<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ECO SOIL SYSTEMS, INC.
(Name of Registrant as Specified in its Charter)
ECO SOIL SYSTEMS, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11:
(1) Title of each class of securities to which the transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
ECO SOIL SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS AND PROXY STATEMENT
TO THE SHAREHOLDERS OF ECO SOIL SYSTEMS, INC.:
Notice is hereby given that the Annual Meeting of the Shareholders of
Eco Soil Systems, Inc. (the "Company" or "Eco Soil"), will be held at the
executive offices of the Company, located at 10890 Thornmint Road, Suite 200,
San Diego, California 92127 on Tuesday, June 3, 1997 at 9:00 a.m. for the
following purposes:
1. To elect two directors for a three-year term to expire at the
2000 Annual Meeting of Shareholders. The present Board of Directors of
the Company has nominated and recommends for election as directors the
following two persons:
Bradley K. Edwards
S. Bartley Osborn
2. To consider and vote upon a proposal to amend the 1992 Stock
Option Plan to increase the number of shares available for issuance
thereunder.
3. To transact such other business as may be properly brought
before the Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on May 1, 1997
as the record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting. A list of such shareholders shall be open to
the examination of any shareholder at the Annual Meeting and for a period of ten
days prior to the date of the Annual Meeting at the offices of Eco Soil Systems,
Inc., 10890 Thornmint Road, Suite 200, San Diego, California 92127.
Accompanying this Notice is a Proxy. WHETHER OR NOT YOU EXPECT TO BE AT
THE ANNUAL MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY. If you plan to attend the Annual Meeting and wish to vote your shares
personally, you may do so at any time before the Proxy is voted.
All shareholders are cordially invited to attend the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Jeffrey A. Johnson
Secretary
San Diego, California
April 30, 1997
1
<PAGE> 3
ECO SOIL SYSTEMS, INC.
10890 THORNMINT ROAD, SUITE 200
SAN DIEGO, CALIFORNIA 92127
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
JUNE 3, 1997
The Board of Directors of Eco Soil Systems, Inc., a Nebraska
corporation (the "Company" or "Eco Soil") is soliciting the enclosed Proxy for
use at the Annual Meeting of Shareholders of the Company to be held on June 3,
1997 (the "Annual Meeting"), and at any adjournments thereof. This Proxy
Statement will be first sent to shareholders on or about May 2, 1997. Unless
contrary instructions are indicated on the Proxy, all shares represented by
valid proxies received pursuant to this solicitation (and not revoked before
they are voted) will be voted for the election of the Board's nominees for
directors. As to any other business which may properly come before the Annual
Meeting and be submitted to a vote of the shareholders, Proxies received by the
Board of Directors will be voted in accordance with the best judgment of the
holders thereof.
A Proxy may be revoked by written notice to the Secretary of the
Company at any time prior to the Annual Meeting, by executing a later Proxy or
by attending the Annual Meeting and voting in person.
The Company will bear the cost of solicitation of Proxies. In addition
to the use of mails, Proxies may be solicited by personal interview, telephone
or telegraph, by officers, directors, and other employees of the Company. The
Company will also request persons, firms, and corporations holding shares in
their names, or in the names of their nominees, which are beneficially owned by
others to send or cause to be sent Proxy material to, and obtain Proxies from,
such beneficial owners and will reimburse such holders for their reasonable
expenses in so doing.
The Company's mailing address is 10890 Thornmint Road, Suite 200, San
Diego, California 92127.
VOTING
Shareholders of record at the close of business on May 1, 1997 (the
"Record Date") will be entitled to notice of and to vote at the Annual Meeting
or any adjournments thereof.
As of March 31, 1997, 11,390,171 shares of the Company's common stock,
$.005 par value per share ("Common Stock"), were outstanding, representing the
only voting securities of the Company. Each share of Common Stock is entitled to
one vote.
Votes cast by Proxy or in person at the Annual Meeting will be counted
by the person appointed by the Company to act as Inspector of Election for the
Annual Meeting. The Inspector of Election will treat shares represented by
Proxies that reflect abstentions or include "broker non-votes" as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. Abstentions or "broker non-votes" do not constitute a vote "for" or
"against" any matter and thus will be disregarded in the calculation of "votes
cast." Any unmarked Proxies, including those submitted by brokers or nominees,
will be voted in favor of the nominees of the Board of Directors, as indicated
in the accompanying Proxy card.
