EARTH SEARCH SCIENCES, INC.
Notice of Annual Meeting of Shareholders
October 7, 1997
To the Shareholders of Earth Search Sciences, Inc.:
An annual meeting of the shareholders of Earth Search Sciences, Inc., a
Utah corporation, will be held at the offices of the Company, 502 North 3rd
Street, #8, McCall, Idaho 83638, on October 7, 1997, at 2:00 p.m., Mountain
Daylight Savings Time for the following purposes:
1. The election of Directors for the coming year:
a. Larry F. Vance
b. John W. Peel
c. Brian C. Savage
d. Rory J. Stevens
e. Tami J. Story
2. To ratify the appointment of Price Waterhouse LLP as the Company's
independent auditors effective with the fiscal year ended
March 31, 1997;
3. To transact any other business that properly comes before the
meeting.
Only shareholders of record at the close of business on August 12, 1997
will be entitled to vote at the annual meeting. You are requested to date and
sign the enclosed proxy and return it in the postage-prepaid envelope enclosed
for that purpose.
By Order of the Board of Directors
/s/ Tami J. Story
Tami J. Story
Secretary
McCall, Idaho
<PAGE>
EARTH SEARCH SCIENCES, INC.
502 North 3rd Street, #8
McCall, Idaho 83638
August 12, 1997
------------
PROXY STATEMENT
------------
A proxy in the form accompanying this proxy statement is solicited on
behalf of the Board of Directors of Earth Search Sciences, Inc., a Utah
corporation (the "Company"), for use at the annual meeting of shareholders to be
held on October 7, 1997. The Company will bear the cost of preparing and mailing
the proxy, proxy statement, and any other material furnished to the shareholders
by the Company in connection with the annual meeting. Proxies will be solicited
by use of the mail, and officers and employees of the Company may, without
additional compensation, also solicit proxies by telephone or personal contact.
Copies of solicitation materials will be furnished to fiduciaries, custodians,
and brokerage houses for forwarding to beneficial owners of the stock held in
their names.
Any shares of stock of the Company held in the name of fiduciaries,
custodians, or brokerage houses for the benefit of their clients may only be
voted by the fiduciary, custodian, or brokerage house itself -- the beneficial
owner may not vote the shares directly and must instruct the person or entity in
whose name the shares are held how to vote the shares held for the beneficial
owner. Therefore, if any shares of stock of the Company are held in "street
name" by a brokerage house, only the brokerage house, at the instructions of its
client, may vote the shares.
Any person giving a proxy in the form accompanying this proxy statement
has the power to revoke it at any time before its exercise. The proxy may be
revoked by filing with the Secretary of the Company an instrument of revocation
(in any form that clearly indicates an intention to revoke) or a duly executed
proxy bearing a later date. The proxy may also be revoked by affirmatively
electing to vote in person while attending the meeting. However, a shareholder
who attends the meeting need not revoke the proxy and vote in person unless the
shareholder wishes to do so. All valid, unrevoked proxies will be voted at the
annual meeting in accordance with the instructions given.
<PAGE>
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
The Company's Common Stock is the only outstanding voting security of
the Company. The record date for determining holders of Common Stock entitled to
vote at the annual meeting is August 12, 1997. On that date there were
73,606,154 shares of Common Stock outstanding, entitled to one vote per share.
The following table sets forth certain information regarding ownership
of the Company's Common Stock as of August 12, 1997 by each person known by the
Company to own beneficially more than five percent of the Common Stock and by
all directors and officers individually and as a group:
<TABLE>
<CAPTION>
Amount and
Name and Address of Nature of Percent of
Beneficial Owner Beneficial Ownership (1) Class
<S> <C> <C>
Larry F. Vance 11,485,568(2)(3) 15%
P. O. Box 674
McCall, Idaho 83638
Universal Search Technology 11,485,568(3)(4) 15%
P.O. Box 674
McCall, Idaho 83638
John W. Peel, III 210,000(5) 0%
502 North 3rd Street, #8
McCall, Idaho 83638
Brian C. Savage 0(6) 0%
9272 S. Prairie View Drive
Highlands Ranch, CO 80126
Tami J. Story 472,661(7) 1%
1871 Warren Wagon Road
McCall, Idaho 83638
Rory J. Stevens 1,000,000(8) 1%
8531 Dibble Ave. N.W.
Seattle, Washington 98117
Francisco Elmudesi 4,550,000 6%
10439 Deerpath Road
Woodstock, IL
Arthur McClain 3,048,853 4%
304 W. Jackson Street
Woodstock, IL
All directors and officers 44,468,229(9) 60%
(including those listed
above) as a group (five persons)
- ----------------------------------
</TABLE>
<PAGE>
(1) All shares are held directly with sole voting and investment power
unless otherwise indicated.
