EXHIBIT 10.61 1996 SERIES E PREFERRED STOCK AND WARRANT AGREEMENT
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) ▇▇▇▇▇▇ ▇. ▇▇▇▇ ("▇▇▇▇"), and (iii)
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇") (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 & ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ 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 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:
(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 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 ▇▇▇▇▇▇ 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;
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.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of November 13, 1996.
AMERICAN ECOLOGY CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman & CEO
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
SCHEDULE 1
Aggregate Purchase
Price of Series D
Number of Shares Preferred Stock
of Series D Number of Shares and Warrants
Purchaser Preferred Stock Warrants to be Purchased
---------- --------------- -------- -----------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 200,000 2,000,000 $2,000,000
▇▇▇▇▇▇ ▇. ▇▇▇▇ 100,000 1,000,000 $1,000,000
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
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
(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 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.
(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.
(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;
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) 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 _____ day of November, 1996.
AMERICAN ECOLOGY CORPORATION
By:
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Name:
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Title:
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ATTEST:
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Name:
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Title:
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Number: W
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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 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 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.
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, agrees to be bound by the provisions of this Section and represents to
the Company that it is acquiring the Warrant and the Common Stock issuable
hereunder solely for its own account, for the purpose of investment and not with
a view to distributing or selling it or any part thereof in violation of the
Securities Act, but subject, nevertheless, to any requirement of law that the
disposition of such holder's property be at all times within its control.
9. Replacement. Upon receipt of evidence reasonably satisfactory to the Company
(an affidavit of the registered holder shall be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of this Warrant, and in the case
of any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Company (provided that the holder's own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of this
Warrant, the Company shall (at its expense) execute and deliver in lieu of this
Warrant a new warrant of like kind dated the date of such lost, stolen,
destroyed or mutilated Warrant.
10. Notice Generally. Any notice, demand or delivery pursuant to the provisions
hereof shall be sufficiently given or made if sent by first class mail, postage
prepaid, addressed to the holder of this Warrant or of the Common Stock issued
upon the exercise hereof at the holder's last known address appearing on the
books of the Company, or, except as herein otherwise expressly provided, to the
Company at its main office, Attention of the President, or such other address as
shall have been furnished to the party giving or making such notice, demand or
delivery.
11. Voting Rights, Dividends. This Warrant does not grant the holder hereof any
voting rights or other rights as a stockholder of the Company. No dividends are
payable or will accrue on this Warrant or the shares purchasable hereunder
until, and except to the extent that, this Warrant is exercised.
12. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY THE LAW OF THE STATE OF
DELAWARE.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed this
______ day of November, 1996.
AMERICAN ECOLOGY CORPORATION
By:
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Name:
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Title:
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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:
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Name of Warrant Holder
By:
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Name:
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Title:
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Street Address
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