2
<PAGE> 4
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 25, 1997, the number and
percentage ownership of the Company's Common Stock by: (i) each director of the
Company, (ii) each Named Executive Officer (as defined below) of the Company,
(iii) each person or entity known by the Company to own beneficially more than
five percent of the Company's Common Stock and (iv) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE OF
NAME AND ADDRESS (1) BENEFICIAL OWNERSHIP OUTSTANDING SHARES
-------------------- -------------------- ------------------
<S> <C> <C>
William B. Adams(2) 1,443,463 11.79%
Bradley K. Edwards(3) 801,433 6.89%
Heartland Capital Fund, Ltd.
11930 Arbor Street, Suite 201
Omaha, NE 68144
Douglas M. Gloff(4) 518,556 4.40%
Wally Fuchs(5) 373,794 3.28%
William S. Potter(6) 363,132 3.62%
13875 Old El Camino Real
San Diego, CA 92130
Kevin P. Lyons(7) 333,825 2.93%
David W. Schermerhorn(8) 333,825 2.93%
Jeffrey A. Johnson(9) 301,176 2.59%
S. Bartley Osborn(10) 74,166 *
360 Orono Orchard Road
Wayzata, MN 55391
All executive officers and directors 4,834,970 36.15%
as a group (14 persons)(11)
</TABLE>
*Less than 1%.
(1) Except as indicated by footnote, each person or group identified has sole
voting and investment power with respect to all shares of Common Stock shown as
beneficially owned by them. Except as otherwise indicated, the address of each
of the above persons is c/o Eco Soil Systems, Inc., 10890 Thornmint Road, Suite
200, San Diego, California 92127.
(2) Includes 619,823 shares of Common Stock subject to currently exercisable
options and 237,500 shares of Common Stock subject to currently exercisable
warrants.
(3) All shares are owned by Heartland Capital; beneficial ownership of such
shares is attributed to Mr. Edwards because he is a general partner of Heartland
Capital and is therefore deemed to exercise voting power and investment
authority with respect to the shares. Shares listed include 56,666 shares of
Common Stock subject to currently exercisable options and 180,834 shares of
Common Stock subject to currently exercisable warrants.
3
<PAGE> 5
(4) Includes 163,556 shares of Common Stock subject to currently exercisable
options and 230,000 shares of Common Stock subject to currently exercisable
warrants.
(5) Includes 18,721 shares of Common Stock held by Mr. Fuchs as Trustee for the
Fuchs Family Charitable Remainder Trust.
(6) Includes 70,132 shares of Common Stock subject to convertible debt
securities, 10,000 shares of Common Stock subject to currently exercisable
options and 90,000 shares of Common Stock subject to currently exercisable
warrants. Also includes 193,000 shares owned by Rugged Rigger, Inc., a
California corporation that is wholly owned by Mr. Potter.
(7) Includes 10,000 shares of Common Stock subject to currently exercisable
options.
(8) Includes 10,000 shares of Common Stock subject to currently exercisable
options.
(9) Includes 225,909 shares of Common Stock subject to currently exercisable
options.
(10) Includes 15,000 shares of Common Stock subject to convertible debt
securities, 3,333 shares of Common Stock subject to currently exercisable
options and 15,000 shares of Common Stock subject to currently exercisable
warrants.
(11) See notes 1-8 above. Also includes 48,333 shares of Common Stock subject to
currently exercisable options held by John M. Doyle.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors currently consists of six members. The Company's
Amended and Restated Articles of Incorporation provide for the classification of
the Board of Directors into three classes, as nearly equal in number as
possible, with staggered terms of office and provides that upon the expiration
of the term of office for a class of directors, nominees for such class shall be
elected for a term of three years or until their succesors are duly elected and
qualified. At this meeting, two nominees for director are to be elected as Class
I directors. The nominees are Bradley K. Edwards and S. Bartley Osborn. The
Class II and Class III directors have one year and two years, respectively,
remaining on their terms of office. If no contrary indication is made, proxies
in the accompanying form are to be voted for such nominees or, in the event any
such nominee is not a candidate or is unable to serve as a director at the time
of the election (which is not currently expected), for any nominee who shall be
designated by the Board of Directors to fill such vacancy. Both nominees are
members of the present Board of Directors.