(2) Includes 1,775,000 shares held by Universal Search Technology, a
private company owned by Mr. Vance.
(3) Excludes options granted to Mr. Vance in March, 1995, the Company
granted to Mr. Vance options for 1,500,000 shares, which was partial
consideration for past compensation never paid by the Company. The
Company recognized the estimated fair value of the shares at $157,800.
In April 1995, the Company also granted to Mr. Vance options for
5,000,000 shares, one-half of which are exercisable immediately and
one-half of which are exercisable upon the Company achieving certain
earnings targets. In March, 1997, the Company granted to Mr. Vance
options for up to 5,000,000 shares which become exercisable once the
market price of the Company's common stock exceeds certain targets.
(See "Compensation.")
(4) Includes 9,701,568 shares held by Mr. Vance, sole shareholder of
Universal Search Technology.
(5) Excludes option granted to Dr. Peel in April 1995, the Company granted
to Dr. Peel options for 5,000,000 shares, one-half of which are
exercisable immediately and one-half of which are exercisable upon the
Company achieving certain earnings targets. In March, 1997, the
Company granted to Dr. Peel options for up to 5,000,000 shares which
become exercisable once the market price of the Company's common stock
exceeds certain targets. (See "Compensation.")
(6) In June, 1996, the Company granted to Mr. Savage option for 2,500,000
shares, one-half of which are exercisable immediately and one-half of
which are deemed "Performance Options". In March, 1997, the Company
granted to Mr. Savage options for up to 5,000,000 shares which become
exercisable once the market price of the Company's common stock exceeds
certain targets.
(7) Excludes 300,000 shares subject to options granted to Ms. Story in May
1995, all of which are exercisable immediately. Also excludes 1,000,000
shares subject to options granted to Ms. Story in March 1997, which
become exercisable once the average closing price of the Company's
common stock exceeds $0.50 for a period of 60 consecutive days.
(8) Includes 1,000,000 shares subject to options held by Mr. Stevens and
exercisable upon full-time employment of Mr. Stevens with the Company.
(9) If the shares referenced in footnotes (3), (5), (6) and (7) are
included, the holdings of directors and officers as a group would
increase to 44,468,229 or 60%.
<PAGE>
ELECTION OF NEW DIRECTORS
The Company's Articles of Incorporation provide that the Board of
Directors shall consist of not less than three (3) nor more than nine (9)
members as determined by the Board of Directors from time to time. At the last
annual meeting, the Company's shareholders elected five directors, all of whom
have served on the Board of Directors continuously since that meeting.
The Directors have determined to nominate themselves for reelection at
the Company's annual meeting. Each shareholder is entitled to one vote per share
at the annual meeting. Shareholders do not have cumulative voting rights with
respect to the election of directors.
Directors hold office until the next annual meeting of shareholders or
until their successors are elected and qualified.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ELECTION OF
MR. VANCE, MR. PEEL, MR. STEVENS, MR. SAVAGE AND MS. STORY.
Larry F. Vance has served as a director of the Company since 1985 and
served as Chief Executive Officer of the Company from 1985 until April 8, 1995.
Since April 8, 1995, Mr. Vance has served as Chairman of the Company. Mr. Vance
is a director of the Company. Mr. Vance is a full- time employee of the Company
and has been since 1985.
John W. Peel, III has served as a director of the Company for the past
two years and joined the Company as Chief Executive Officer in April 1995. Prior
to joining the Company, Dr. Peel served for the six and-one-half years as Senior
Vice President of Tetra Tech, Inc., a major publicly-held environmental
remediation consulting firm. Dr. Peel holds a Bachelor of Science in Biology
from Millsaps College, a Master of Science in Parasitology and Invertebrate
Zoology from the University of Mississippi and a Ph.D. in Environmental
Health/Health Physics from Purdue University. Dr. Peel is a full-time employee
of the Company and has been since 1995.
