-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Tj1TLixCYbaK9AwkzK8lf18AOhMKszgPVohpW6bmPZctzYM3y+IKPY9UOnskUq4H X3/yXMUqs6TPLR6XFrafiA== 0000950129-97-001674.txt : 19970424 0000950129-97-001674.hdr.sgml : 19970424 ACCESSION NUMBER: 0000950129-97-001674 CONFORMED SUBMISSION TYPE: PRER14A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19970423 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN ECOLOGY CORP CENTRAL INDEX KEY: 0000742126 STANDARD INDUSTRIAL CLASSIFICATION: REFUSE SYSTEMS [4953] IRS NUMBER: 953889638 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PRER14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-11688 FILM NUMBER: 97585826 BUSINESS ADDRESS: STREET 1: 805 W IDAHO STREET 2: STE 200 CITY: BOSIE STATE: ID ZIP: 83702 BUSINESS PHONE: 2083318400 MAIL ADDRESS: STREET 1: 5333 WESTHEIMER STREET 2: STE 1000 CITY: HOUSTON STATE: TX ZIP: 77056-5407 PRER14A 1 AMERICAN ECOLOGY CORPORATION - AMEND.#1 1 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. 1) Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [X] Amended Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Rule 14a-12 AMERICAN ECOLOGY CORPORATION ------------------------------------------------ (Name of Registrant as Specified In Its Charter) ------------------------------------------------ (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: ----------------------------------------------------------------------- 2) Aggregate number of securities to which transaction applies: ----------------------------------------------------------------------- 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): ----------------------------------------------------------------------- 4) Proposed maximum aggregate value of transaction: ----------------------------------------------------------------------- 5) Total fee paid: ----------------------------------------------------------------------- [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: ----------------------------------------------------------------------- 2) Form, Schedule or Registration Statement No.: ----------------------------------------------------------------------- 3) Filing Party: L. GARY DAVIS, CPA DIRECTOR OF AUDIT ----------------------------------------------------------------------- 4) Date Filed: ----------------------------------------------------------------------- 2 AMERICAN ECOLOGY CORPORATION 805 W. IDAHO, SUITE 200 BOISE, IDAHO 83702-8916 (208) 331-8400 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 22, 1997 The Annual Meeting of Stockholders of American Ecology Corporation (the "Company") will be held on May 22, 1997, at 10:00 a.m., mountain time, at the Owyhee Plaza, Capitol Room, 1109 Main Street, Boise, Idaho. The meeting is being held to consider and act upon the following matters: 1. To elect eight directors of the Board of Directors; 2. To amend the Company's Restated Certificate of Incorporation to increase the authorized common stock from 20,000,000 to 25,000,000 shares; 3. To ratify the selection of Balukoff, Lindstrom & Co., P.A. as the Company's independent auditors for fiscal year 1997; 4. To ratify the November 13, 1996 issuance of Series E Redeemable Convertible Preferred Stock and associated warrants; 5. Such other business as may properly come before the meeting or any adjournments or postponements thereof. The Board of Directors has fixed the close of business on April 16, 1997 as the record date for determining those stockholders who will be entitled to vote at the meeting and any adjournments or postponements thereof. A list of stockholders will be available for inspection for a period of 10 days prior to the meeting at the Company's principal office identified above and will also be available for inspection at the meeting. Please sign and date the enclosed proxy and return it promptly in the enclosed self-addressed pre-paid envelope. If you attend the meeting, you may withdraw your proxy and vote your shares in person. BY ORDER OF THE BOARD OF DIRECTORS PHILLIP K. CHATTIN Secretary Boise, Idaho April 22, 1997 3 AMERICAN ECOLOGY CORPORATION ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 22, 1997 PROXY STATEMENT --------------------------------- This Proxy Statement relates to the Annual Meeting of Stockholders of American Ecology Corporation, a Delaware corporation (the "Company"), to be held on May 22, 1997, at 10:00 a.m., mountain time, at the Owyhee Plaza, Capitol Room, 1109 Main Street, Boise, Idaho, including any adjournments or postponements thereof (the "Meeting"). This Proxy Statement, the accompanying proxy card and the Company's Annual Report are first being mailed to stockholders of the Company on or about April 22, 1997. THEY ARE FURNISHED IN CONNECTION WITH THE SOLICITATION BY THE COMPANY OF PROXIES FROM THE HOLDERS OF THE COMPANY'S COMMON STOCK, PAR VALUE $.01 PER SHARE ( "COMMON STOCK"), FOR USE AT THE MEETING. Holders of preferred stock of the Company do not have voting rights with respect to the matters to be considered at the meeting. The principal solicitation of proxies is being made by mail; however, additional solicitation may be made by telephone, telegraph, facsimile or personal visits by directors, officers and regular employees of the Company and its subsidiaries, who will not receive additional compensation therefore. The Company has retained ChaseMellon Shareholder Services to aid in the solicitation of proxies. Estimated fees expected to be incurred by the Company in this connection should not exceed $10,000. The Company will reimburse brokerage firms and others for their reasonable expenses in forwarding soliciting material. All shares represented by duly executed proxies in the accompanying form received prior to the Meeting will be voted in the manner specified therein. Any stockholder granting a proxy may revoke it at any time before it is voted by filing with the Secretary of the Company either an instrument revoking the proxy or a duly executed proxy bearing a later date. Proxies may also be revoked by any stockholder present at the Meeting who expresses a desire to vote his shares in person. As to any matter for which no choice has been specified in a duly executed proxy, the shares represented thereby will be voted FOR each proposal listed herein and, in the discretion of the persons named in the proxy in any other business that may properly come before the Meeting. STOCKHOLDERS ARE URGED, WHETHER OR NOT THEY EXPECT TO ATTEND THE MEETING TO COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. The Company's Annual Report to Stockholders for the fiscal year ended December 31, 1996 is being furnished with this Proxy Statement to stockholders of record on April 16, 1997. The Annual Report to Stockholders does not constitute a part of the proxy soliciting material except as otherwise provided by the rules of the Securities and Exchange Commission, or as expressly provided for herein. 1 4 OUTSTANDING SHARES AND VOTING RIGHTS The Board of Directors of the Company has fixed April 16, 1997 as the record date ("Record Date") for the determination of stockholders entitled to notice of and to vote at the Meeting. On the Record Date there were 8,015,308 shares of common stock issued and outstanding and entitled to vote. The Company has no other voting securities outstanding. Each stockholder of record is entitled to one vote per share held on all matters submitted to a vote of stockholders, except that in electing directors, each stockholder is entitled to cumulate his or her votes and give any one candidate an aggregate number of votes equal to the number of directors to be elected (eight) multiplied by the number of his or her shares, or to distribute such aggregate number of votes among as many candidates as he or she wishes. For a stockholder to exercise his or her cumulative voting rights, the stockholder must give notice of his or her intention to cumulatively vote prior to the Meeting, or at the Meeting in person, prior to voting. If any stockholder has given such notice, all stockholders may cumulatively vote. The holders of proxies will have authority to cumulatively vote and allocate such votes in their discretion to one or more of the director nominees. The holders of the proxies solicited hereby do not, at this time, intend to cumulatively vote the shares they represent, unless a stockholder indicates his intent to do so, in which instance the proxy holders intend to cumulatively vote all the shares they hold by proxy in favor of some or all of the director nominees identified herein. The holders of a majority of the outstanding shares of common stock on the Record Date present at the Meeting in person or by proxy will constitute a quorum for the transaction of business at the meeting. An affirmative vote of a majority of the shares present and voting at the Meeting is required for approval of all matters except Proposal 2, as to which the affirmative vote of a majority of the outstanding shares of common stock is required for approval. Abstentions and broker non-votes are each included in the determination of the number of shares present. Abstentions are counted in tabulations of the votes cast on proposals presented to stockholders and thus have the effect of effect of voting against a proposal, whereas broker non-votes are not counted for purposes of determining whether a proposal has been approved and thus have no effect, except in regard to Proposal 2. PROPOSAL NO. 1 ELECTION OF DIRECTORS DIRECTORS. At the Meeting, eight directors are to be elected. If Proposal 1 is adopted, eight directors will be elected to hold office until the next Annual Meeting of Stockholders or until the election and qualification of his or her respective successor. It is the intention of the persons named in the proxy to vote the proxies which are not marked to the contrary for the election as directors of the persons named below as nominees. If any such nominee refuses or is unable to serve as a director, the persons named as proxies may in their discretion vote for any or all other persons who may be nominated. The eight nominees receiving the greatest number of votes cast will be elected directors, provided that each nominee receives at least a majority of the votes cast. 2 5 Director nominees standing for election to serve until the 1998 Annual Meeting are:
NAME AGE POSITION WITH COMPANY DIRECTOR SINCE - ---- --- --------------------- -------------- Jack K. Lemley 62 Director, Chairman, Chief 1992 Executive Officer and President Paul F. Schutt 64 Director 1994 John J. Scoville 61 Director 1984 Patricia M. Eckert 49 Director 1995 Edward F. Heil 52 Director 1994 Rotchford D. Barker 60 Director 1996 Paul C. Bergson 52 Director 1996 Keith D. Bronstein 47 Director 1997
Please see "Directors and Officers" below, for a brief business biography of each director-nominee. PROPOSAL NO. 2 AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION TO INCREASE AUTHORIZED COMMON STOCK On April 11, 1997, the Board of Directors by unanimous vote of those present, adopted a resolution approving and submitting to a vote of the stockholders an amendment to Article Fourth of the Company's Restated Certificate of Incorporation ("Certificate") to increase its authorized common stock from 20,000,000 to 25,000,000 shares. The text of Article Fourth as proposed to be amended is as follows: "FOURTH: The total number of shares of stock which the corporation shall have authority to issue is 25,000,000 shares of common stock, par value $.01 per share (the "Stock") and 1,000,000 shares of preferred stock, par value $.01 per share (the "Preferred Stock" or "Preferred Shares")." The proposed increase in the authorized common stock is recommended by the Board of Directors to ensure the availability of an adequate supply of authorized unissued shares for the planned shareholder rights offering, stock options, the exercise of existing warrants and other corporate purposes as may be decided by the Board of Directors. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSED AMENDMENT TO INCREASE THE COMPANY'S AUTHORIZED COMMON STOCK. The proposed amendment will be adopted if a majority of the outstanding common stock is voted in favor of the proposed amendment. 3 6 PROPOSAL NO. 3 SELECTION OF AUDITORS The Board of Directors has selected Balukoff, Lindstrom & Co., P.A. ("Balukoff, Lindstrom"), as independent auditors for the Company's 1997 fiscal year. Balukoff, Lindstrom examined the financial statements of the Company for its 1996 fiscal year. It is expected that representatives of Balukoff, Lindstrom will be present at the Meeting, will have the opportunity to make a statement if they so desire, and will be available to respond to appropriate questions. Although selection of auditors is not required to be submitted to a vote of the stockholders, THE BOARD OF DIRECTORS HAS DECIDED TO ASK THE STOCKHOLDERS TO APPROVE THE SELECTION AND RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL. If a majority of shares of common stock voting on this proposal at the Meeting does not vote to approve the selection, the Board will reconsider the selection. PROPOSAL NO. 4 RATIFICATION OF ISSUANCE OF CONVERTIBLE REDEEMABLE SERIES E PREFERRED STOCK AND ASSOCIATED WARRANTS On October 31, 1996, the Board of Directors unanimously approved the issuance of 300,000 new Series E Redeemable Convertible Preferred Stock ("Series E") and associated Warrants ("Warrants") to two subscribing directors (Messrs. Barker and Heil) who abstained from consideration and voting at the meeting. Each Series E share has a Warrant associated with it allowing the holder to purchase ten shares of the Company's common stock at the price of $1.50 per share on or after July 1, 1997. The following excerpt from the minutes of the Directors' October 31, 1996 meeting best describes the Directors' consideration of the reasons for and the fairness to the Company of the transaction: "Next, the Directors engaged in a lengthy discussion concerning the historical and current financial condition of the Company and its future financial and operational prospects. The Directors concluded that the ability to eliminate any dilution by the new preferred through a rights offering left the warrants and the dividends to be paid in kind as the sole fairness issues. The Directors discussed the Series D private placement of preferred stock by the Company in September 1995 wherein warrants were issued to the subscribers. The Directors considered whether, and under what terms, a third party (including venture capitalists) would make a similar investment, and concluded a third party investor would likely demand substantial equity in the Company, severely diluting existing shareholders. It was noted that discussions with the Bank indicated that if the Bank were to exchange its debt for equity, it would also severely dilute, if not eliminate, existing shareholders. That fact that the Bank demanded and received