In voting for the election of directors of the Company under the
Nebraska Business Corporation Act, all shareholders may cumulate their votes in
the election of directors for any nominee if the nominee's name was placed in
nomination prior to the voting. Under cumulative voting, each shareholder is
entitled in the election of directors to vote one vote for each share held by
him multiplied by the number of directors to be elected, and he may cast all
such votes for a single nominee for director or may distribute them among any
two or more nominees as he sees fit. The candidates receiving the highest number
of votes, up to the number of directors to be elected, will be elected. The
Proxy solicited by the Board of Directors confers discretionary authority on the
proxies to cumulate votes so as to elect the maximum number of directors. The
Proxy may not be voted for more than two persons.
4
<PAGE> 6
INFORMATION REGARDING DIRECTORS
The information set forth below as to each nominee for Director has
been furnished to the Company by the respective nominees for Director:
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR A THREE-YEAR TERM EXPIRING AT THE
2000 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION WITH THE COMPANY
---- --- ---------------------------------
<S> <C> <C>
Bradley K. Edwards................. 38 Director
S. Bartley Osborn.................. 55 Director
</TABLE>
BRADLEY K. EDWARDS has served as a director of the Company since July
1991. Since January 1993, Mr. Edwards has been a general partner of Heartland
Capital. Heartland Capital is the successor to the NRDA, a state-sponsored
venture capital entity that was an original investor in the Company. From
November 1989 to January 1993, Mr. Edwards was employed by the NRDA, initially
as a fund manager and later as its President.
S. BARTLEY OSBORN has served as a director of the Company since
November 1991. Mr. Osborn is currently Chairman of the Board of Directors of the
Fairway Foundation, a nonprofit foundation dedicated to teaching and exposing
the game of golf to inner-city children in Minneapolis, Minnesota. From October
1965 through May 1982, Mr. Osborn was Executive Vice President of Ecolab, Inc.,
a Fortune 500 specialty chemical manufacturer based in Minneapolis, Minnesota.
Mr. Osborn is a trustee of the IC Koran foundation, which assists employees of
EcoLab through scholarships for its children and through financial hardship
assistance.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT THE
1998 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION WITH THE COMPANY
---- --- ---------------------------------
<S> <C> <C>
Jeffrey A. Johnson................. 40 President and General Manager
of Golf Division and Director
William S. Potter.................. 51 Director
</TABLE>
JEFFREY A. JOHNSON served as President and Chief Operating Officer of
the Company from March 1991 to April 1997. He has served as a diretor since
March 1991 and has served as the President and General Manager of the Company's
Golf Division since April 1997. Prior to his involvement with the Company, Mr.
Johnson was a partner and employee of WBA Consultants from 1986 until March
1991. Mr. Johnson was also a Vice President of Printrak, Inc. from 1989 to 1991
and Vice President of Corporate Development of Check Technology Corporation from
1986 to 1988. From 1983 to 1986, Mr. Johnson was Vice President of Corporate
Finance for Craig Hallum, Inc., an investment banking firm based in Minneapolis,
Minnesota.
WILLIAM S. POTTER has served as a director of the Company since August
1992. Since 1988, Mr. Potter has also been President of Rugged Rigger, Inc., a
personal services corporation. From 1970 to 1988, Mr. Potter worked in various
capacities for H.M. Stevens Incorporated, a national food service and catering
company specializing in sporting events, culminating in the position of
Operational Vice President. Mr. Potter is a founding member of Fairbanks Ranch
Country Club in San Diego.
5
<PAGE> 7
TERM EXPIRING AT THE
1999 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION WITH THE COMPANY
---- --- ---------------------------------
<S> <C> <C>
William B. Adams................... 50 Chairman of the Board, Chief Executive
Officer, and Director
Douglas M. Gloff................... 50 President, Chief Operating Officer and
Director
</TABLE>
WILLIAM B. ADAMS has served as Chairman of the Board, Chief Executive
Officer and as a director of the Company since March 1991. Mr. Adams is also
currently Chairman of Orphan Medical, Inc., a publicly traded spinoff of
Chronimed, Inc., a publicly held medical products company. From 1985 to 1994,
Mr. Adams was Chairman of the Board of Chronimed. Prior to his involvement with
the Company, Mr. Adams founded WBA Consultants, Ltd., a management consulting
firm, in 1980 and acted as an independent management consultant until 1994. From
August 1989 to February 1991, Mr. Adams was Executive Chairman of Printrak,
Inc., a developer of specialized computer systems for the law enforcement
community. From April 1986 to April 1988, Mr. Adams was President and Chief
Executive Officer of Check Technology Corporation, a manufacturer of electronic
printing equipment.
DOUGLAS M. GLOFF joined the Company as Executive Vice President in
January 1994 and became a director of the Company in August 1995. Mr. Gloff has
served as the Company's President and Chief Operating Officer since April 1997.
Mr. Gloff shares many of the executive management duties of the Company with Mr.
Adams. Prior to joining the Company, Mr. Gloff acted as a consultant from 1992
until January 1994. From 1978 to 1992, he served in various capacities with U.S.
Surgical, Inc., a publicly held supplier of medical instruments used in surgery,
culminating in the position of Director of Sales for the western area.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers and key employees of the Company and their ages
as of April 30, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION WITH THE COMPANY
---- --- ---------------------------------
<S> <C> <C>
L. Jean Dunn, Jr. ................. 41 Chief Financial Officer
Dr. Thomas C. Quick................ 42 Vice President, Agriculture
John M. Doyle...................... 38 Vice President of Marketing and Commercial
Development
Kevin P. Lyons..................... 41 Senior Vice President and Co-General
Manager, Turf Specialty
David W. Schermerhorn.............. 38 Senior Vice President and Co-General
Manager, Turf Specialty
Wally Fuchs........................ 57 Vice President and General Manager, Turf
Products
Michael R. Scott................... 41 President of Aspen Consulting Companies, Inc.
</TABLE>
L. JEAN DUNN, JR. joined the Company as Corporate Financial
Officer/Corporate Operations Officer in May 1996. From 1992 to 1996, Mr. Dunn
had been a partner in Capital Advisors LLC, an investment banking firm. Prior to
that, Mr. Dunn was a Vice President at Mitsubishi Bank in New York from 1989 to
1992, and a Vice President at Banque Paribas in Los Angeles and New York from
1982 to 1989.
DR. THOMAS C. QUICK has served as the Vice President, Agriculture of
the Company since September 1996. From October 1994 to August 1996, he served as
an International Product Manager, Biopesticides, for Abbott Laboratories. Prior
to that, he served in various capacities with Mycogen Corporation from May 1987
until March 1994, culminating in the position of Technical Sales Representative.
6
<PAGE> 8
JOHN M. DOYLE joined the Company in May 1994 as the Company's Vice
President of Product Development. He was named Vice President of Marketing and
Commercial Development in March 1997. Mr. Doyle is responsible for product and
technology acquisition, production, marketing and communication materials, and
sales support for the BioJect system. Prior to joining the Company, Mr. Doyle
spent seven years in various positions with Ringer Corporation, a supplier of
natural turf maintenance products based in Minneapolis, Minnesota, culminating
in the position of Vice President of Product Development.
KEVIN P. LYONS has served in various capacities with Turf Specialty
since October 1985, culminating in his current position of Senior Vice President
and Co-General Manager. Prior to joining Turf Specialty, he was a Senior
Technical Representative for O.M. Scott & Sons, Inc. from February 1980 until
October 1985.
DAVID W. SCHERMERHORN has served in various capacities with Turf
Specialty since October 1987, culminating in his current position of Senior Vice
President and Co-General Manager. Prior to joining Turf Specialty, he was a
Technical Representative for O.M. Scott & Sons, Inc. from October 1985 until
October 1987.
WALLY FUCHS founded Turf Products in February 1969 and currently serves
as the Vice President and General Manager of Turf Products. He was an original
member of the Independent Turf and Ornamental Distributors Association (ITODA),
the principal association of golf course and nursery product distributors.
MICHAEL R. SCOTT is the Founder and President of Aspen Consulting,
Inc., the Company's wholly owned subsidiary that plans and designs complete
irrigation systems for golf courses, residential housing projects and large
commercial developments. Mr. Scott founded Aspen in 1981. Mr. Scott is a
Certified Irrigation Designer for golf courses by the American Irrigation
Association, a Certified Irrigation Designer for large commercial projects by
the American Irrigation Association, a member of the American Society of
Irrigation Consultants, and a member of the Center for Irrigation Technology.
BOARD MEETINGS AND COMMITTEES
The Company's Board of Directors held five regularly scheduled meetings
and two special telephonic meetings during 1996. No nominee for director who
served as a director during the past year attended fewer than 75% of the
aggregate of the total number of meetings of the Board of Directors and the
total number of meetings of committees of the Board of Directors on which he
served. The Board of Directors has established a Compensation Committee and an
Audit Committee. The Company does not have a Nominating Committee.