Brian C. Savage, has served as a director of the Company for the past
year and joined the Company on June 1, 1996, as Vice-President of Resource
Development and President of the Company's wholly owned subsidiary, Earth Search
Resources, Inc. On April 9, 1997 Mr. Savage was appointed President of Earth
Search Sciences, Inc. Mr. Savage has served in capacities of increasing
responsibility in equity financing, corporate and project financing, merger and
acquisition, public debt and advisory projects. Prior to joining the Company Mr.
Savage served four years as director of the Investment Banking Mining Group of
Nesbitt Burns. Mr. Savage obtained a Bachelor of Science degree in Mining
Engineering and a Master of Science degree in Mineral Economics from the
Colorado School of Mines.
Mr. Stevens has served as a director of the Company for the past three
years. Mr. Stevens has served as controller of Chiyoda International Corporation
since prior to 1990, and worked in other accounting capacities prior to that
time.
Tami J. Story joined the Company as Secretary and Treasurer in 1993.
Ms. Story has been with the Company for 6 years in an administrative support
capacity as an independent contractor. Ms. Story also has served as a director
of the Company for the past four years. Ms. Story holds a degree with a major
in Nursing and a minor in Business Administration.
<PAGE>
THE BOARD OF DIRECTORS
The names of the Company's directors and certain information about them
are set forth below:
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned
Principal Occupation and on March 31, 1997 (1)
-------------------------------------
NAME POSITION WITH THE COMPANY AGE NUMBER PERCENT
- --------------- -------------------------- --- ------------ -------
<S> <C> <C> <C> <C>
Larry F. Vance Chairman of the Company 62 11,485,568(2) 15%
John W. Peel Chief Executive Officer 51 210,000(2) 0%
Brian C. Savage President 37 0 0%
Rory J. Stevens Controller of Chiyoda 39 1,000,000(2) 1%
International Corporation
Tami J. Story Secretary/Treasurer 34 472,661(2) 1%
of the Company
- ----------------------
</TABLE>
(1) All shares are held directly with sole voting and investment power
unless otherwise indicated.
(2) See "Voting Securities and Principal Shareholders."
Each of the directors has been engaged in his or her present occupation
for at least the last five years, except as indicated below.
Mr. Vance has served as a director and an officer of the Company for
the past twelve years. Prior to joining the Company, Mr. Vance worked in various
capacities in the computer industry.
Dr. Peel has served as a director and as Chief Executive Officer of the
Company for the past two years. Prior to joining the Company Dr. Peel worked at
Tetra Tech as Senior Vice President.
Mr. Savage has served as a director of the Company for the past year
and has recently been elected President of the Company. Prior to joining the
Company Mr. Savage worked for the past four years as director of the US Mining
Group for Bank of Montreal and director for the US Investment Banking Mining
Group of Nesbitt Burns.
Ms. Story has served as a director and as secretary and treasurer of
the Company for the past four years. Prior to joining the Company, Ms. Story
obtained a minor in business administration and has completed several business
courses.
Mr. Stevens has served as a director of the Company for the past three
years. Mr. Stevens has served as controller of Chiyoda International Corporation
since prior to 1990, and worked in other accounting capacities prior to that
time.
The Board of Directors met six times during the last fiscal year. Each
director attended all of the meetings of the Board of Directors. There are no
audit, nominating, or compensation committees of the Board of Directors or
committees performing similar functions. Directors serve one year terms.
Mr. Vance has been a Director for twelve years. Mr. Stevens has been a Director
for three years. Ms. Story has been a Director for four years. Dr. Peel has
been a Director for two year. Mr. Savage has been a Director for one year.
Directors are not paid any director's fee. See "COMPENSATION--Compensation
of Directors."
The proxies will be voted with respect to the election of Larry F.
Vance, John W. Peel, Rory J. Stevens, Brian C. Savage and Tami J. Story as
directors of the Company in accordance with the instructions specified in the
proxy form. If no instructions are given, proxies will be voted in favor of the
election of Mr. Vance, Dr. Peel, Mr. Stevens, Mr. Savage and Ms. Story. If a
quorum is present, in person or by proxy, at the annual shareholders meeting,
each of Mr. Vance, Dr. Peel, Mr. Stevens, Mr. Savage and Ms. Story will be
elected as directors of the Company if the number of votes cast in favor of
his/her election exceeds the number of votes cast in opposition of his/her
election.
<PAGE>
COMPENSATION
EXECUTIVE COMPENSATION
Compensation Summary. As of March 31, 1997, the Company has not paid any
salaries to its Chairman and Secretary. However, at the time (if ever) the
Company attains adequate positive cash flow, it expects to pay certain salaries
to the Chairman and Secretary. The following table sets forth, for the Officers
of the Company, all compensation paid or accrued (or to be paid as
aforesaid) for services rendered in all capacities during the fiscal year ended
March 31, 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Name and Principal Position Fiscal Year 1997 Annual Compensation
- --------------------------- ------------------------------------
<S> <C>
Larry F. Vance No compensation paid to date. Effective March 31, 1995,
Chairman the Company's Board of Directors approved cash compensation
for Mr. Vance's past services in the amount of $300,000.
Effective March 31, 1996, the Company's Board of Directors
approved cash compensation for Mr. Vance's past services in
the amount of $160,000. For fiscal year 1997, the Company
accrued but did not pay to Mr. Vance compensation in the
amount of $160,000. Payment of such compensation will be
deferred until such time as the Company achieves adequate
cash flow from operations.
John W. Peel $150,000
Chief Executive Officer
Brian C. Savage $140,000
President
Tami J. Story $50,000
</TABLE>
CHAIRMAN'S EMPLOYMENT AGREEMENT
The Company entered into an employment agreement with Larry F. Vance
effective April 1, 1995, to serve as Chairman of the Company until December 31,
1999. Mr. Vance's annual base salary under the agreement is $160,000, and is
subject to adjustment each January 1, starting January 1, 1996, by an amount
negotiated in good faith by Mr. Vance and the Company that is appropriate in
light of changes in the nature and prospects of the business of the Company, the
Company's net cash flow and the responsibilities of Mr. Vance. Barring an
agreement on such adjustment, either party may seek binding arbitration.
In addition, Mr. Vance is entitled to an annual bonus as determined by
the Company's Board of Directors and has been granted options to purchase an
aggregate of 5,000,000 shares of the common stock of the Company at a purchase
price of $0.21 per share. Fifty percent (50%) of the options are exercisable at
any time. The remaining fifty percent (50%) of the options are deemed
"Performance Options", and are exercisable as follows: (I) one-third of said
Performance Options shall become exercisable once the Company reports a positive
net after tax profit for any fiscal year commencing on or after March 31, 1995;
(II) another one-third of said Performance Options shall become exercisable once
the Company reports a net after tax profit of greater than $1 million for any
fiscal year commencing on or after March 31, 1996; (III) all of said Performance
Options shall become exercisable once the Company reports a net after tax profit
of greater than $2 million for any fiscal year commencing on or after March 31,
1996; and (IV) any Performance Options which have not become exercisable as
aforesaid once the Company reports its net after tax profits or losses for the
fiscal year ended March 31, 1998, shall become null and void. Any options
remaining unexercised on December 31, 2004 shall lapse and be deemed null and
void.
<PAGE>
Notwithstanding the foregoing, all Performance Options become
immediately exercisable if Mr. Vance's employment is terminated by the Company
without "Cause" or by Mr. Vance with "Cause." In the event of a Change in
Control, all Performance Options become immediately exercisable.
The term "Cause" means only the following:
(i) Malfeasance or negligence by Mr. Vance material in nature in the
performance of his duties under this Agreement;
(ii) Breach by Mr. Vance of any material provisions of this Agreement;
(iii) Engaging by Mr. Vance in misconduct materially injurious to the
Company;
(iv) Conviction of Mr. Vance of a felony;
(v) Indulgence in alcohol or drugs to an extent that renders Mr.
Vance unable or unfit to perform his duties under this Agreement;
(vi) Failure to comply with the material policies, procedures, or
directives of the Company established by the board of directors
not inconsistent with the provisions of this Agreement; or
(vii) Persistent failure or refusal to discharge with reasonable
competence and in good faith Mr. Vance's duties under this
Agreement.