warrants for 10% of the Company's stock exercisable at $1.50 per share in order to restructure the Bank debt without extending additional credit was noted. Given the urgency of the Company's financial condition, and the risk to be undertaken by the subscribers to the preferred stock, the Directors concluded that an alternative transaction was not possible. It was also concluded that if the Company did not act promptly to secure new financing or equity, that the Company's business failure was likely. Given the Company's current financial condition, new financing other than 4 7 equity is impossible. It was pointed out that no other parties had come forward seeking to invest $3,000,000 in the Company on terms that would be more favorable than those of the proposal. It was also noted that the Company's outside financial consultants, Jay Alix & Company, after studying the Company and developing a financial model forecasting flat revenue and decreasing operating costs, had suggested a restructure plan whereby the company would severely contract the size and scope of operations and trade its debt to the Bank for equity, almost entirely eliminating its existing shareholders. That plan was previously rejected because it was not in the best interest of existing shareholders. It was noted that the warrants to be issued in accordance with the Proposal were exercisable only after the time set for a shareholder rights offering, were exercisable at $1.50 per share and would be diluted by any rights offering. Recently, the Company's stock price has traded at a high of 1 1/8 and low of 7/8, showing an overall decline of 12% since September." Mr. Barker and Mr. Heil, respectively, subscribed to and paid for 200,000 and 100,000 Series E shares at $10.00 per share effective November 13, 1996, and were issued Warrants to purchase, after June 30, 1997 and before July 1, 2003, common stock at $1.50 per share for each Series E share. The purchase agreement is attached hereto as Exhibit 99.5. Subsequently, Mr. Barker sold 25,000 and 1,000 Series E shares and associated Warrants to Mr. Bronstein and Mr. Bergson, both of whom are directors, at the price of $10.00 per share. The entire proceeds of the issuance were used as working capital by the Company. The Series E stock was issued to satisfy a condition required by the Company's bank when its secured credit agreement was renegotiated and extended. The condition required the Company to raise $3.0 million in new equity before the end of 1996, and to use its best efforts to raise an additional $2.0 million in equity by June 30, 1997. The Company intends to satisfy this condition by an offering to all holders of common stock to subscribe for one share of common stock at $1.00 per share for each share of common stock held ("Rights Offering"). The Series E stock is non-voting; has a liquidation preference of $10.00 per share, plus unpaid dividends; has an annual dividend of 11.25% paid quarterly solely in common stock of the company at its average trading price 10 days prior to quarter-end; will be redeemed by the Company at its $10.00 stated value in a Rights Offering provided the proceeds of the Rights Offering exceeds $5,000,000; is convertible after June 30, 1997 into 10 shares of common stock if the Rights Offering does not occur; will be converted pro-rata into 10 shares of common stock to the extent it is not redeemed in the Rights Offering; has an anti-dilution provision other than in the Rights Offering; and requires an unanimous vote of all holders to modify or amend its terms. The Certificate of Designation setting forth the terms of the Series E stock is attached hereto as Exhibit 99.6. Additionally, the Series E stock is described in Footnote 8 to the Company's Financial Statements in its 1996 Annual Report which accompanies this Proxy Statement. The following chart is intended to show the effect on subscribers and current shareholders of the Series E stock issuance based on the two most opposite hypothetical cases. In each case, it is assumed the warrants are exercised entirely (equity proceeds to the Company of $4.5 million). The first case assumes the Rights Offering is entirely unsuccessful and the Series E is therefore converted to common stock. The second case assumes the Rights Offering is fully subscribed and the Series E shares are therefore redeemed. 5 8 TOTALLY UNSUCCESSFUL RIGHTS OFFERING FULL SUBSCRIPTION OF RIGHTS OFFERING
Currently % Series E Exercise of Warrants Total Common % --------- - -------- -------------------- ------------ - @ $1.50 ------- R. Barker 134,148 1.67 1,740,000 1,740,000 3,614,148 25.79 --------- ---------- ----- 0 2,008,296 10.55 E. Heil 2,007,234 25.04 1,000,000 1,000,000 4,007,234 28.59 --------- ---------- ----- 0 5,014,468 26.35 K. Bronstein 67,533 0.84 250,000 250,000 567,533 4.05 --------- ---------- ----- 0 385,066 2.02 P. Bergson 161 0.01 10,000 10,000 20,161 0.14 --------- ---------- ----- 0 10,322 0.05 All other 5,806,232 72.44 0 N/A 5,806,232 41.43 shareholders --------- ---------- ----- 0 11,612,464 61.03 ========== ===== 14,015,308 100 ---------- ----- TOTALS 8,015,308 100 19,030,616 100
At the time of the transaction, the Company, acting upon advice of counsel, concluded that stockholder approval of the was not required by either Delaware law, the Company's Certificate of Incorporation, its bylaws, or rules of the NASDAQ Stock Market, Inc. relating to stockholder approval of issuance of listed securities. Subsequent to the issuance of the Series E, the NASDAQ Stock Market, in a letter to the Company, concluded that the Company's issuance of the Series E stock and Warrants, without prior stockholder approval, constituted a violation of the NASDAQ Stock Market's continued listing rules. The Company has disputed, and continues to dispute, the NASDAQ's interpretation of its rules. However, the Company believes it is in the best interest of its stockholders to seek ratification of the issuance of the Series E preferred stock. Copies of the share Purchase Agreement, Series E Designation Certificate, and Form of Warrant issued in the transaction are attached to this Proxy Statement as Exhibit 99.5, 99.6 and 99.7, respectively. Although the issuance of the Series E Redeemable Convertible preferred stock and associated warrants is not in the Company's opinion, required to be submitted to a vote of the stockholders, the Board has decided to ask the stockholders to approve the transaction. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL. If a majority of the shares of common stock represented at the Meeting does not vote to approve the transaction, the Board will consider what action, if any, it may lawfully take with respect to the transaction. 6 9 COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS. The Committees of the Board of Directors during 1996 were the Nominating, Executive, Audit and Compensation Committees. The members of the Nominating Committee are Messrs. Lemley, Heil and Scoville. Mr. Scoville is chairman. The Nominating Committee searches for and recommends to the Board of Directors, qualified and experienced individuals to fill vacancies and new director seats, upon expansion of the board. The Nominating Committee met twice during 1996. The members of the Executive Committee are Messrs. Lemley, Barker, Heil and Scoville. Mr. Lemley is chairman. Except certain powers which, under Delaware law, may only be exercised by the full Board of Directors, the Executive Committee may exercise all powers and authority of the Board of Directors in the management of the business of the Company. The Executive Committee did not meet in 1996. The members of the Audit Committee are Messrs. Bergson, Schutt and Ms. Eckert. Mr. Schutt is chairman. The Audit Committee reviews the proposed plan and scope of the Company's annual audit as well as the result when it is completed. The Committee reviews the services provided by the Company's independent auditors and their fees. The Committee also meets with the Company's financial personnel to assure the adequacy of the Company's accounting principles, financial controls and policies. The Committee is also charged with reviewing transactions which may present a conflict of interest on the part of management or directors. The Audit Committee met three times in 1996. The members of the Compensation Committee are Messrs. Barker, Bergson, Heil and Schutt. Mr. Barker is chairman. The Compensation Committee reviews and approves executive officer and key employee compensation and benefits. It also administers the Company's employee stock option plan, approving the grant and terms of stock options to executives and key employees of the Company. The Compensation Committee met one time in 1996. During 1996, the Board of Directors held twenty meetings. All directors attended 80% or more of the meetings of the Board of Directors and Committees of the Board on which they served. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. During 1996, no member of the Directors Compensation Committee was an officer or employee of the Company or any of its subsidiaries, or had any other relationship requiring disclosure by the Company under Item 404 of SEC Regulation S-K. During 1996, no executive officer of the Company served as: (i) a member of the compensation committee (or other board committee performing equivalent functions) of an unrelated entity, one of whose executive officers served on the Directors Compensation Committee of the Company, (ii) a director of an unrelated entity, one of whose executive officers served on the Directors Compensation Committee of the Company, or (iii) a member of the Compensation Committee (or other board committee performing equivalent functions) of another entity, one of whose executive officers served as a director of the Company. 7 10 Directors who are not employees of the Company or its subsidiaries receive an annual fee of $16,000 payable monthly plus $1,333 for each special meeting attended in person, which at the director's discretion is payable quarterly in stock of the Company at its then market price. Directors who are employees of the Company receive no additional compensation for their service as directors. All directors are reimbursed for their travel and other expenses involved in attendance at Board and committee meetings. In addition, each director who at the time of his or her initial election to the Board is not an employee of the Company is granted, a stock option to purchase from the Company 7,500 shares of the Company's common stock. Each director who is not an employee of the Company at the time of each re-election to the Board is also granted a stock option to purchase from the Company 7,500 shares of the Company's common stock. 8 11 STOCK PERFORMANCE GRAPH.(1) The following graph compares the most recent five year market-value performance of the Company's common stock to the NASDAQ US and Foreign Stock Index, and a hazardous waste industry peer group(2) which the Company believes accurately reflects its competitors. The graph assumes that the value of the investment in the common stock and each index was $100 at December 31, 1989. PERFORMANCE GRAPH
1991 1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- ---- American Ecology Corporation 300.0 234.0 204.0 175.9 78.8 30.4 NASDAQ US & Foreign Stock 135.7 157.4 181.1 175.3 243.6 267.2 Peer Group 104.9 104.5 69.1 56.3 64.8 66.5
[GRAPH] - -------------------- (1) Notwithstanding filings by the Company with the SEC that have incorporated or may incorporate by reference other SEC filings (including this proxy statement) in their entirety, this performance graph shall not be incorporated by reference into such filings and shall not be deemed to be filed with the SEC except as specifically provided otherwise or to the extent required by Item 402 of Regulation S-K. (2) The companies which make up the Company s peer group are: 3CI Complete Compliance Corp.; American Medical Tech, Inc.; American Waste Services; Ametech; Biomedical Waste Systems, Inc.; Chemical Waste Management; WMX Technologies, Inc.; Clean Harbors Inc.; Environmental Services of America, Inc.; GNI Group; Metalclad Corp.; Mobley Environmental Services, Inc.; Molten Metal Technology; Perma-Fix Environmental Services, Inc.; Rollins Environmental Services; Safety Kleen Corp.; and Security Environmental Systems. 9 12 DIRECTORS AND EXECUTIVE OFFICERS
OFFICE HELD AS OF MARCH 24, 1997 NAME AGE CITY STATE DIRECTOR/OFFICER - -------------- ---- --- ---- ----- ---------------- Director, Chairman, Jack K. Lemley 62 Boise Idaho 1992-Director Chief Executive Officer October 12, 1995- and President . . . . . Officer Vice President . . . . Joseph J. Nagel 54 Boise Idaho February 14, 1997 Vice President . . . . Richard F. Paton 47 Boise Idaho October 12, 1995 Vice President . . . . Robert S. Thorn 74 Boise Idaho May 22, 1996 Treasurer . . . . . . . Ian P.F. Dorling 49 Boise Idaho March 27, 1996 Director . . . . . . . Rotchford D. Barker 60 Golf Illinois 1996 Director . . . . . . . Paul C. Bergson 52 Washington D.C. 1996 Director . . . . . . . Keith D. Bronstein 47 Phoenix Arizona 1997 Director . . . . . . . Patricia M. Eckert 49 San Francisco California 1995 Director . . . . . . . Edward F. Heil 52 Downers Grove Illinois 1994 Director . . . . . . . Paul F. Schutt 64 Norcross Georgia 1994 Director . . . . . . . John J. Scoville 61 Santa Rosa California 1984