COMPENSATION COMMITTEE
The Compensation Committee consists of Messrs. Adams, Edwards, and
Potter. The Compensation Committee provides recommendations concerning salaries
and incentive compensation for the Company's officers and administers the
Company's benefit plans, other than the 1992 Stock Option Plan. The Compensation
Committee did not meet during 1996.
AUDIT COMMITTEE
The Audit Committee consists of Messrs. Johnson, Edwards and Osborn.
The Audit Committee recommends to the Board of Directors the engagement of the
Company's independent public accountants and reviews the scope and results of
their audits and other services. The Audit Committee meets with management and
with the independent public accountants to review matters relating to the
quality of the Company's financial reporting and internal accounting control,
including the nature, extent and results of the audits, proposed changes to the
Company's accounting principles and otherwise maintains communications between
the independent public accountants and the Board of Directors. The Audit
Committee did not meet during 1996.
7
<PAGE> 9
COMPENSATION OF DIRECTORS
The Company has not paid any cash compensation to a director in his
capacity solely as a director and has no present plan to pay directors' fees. It
is the Company's current policy to award non-employee directors an option to
purchase 10,000 shares of Common Stock at the then-current market price, vesting
over three years, for each year of service as a director. All directors are
reimbursed for travel and other out-of-pocket expenses incurred in connection
with attendance at meetings of the Board of Directors.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that shareholders vote FOR the slate
of nominees set forth above. Proxies solicited by the Board of Directors will be
so voted unless shareholders specify otherwise on the accompanying Proxy.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal year ending December 31,
1996, the cash compensation paid by the Company, as well as certain other
compensation paid or accrued for those years, to the Company's Chief Executive
Officer and to the only executive officers whose salary and bonus exceeded
$100,000 for that year (the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------- --------------------------------------
(A) (b) (c) (d) (e) (f) (g) (h)
ALL OTHER
OTHER RESTRICTED SECURITIES COMPEN-
NAME AND ANNUAL STOCK UNDERLYING SATION
PRINCIPAL POSITION YEAR SALARY ($)(1) BONUS ($) COMPENSATION AWARDS ($) OPTIONS (#) ($)
------------------ ---- ------------- --------- ------------ ---------- ----------- ---
<S> <C> <C> <C> <C> <C> <C> <C>
William B. Adams 1996 75,000 0 0 0 0 0
1995 75,000 0 0 0 0 0
1994 75,000 0 0 0 0 0
Kevin P. Lyons 1996 85,000 80,000 0 0 10,000 0
David W. Schermerhorn 1996 85,000 80,000 0 0 10,000 0
Wally Fuchs 1996 155,000 0 0 0 0 0
</TABLE>
8
<PAGE> 10
STOCK OPTION GRANTS TABLE
The following table provides information concerning the grant of stock
options to the Named Executive Officers of the Company during fiscal 1996. The
Company does not have any outstanding stock appreciation rights.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED (#) FISCAL YEAR(%) PRICE ($/SH) DATE
- ---- ----------- -------------- ------------ ----
<S> <C> <C> <C> <C> <C>
William B. Adams 1996 0 (1) 0 N/A N/A
Kevin P. Lyons 1996 10,000 2.0 3.00 10/15/01
David W. Schermerhorn 1996 10,000 2.0 3.00 10/15/01
Wally Fuchs 1996 0 0 N/A N/A
</TABLE>
- -------------------------
(1) Excludes warrants to purchase 107,500 shares of Common stock at an
exercise price of $3.00 per share. For a further discussion of such
warrants, see "Certain Transactions."
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table provides information with respect to the Named
Executive Officers, concerning the exercise of stock options during fiscal 1996
and unexercised options held as of the end of fiscal 1996.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS
FY-END (#) AT FY-END ($)(1)
------------- ----------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- --------------- ------------------ ------------- ----------------
<S> <C> <C> <C> <C> <C>
William B. Adams 1996 0 0 619,823(2)/0 1,678,043/0
Kevin P. Lyons 1996 0 0 10,000/0 11,250/0
David W. Schermerhorn 1996 0 0 10,000/0 11,250/0
Wally Fuchs 1996 0 0 0/0 0/0
</TABLE>
- ---------------------------
(1) In order to calculate the value of unexercised in-the-money options at
fiscal year end, the Company assumed the fair market value of the
Company's Common Stock at fiscal year end was $4.125, the price set for
the initial public offering of the Company's Common Stock on January 17,
1997.