Mr. Vance's employment agreement provides certain disability and
termination benefits in addition to standard employee benefits provided to other
employees of the Company. If Mr. Vance's employment is terminated as a result of
a permanent disability, the Company will continue his base compensation for 9
months with credit for any long term disability benefits paid during the last 6
months of that period. If Mr. Vance's employment is terminated by the Company
following a Change in Control, the Company will continue his base compensation
for 24 months.
Mr. Vance's employment agreement contains standard nondisclosure and
noncompete provisions with a noncompetition period of 12 months following
termination of employment.
CHIEF EXECUTIVE OFFICER'S EMPLOYMENT AGREEMENT
The Company has entered into an employment agreement with John W. Peel,
III effective April 8, 1995, to serve as Chief Executive Officer of the Company
until December 31, 1999. Dr. Peel's annual base salary under the agreement is
$150,000, and is subject to adjustment each January 1, starting January 1, 1996,
by an amount negotiated in good faith by Dr. Peel and the Company that is
appropriate in light of changes in the nature and prospects of the business of
the Company, the Company's net cash flow and the responsibilities of Dr. Peel.
Barring an agreement on such adjustment, either party may seek binding
arbitration.
In addition, Dr. Peel is entitled to an annual bonus as determined by
the Company's Board of Directors and has been granted options to purchase an
aggregate of 5,000,000 shares of the common stock of the Company at a purchase
price of $0.21 per share. Fifty percent (50%) of the options are exercisable at
any time. The remaining fifty percent (50%) of the options are deemed
"Performance Options", and are exercisable as follows: (I) one-third of said
Performance Options shall become exercisable once the Company reports a positive
net after tax profit for any fiscal year commencing on or after March 31, 1995;
(II) another one-third of said Performance Options shall become exercisable once
the Company reports a net after tax profit of greater than $1 million for any
fiscal year commencing on or after March 31, 1996; (III) all of said Performance
Options shall become exercisable once the Company reports a net after tax profit
of greater than $2 million for any fiscal year commencing on or after March 31,
1996; and (IV) any Performance Options which have not become exercisable as
aforesaid once the Company reports its net after tax profits or losses for the
fiscal year ended March 31, 1998, shall become null and void. Any options
remaining unexercised on December 31, 2004 shall lapse and be deemed null and
void.
<PAGE>
Notwithstanding the foregoing, all Performance Options become
immediately exercisable if Dr. Peel's employment is terminated by the Company
without "Cause" or by Dr. Peel with "Cause." In the event of proposed
dissolution or liquidation of the Company or in the event of a transfer of more
than 50% of the outstanding shares of the Company, or the sale of all or
substantially all of the assets of the Company, to a person or persons who are
not as of April 8, 1995, shareholders or employees of the Company (a "Change in
Control"), all Performance Options become immediately exercisable.
The term "Cause" means only the following:
(i) Malfeasance or negligence by Dr. Peel material in nature in the
performance of his duties under this Agreement;
(ii) Breach by Dr. Peel of any material provisions of this Agreement;
(iii) Engaging by Dr. Peel in misconduct materially injurious to the
Company;
(iv) Conviction of Dr. Peel of a felony;
(v) Indulgence in alcohol or drugs to an extent that renders Dr. Peel
unable or unfit to perform his duties under this Agreement;
(vi) Failure to comply with the material policies, procedures, or
directives of the Company established by the board of directors
not inconsistent with the provisions of this Agreement; or
(vii) Persistent failure or refusal to discharge with reasonable
competence and in good faith Dr. Peel's duties under this
Agreement.
Dr. Peel's employment agreement provides certain disability and
termination benefits in addition to standard employee benefits provided to other
employees of the Company. If Dr. Peel's employment is terminated as a result of
a permanent disability, the Company will continue his base compensation for 9
months with credit for any long term disability benefits paid during the last 6
months of that period. If Dr. Peel's employment is terminated by the Company
following a Change in Control, the Company will continue his base compensation
for 24 months.
Dr. Peel's employment agreement also obligates the Company to make a
loan to Dr. Peel at his option, in an amount equal to the market value of shares
of Common Stock of the Company owned by Dr. Peel and pledged to the Company as
security along with a mortgage encumbering the equity in Dr. Peel's residence in
Pasadena, California, to facilitate his relocation and purchase of a home near
the headquarters of the Company. The loan shall be on such terms as Dr. Peel and
the board of directors may agree, and shall be payable in full at the earlier of
the closing of the sale of his residence or December 31, 1999.