Jack K. Lemley is the Chairman of the Board, Chief Executive Officer and President of the Company. Prior to February 1995, he was an independent business consultant. From May 1989 through 1993, Mr. Lemley was Chief Executive Officer of Transmanche-Link J.V. which designed and built the tunnel and related transportation infrastructure to provide train service between England and France. Prior to his position at Transmanche-Link, Mr. Lemley founded Lemley and Associates, Inc. and was a management consultant to various clients in the industry. Mr. Lemley is also a director of Idaho Power Company. Joseph J. Nagel joined the Company in 1996 as Vice President for Governmental and Regulatory Affairs. In February 1997, Mr. Nagel was appointed Executive Vice President and Chief Operating Officer of the Company's US Ecology subsidiary. Prior to that, Mr. Nagel spent six years as Administrator of the Idaho Division of Environmental Quality. Richard F. Paton has been employed by the Company or its subsidiaries in various positions since 1986. Robert S. Thorn served as a consultant to the Company from November 1995 to May 1996 when he accepted the position of Vice President, Administration and Chief Accounting Officer. Prior to that time, Mr. Thorn served as a consultant with Lemley and Associates, Inc., a consulting engineering firm, from 1994 to November 1995 and before that as U.K. Controls Director for Transmanche-Link, J.V. which designed and built the tunnels and related transportation infrastructure to provide train service between England and France. Ian P.F. Dorling accepted employment with the Company in February 1996, and was appointed Treasurer in March 1996. Prior to that time, Mr. Dorling was the manager of cash management of Morrison - Knudsen Corporation, a Boise, Idaho based engineering and construction firm. 10 13 Rotchford D. Barker became a director in April 1996. Mr. Barker is an independent business man and commodity trader. Mr. Barker has been a member of the Chicago Board of Trade for more than thirty years and has served on the board of directors of the exchange. Mr. Barker was the President of Agra Trading, Inc. until that company was acquired by Gill & Duffus, a United Kingdom holding company, in 1970. He has also served as a director of Agra Trading, Inc., Colorado Beef, Inc. and the December Group. Paul C. Bergson became a director of the Company in February 1996. Mr. Bergson is a principal in Bergson & Company, a government relations consulting firm serving a range of clients in tax, environmental and chemical matters. Mr. Bergson is also a General in the U.S. Army Reserves, a member of the Board of Advisers of the Far East Studies Institute and serves on the boards of several philanthropic organizations. Keith D. Bronstein, a member of the Chicago Board of Trade and President of Tradelink LLC, became a director in January 1997. Previously he has served as a board member of the American Cancer Society, as lay board member of The University of Wisconsin Medical School, as a member of the Wisconsin Health Policy Board, and is a trustee member of Highland Park Hospital & Lakeland Health Service. Mr. Bronstein was a co-founder of S'Lil Pharmaceuticals, a bio- technology company involved in early-stage discovery and development of pharmaceutical drugs. Patricia M. Eckert currently practices law and is the owner of a consulting firm, Patricia M. Eckert & Associates. Ms. Eckert formerly served as the President of the California Public Utilities Commission and served as a Commissioner from 1989 to 1994. Edward F. Heil has been the Chairman of the Board of American Environmental Construction Company for more than the last five years. Mr. Heil is also a director of Medi Net, Inc. Paul F. Schutt has been the Chief Executive Officer and a director of Nuclear Fuel Services Inc. for more than the past 5 years. Mr. Schutt also led the formation of Advanced Recovery Systems, Inc., and NFS Radiation Protection Systems, Inc., and serves as a director on the boards of those companies. Mr. Schutt was a founding director in 1968 and President of Nuclear Assurance Corporation, Senior Planning Analyst for Union Carbide (AECOP), Oak Ridge, Tennessee, and held management positions in Marketing, Planning and Research and Development for Babcock & Wilcox Co. John J. Scoville is President of J.J. Scoville & Associates, Inc., a nuclear consulting firm. He was President of US Ecology, Inc., a subsidiary of the Company, from April 1981 to May 1990 and became a director of the Company in March 1984. Mr. Scoville was also a Vice President of the Company from May 1986 to May 1990. There are no family relationships among the directors and executive officers of the Company. The Company is not aware of any involvement in legal proceedings by its directors or executive officers during the past five years that are material to an evaluation of the ability or integrity of such director or executive officer. 11 14 COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT. Section 16 of the Securities Exchange Act of 1934 ("Section 16") requires that reports of beneficial ownership of common stock and preferred stock and changes in such ownership be filed with the Securities and Exchange Commission (the "SEC") by Section 16 "reporting persons" including directors, certain officers, holders of more than 10% of the outstanding common stock or preferred stock, and certain trusts of which certain reporting persons are trustees. The Company is required to disclose in this proxy statement each reporting person whom it knows to have failed to file any required reports under Section 16 on a timely basis. Based solely upon a review of copies of Section 16 reports furnished to the Company and written statements confirming that no other reports were required, to the Company's knowledge, all Section 16 reporting requirements applicable to known reporting persons, except for one Form 3 report which was filed late by Mr. Thorn, were complied with during 1996. EXECUTIVE COMPENSATION Set forth below is information regarding the compensation of the Company's Chief Executive Officer and the other most highly compensated executive officers for 1996 (together with the Chief Executive Officer, the "named officers"). In addition, information is included regarding the compensation of one individual who would have been included in the named officers but for the fact he was not an executive officers of the Company at December 31, 1996. Summary Compensation Table. The summary compensation table set forth below contains information regarding the compensation of each of the named officers for services rendered in all capacities during 1994, 1995 and 1996. 12 15 SUMMARY COMPENSATION TABLE
Long-Term Compensation Annual Compensation --------------- Name and Principal ------------------------------- Stock Options All-Other Position Year Salary Bonus (No. of Shares) Compensation(1) -------- ---- ------ ----- --------------- ------------ Jack K. Lemley. . . . . . . . . 1996 $150,000 -0- -0- $ 761.52 Chairman & CEO 1995 $167,017 -0- 250,000 $ 4,588.63 1994 -0- -0- 10,000 -0- Richard F. Paton. . . . . . . . 1996 $ 96,890 -0- -0- $ 3,197.74 Vice President 1995 $ 96,828 -0- 1,500 $ 3,919.32 1994 $ 94,853 $ 5,000 -0- $ 7,379.08 Edmund J. Gorman (2). . . . . . 1996 $120,700 -0- -0- $ 3,785.92 President & COO 1995 $ 46,515 -0- 150,000 $ 1,793.43 1994 -0- -0- -0- -0- Robert S. Thorn(3). . . . . . . 1996 $ 59,558 -0- -0- $41,327.53 Vice President Administration 1995 -0- -0- -0- $12,880.00 1994 -0- -0- -0- -0-
Option Grants. There were no options granted in 1996 to the named officers. - -------------------- (1) Includes the amount of premium paid by the Company for group term life insurance for each named executive officer, car allowance and the amount of the Company s matching contribution for each named executive officer under the Company s 401(k) Savings Plan and the Company s Retirement Plan. (2) Mr. Gorman left the Company effective October 11, 1996. His annual salary was $175,000. (3) Mr. Thorn became an employee May 1, 1996 with an annual salary of $95,000. Prior to becoming an employee (November 26, 1995 - April 30, 1996), he was paid $10,000 per month as a consultant. 13 16 Option Exercises and 1996 Year-End Option Holdings. Shown below is information with respect to unexercised options to purchase Common Stock granted in prior years to the named officers and held by them at December 31, 1996. None of the named officers exercised any stock options in 1996.
Number of Unexercised Value of Unexercised Options at In-the-Money Options December 31, 1996 at December 31, 1996 Name Exercisable/Unexercisable Exercisable/Unexercisable(4) ---- ------------------------- ------------------------- Jack K. Lemley........................ 170,500/100,000 $0/$0 Richard F. Paton...................... 3,400/ 1,600 $0/$0
COMPENSATION COMMITTEE REPORT.(5) The Compensation Committee of the Board of Directors is composed entirely of outside directors and is responsible for developing and making recommendations to the Board with respect to the Company's executive compensation policies. The Committee also reviews and approves the Company's compensation and benefit plans. This Report describes the basis on which the 1996 compensation determinations were made by the Compensation Committee with respect to the executive officers of the Company. The Company believes that executive compensation should reflect value created for stockholders in furtherance of the Company's strategic goals. The following objectives are among those utilized by the Compensation Committee: 1. Executive compensation should be meaningfully related to the long-term and short-term value created for stockholders. 2. Executive compensation programs should support the long-term and short-term strategic goals and objectives of the Company. 3. Executive compensation programs should reflect and promote the Company's overall value, business standards and reward individuals for outstanding contributions to the Company's success. 4. Short and long term executive compensation play a critical role in attracting and retaining well qualified executives. Currently the Company has a compensation program based on three components: a base salary, a related bonus program tied to Company performance, and a stock option program. The Compensation Committee regularly reviews the various components of the compensation program to ensure that they are consistent with the Company's objectives. - -------------------- (4) A stock option is considered to be in-the-money if price of the related stock is higher than the exercise price of the option. The closing market price of the Common Stock was $1.063 per share on the NASDAQ National Market for December 31, 1996. (5) Notwithstanding filings by the Company with the Securities and Exchange Commission ( SEC ) that have incorporated or may incorporate by reference other SEC filings in their entirety, this Compensation Committee Report shall not be incorporated by reference into such filings and shall not be deemed to be filed with the SEC except as specifically provided otherwise or to the extent required by Item 402 of Regulation S-K. 14 17 BASE SALARY -- The Compensation Committee, in determining the appropriate base salaries of its executive officers, generally considers the level of executive compensation in similar companies in the industry. In addition, the Compensation Committee takes into account (i) the performance of the Company and the roles of the individual executive officers with respect to such performance, and (ii) the particular executive officer's specific experience and responsibilities, and the performance of such executive officer in those areas of responsibility. The base salaries for 1996 were established by the Committee at levels believed to be at or somewhat below competitive amounts paid to executives of companies in the environmental industry with comparable qualifications, experience and responsibilities. During 1996, Jack K. Lemley, the chief executive officer of the Company received a base salary of $150,000, which the Committee believes to be below the average of the base salary for chief executive officers with comparable qualifications, experience and responsibilities of other companies in the environmental industry. ANNUAL INCENTIVES -- The bonus program provides direct financial incentives in the form of an annual cash bonus to executive officers to achieve and exceed the Company's annual goals. The Committee awards cash bonuses based on the performance of the Company relative to its budgeted net income for the fiscal year and other pertinent absolute and relative criteria. The Compensation Committee determined, after the end of 1996, not to pay cash bonuses to the named officers of the Company, given the financial performance of the Company which was below expectations. Mr. Lemley received no bonus in 1996. LONG-TERM INCENTIVES --The stock option program is currently the Company's primary long-term incentive plan for executive officers and key employees. The Committee is reviewing other possible long-term incentive plans and may implement such a plan as a supplement to the stock option program in the future. The objectives of the stock option program are to align executive officer compensation and shareholder return, and to enable executive officers to develop and maintain a significant, long-term stock ownership position in the Company's Common Stock. In addition, grants of stock options to executive officers and others are intended to retain and motivate executives to improve long-term corporate and stock market performance. Stock options are granted at the prevailing market value and will only have value if the Company's stock price increases. Generally, grants of stock options vest in equal amounts over five years, and the executives must be employed by the Company at the time of vesting in order to exercise the stock option. 15 18 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth information as of April 10, 1997 with respect to the beneficial ownership of the Company's Common Stock by (i) each director and nominee for director of the Company individually, (ii) each executive officer of the Company, and (iii) all directors, nominees for director and executive officers of the Company listed in the Summary Compensation Table as a group. Unless otherwise indicated below, each of the named persons and members of the group has sole voting and investment power with respect to the shares shown.
NAME of BENEFICIAL OWNER AMOUNT and NATURE of BENEFICIAL PERCENT OF CLASS* ------------------------ ------------------------------- ----------------- OWNERSHIP O ----------- Rotchford D. Barker 161,421.70(6) 2.0% Paul C. Bergson 161 Keith D. Bronstein 67,533 * Patricia M. Eckert 7,500(7) * Edward F. Heil 2,334,246.95(8) 26.86% Jack K. Lemley 262,800.72(9) 3.17% Paul F. Schutt 115,587.10(10) 1.43% John J. Scoville 61,193.90(11) * Ian P.F. Dorling 882.449(12) * Joseph J. Nagel 0 0 Richard F. Paton 5,180.13(13) * Robert S. Thorn 600 * All directors and executive officers as a group (12) 3,017,106.95 32.99%
- -------------------- O Direct ownership and sole investment and voting power one unless indicated otherwise. * Indicates less than 1%. (6) Indicates common stock if 3,157.89 Series D Preferred Convertible stock is converted. (7) Includes 7,500 shares subject to option. (8) Includes 17,500 shares subject to option, 314,730 shares in capacity as trustee of a trust and common stock if 35,245.86 Series D Preferred Convertible stock is converted. (9) Includes 150,000 shares subject to option and common stock if 6,052.71 Series D Preferred Convertible stock is converted. (10) Includes 17,500 shares subject to option and common stock if 5,263.20 Series D Preferred Convertible stock is converted. (11) Includes 30,500 shares subject to option and common stock if 842.11 Series D Preferred Convertible stock is converted. (12) 882.449 shares owned under the 401K plan. (13) Includes 3,400 shares subject to option and 1,780.13 shares owned under the 401K plan. 16 19 SECURITY OWNERSHIP OF 5% BENEFICIAL OWNERS The following information is given with respect to the persons known by the Company to own beneficially more than 5% of the outstanding shares of the Common Stock as of December 31, 1996. Unless otherwise noted, each shareholder listed below has sole voting and investment power with respect to the shares listed.
Name and Address Number of Shares Percent of of Beneficial Owner Beneficially Owned Class ------------------- ------------------ ----- Edward F. Heil (1)..................... 2,334,246.95 26.86% 2901 Centre Circle Downers Grove, Illinois 60515 Harry J. Phillips, Jr. (2)............. 2,957,758.61 33.20% 3 Riverway, Suite 170 Houston, Texas 77056 Fayez Sarofim (3)...................... 466,980 5.8% 2900 Two Houston Center Houston, Texas 77010
- -------------------------- 1. Pursuant to a Section 16 Form 4 filed on December 31, 1996, Mr. Heil reported that 1,329,080 shares of Common Stock were beneficially owned individually by Mr. Heil and 314,730 shares of Common Stock were beneficially owned by Mr. Heil in his capacity as trustee of a trust. Also included are 17,500 shares subject to option, 315,792 Series D warrants and 30,132 Series E dividends paid in common stock. 2. Pursuant to a Schedule 13-D/A filing on February 16, 1996, Mr. Phillips reported that he may be deemed the beneficial owner of 952,608 shares of Common Stock, and 1,110,206 shares of Common Stock owned of record by ECOL Partners II, Ltd. ("Ecol Partners II") and 2,352 shares owned of record by Phillips Investments, Inc. As the sole shareholder of Phillips Investments, Inc., which is the corporate general partner of ECOL Partners II, Mr. Phillips shares voting and investment power over the Common Stock owned by Phillips Investments, Inc. and ECOL Partners II. 3. Pursuant to a Schedule 13-G/A filing on February 13, 1997, Mr. Fayez Sarofim reported that as of December 31, 1996 he may be deemed to be the beneficial owner of 466,980 shares of Common Stock. Mr. Sarofim reported sole voting and dispositive power with respect to 413,328 such shares, shared voting power with respect to 46,742 of such shares, and shared dispositive power with respect to 53,652 of such shares. 17 20 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS John J. Scoville, a director of the Company, is President and beneficial owner of J.J. Scoville and Associates, Inc., which received $89,934.36 as of March 24, 1997, from the Company for consulting services. Such services were provided upon terms substantially similar to those the Company would have engaged in with unrelated parties. On November 13, 1996, the Company sold 300,000 shares of Series E Redeemable Convertible Preferred Stock in a private offering to two of the Company's directors and received cash proceeds of $3,000,000. Each Series E share has a warrant to purchase ten shares of the Company's common stock associated with it. The directors are Edward F. Heil and Rotchford D. Barker. Subsequently, directors Keith D. Bronstein and Paul C. Bergson purchased 25,000 and 1,000 shares, respectively, of the Series E preferred stock and associated Warrants from Mr. Barker at the issue price. For a full discussion of the terms of the Series E preferred stock, please see the discussion thereof at Proposal No. 4 on page 4 hereof. For details of the Company's Series D and Series E preferred stock, refer to Note 8 to the 1996 financial statements of the Form 10-K, found in the Annual Report accompanying this Proxy Statement. STOCKHOLDER PROPOSALS AT THE NEXT ANNUAL MEETING OF STOCKHOLDERS Stockholder proposals submitted for inclusion in the Company's 1998 proxy materials and consideration at the 1998 annual meeting of stockholders must be received by the Company no later than December 23, 1997. Stockholder proposals should be submitted to the Secretary of American Ecology Corporation, 805 W. Idaho, Suite 200, Boise, Idaho 83702. Any such proposal should comply with the Securities and Exchange Commission rules governing stockholder proposals submitted for inclusion in proxy materials. OTHER MATTERS The management of the Company knows of no other matters which may come before the Meeting. However, if any matters other than those referred to above should properly come before the Meeting, it is the intention of the persons named in the enclosed proxy to vote all proxies in accordance with their best judgment. April 22, 1997 AMERICAN ECOLOGY CORPORATION 18 21 AMERICAN ECOLOGY CORPORATION THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY The undersigned, hereby revoking all prior proxies, appoints Jack K. Lemley, Robert S. Thorn and Ian P.F. Dorling, and each of them, proxies with full and several power of substitution, to represent and to vote all the shares of Common Stock of AMERICAN ECOLOGY CORPORATION that the undersigned would be entitled to vote if personally present at the Annual Meeting of Stockholders of AMERICAN ECOLOGY CORPORATION to be held on May 22, 1997, and at any adjournment(s) thereof. THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFIC INDICATIONS ON THE REVERSE SIDE. IN THE ABSENCE OF SUCH INDICATIONS, A SIGNED PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4, AND IN ACCORDANCE WITH THE JUDGMENT OF THE PROXY WITH RESPECT TO ANY OTHER BUSINESS PROPERLY BEFORE THE MEETING. 22 PLEASE MARK YOUR VOTES AS [X] INDICATED IN THIS EXAMPLE 1. Election of Directors (to withhold authority to vote for any individual members, strike a line through the members name in the list below) FOR all nominees WITHHOLD AUTHORITY Rotchford D. Barker, Paul listed to the right to vote for all nominees Bergson, Keith D. Bronstein, (except as marked to the listed to the right Patricial M. Eckert, Edward contrary) F. Heil, Jack K. Lemley, Paul F. Schutt, John J. Scoville [ ] [ ] 2. To amend Article FOURTH of the Restated Certificate of Incorporation of American Ecology Corporation [ ] FOR [ ] AGAINST [ ] ABSTAIN 3. To ratify the selection of Balukoff, Lindstrom & Co., P.A. as independent auditors for American Ecology Corporation [ ] FOR [ ] AGAINST [ ] ABSTAIN 4. To ratify the issuance of Series E Redeemable Convertible Preferred Stock and associated warrants [ ] FOR [ ] AGAINST [ ] ABSTAIN 5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. The undersigned acknowledge(s) receipt of the Notice of the aforesaid Annual Meeting, the Proxy Statement and Annual Report accompany the same, each dated April 22, 1997. Date___________________________________, 1997 _____________________________________________ SIGNATURE OF STOCKHOLDER _____________________________________________ _____________________________________________ SIGNATURE IF HELD JOINTLY 23 INDEX TO EXHIBITS Exhibit No. Description ------- ----------- 99.5 Purchase Agreement dated and effective as of November 13, 1996 by and among the Company and Edward F. Heil and Rotchford L. Barker. 99.6 Form of: Certificate of Designation, Preferences and Rights of Series E Redeemable Convertible Preferred Stock of American Ecology Corporation. 99.7 Form of: Warrant to Purchase Common Stock of American Ecology Corporation. EX-99.5 2 PURCHASE AGREEMENT DATED - 11/13/96 1 EXHIBIT 99.5 PURCHASE AGREEMENT This Purchase Agreement ("Agreement") is dated and effective as of November 13, 1996, and is entered into by and among (i) American Ecology Corporation, a Delaware corporation (the "Company"), (ii) Edward F. Heil ("Heil"), and (iii) Rotchford Barker ("Barker") (the individuals identified in clauses (ii) through (iii) being herein referred to collectively as "Purchasers" and severally as "Purchaser"). In consideration of the agreements and undertakings of the parties hereinafter set forth, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows. 1. Purchase and Sale of Securities. Subject to the terms and conditions set forth in this Agreement the Company will issue and sell to each Purchaser on the date hereof and each Purchaser will purchase from the Company on the date hereof the number of shares of Series E Preferred Stock (as hereinafter defined) specified on Schedule 1 and (b) the number of Warrants (as hereinafter defined) specified on Schedule 1 of the Company (collectively the Series E Preferred Stock, the Warrants and any common stock issued in respect of the foregoing are sometimes referred to as the "Securities"). The aggregate purchase price of each (i) one share of Series E Preferred Stock and (ii) ten Warrants shall be $10.00, which shall be paid to the Company in cash. The obligations of the respective Purchasers to purchase shares of Series E Preferred Stock and Warrants pursuant to this Agreement are several, and not joint. The purchase and sale of the shares of Series E Preferred Stock and Warrants shall occur at the offices of Jenner & Block, Chicago, Illinois not later than the close of business on the date hereof, or at such other time and place as may be agreed to by all of the parties to this Agreement. As used in this Purchase Agreement, the term "Series E Preferred Stock" means a series of preferred stock of the Company established by the Certificate of Designation, Preferences and Rights of Series E Redeemable Convertible Preferred Stock of American Ecology Corporation (the "Certificate of Designation") attached hereto as Exhibit A. As used in this Agreement, the term "Warrant" means a warrant to purchase common stock of the Company in the form attached hereto as Exhibit B. 2. Representations of the Company. The Company represents and warrants to each Purchaser as follows: 2.1 The Company has all requisite corporate power and authority to enter into this Agreement and to perform all the obligations required to be performed by the Company under this Agreement. 2.2 This Agreement has been duly executed and delivered by the Company, and, upon execution and delivery by the Purchasers, this Agreement will be the valid and legally binding obligation of the Company, enforceable as to the Company in accordance with its terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application relating to or affecting enforcement of creditors' rights and equitable remedies. 2.3 All shares of Series E Preferred Stock being issued shall be, all Warrants being issued shall be, and all shares of common Stock issuable pursuant to such Warrants ("Underlying Common Shares") shall be upon issuance of such Underlying Common Shares, duly authorized, validly issued, fully paid and nonassessable and issued without violation of and not subject to any preemptive right; and a number of shares of authorized and unissued Common Stock of the Company equal to the number of such Underlying Common Shares shall have been reserved for issuance on or before July 1, 1997. 3. Representations of Purchasers. Each Purchaser, severally and not jointly, represents and warrants to the Company as to himself as follows: 3.1. Such Purchaser has all requisite authority to enter into this Agreement and to perform all the obligations required to be performed by such Purchaser under this Agreement. This Agreement has been duly executed and delivered by such Purchaser, and, upon execution and delivery by the Company and the other Purchasers, this Agreement will be the valid and legally binding obligation of such Purchaser, enforceable as to such Purchaser in accordance with its terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application relating to or affecting enforcement of creditors' rights and equitable remedies. 3.2. Neither the Company nor any person acting or purporting to act on behalf of the Company has offered or sold any of the Securities to such Purchaser by means of any form of general solicitation or general advertising. Such Purchaser is acquiring the Securities to be purchased by such Purchaser under this Agreement solely for his own beneficial 19 2 account, for investment purposes, and not with any view to, or for resale in connection with, any distribution of any such Securities. Such Purchaser understands that the Securities have not been registered under the Securities Act of 1933, as amended (the "Act"), or any state securities laws, by reason of specific exemptions under the provisions thereof which depend in part upon the investment intent of such Purchaser and upon the accuracy of the other representations made by such Purchaser in this Agreement. Such Purchaser understands that the Company is relying upon the representations and agreements contained in this Agreement for the purpose of determining that the transactions contemplated by this Agreement meet the requirements for such exemptions. Such Purchaser is a director of the Company and an "accredited investor" as defined in Regulation D pursuant to the Act. 4. Restrictive Legends. 4.1. Each certificate or other document representing any of the Securities issued pursuant to this Agreement shall be stamped or otherwise imprinted with a restrictive legend in the form set forth on the form of the Warrant attached hereto as an exhibit (or, in the case of shares of Series E Preferred Stock or shares of common stock issuable upon conversion thereof or exercise of the Warrants, an equivalent legend appropriately modified to refer to such Securities). In the event of any transfer or reissuance of any such Security, the certificates or other instruments representing such Securities shall continue to bear such legends. 4.2. The Company hereby agrees that it will promptly deliver or cause to be delivered a new certificate or certificates or instrument or instruments for any Securities, which certificate or certificates or instrument or instruments will not bear the legends referred to above, upon determination by the Company that such Securities have been held beneficially by the holder for at least three years and that such holder is not and has not been within the preceding three months an affiliate of the Company. All determinations pursuant to the preceding sentence shall be made in accordance with Rule 144(k) under the Act or any applicable successor rule. In the event that a period shorter than specified above is permitted by reason of the amendment or replacement of such Rule 144(k), then the Company shall impose no greater restriction than the restriction imposed as the result of such amendment or replacement. 5. Conditions to the Obligations of the Purchasers. The obligations of each Purchaser to purchase the Securities to be purchased by such Purchaser under this Agreement are subject to the satisfaction or waiver by such Purchaser of the following conditions: 5.1. The Company shall, against receipt of payment therefore as provided herein, deliver to the Purchaser the certificates or other instruments evidencing such Securities in the form contemplated by this Agreement; and 5.2. The representations of the Company set forth in Section 2 of the Agreement shall be true and correct in all material respects at the time of such purchase and sale of such Securities. 6. Conditions to the Obligations of the Company. The obligations of the Company to issue and sell the Securities to be issued and sold by the Company under this Agreement are subject to the satisfaction or waiver by the Company of the following conditions: 6.1. Each Purchaser shall have delivered payment as provided herein against delivery to such Purchaser of the certificates or other instruments evidencing such Securities in the form contemplated by this Agreement; and 6.2. The representations of each Purchaser set forth in Section 3 of this Agreement shall be true and correct in all material respects at the time of such purchase and sale of such Securities; and 6.3. The Company shall have received such consents, waivers and agreements from its secured bank lender as shall be required, in the judgment of the Company, to permit the issuance and sale of such Securities with the result that, upon consummation of such issuance and sale, the Company shall not be in default (or shall be subject to a forbearance agreement reasonably satisfactory to the Company with respect to any such default) under the provisions of any agreement or instrument governing or evidencing any obligations of the Company to its secured bank lender. 7. Registration Rights. 7.1. As used in this Section 7: 20 3 (a) The terms "register," "registered" and "registration" refer to a registration effective by preparing and filing a registration statement in compliance with the Act, and the declaration or ordering of the effectiveness of such registration statement. (b) The term "Registrable Securities" means: (i) any common stock of the Company ("Common Stock") issued, or issuable, upon the conversion of any Series E Preferred Stock regardless of whether such conversion has taken place at any time; (ii) any Common Stock issued, or issuable upon the conversion or exercise of any Warrant, regardless of whether such exercise has taken place at any time, or any warrant, right or other security which is issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, any Series E Preferred Stock or any Warrant; and (iii) any Common Stock issued as a dividend on any Series E Preferred Stock; excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which his rights under this Section 7 are not assigned. (c) The term "Holder" means any holder of Registrable Securities who acquired such Registrable Securities in a transaction or series of transactions not involving any public offering or any sale pursuant to Rule 144 under the Act. 7.2. The Company hereby agrees that: (a) If at any time or from time to time, the Company determines to register any of its securities, either for its own account or the account of a security holder or holders, (other than a registration solely to implement an employee benefit plan or a registration on Form S-4 or a Rights Offering as such term is defined in the Certificate of Designation), the Company will: (i) promptly give to each Holder written notice thereof (which will include a list of the jurisdictions in which the Company intends to attempt to qualify such securities under the applicable blue sky law or other state securities laws); and (ii) include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in any written request or requests by any Holder received by the Company within twenty days after such written notice is given and make its best efforts to qualify all the Registrable Securities specified in such request under the blue sky or other securities laws of any jurisdiction which said Holders may reasonably request. (b) If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company will so advise the Holders as a part of the written notice given pursuant to Section 7.2(a)(i) above. In such event, the right of any Holder to registration pursuant to this Section 7.2 will be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute Registrable Securities through such underwriting (together with the Company and the other shareholders distributing their securities through such underwriting) will enter into an underwriting agreement in customary form, satisfactory to the Company, with the underwriter or underwriters selected for such underwriting by the Company. Notwithstanding any other provision of this Section 7.2, if the managing underwriter determines in good faith that marketing factors require a limitation of the number of shares to be underwritten for the accounts of Holders of Registrable Securities and other securities of the Company entitled to registration pursuant to agreements with the Company, the managing underwriter may limit the number of Registrable Securities and other securities of the Company entitled to registration pursuant to agreements with the Company to be included in the registration. The Company will so advise all Holders of Registrable Securities and all shareholders owning securities of the Company entitled to registration pursuant to agreements with the Company and participating in such registration, and the number of shares of Registrable Securities and such other securities that may be included in the registration and underwriting will be allocated among all Holders and other shareholders in proportion, as nearly as practicable, to the respective amounts of Registrable Securities and such other securities entitled to such registration held by such Holders and other shareholders at the time of filing the registration statement. No Registrable Securities excluded from the underwriting by reason of the underwriter's marketing limitation will be included in such registration. If any Holder disapproves of the terms of the underwriting, he may elect to withdraw therefrom by written notice to the Company and the managing underwriter. The Registrable Securities so withdrawn will also be withdrawn from registration; provided, however, that, if by the withdrawal of such Registrable Securities or any other securities entitled to registration pursuant to agreements with the Company a greater number of Registrable Securities held by Holders may be included in such registration (up to the 21 4 maximum of any limitation imposed by the managing underwriter) then the Company will offer to all Holders and other shareholders who have included Registrable Securities and such other securities in the registration the right to include additional Registrable Securities or other securities in portion to the amounts of their Registrable Securities and such other securities so included. (c) The Company shall cooperate and communicate with all Holders wishing to participate in any registration pursuant to this Section 7.2 so as to permit them a reasonable and effective opportunity to participate, including providing prompt notice of any stop orders and copies of all registration statements and prospectuses filed with the Securities and Exchange Commission, including any amendments, and any such other materials and information that is provided to other participating securities holders. The Company will bear all expenses of any registration, including filing fees, blue sky fees and expenses, accounting and legal fees and expenses, printing and mailing costs and other similar expenses, but will not bear any expenses (including fees of legal counsel) incurred by participating Holders and will not bear any underwriting discount or concession or similar sale costs with respect to Registrable Securities offered and sold by or for participating Holders. The Company and the participating Holders will agree to indemnify each other or to contribute to one another on reasonable and customary terms. 8. Selection of Shares to be Redeemed or Converted. If less than all the Series E Preferred Stock is required to be redeemed or converted pursuant to Subsections 5(a) or 6(a) of the Certificate of Designation, the shares to be redeemed or converted shall be determined by written agreement of the Purchasers or, if the Purchasers fail to tender a written agreement to the Company prior to the time for redemption or conversion, the shares to be redeemed or converted shall be determined as follows: 8.1. The first 100,000 shares of Series E Preferred Stock redeemed pursuant to Subsection 5(a) of the Certificate of Designation shall be redeemed from those shares purchased by Barker and any remaining shares redeemed shall be redeemed ratably from the balance of the Series E Preferred Stock purchased by each Purchaser after deducting therefrom any Series E Preferred Stock tendered by the Purchaser to pay for Common Stock purchased in a Rights Offering pursuant to Subsection 5(b) of the Certificate of Designation. 8.2. Any Series E Preferred Stock converted pursuant to Subsection 6(a) of the Certification of Designation shall come ratably from the Series E Preferred Stock purchased by each Purchaser after deducting therefrom any Series E Preferred Stock tendered by the Purchaser to pay for Common Stock purchased in a Rights Offering pursuant to Subsection 5(b) of the Certificate of Designation. 8.3. Should either or both Purchasers transfer all or any part of their Series E Preferred Stock, the shares transferred shall be treated for purposes of the computations in this Section 8 as still owned by the transferring Purchaser and a pro rata portion of any shares required to be redeemed or converted from the shares originally purchased by the Purchaser shall be converted or redeemed from those transferred. The Purchasers shall notify each transferee of the restrictions in this Agreement and shall require that each transferee notify any transferee from it of such restrictions. 9. Miscellaneous. 9.1 Remedies Not Exclusive. No remedy conferred by any of the specific provisions of this Agreement is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. The election of any one or more remedies by any party hereto shall not constitute a waiver of the right to pursue other available remedies. 9.2. Parties Bound. Except to the extent otherwise expressly provided herein, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, representatives, administrators, guardians, successors and assigns; and no other person shall have any right, benefit or obligation hereunder. 9.3. Notices. All notices, reports records or other communications that are required or permitted to be given to the parties under this Agreement shall be sufficient in all respects if given in writing and delivered in person, by telecopy, by overnight courier or by registered or certified mail, postage prepaid, return receipt requested, to the receiving party at the following address: If to a Purchaser, to him at the most recent address furnished by him to the Company; 22 5 If to the Company, to the Company's main office; or to such other address as such party may have given to the other parties by notice pursuant to this Section 9.3. Notice shall be deemed given on the date of delivery, in the case of personal delivery or telecopy, or on the delivery or refusal date, as specified on the return receipt, in the case of overnight courier or registered or certified mail. 9.4. Choice of Law. This Agreement shall be construed, interpreted, and the rights of the parties determined in accordance with, the laws of the State of Delaware, without giving effect to any conflicts of laws principles. 9.5. Entire Agreement; Amendments and Waivers; Assignment. This Agreement, together with all exhibits and schedules hereto, constitutes the entire agreement between the parties pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, of the parties. Except as set forth herein, there are no warranties, representations or other agreements between the parties in connection with the subject matter hereof. No supplement, modification or waiver of this Agreement shall be binding unless it shall be specifically designated to be a supplement, modification or wavier of this Agreement and shall be executed in writing by each party to be bound thereby. No wavier of any of the provisions of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. In the event of any permitted transfer of any Securities, any rights of the holder thereof pursuant to Section 7 shall be transferred automatically. Except as set forth in the preceding sentence and except as provided in Section 8 hereof, this Agreement may not be assigned by operation of law or otherwise. 9.6. Further Assurances. From time to time hereafter and without further consideration, each of the parties hereto shall execute and deliver such additional or further instruments of conveyance, assignment and transfer and take such actions as any of the other parties hereto may reasonably request in order to more effectively consummate the transactions contemplated by this Agreement or as shall be reasonably necessary or appropriate in connection with the carrying out of the parties' respective obligations hereunder or the purposes of this Agreement. 9.7. Multiple Counterparts. This Agreement may be executed in or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 9.8. Headings. The headings of the several Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 23 6 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of November 13, 1996. AMERICAN ECOLOGY CORPORATION By:/s/ ---------------------------------- Jack K. Lemley Chairman & CEO /s/ ------------------------------------- Edward F. Heil /s/ ------------------------------------- Rotchford D. Barker 24 7 SCHEDULE 1
Aggregate Purchase Price of Series E Number of Shares Preferred Stock of Series E Number of Shares and Warrants Purchaser Preferred Stock Warrants to be Purchased - --------- --------------- -------- --------------- Rotchford Barker 200,000 2,000,000 $2,000,000 Edward F. Heil 100,000 1,000,000 $1,000,000
25 EX-99.6 3 FORM OF: CERTIFICATE OF DESIGNATION 1 EXHIBIT 99.6 CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES E REDEEMABLE CONVERTIBLE PREFERRED STOCK OF AMERICAN ECOLOGY CORPORATION American Ecology Corporation, a corporation organized and existing under the Delaware General Corporation Law, (the "Corporation") DOES HEREBY CERTIFY: That, effective October 31, 1996, pursuant to the authority conferred upon the Board of Directors by the Amended and Restated Certificate of Incorporation of the Corporation and pursuant to the provisions of Section 151(a) and other applicable provisions of the Delaware General Corporation Law, the Board of Directors (or, as and to the extent authorized pursuant to applicable law, a committee acting with the authority of the Board of Directors) duly adopted, by all necessary action on the part of the Corporation, the following resolution creating a series of 300,000 shares of preferred stock designated as Series E Redeemable Convertible Preferred Stock: RESOLVED, that pursuant to the authority vested in the Board of Directors of this Corporation in accordance with the provisions of its Amended and Restated Certificate of Incorporation, a series of preferred stock of the Corporation be and it hereby is created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: Series E Redeemable Convertible Preferred Stock. 1. Designation. The series shall be designated as the "Series E Redeemable Convertible Preferred Stock" (the "Series E Preferred Stock"). 2. Number. The number of shares of the Series E Preferred Stock authorized to be issued is 300,000. 3. Dividends. (a) The Corporation shall pay to the holders of the Series E Preferred Stock, a mandatory quarterly dividend at an annual rate of 11.25% of the Stated Amount (as such term is defined in Section 4 below) payable solely in the form of Common Stock of the Corporation, subject only to the Corporation being able to lawfully pay such dividend in accordance with applicable law. Dividends on the Series E Preferred Stock shall commence to accrue and are cumulative (whether or not declared) from the date on which such shares shall have been issued until the date on which such shares are redeemed, converted or exchanged. Such 1 2 dividends shall be mandatorily payable as stated above, in Common Stock of the Corporation at its Current Market Price (as defined below) on the date of payment, in equal quarterly payments in arrears on the last day of each fiscal quarter of the Corporation of each year or such earlier date on which a share of Series E Preferred Stock is redeemed, converted or exchanged (each such date being referred to herein as a "Dividend Payment Date"), commencing December 31, 1996, or if not paid on such Dividend Payment Date by reason of a prohibition against such payment pursuant to the first sentence of this Subsection (a) (a "Payment Prohibition"), then promptly when and to the extent no such Payment Prohibition continues to apply; provided, however, that the dividend payable in respect of the quarter ended on the first dividend payment date after the date on which such shares shall have been issued and in respect of any other quarter in which some or all of the Series E Preferred Stock was not outstanding for the entire quarter shall be reduced in proportion to the portion of such quarterly period in which such shares were not outstanding; and provided further, however, that if and to the extent that, at any dividend payment date, the Corporation shall fail to make any quarterly dividend payment on the Series E Preferred Stock (which failure shall only be permitted to the extent a Payment Prohibition applies), such unpaid dividend amount shall accumulate without interest until paid. Such dividends shall be paid to the Series E Preferred Stock stockholders of record on the last business day immediately preceding the date of payment. All partial dividends paid with respect to shares of the Series E Preferred Stock shall be paid pro rata to the holders entitled thereto in proportion to the total amount of dividends to which each is entitled. The "Current Market Price" of the Corporation's Common Stock on any given day shall be: (i) if the Common Stock is listed or admitted to unlisted trading privileges on any exchange registered with the Securities and Exchange Commission as a "national securities exchange" under the Securities Exchange Act of 1934 (a "National Securities Exchange"), the arithmetic average of the last sales price of the shares of Common Stock on the National Securities Exchange in or nearest the City of New York on which the shares of Common Stock shall be listed or admitted to unlisted trading privileges (or the quoted closing bid if there be no sales on such National Securities Exchange) on the ten most recently completed trading days prior to such day; or (ii) if the Common Stock is not so listed or admitted, the arithmetic average of the closing sales price of a share of Common Stock as quoted in The Nasdaq Stock Market on the ten most recently completed trading days prior to the day in question; or (iii) if the Common Stock is not so quoted, the arithmetic average of the mean between the high and low bid prices of a share of Common Stock in the over-the-counter market on the ten most recently completed trading days prior to the day in question as reported by National Quotation Bureau Incorporated or a similar organization. (b) So long as any shares of the Series E Preferred Stock are outstanding, unless all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series E Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) pay or declare any dividends, or make any other distributions, on any shares of stock ranking junior to the Series E Preferred Stock in respect of dividends or distribution of assets upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (a "Liquidation"); (ii) pay or declare any dividends, or make any other distributions, on any shares of stock ranking on a parity to the Series E Preferred Stock in respect of dividends or distribution of assets upon Liquidation, except dividends paid ratably on the Series E Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; or (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior to the Series E Preferred Stock in respect of dividends or distribution of assets upon Liquidation, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation raking junior to the Series E Preferred Stock in respect of dividends or distribution of assets upon Liquidation. Except as otherwise provided in this Subsection (b), the Board of Directors may declare and the Corporation may pay or set apart for payment dividends and other distributions on the common stock (the "Common Stock") and the preferred stock (the "Preferred Stock") of the Corporation ranking junior to or on a parity with the Series E Preferred Stock in respect of dividends or distributions of assets upon Liquidation, and may redeem, purchase, retire or otherwise acquire for consideration shares of Common Stock or Preferred Stock ranking junior to or on a parity with the Series E Preferred Stock in respect of dividends or distributions of assets upon Liquidation, and the holders of the Series E Preferred Stock shall not be entitled to share therein. (c) In the event the Corporation, not being in violation of the provisions of the preceding paragraph, shall distribute to all holders of its Common Stock (x) evidences of indebtedness or assets and property other than cash, (y) capital stock of the Corporation other than Common Stock, or (z) rights to purchase only (i) Common Stock (except in a Rights Offering as defined in Subsection 5(b) below) or (ii) units consisting of shares of Common Stock and warrants to purchase shares of Common Stock (all of such distributions collectively hereinafter called "Shared Distributions"), then the holders of the Series E Preferred Stock shall participate in such Shared Distributions as if immediately prior to the record date for determination of stockholders entitled to receive such Shared Distribution such holders had converted their shares of the Series E Preferred Stock in to shares of Common Stock. 4. Liquidation Rights. In the event of the Liquidation of the Corporation, the holders of the Series E Preferred Stock shall be entitled to have paid to them out of the assets of the Corporation, before any distribution is made to or set apart for the holders of Common Stock or of any other class or series of stock of the Corporation ranking junior to the Series E Preferred Stock in respect of distribution of assets upon Liquidation, an amount equal to $10. 00 per share 2 3 (the " Stated Amount"), plus unpaid dividends and Shared Distributions which have accrued but have not been paid on or prior to the date of final distribution to holders of the Series E Preferred Stock, and no more. The liquidation payment with respect to each outstanding fractional share of the Series E Preferred Stock shall be equal to a ratably proportionate amount of the liquidation payment with respect to each outstanding share of the Series E Preferred Stock. If upon any Liquidation of the Corporation the assets of the Corporation or proceeds thereof distributable among the holders of shares of the Series E Preferred Stock and the holders of any stock on a parity with the Series E Preferred Stock shall be insufficient to pay in full the preferential amounts payable to such holders, then such assets or the proceeds thereof shall be distributed among such holders ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. For purposes of this Section 4, the voluntary sale, lease, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation to, or a consolidation or merger of the Corporation with, one or more corporations shall not be deemed to be a Liquidation. 5. Redemption. (a) Shares of the Series E Preferred Stock shall be redeemed by the Corporation on the first business day (the "Redemption Date") following the issuance of Common Stock in a Rights Offering (as defined in Subsection 5(b) below) from the proceeds of such Rights Offering at the Stated Amount of such Series E Preferred Stock (in addition to the payment in Common Stock pursuant to Subsection 1 (a) above of dividends to the Redemption Date on the Series E Preferred Stock redeemed) to the extent that the purchase price of the Common Stock sold in the Rights Offering plus the Stated Amount of the Series E Preferred outstanding on the Redemption Date is in excess of $5,000,000. If less than all of the Series E Preferred Stock outstanding is redeemed, the Series E Preferred Stock to be redeemed shall be determined pursuant to the agreement for the initial purchase of the Series E Preferred Stock. Except as provided in the Subsection 5(a), the Series E Preferred Stock shall not be subject to redemption. Any Series E Preferred Stock called for redemption pursuant to this Subsection 5(a) but not tendered by the holder thereof for redemption shall be deemed cancelled and shall no longer be treated as outstanding and no dividends or Shared Distributions thereon or interest on the redemption price shall be paid in regard to the period on or after the Redemption Date. (b) The term "Rights Offering" shall refer to any offering of rights to acquire the Corporation's Common Stock made after October 31, 1996 and prior to June 30, 1997. The Corporation shall not make a Rights Offering without the consent of all the holders of the Series E Preferred Stock except on the terms set forth in this Subsection 5(b). Any Rights Offering shall be an offer, to all holders of record of the Corporation's Common Stock on or about the second business day preceding the date the registration of the Rights Offering is declared effective by the Securities and Exchange Commission, to purchase one share of Common Stock for each share of Common Stock held of record on such date at a purchase price of $1.00 per share payable, within 30 days after the effective date of such Rights Offering, either in cash or by tender of Series E Preferred Stock for exchange for such Common Stock at the Stated Amount of such Series E Preferred Stock. Any Series E Preferred Stock tendered in payment of the purchase price of Common Stock in the Rights Offering at its Stated Amount shall be cancelled but dividends in Common Stock shall be paid thereon pursuant to Section l(a) to the date of exchange. Nothing herein or in any other document shall obligate the Corporation to make any Rights Offering. Other than pursuant to a Rights Offering or to options, warrants, or other rights outstanding prior to November 1, 1996, the Corporation shall not issue any shares of Common Stock in addition to these outstanding on October 3 1, 1996 prior to July 1, 1997. 6. Conversion Rights. (a) If there is a Rights Offering and less than 5,000,000 shares of Common Stock are sold pursuant to the Rights Offering, one share of Series E Preferred Stock shall be converted into 10 shares of fully paid and nonassessable Common Stock for each 10 shares or portion thereof of Common Stock less than 5,000,000 sold in the Rights Offering. Such conversion shall occur on the first business day (the "Mandatory Conversion Date") immediately following the expiration of the Rights Offering. If less than all of the Series E Preferred Stock is required to be converted, the Series E Preferred Stock to be converted shall be determined pursuant to the agreement for the initial purchase of the Series E Preferred Stock. Any Series E Preferred Stock required to be converted pursuant to this Subsection 6(a) but not tendered for conversion shall be deemed cancelled on the Mandatory Conversion Date and shall no longer be treated as 3 4 outstanding. Dividends accrued to the Mandatory Conversion Date shall be paid pursuant to Subsection l(a) on the Series E Preferred Stock converted but no dividends or Shared Distributions thereon shall be paid in regard to the period on and after the Mandatory Conversion Date. For all purposes the holders of record of the Series E Preferred Stock required to be converted on the Mandatory Conversion Date shall be deemed to have become the record holder or holders of the Common Stock in to which such Series E Preferred Stock is convertible on the Mandatory Conversion Date. (b) Subject to the provisions for adjustment hereinafter set forth, shares of Series E Preferred Stock may be converted, at the option of the holder thereof, at any time or from time to time after June 30, 1997 into fully paid and nonassessable whole shares of Common Stock at rate of 10 shares of Common Stock for each share of the Series D Preferred Stock duly surrendered for conversion. Dividends accrued to the Date of Conversion (as defined below), shall be paid pursuant to Subsection 1(a) on the Series E Preferred Stock converted but no dividends or Shared Distributions with respect to the shares of Series D Preferred Stock converted shall be paid in regard to the period on and after the Date of Conversion. (c) Each holder of the Series E Preferred Stock desiring to exercise such holder's right of conversion pursuant to Subsection 6(b) shall deliver written notice of election to convert, stating the names and addresses of the persons to whom the Common Stock is to be issued, and shall surrender the certificate or certificates for the shares of Series E Preferred Stock to be converted, duly endorsed or accompanied by proper instruments of transfer (unless such endorsement or instruments are waived by the Corporation) to the Corporation during usual business hours at the office of the transfer agent of the Corporation for the transfer of its Common Stock in Dallas, Texas (or such other place as may be designated by the Corporation upon written notice to all holders of the Series E Preferred Stock). Upon receipt by the Corporation of any such notice of election to convert shares of the Series E Preferred Stock, and upon surrender of the certificate or certificates therefor, the Corporation shall execute and deliver, as soon as practicable, to the converting holder, or to such holder's nominee or nominees, a certificate or certificates for the number of shares of Common Stock resulting from such conversion, together with any cash adjustment in lieu of fractional shares as provided in Subsection (e). For all purposes, the rights of a converting holder, as such, shall cease, and the person or persons in whose name or names the certificate or certificates for Common Stock issuable upon such conversion are to be issued shall be deemed to have become the record holder or holders of such Common Stock at the close of business on the day (the "Date of Conversion") on which delivery of such notice or the surrender of the certificate or certificates for such shares (whichever shall later occur) shall be made. (d) The Corporation shall pay all issue costs, if any, incurred in respect to the Common Stock delivered on conversion; provided, however, that the Corporation shall not be required to pay transfer or other taxes, if any, incurred by reason of the issuance or delivery of such Common Stock in names other than those in which the shares surrendered for conversion are registered, and no delivery of certificates for such Common Stock shall be made unless and until there has been paid to the Corporation the amount of any such taxes, or there shall have been established to the satisfaction of the Corporation that such taxes have been or are not required to be paid. The Corporation shall not close its books against the transfer of Series E Preferred Stock or of Common Stock issued or issuable upon conversion of Series E Preferred Stock in any manner which interferes with the timely conversion of Series E Preferred Stock. The Corporation shall assist and cooperate with any holder of shares of Series E Preferred Stock required to make any required governmental filings or obtain any governmental approval prior to or in connection with any conversion of such shares hereunder (including, without limitation, making any filings required to be made by the Corporation). All shares of Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Corporation shall take all such actions as may be necessary to assure that all such shares of Common Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Corporation upon each such issuance). (e) The Corporation shall not be required to issue fractional shares of Common Stock upon conversion of shares of the Series E Preferred Stock. If more than one share of the Series E Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares so surrendered. If any fractional interest in a share of Common Stock would be deliverable upon the conversion of any shares, the Corporation shall, in lieu of delivering such fractional share, make a cash payment, as an adjustment in respect of such undelivered fraction of a share, in an amount equal to the same fraction of the Current Market Price of one share of the Common Stock on the last business day before the Date of Conversion. 4 5 (f) The number of shares of Common Stock into which each share of the Series E Preferred Stock is convertible (the "Conversion Rate") shall be subject to adjustment from time to time as follows: (i) In case the Corporation shall (A) pay a dividend in or make a distribution of Common Stock on outstanding Common Stock, (B) subdivide outstanding Common Stock into a larger number of shares of Common Stock by reclassification or otherwise, or (C) combine outstanding Common Stock into a smaller number of shares of Common Stock by reclassification or otherwise, the Conversion Rate in effect immediately prior thereto shall be adjusted proportionately so that the holder of a share of the Series E Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock that such holder would have owned after the happening of any of the events described above had such share been converted immediately prior to the happening of such event. An adjustment made pursuant to this subparagraph (i) shall become effective retroactively to immediately after the record date in the case of a share dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination. (ii) In case of any capital reorganization or reclassification of the shares of Common Stock (except as provided in subparagraph (i) above), or in case of any consolidation or merger to which the Corporation is a party (other than a merger in which the Corporation is the surviving corporation and which does not result in any capital reorganization or reclassification of Common Stock), or in case of any sale or conveyance to another corporation of all or substantially all of the property and assets of the Corporation, and if, in connection with any such consolidation, merger, sale or conveyance, shares or other securities or property shall be issuable or deliverable in exchange for shares of Common Stock, provision shall be made as part of the terms of such capital reorganization or reclassification, consolidation, merger, sale or conveyance that the holder of each share of the Series E Preferred Stock thereafter surrendered for conversion shall have the right to convert such share into the same kind and amount of stock and other securities and property as would have been receivable upon such capital reorganization or reclassification, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock into which such share might have been converted immediately prior thereto. In any such case, appropriate provision (as determined to be equitable in the business judgment of the Board of Directors) shall be made for the application of Section 6 with respect to the rights and interest thereafter of the holders of the Series E Preferred Stock to the end that such Section (including adjustments of the Conversion Rate) shall be reflected thereafter, as nearly as reasonably practicable, in all subsequent conversions of the Series E Preferred Stock. The Corporation shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof, the successor corporation (if other than the Corporation) resulting from consolidation or merger or the corporation purchasing such assets assumes by written instrument (in a manner determined to be equitable in the business judgment of the Board of Directors to the holders of the Series E Preferred Stock then outstanding), the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire. (iii) In case the Corporation shall issue, other than pursuant to a Rights Offering, pro rata to the holders of shares of its Common Stock rights or warrants entitling them, during a period not exceeding 30 days after the record date mentioned below, to subscribe for or purchase only shares of its Common Stock at a price per share less than the average of the Current Market Price (as defined above) of the Common Stock determined as of such record date, the number of shares of its Common Stock into which each share of the Series E Preferred Stock shall be convertible thereafter shall be determined by multiplying the number of shares of Common Stock into which each such share was convertible theretofore by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding immediately prior to such record date plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the denominator shall be the number of shares of Common Stock outstanding immediately prior to such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares being offered would purchase at such Current Market Price. Such adjustment shall be made whenever such rights or warrants are issued and shall become retroactively effective immediately after the record date for the determination of the stockholders entitled to receive such rights or warrants. To the extent that shares of Common Stock are not delivered after the expiration of such rights or warrants, the Conversion Rate shall be readjusted to the Conversion Rate that would then be in effect had the adjustments made upon the issuance of such rights or warrants been made upon the basis of delivery of only the number of shares of Common Stock actually delivered. 5 6 (iv) In case the Corporation shall issue, other than pursuant to a Rights Offering, pro rata to the holders of shares of its Common Stock rights or warrants to subscribe for or purchase only (A) shares of its Common Stock except as described in subparagraph (iii) above, or (B) units consisting of shares of Common Stock and warrants to purchase shares of Common Stock, the number of shares of its Common Stock into which each share of the Series E Preferred Stock shall be convertible thereafter shall be determined by multiplying the number of shares of Common Stock into which each such share was convertible theretofore by a fraction, of which the numerator shall be the Current Market Price for a share of Common Stock determined as of the record date mentioned below, and of which the denominator shall be such Current Market Price less the fair market value (as determined in the business judgment of the Board of Directors) as of such record date of the rights or warrants distributed pro rata to one of the outstanding shares of Common Stock. Such adjustment shall be made whenever such distribution is made and shall become retroactively effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. (v) In case the Corporation shall issue or sell any shares (including treasury shares) of Common Stock ("Additional Shares of Common Stock"), whether or not subsequently reacquired or retired by the Corporation, other than shares of Common Stock issued (A) upon exercise of warrants to purchase shares of Common Stock issued prior to or substantially simultaneously with the first issuance of shares of the Series E Preferred Stock, (B) pursuant to any stock option plan or other stock incentive or stock ownership plan for employees or management of the Corporation, (C) pursuant to a Rights Offering, or (D) in payment of dividends on the Series E Preferred Stock, for a cash purchase price per share that is less than the quotient of $10.00 divided by the number of shares of Common Stock into which each share of Series E Preferred Stock was theretofore convertible (such quotient, the "Conversion Price"), the number of shares of Common Stock into which each share of the Series E Preferred Stock shall be convertible thereafter shall be determined by multiplying the number of shares of Common Stock into which each such share was convertible theretofore by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding immediately after such issuance or sale, and of which the denominator shall be the number of shares of Common Stock outstanding immediately prior to such issuance or sale plus the number of shares of Common Stock that the aggregate consideration received by the Corporation for such Additional Shares of Common Stock so issued or sold would purchase at the Conversion Price. Such adjustment shall be made whenever any such Additional Shares of Common Stock are so issued or sold. The foregoing provisions for adjustment of the Conversion Rate shall apply in each successive instance in which an adjustment is required thereby. No adjustment in the Conversion Rate resulting from the application of the foregoing provisions is to be given effect unless, by making such adjustment, the Conversion Rate in effect immediately prior to such adjustment would be changed thereby by 1% or more, but any adjustment that would change the Conversion Rate by less than 1% is to be carried forward and given effect in making future adjustments; provided, however, that each adjustment of the conversion Rate shall in all events be made not later than three years from the date such adjustment would have been required to be made except for the provisions of this sentence. All calculations under this Section 6 shall be made to the nearest one-hundredth (1/100th) of a share. Shares of Common Stock owned by or held for the account of the Corporation shall not be deemed to be outstanding for the purposes of any computation made under this Section 6. Whenever the number of shares of Common Stock deliverable upon the conversion of shares of the Series E Preferred Stock shall be adjusted pursuant to the provisions hereof, the Corporation shall forthwith file at its principal office and with any transfer agent for the Series E Preferred Stock and for the Common Stock a statement, signed by the President or one of the Vice-Presidents of the Corporation and by its Treasurer or one of its Assistant Treasurers, stating the adjusted number of shares of Common Stock deliverable per share of the Series E Preferred Stock and setting forth in reasonable detail, the method of calculation and the facts requiring such adjustment and upon which such calculation is based, and shall mail a notice of such adjustment to each holder of record of the Series E Preferred Stock. Each adjustment shall remain in effect until a subsequent adjustment hereunder is required. In the event: (x) of the occurrence of any of the events referred to in subparagraphs (i), (ii), (iii) and (iv) above; or (y) of the Liquidation of the Corporation; 6 7 then the Corporation shall cause to be mailed to any transfer agent for the Series E Preferred Stock and to the holders of record of the outstanding shares of the Series E Preferred Stock at least 20 days prior to the applicable date hereinafter specified, a notice describing the event and stating the effect, if any, that such event will have upon the Conversion Rate, and (A) the date on which a record is to be taken for the purpose of a distribution referred to in subparagraphs (i), (iii) or (iv) above, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such distribution are to be determined, or (B) the date on which any subdivision, combination or other capital reorganization or reclassification or any consolidation, merger, sale or conveyance referred to in subparagraphs (i) or (ii) above or such Liquidation is expected to become effective. The Corporation will at all times reserve and keep available for issuance upon conversion of the Series E Preferred Stock the number of shares of Common Stock that is equal to the number of shares of the Series E Preferred Stock outstanding multiplied by the Conversion Rate; provided, however, that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of the conversion of the outstanding shares of the Series E Preferred Stock by delivery of shares of Common Stock that are held in the treasury of the Corporation. The Corporation covenants that all shares of Common Stock that shall be issued upon conversion of the shares of the Series E Preferred Stock will, upon issue, be fully paid and nonassessable and not subject to any preemptive rights. The shares of Common Stock issuable upon conversion of the shares of the Series E Preferred Stock when the same shall be issued in accordance with the terms of the Series E Preferred Stock are hereby declared to be and shall be fully paid nonassessable shares of Common Stock and not liable to any calls or assessments thereon, and the holders thereof shall not be liable for any further payments in respect thereof. "Common Stock" when used in Section 6 with reference to the Common Stock into which the Series E Preferred Stock is convertible and when used in Section 8 below, shall mean only Common Stock as authorized by the Restated Certificate of Incorporation of the Corporation, as amended to the date hereof, and any shares into which such Common Stock may thereafter have been changed, and, when otherwise used in Section 6 and when used in Section 3, shall also include shares of the Corporation of any other class or series, whether now or hereafter authorized, that ranks or is entitled to participation, as to payment of assets upon Liquidation and payment of dividends, substantially on a parity with such Common Stock or other class of shares into which such Common Stock may have been changed. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion privilege of the holders of the Series E Preferred Stock against dilution or other impairment. Without limiting the generality of the foregoing, the Corporation (1) will not increase the par value of any shares of stock receivable upon conversion of the Series E Preferred Stock above the Conversion Price then in effect, and (2) will take all such actions as may be necessary or appropriate in order that the Corporation may validly and legally issue fully paid and nonassessable shares of stock upon the conversion in full of all Series E Preferred Stock from time to time outstanding. 7. Voting Rights. Except as otherwise required by applicable law, the holders of the Series E Preferred Stock shall have no voting rights or powers. 8. Ranking. The Series E Preferred Stock shall rank senior to the Common Stock (as defined in Section 6) and to all other series of the Corporation's preferred stock as to the payment of dividends and Shared Distributions, and as to the distribution of the Corporation's assets, unless the terms and designations of any such series of preferred stock shall provide otherwise, provided, however, that in no event shall the Series E Preferred Stock rank junior to any other class or series of the Corporation's capital stock. 9. Other Rights. The holders of the Series E Preferred Stock shall not have any other preferences or special rights. 10. Registration of Transfer. The Corporation shall keep at its principal office a register for the registration of Series E Preferred Stock. Upon the surrender of any certificate representing Series E Preferred Stock at such place, the Corporation shall, at the request of the record holder of such certificate, execute and deliver (at the Corporation's expense) 7 8 a new certificate or certificates in exchange therefor representing in the aggregate the number of shares of Series E Preferred Stock represented by the surrendered certificate. Each such new certificate shall be registered in such name (upon satisfactory compliance with all applicable securities laws) and shall represent such number of Shares as is requested by the holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate, and dividends shall accrue on the Series E Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such Series E Preferred Stock represented by the surrendered certificate. 11. Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of any class of Series E Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that the holder's own agreement shall be satisfactory), or, in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on the Series E Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate. 12. Amendment and Waiver. Any amendment, modification or waiver shall be binding or effective with respect to any provision of Sections 1 to 12 hereof with the prior written consent of all the holders of the Series E Preferred Stock outstanding at the time such action is taken. IN WITNESS WHEREOF, the undersigned officers of the Corporation have executed and subscribed this Certificate this 13th day of November, 1996. AMERICAN ECOLOGY CORPORATION By:/s/ ------------------------- Name: Jack K. Lemley Title: Chairman & CEO ATTEST: /s/ - ---------------------------------- Name: Phillip K. Chattin Title: Secretary 8 EX-99.7 4 FORM OF: WARRANT TO PURCHASE COMMON STOCK 1 Exhibit 99.7 Number: W_______________ NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY OTHER SECURITIES STATUTE. NO SALE, TRANSFER OR OTHER DISPOSITION HEREOF OR THEREOF, OR OF ANY INTEREST HEREIN OR THEREIN, MAY BE MADE OR SHALL BE RECOGNIZED UNLESS IN THE OPINION OF COUNSEL TO OR REASONABLY SATISFACTORY TO THE COMPANY SUCH TRANSACTION WOULD NOT VIOLATE OR REQUIRE REGISTRATION UNDER SUCH ACT OR OTHER STATUTE. WARRANT TO PURCHASE COMMON STOCK OF AMERICAN ECOLOGY CORPORATION THIS WARRANT CERTIFIES that, for value received, _______________________, (the "Holder") is entitled to purchase from American Ecology Corporation, a Delaware corporation (the "Company"), at a price of $1.50 per share, subject to adjustment as provided in Section 4 hereof ("Purchase Price"), at any time after June 30, 1997 up to and including June 30, 2003 (such period, the "Exercise Period"), _________________ fully paid and non-assessable shares of the Company's Common Stock, par value $.Ol per share ("Common Stock"), subject, however, to the provisions and upon the terms and conditions hereinafter set forth. 1. Exercise of Warrant. The rights represented by this Warrant may be exercised by the holder hereof, at any time or from time to time during the Exercise Period, on any day that is not a Saturday, Sunday or public holiday under the laws of the State of Idaho (such day being hereinafter referred to as a "Business Day"), for all or part of the number of shares of Common Stock purchasable upon its exercise, by (i) delivery of a Subscription Notice (in the form attached to this Warrant) of such holder's election to exercise this Warrant, specifying the number of shares of Common Stock to be purchased, (ii) payment of the Purchase Price for such shares by certified check or bank draft payable to the order of the Company and (iii) surrender of this Warrant (properly endorsed if required) at the Company's principal office or such other office or agency of the Company as the Company may designate by notice in writing to the holder hereof. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of Common Stock so purchased shall be delivered to the holder hereof as soon as reasonably practicable, but in any event within twenty-one days, after the rights represented by this Warrant shall have been so exercised, and unless this Warrant has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof within such time. Each person in whose name any such certificate for shares of Common Stock is issued shall for all purposes be deemed to have become the holder of record of the Common Stock represented hereby on the date on which this Warrant was surrendered and payment of the Purchase Price was made, irrespective of the date of issue or delivery of such certificate. 2. Transfer. The Company will maintain books for the registration and transfer of the Warrants, and any such transfer will be registrable thereon upon surrender of the transferred Warrant to the Company's main office, together with a duly executed assignment thereof and funds sufficient to pay any required stock transfer taxes. Upon such surrender and payment, the Company shall, subject to Section 9, execute and deliver a new Warrant or Warrants in the name of the assignees and in the number of shares of Common Stock specified in the assignment and this Warrant shall promptly be cancelled. 3. Certain Covenants of the Company. The Company covenants and agrees that all shares of Common Stock that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and non-assessable and free from all taxes, liens, charges and security interests with respect to the issue thereof. The Company further covenants and agrees that during the period within which the rights represented by the Warrant may be exercised, the Company will at all times have authorized, and reserved free of preemptive or other rights for the exclusive 9 2 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 subparagraph (a) shall become effective retroactively to immediately after the record date in the case of a share dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination. b. In case of any capital reorganization or reclassification of the shares of Common Stock (except as provided in subparagraph (a) above), or in case of any consolidation or merger to which the Company is a party (other than a merger in which the Company is the surviving corporation and which does not result in any capital reorganization or reclassification of Common Stock), or in case of any sale or conveyance to another corporation of all or substantially all of the property and assets of the Company, and if, in connection with any such consolidation, merger, sale or conveyance, shares or other securities or property shall be issuable or deliverable in exchange for shares of Common Stock, provision shall be made as part of the terms of such capital reorganization or reclassification, consolidation, merger, sale or conveyance that the holder of this Warrant thereafter exercised shall have the right upon such exercise to receive the same kind and amount of stock and other securities and property as would have been receivable upon such capital reorganization or reclassification, consolidation, merger, sale or conveyance by a holder of the number shares of Common Stock with respect to which such Warrant might have been exercised immediately prior thereto. In any such case, appropriate provision (as determined to be equitable in the business judgment of the Board of Directors) shall be made for the application of Section 4 with respect to the rights and interests thereafter of the holder of this Warrant to the end that such Section (including adjustments of the Exercised Rate) shall be reflected thereafter, as nearly as reasonably practicable, in all subsequent exercises of this Warrant. The Company shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof, the successor corporation (if other than the Company) resulting from consolidation or merger or the corporation purchasing such assets assumes by written instrument (in a manner determined to be equitable in the business judgment of the Board of Directors to the holder of this Warrant), the obligation to deliver to such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire. c. In case the Company shall issue (other than pursuant to a Rights Offering as defined in the Company's Certificate of Designation, Preferences and Rights of Series E Redeemable Convertible Preferred Stock) pro rata to the holders of shares of its Common Stock rights or warrants entitling them, during a period not exceeding 30 days after the record date mentioned below, to subscribe for or purchase only shares of its Common Stock at a price per share less than the average of the Current Market Price (as defined in Section 6) of the Common Stock for the 30 consecutive trading days commencing 45 days before such record date (the "Average Market Price"), the number of shares of its Common Stock with respect to which this Warrant is exercisable thereafter shall be determined by multiplying the number of shares of Common Stock with respect to which this Warrant was exercisable theretofore by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding immediately prior to such record date plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the denominator shall be the number of shares of Common Stock outstanding immediately prior to such record date plus the number of shares of Common Stock which the aggregate offering pr ice of the total number of shares being offered would purchase at such Average Market Price. Such adjustment shall be made whenever such rights or warrants are issued and shall become retroactively effective immediately after the record date for the determination of the stockholders entitled to receive such 10 3 rights or warrants. To the extent that shares of Common Stock are not delivered after the expiration of such rights or warrants, the Exercise Rate shall be readjusted to the Exercise Rate that would then be in effect had the adjustments made upon the issuance of such rights or warrants been made upon the basis of delivery of only the number of shares of Common Stock actually delivered. d. In case the Company shall issue (except pursuant to a Rights Offering as defined in subparagraph (c) above) pro rata to the holders of shares of its Common Stock rights or warrants to subscribe for or purchase only (x) shares of its Common Stock except as described in subparagraph (c) above, or (y) units consisting of shares of Common Stock and warrants to purchase shares of Common Stock, the number of shares of its Common Stock with respect to which this Warrant is exercisable thereafter shall be determined by multiplying the number of shares of Common Stock with respect to which this Warrant was exercisable theretofore by a fraction, of which the numerator shall be the Average Market Price for a share of Common Stock determined as of the record date mentioned below, and of which the denominator shall be such Average Market Price less the fair market value (as determined in the business judgment of the Board of Directors) as of such record date of the rights or warrants distributed pro rata to one of the outstanding shares of Common Stock. Such adjustment shall be made whenever such distribution is made and shall become retroactively effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. The foregoing provisions for adjustment of the Exercise Rate shall apply in each successive instance in which an adjustment is required thereby. No adjustment in the Exercise Rate resulting from the application of the foregoing provisions is to be given effect unless, by making such adjustment, the Exercise Rate in effect immediately prior to such adjustment would be changed thereby by 1% or more, but any adjustment that would change the Exercise Rate by less than 1% is to be carried forward and given effect in making future adjustments; provided, however, that each adjustment of the Exercise Rate shall in all events be made no later than three years from the date such adjustment would have been required to be made except for the provisions of this sentence. All calculations under this Section 4 shall be made to the nearest one-hundredth (1/100th) of a share. Shares of Common Stock owned by or held for the account of the Company shall not be deemed to be outstanding for the purposes of any computation made under this Section 4. Whenever the number of shares of Common Stock deliverable upon the exercise of this Warrant shall be adjusted pursuant to the provisions hereof, the Company shall forthwith file at its principal office and with any transfer agent for the Common Stock a statement, signed by the President or one of the Vice-Presidents of the Company and by its Treasurer or one of its Assistant Treasurers, stating the adjusted number of shares of Common Stock deliverable with respect to this Warrant and setting forth in reasonable detail the method of calculation and the facts requiring such adjustment and upon which such calculation is based, and shall mail a notice of such adjustment to the holder of record of this Warrant. Each adjustment shall remain in effect until a subsequent adjustment hereunder is required. In the event: (x) of the occurrence of any of the events referred to in subparagraphs (a), (b), (c) and (d) above; or (y) of any liquidation, dissolution or winding up of the Company (a "Liquidation"); then the Company shall cause to be mailed to the holder of record of this Warrant at least 20 days prior to the applicable date hereinafter specified, a notice describing the event and stating the effect, if any, that such event will have upon the Exercise Rate, and (A) the date on which a record is to be taken for the purpose of a distribution referred to in subparagraphs (a), (c) or (d) above, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such distribution are to be determined, or (B) the date on which any subdivision, combination or other capital reorganization or reclassification or any consolidation, merger, sale or conveyance referred to in subparagraphs (a) or (b) above or such Liquidation is expected to become effective. 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. 11 4 The shares of Common Stock issuable upon exercise of this Warrant when the same shall be issued in accordance with the terms hereof are hereby declared to be and shall be fully paid nonassessable shares of Common Stock and not liable to any calls or assessments thereon, and the holders thereof shall not be liable for any further payments in respect thereof. "Common Stock" when used in Section 4 with reference to the Common Stock with respect to which this Warrant is exercisable, shall mean only Common Stock as authorized by the Restated Certificate of Incorporation of the Company, as amended to the date hereof, and any shares into which such Common Stock may thereafter have been changed, and, when otherwise used in Section 4, shall also include shares of the Company of any other class or series, whether now or hereafter authorized, that ranks or is entitled to participation, as to payment of assets upon Liquidation and payment of dividends, substantially on a parity with such Common Stock or other class of shares into which such Common Stock may have been changed. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion privilege of the holders of this Warrant against dilution or other impairment. Without limiting the generality of the foregoing, the Company (1) will not increase the par value of any shares of stock receivable upon exercise of this Warrant above the Purchase Price then in effect, and (2) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of stock upon the exercise in full of this Warrant from time to time outstanding. 5. Fractional Interests. The Company shall not be required to issue fractional shares on the exercise of a Warrant. If any faction of a share would be issuable on the exercise of a Warrant (or specified portion thereof), the Company shall pay an amount in cash equal to the Current Market Price per share of Common Stock (as defined in Section 6) multiplied by such fraction. 6. Definition of Current Market Value. The "Current Market Price" on any given day shall be: (i) if the Common Stock is listed or admitted to unlisted trading privileges on any exchange registered with the Securities and Exchange Commission as a national securities exchange" under the Securities Exchange Act of 1934 (a "National Securities Exchange"), the last sales price of the shares of Common Stock on the National Securities Exchange in or nearest the City of New York on which the shares of Common Stock shall be listed or admitted to unlisted trading privileges (or the quoted closing bid if there be no sales on such National Securities Exchange) on the most recently completed trading day prior to such day; or (ii) if the Common Stock is not so listed or admitted, the closing sales price of a share of Common Stock as quoted in The Nasdaq Stock Market on the most recently completed trading day prior to the day in question; or (iii) if the Common Stock is not so quoted, the mean between the high and low bid prices of the shares of Common Stock in the over-the-counter market on the most recently completed trading day prior to the day in question as reported by National Quotation Bureau Incorporated or similar organization. 7. Taking of Record; Stock and Warrant Transfer Books. In the case of all dividends or other distributions by the Company to the holders of its Common Stock with respect to which any provision of Section 4 refers to the taking of a record of such holders, the Company will in each such case take such a record and will take such record as of the close of business on a Business Day. The Company will not at any time, except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant. 8. Restrictions on Transferability. This Warrant was originally issued in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and neither this Warrant nor any shares of Common Stock issuable upon the exercise hereof were then registered under the Securities Act. Unless this Warrant or such shares were subsequently registered under the Securities Act and sold by the holder thereof in accordance with such registration, this Warrant or such shares, as the case may be, may not be sold by the holder hereof or of such shares unless this Warrant or such shares is or are subsequently registered under the Securities Act or an exemption from such registration is available. The shares of Common Stock issuable hereunder will bear an appropriate restrictive legend as is required by the Securities Act or any state blue sky laws. The holder of this Warrant, by acceptance of this Warrant, 12 5 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. 13 6 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed this ______ day of November, 1996. AMERICAN ECOLOGY CORPORATION By: -------------------------- Name: ------------------------ Title: ----------------------- 14 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 $.Ol per share (the "Common Stock"), of American Ecology Corporation, constituting all or part of the shares of Common Stock purchasable with this Warrant, and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) together with, if such certificates do not represent all the shares of Common Stock purchasable with this Warrant, a new Warrant, identical to the cancelled Warrant except with respect to the number of shares of Common Stock evidenced thereby, for the remaining unsold shares of Common Stock, be issued in the name of and delivered to the undersigned at the address set forth below. Dated: ---------------------------- ------------------------------------ Name of Warrant Holder By: --------------------------------- Name: ------------------------------- Title: ------------------------------ ------------------------------------ Street Address ------------------------------------ City State Zip Code 15 -----END PRIVACY-ENHANCED MESSAGE-----