(2) Excludes warrants to purchase 237,500 shares of Common Stock at an
exercise price of $3.00. For a further discussion of such warrants, see
"Certain Transactions."
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of the
Named Executive Officers and certain other executive officers. A summary of
the principal terms of such agreements is set forth below.
On May 21, 1991, the Company entered into an employment agreements with
each of William B. Adams, Jeffrey A. Johnson and Douglas M. Gloff, setting
forth each officer's duties, compensation, employee benefits and other terms
of employment. Each agreement, as amended, provides for an initial minimum
annual salary of $75,000 for each officer and terminates in December 1998. The
Company or each officer may terminate the agreement earlier, in which case
such officer will be entitled to severance pay equal to six months' base
salary. Within six months of the occurrence of certain change in control
events, each officer may voluntarily terminate his employment and be entitled
to severance pay equal to six months' base salary.
On October 1, 1995, Aspen Consulting Companies, Inc., a wholly-owned
subsidiary of the Company ("Aspen"), entered into an employment agreement with
Michael R. Scott setting forth Mr. Scott's duties,
9
<PAGE> 11
compensation, employee benefits and other terms of employment. Such agreement
provides for a minimum annual salary of $96,000 and terminates on September 30,
1999, unless earlier terminated by the Company or Mr. Scott. The employment
agreement also provides that Mr. Scott is eligible to receive certain cash
bonuses if Aspen's pre-tax net income exceeds specified levels. The performance
objective was met in 1995, and Mr. Scott was paid a bonus of $50,000, $32,000 of
which was paid in 1996 and $18,000 of which was paid in 1997. In addition, Mr.
Scott received a non-qualified option to purchase up to 50,000 shares of the
Company's Common Stock at $3.00 per share, vesting in equal annual installments
over the next four years, as long as he continues to be employed by the Company
at the end of each anniversary date of the agreement, and an option to purchase
up to 150,000 shares of Common Stock at $3.00 per share if Aspen's pre-tax net
income exceeds certain levels from 1996 through 1999. In 1995, Mr. Scott
received a total of $96,000 in salary, $28,000 of which was paid by the Company
after the Company's acquisition of Aspen in September 1995. In 1996, he received
a total of $96,000 in salary.
On June 1, 1996, the Company entered into an employment agreement with
L. Jean Dunn, Jr. setting forth Mr. Dunn's duties, compensation, employee
benefits and other terms of employment. Such agreement provides for a minimum
annual salary of $90,000 and terminates on December 1, 1998. The agreement
also granted Mr. Dunn an option to purchase up to 75,000 shares of the
Company's Common Stock at $3.00 per share, with such options vesting in three
equal annual installments beginning on December 1, 1996.
On July 8, 1996, the Company entered in employment agreements with
Kevin P. Lyons and David W. Schermerhorn in connection with the Company's
acquisition of Turf Specialty. Each employment agreement provides for a
minimum annual salary of $165,000 and terminates on July 7, 1999 and July 8,
1999, respectively. See "Certain Transactions."
On July 10, 1996, the Company entered into an employment agreement with
Wally Fuchs in connection with Company's acquisition of Turf Products. The
employment agreement provides for a minimum annual salary of $155,000 and
terminates on July 10, 1998.
On September 1, 1996, the Company entered into an employment agreement
with Dr. Thomas C. Quick setting forth Dr. Quick's duties, compensation,
employee benefits and other terms of employment. Such agreement provides for a
minimum annual salary of $80,000 and terminates on March 1, 1999. The
agreement also grants Dr. Quick an option to purchase up to 30,000 shares of
Common Stock at $3.00 per share, with such options vesting in three equal
annual installments beginning on March 1, 1997.
COMPENSATION PLANS
1992 Stock Option Plan. In 1992, the Company adopted a Stock Option
Plan (the "1992 Stock Option Plan") under which shares of Common Stock have
been reserved for issuance upon exercise of options granted to officers,
directors and employees of, and advisors and consultants to, the Company. For
a full discussion of the material terms of the Company Plan, see "Proposal 2:
Amendment of the 1992 Stock Option Plan."
1996 Directors' Option Plan. The 1996 Directors' