier, addressed as follows:
<TABLE>
<S> <C> <C>
Chase: Chase Bank of Texas, N.A. Telephone: (713) 216-5162
712 Main Street, 24TCB E-74 Facsimile: (713) 216-2092
Houston, Texas 77002
Attn.: Mr. Bruce A. Shilcutt
with a copy to: Thomas J. Perich, Esq. Telephone: (713) 220-4200
Andrews & Kurth L.L.P. Facsimile: (713) 220-4285
4200 Texas Commerce Tower
Houston, Texas 77002
</TABLE>
16
<PAGE> 13
<TABLE>
<S> <C> <C>
The Company American Ecology Corporation Telephone: (208) 331-8400
or any 805 West Idaho Street, Suite 200 Facsimile: (208) 331-7900
Subsidiary: Boise, Idaho 83702
Attn.: Joseph J. Nagel, President
with a copy to: Legal Department Telephone: (208) 331-8400
805 West Idaho Street, Suite 200 Facsimile: (208) 331-7990
Boise, Idaho 83702
</TABLE>
6.7 Counterparts. This Agreement may be executed in any number of
counterparts, and once so executed by all parties hereto each such counterpart
hereof shall be deemed to be an original instrument, but all such counterparts
together shall constitute but one Agreement.
6.8 Further Agreements. The parties to this Agreement shall execute and
deliver all documents, provide all information which is not confidential, take
or forebear from all such action as my be necessary, convenient or appropriate
to fully perform the intent of the transactions expressed by this Agreement.
6.9 Choice of Law. This Agreement shall be construed in accordance with
the laws of the State of New York, provided, in applying the laws of New York,
its conflict of law rules shall not be employed to apply the substantive or
procedural laws or equitable principles of any other state. Venue for any action
brought hereunder by either party shall lie exclusively in the federal district
courts for the Southern District of New York, or only in the event the diversity
or jurisdictional limits thereof are not met, in the courts of the State of New
York in the borough of Manhattan, City of New York.
6.10 Time of Essence. All times provided for in this Agreement, or in
any other document executed in accordance herewith, requiring the performance of
any act will be strictly construed, time being of the essence.
6.11 Attorneys' Fees. In the event it becomes necessary for either
party to commence any action or suit to enforce its rights pursuant to this
Agreement, the prevailing party in such litigation shall be entitled to an award
of reasonable attorneys' fees, including without limitation, fees and costs
allocable to in-house counsel, incurred in relation thereto.
6.12 Fees and Commissions. Each party agrees to pay and hold the other
party harmless from any commissions or fees of any nature, including, but not
limited to, attorneys' fees incurred in negotiation and preparation of this
Agreement, by any person or entity employed or allegedly employed by such party.
6.13 Severability. In the event that any part, provision,
representation, covenant, condition or warranty contained in this Agreement is
prohibited by law or is held to be void or unenforceable, such provision shall
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof.
6.14 Construction. Both the Bank and the Company have been represented
by counsel in the course of the negotiations for and the preparation of this
Agreement; accordingly, in all cases, the language
17
<PAGE> 14
of this Agreement will be construed simply, according to its fair meaning, and
not strictly for or against either party.
6.15 Modification and Waiver. The waiver, compromise, or cure of any
breach or default hereunder by either party hereto must be done in writing,
signed by the parties hereto, and shall not be considered a waiver of any other
similar or dissimilar breach or default. Any modification to any provision
herein contained or any amendment to this Agreement shall be effective only if
such modification or amendment is in writing and signed by each of the parties
hereto.
6.16 Laws and Regulations. This Agreement and all acts of the parties
conducted under or in connection with this Agreement, are subject to all valid
and applicable federal, state and local laws and ordinances and all applicable
rules, orders and regulations of any duly constituted federal, state or local
regulatory body or authority having jurisdiction, and all acts of the parties
shall be conducted in conformity therewith.
6.17 Authority. Each party executing this Agreement on behalf of his
respective association or corporation, as the case may be, represents and
warrants that he is duly authorized to execute and deliver this Agreement on
behalf of said association or corporation in accordance with a duly adopted
resolution of the board of directors of said association or corporation, or in
accordance with the authority granted him by the bylaws or governing documents
of said association or corporation, as the case may be, and that this Agreement
is binding upon such association or corporation and all its partners in
accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
COMPANY: AMERICAN ECOLOGY CORPORATION
By: /s/ Jack K. Lemley
----------------------------------------
Jack K. Lemley
Chief Executive Officer
SUBSIDIARIES: AMERICAN ECOLOGY ENVIRONMENTAL SERVICES
CORPORATION
AMERICAN ECOLOGY INTERNATIONAL, INC.
AMERICAN ECOLOGY MANAGEMENT CORPORATION
AMERICAN ECOLOGY RECYCLE CENTER, INC.
AMERICAN ECOLOGY SERVICES CORPORATION
AMERICAN LIABILITY AND EXCESS INSURANCE
COMPANY
18
<PAGE> 15
TEXAS ECOLOGISTS, INC.
TRANSTEC ENVIRONMENTAL, INC.
US ECOLOGY, INC.
WPI TRANSPORTATION, INC.
WPI WASTE CARRIERS, INC.
By: /s/ Jack K. Lemley
----------------------------------------
Jack K. Lemley
Chief Executive Officer
BANK: CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
By: /s/ Bruce A. Shilcutt
----------------------------------------
Bruce A. Shilcutt
Vice President
19
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
EXHIBIT 99.10
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, Chase Bank of Texas,
National Association, (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 the Exercise Trigger Date (as such term is defined in
Section 1 below) and up to and including June 30, 2010 (such period, the
"Exercise Period"), 1,349,843 fully paid and non-assessable shares of the
Company's Common Stock, par value $.01 per share ("Common Stock"), which Company
represents equals 10% of the issued and outstanding Common Stock, subject,
however, to the provisions and upon the terms and conditions hereinafter set
forth, and provided that this Warrant shall expire and thereafter be of no force
or effect thirty (30) days from the date Chase Bank of Texas has received $35.0
million from American Ecology Corporation or its subsidiaries resulting from the
payments provided for in the Settlement Agreement dated November 12, 1998
between said parties and any partial exercise or sale of the Warrants.
1. Exercise of Warrant. (a) 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.
(b) For purposes of this Warrant, the term "Exercise Trigger Date"
shall mean November 13, 1998.
(c) 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
26
<PAGE> 2
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. (a) 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 principal 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 canceled.
(b) The Company covenants and agrees that (i) it will pay, when due and
payable, any and all stock transfer and similar taxes that may be payable in
respect of the issuance of this Warrant or of any shares of Common Stock
issuable upon exercise; and (ii) the Common Stock shall be deemed to be issued
to the Holder or its designee as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment of the Exercise Price has been properly tendered for the purchase of
such shares.
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:
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 subsection (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 subsection (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
27
<PAGE> 3
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.
c. In case the Company shall offer shares of Common Stock or
securities convertible into or exchangeable for Common Stock or rights, options
or warrants to subscribe for or purchase shares of its Common Stock or
securities convertible into or exchangeable for Common Stock (including, without
limitation, any offering of rights or warrants entitling holders of shares of
Common Stock to purchase Common Stock or securities convertible or exchangeable
into Common Stock) at a price per share equal to or less than $1.50 each, 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 (not to be less than one), 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 $1.50 per share. Such
adjustment shall be made whenever such Common Stock or rights, options or other
securities are issued and shall become retroactively effective immediately after
the record date. This paragraph c. shall not apply to the Warrants that were
issued in connection with the Series E Redeemable Convertible Preferred Stock
which was issued on or about October 31, 1996
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. 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.
28
<PAGE> 4
In the event:
(x) of the occurrence of any of the events referred to in subsections
(a), (b) and (c) 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 subsections (a) or (c) 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 subsections (a) or (b) above or such Liquidation is expected to become
effective.
In the case of rights, options, warrants or convertible or exchangeable
securities being issued, the price per share of Common Stock shall be determined
by dividing (x) the total amount receivable by the Company in consideration of
the sale and issuance of such rights, options, warrants or convertible or
exchangeable securities, plus the total consideration payable to the Company
upon exercise, conversion or exchange thereof, by (y) the total number of shares
of such class or series of Common Stock covered by such rights, options,
warrants or convertible or exchangeable securities. In case the Company shall
sell and issue shares of any class or series of Common Stock, or options,
warrants or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of any class or series of Common Stock, for a
consideration consisting, in whole or in part, of property other than cash or
its equivalent, then in determining the consideration received by the Company
for purposes hereof, the Board of Directors of Company shall determine, in good
faith, the fair value of the property.
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
29
<PAGE> 5
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 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. (a) 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. If the Company's
Common Stock is not traded or a price is not quoted as set forth above, Current
Market Price shall be Fair Market Value.
(b) "Fair Market Value" shall be determined (i) in good faith
by the Board of Directors of the Company, or (ii) if the holder of this
Warrant disagrees with the Fair Market Value as so determined pursuant
to subsection (i), it must notify the Company in writing of such
disagreement within twenty days after receiving notice of the Board of
Directors' determination and include in such notice the holder's
estimate of the Fair Market Value, in which event the Fair Market Value
shall then be determined by an investment banking firm chosen by the
Company which is satisfactory to and approved by the holder (the
"Independent Financial Expert").
If the Company and the holder are unable to agree upon an investment
banking firm to act as the Independent Financial Expert within ten days after
the notice from Holder provided for in subsection (b)(ii) above, then each party
will within ten days thereafter select an investment banking firm and the two
investment banking firms so selected shall select a third investment banking
firm within ten days and such third investment banking firm shall, as the
Independent Financial Expert, determine the Fair Market Value. If either party
fails to timely designate its investment banking firm as provided above then the
investment banking firm selected by the other party shall act as Independent
Financial Expert to determine Fair Market Value. The Independent Financial
Expert shall use one or more valuation methods that it, in its professional
judgment, determines to be most appropriate. The decision of the Independent
Financial Expert so selected shall be final and binding upon all parties. The
Company shall bear the costs of the chosen investment banking firms.
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
30
<PAGE> 6
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 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.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed this 13th day of November, 1998.
AMERICAN ECOLOGY CORPORATION
By: /s/ Jack K. Lemley
-----------------------------------
Name: Jack K. Lemley
Title: Chief Executive Officer
31
<PAGE> 7
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 $.01 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
canceled 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
32
<PAGE> 8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN ECOLOGY CORPORATION
(Registrant)
Date: November 19, 1998 By: /s/ Jack K. Lemley
------------------------------
Jack K. Lemley
Chief Executive Officer
Date: November 19, 1998 By: /s/ R. S. Thorn
------------------------------
R. S. Thorn
Vice President of Administration
Chief Accounting Officer
33
<PAGE> 1
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. (a) 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 principal 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 canceled.
(b) The Company covenants and agrees that (i) it will pay, when due and
payable, any and all stock transfer and similar taxes that may be payable in
respect of the issuance of this Warrant or of any shares of Common Stock
issuable upon exercise; and (ii) the Common Stock shall be deemed to be issued
to the Holder or its designee as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment of the Exercise Price has been properly tendered for the purchase of
such shares.
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:
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 subsection (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 subsection (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
27
<PAGE> 2
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.
c. In case the Company shall offer shares of Common Stock or
securities convertible into or exchangeable for Common Stock or rights, options
or warrants to subscribe for or purchase shares of its Common Stock or
securities convertible into or exchangeable for Common Stock (including, without
limitation, any offering of rights or warrants entitling holders of shares of
Common Stock to purchase Common Stock or securities convertible or exchangeable
into Common Stock) at a price per share equal to or less than $1.50 each, 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 (not to be less than one), 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 $1.50 per share. Such
adjustment shall be made whenever such Common Stock or rights, options or other
securities are issued and shall become retroactively effective immediately after
the record date. This paragraph c. shall not apply to the Warrants that were
issued in connection with the Series E Redeemable Convertible Preferred Stock
which was issued on or about October 31, 1996
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. 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.
28
<PAGE> 3
In the event:
(x) of the occurrence of any of the events referred to in subsections
(a), (b) and (c) 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 subsections (a) or (c) 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 subsections (a) or (b) above or such Liquidation is expected to become
effective.
In the case of rights, options, warrants or convertible or exchangeable
securities being issued, the price per share of Common Stock shall be determined
by dividing (x) the total amount receivable by the Company in consideration of
the sale and issuance of such rights, options, warrants or convertible or
exchangeable securities, plus the total consideration payable to the Company
upon exercise, conversion or exchange thereof, by (y) the total number of shares
of such class or series of Common Stock covered by such rights, options,
warrants or convertible or exchangeable securities. In case the Company shall
sell and issue shares of any class or series of Common Stock, or options,
warrants or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of any class or series of Common Stock, for a
consideration consisting, in whole or in part, of property other than cash or
its equivalent, then in determining the consideration received by the Company
for purposes hereof, the Board of Directors of Company shall determine, in good
faith, the fair value of the property.
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
29
<PAGE> 4
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 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. (a) 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. If the Company's
Common Stock is not traded or a price is not quoted as set forth above, Current
Market Price shall be Fair Market Value.
(b) "Fair Market Value" shall be determined (i) in good faith
by the Board of Directors of the Company, or (ii) if the holder of this
Warrant disagrees with the Fair Market Value as so determined pursuant
to subsection (i), it must notify the Company in writing of such
disagreement within twenty days after receiving notice of the Board of
Directors' determination and include in such notice the holder's
estimate of the Fair Market Value, in which event the Fair Market Value
shall then be determined by an investment banking firm chosen by the
Company which is satisfactory to and approved by the holder (the
"Independent Financial Expert").
If the Company and the holder are unable to agree upon an investment
banking firm to act as the Independent Financial Expert within ten days after
the notice from Holder provided for in subsection (b)(ii) above, then each party
will within ten days thereafter select an investment banking firm and the two
investment banking firms so selected shall select a third investment banking
firm within ten days and such third investment banking firm shall, as the
Independent Financial Expert, determine the Fair Market Value. If either party
fails to timely designate its investment banking firm as provided above then the
investment banking firm selected by the other party shall act as Independent
Financial Expert to determine Fair Market Value. The Independent Financial
Expert shall use one or more valuation methods that it, in its professional
judgment, determines to be most appropriate. The decision of the Independent
Financial Expert so selected shall be final and binding upon all parties. The
Company shall bear the costs of the chosen investment banking firms.
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
30
<PAGE> 5
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 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.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed this 13th day of November, 1998.
AMERICAN ECOLOGY CORPORATION
By: /s/ Jack K. Lemley
-----------------------------------
Name: Jack K. Lemley
Title: Chief Executive Officer
31
<PAGE> 6
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 $.01 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
canceled 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
32