Dr. Peel's employment agreement contains standard nondisclosure and
noncompete provisions with a noncompetition period of 12 months following
termination of employment.
PRESIDENT'S EMPLOYMENT AGREEMENT
The Company has entered into an employment agreement with Brian C.
Savage effective August 1, 1997, to serve as President of Earth Search Sciences,
Inc. until December 31, 1999. Mr. Savage's annual base salary under the
agreement is $140,000, and is subject to adjustment each January 1, starting
January 1, 1998, by an amount negotiated in good faith by Mr. Savage and the
Company that is appropriate in light of changes in the nature and prospects of
the business of the Company, the Company's net cash flow and the
responsibilities of Mr. Savage. The Company shall pay Mr. Savage a Sign-On Bonus
in the amount of $100,000, $10,000 of which was paid upon the signing of the
employment agreement and the remaining $90,000 to be paid upon completion by Mr.
Savage of a financing for the Company. Barring an agreement on such adjustment,
either party may seek binding arbitration.
In addition, Mr. Savage is entitled to an annual bonus as determined by
the Company's Board of Directors and has been granted options to purchase an
aggregate of 2,500,000 shares of the common stock of the Company at a purchase
price of fifty percent (50%) of the closing market price per share. Fifty
percent (50%) of the options are exercisable at any time after the signing of
this agreement. The remaining fifty percent (50%) of the options are deemed
"Performance Options", and may be exercised upon completion by the Officer of a
financing for the Company. Upon the Company reporting a net after tax profit of
greater than five million dollars for any fiscal year, the Officer will receive
a bonus equal to the number of options unexercised multiplied by the Purchase
Price per share grossed up for taxes. Any options remaining unexercised on
December 31, 2006 shall lapse and be deemed null and void. The exercise of any
option will be contingent upon receipt from the Officer, or other such purchaser
pursuant to clause (iv) hereof, of written representation that at the time of
such exercise it is the optionee's then present intention to acquire the shares
for investment and not with a view to, or for sale in connection with, any
distribution thereof.
<PAGE>
Notwithstanding the foregoing, all Performance Options become
immediately exercisable if Mr. Savage's employment is terminated by the Company
without "Cause" or by Mr. Savage with "Cause." In the event of proposed
dissolution or liquidation of the Company or in the event of a transfer of more
than 50% of the outstanding shares of the Company, or the sale of all or
substantially all of the assets of the Company, to a person or persons who do
not presently own at least 5% of the common shares of the Company (a "Change in
Control"), all Performance Options become immediately exercisable.
The term "Cause" means only the following:
(i) Malfeasance or negligence by Mr. Savage material in nature in the
performance of his duties under this Agreement;
(ii) Breach by Mr. Savage of any material provisions of this Agreement;
(iii) Engaging by Mr. Savage in misconduct materially injurious to the
Company;
(iv) Conviction of Mr. Savage of a felony;
(v) Indulgence in alcohol or drugs to an extent that renders Mr.
Savage unable or unfit to perform his duties under this Agreement;
(vi) Failure to comply with the material policies, procedures, or
directives of the Company established by the board of directors
not inconsistent with the provisions of this Agreement; or
(vii) Persistent failure or refusal to discharge with reasonable
competence and in good faith Mr. Savage duties under this
Agreement.
Mr. Savage's employment agreement provides certain disability and
termination benefits in addition to standard employee benefits provided to other
employees of the Company. If Mr. Savage's employment is terminated as a result
of a permanent disability, the Company will continue his base compensation for a
90 day period following the date active services cease. After said 90-day
period, the Company agrees to pay to Mr. Savage during each month for the next
six months that amount which is equal to the difference between Mr. Savages
monthly base salary described above for said month and the amount that Mr.
Savage receives or is entitled to receive form any long-term disability
insurance coverage provided for Mr. Savage by the Company. months with credit
for any long term disability benefits paid during the last 6 months of that
period. If Mr. Savage's employment is terminated by the Company following a
Change in Control, the Company will continue his base compensation for 24
months.
Mr. Savage's employment agreement contains standard nondisclosure and
noncompete provisions with a noncompetition period of 12 months following
termination of employment.
COMPENSATION OF DIRECTORS
Directors presently are not compensated for service on the Company's
Board of Directors. Directors are reimbursed for out-of-pocket expenses incurred
in attending board meetings.
To induce Larry Vance, John Peel, Brian Savage and Tami Story to remain
in the employment of the Company during this critical time in the Company's
development, August 5, 1997, the Company granted to each Larry Vance, John Peel,
Brian Savage and Tami Story, an option to purchase 1,000,000 shares of ESSI
common stock at a strike price equal to $0.50 per share exercisable for a period
of 24 month from the date of vesting. The options will be deemed vested for each
individual if that individual is employed by the company on the first date on
which the closing market price of the Company's common stock equals or exceeds
$0.50 per share for 30 consecutive days, and the options shall lapse and be null
and void if they have not become exercisable by July 31, 1999.
<PAGE>
In addition, at the same time, the Company granted to each of Larry
Vance, John Peel and Brian Savage an option to purchase up to 4 million shares
of ESSI's common stock upon the following terms and conditions:
1. When the closing market price of ESSI common stock equals or exceeds
$1.00 per share for 30 consecutive days then each of the three individuals shall
become fully vested with an option to purchase 1,000,000 shares of ESSI common
stock at a strike price equal to $1.00 per share exercisable for a period of 24
months from the date of vesting.
2. When the closing market price of ESSI common stock equals or exceeds
$1.50 per share for 30 consecutive days then each of the three individuals shall
become fully vested with an option to purchase 1,000,000 shares of ESSI common
stock at a strike price equal to $1.50 per share exercisable for a period of 24
months from the date of vesting.
3. When the closing market price of ESSI common stock equals or exceeds
$2.00 per share for 30 consecutive days then each of the three individuals shall
become fully vested with an option to purchase 1,000,000 shares of ESSI common
stock at a strike price equal to $2.00 per share exercisable for a period of 24
months from the date of vesting.
4. When the closing market price of ESSI common stock equals or exceeds
$2.50 per share for 30 consecutive days then each of the three individuals shall
become fully vested with an option to purchase 1,000,000 shares of ESSI common
stock at a strike price equal to $2.50 per share exercisable for a period of 24
months from the date of vesting.
5. To vest in the options, the individual must be employed by the
company on the first date on which the closing market price of the Company's
common stock equals or exceeds the relevant price.
6. Options shall lapse and be null and void if they have not become
exercisable by July 31, 1999.
At March 31, 1995, the Company granted to Larry F. Vance, a director
and Chairman of the Company, as partial consideration for Mr. Vance releasing
claims to certain past compensation never paid by the Company, an option for
1,500,000 shares of Common Stock, exercisable at any time on or prior to March
31, 2005 at a price of $.105 per share. Mr. Vance also received certain
"piggyback" registration rights with respect to the option shares.
The Company granted in 1993 to Rory J. Stevens, a director of the
Company, an option for 1,000,000 shares of Common Stock, exercisable at any time
within five years after Mr. Stevens becomes a full-time employee of the Company
based on certain mutually agreeable performance criteria and at a price equal
to $.21 per share. Mr. Stevens is not at this time an employee of the
Company.
The Company granted in May 1995 to Tami J. Story, a director and
secretary/treasurer of the Company, an option for 300,000 shares of Common
Stock, exercisable at any time within five years after the September 26, 1995
meeting of shareholders at a price of $.21 per share.
<PAGE>
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has, subject to ratification by the
shareholders, selected Price Waterhouse LLP to serve as independent auditors for
the Company commencing with the fiscal year ended March 31, 1997.
A representative of Price Waterhouse LLP is expected to attend the
meeting either in person or telephonically. Such representative will have the
opportunity to make a statement if s/he desires to do so and will be available
to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP
AS THE COMPANY'S INDEPENDENT AUDITORS.
ANNUAL REPORTS
A copy of the Company's 1997 Form 10-K is being mailed to each
stockholder of record together with this proxy statement. The Form 10-K contains
detailed information concerning the Company and its operations, supplementary
financial information and certain schedules and exhibits. Copies of the Form
10-K will be furnished to stockholders without charge upon written request
directed to: Earth Search Sciences, Inc., 502 North 3rd St., #8, McCall, Idaho
83638; Attention: Tami J. Story, Secretary. Each such request must set forth a
good faith representation that the person making the request was a beneficial
owner of ESSI Common Stock as of August 12, 1997.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors, and persons who own more than ten
percent of Company Common Stock to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). SEC regulations
require that persons filing these reports furnish copies to the Company. Based
solely on a review of the copies of the reports received by the Company and on
written representations of certain reporting persons, the Company believes that
all of its executive officers and directors complied with applicable filing
requirements as of March 31, 1997.
DISCRETIONARY AUTHORITY
While the Notice of annual meeting of Shareholders provides for the
transaction of any business that properly comes before the meeting, the Board of
Directors has no knowledge of any matters to be presented at the meeting other
than those referred to herein. The enclosed proxy, however, gives discretionary
authority if any other matters are presented.
SHAREHOLDER PROPOSALS
Any shareholder proposals to be considered for inclusion in proxy
material for the Company's 1997 annual meeting must be received at the principal
executive offices of the Company not later than August 12, 1997.
By Order of the Board of Directors
/s/Tami J. Story
Tami J. Story
Secretary
August 8, 1997
<PAGE>
PROXY
EARTH SEARCH SCIENCES, INC.
Annual Meeting, October 7, 1997
PROXY SOLICITED BY BOARD OF DIRECTORS
PLEASE SIGN AND RETURN THIS PROXY
The undersigned hereby appoints Larry F. Vance and Rory J. Stevens, and each of
them, proxies with power of substitution to vote on behalf of the undersigned
all shares which the undersigned may be entitled to vote at the annual meeting
of shareholders of Earth Search Sciences, Inc. (the "Company") on October 7,
1997 and any adjournments thereof, with all powers that the undersigned would
possess if personally present, with respect to the following:
<TABLE>
<CAPTION>
1. Election of Directors
<S> <C> <C> <C>
FOR election of WITHHOLD AUTHORITY to elect ABSTAIN
Larry F. Vance Larry F. Vance
as a director as a director
FOR election of WITHHOLD AUTHORITY to elect ABSTAIN
John W. Peel, III John W. Peel, III
as a director as a director
FOR election of WITHHOLD AUTHORITY to elect ABSTAIN
Brian C. Savage Brian C. Savage
as a director as a director
FOR election of WITHHOLD AUTHORITY to elect ABSTAIN
Rory J. Stevens Rory J. Stevens
as a director as a director
FOR election of WITHHOLD AUTHORITY to elect ABSTAIN
Tami J. Story Tami J. Story
as a director as a director
2. Selection of Auditors
FOR selection of AGAINST selection of ABSTAIN
Price Waterhouse LLP Price Waterhouse LLP as
as independent auditor independent auditor
3. Transaction of any business that properly comes before the meeting or any
adjournments thereof. A majority of the proxies or substitutes at the meeting
may exercise all the powers granted hereby.
The shares represented by this proxy will be voted as specified on this
proxy, but if no specification is made, this proxy will be voted for each
of the proposals submitted by the Board of Directors. The proxies may vote
in their discretion as to other matters which may come before this
meeting.
P Shares:
R
O Date:_____________________________, 19__
X
Y
Signature or Signatures
Please date and sign as name is imprinted hereon, including designation as
executor, trustee, etc., if applicable. A corporation must sign its name by the
president or other authorized officer.
The annual meeting of Shareholders of Earth Search Sciences, Inc. will be held
on Tuesday, October 7, 1997, at 2:00 p.m., Mountain Daylight Savings Time, at
the offices of the Company, 502 North 3rd Street, #8, McCall, Idaho 83638.
Please Note: Any shares of stock of the Company held in the name of fiduciaries,
custodians, or brokerage houses for the benefit of their clients may only be
voted by the fiduciary, custodian, or brokerage house itself--the beneficial
owner may not directly vote or appoint a proxy to vote the shares and must
instruct the person or entity in whose name the shares are held how to vote the
shares held for the beneficial owner. Therefore, if any shares of stock of the
Company are held in "street name" by a brokerage house, only the brokerage
house, at the instructions of its client, may vote or appoint a proxy to vote
the shares.
</TABLE>
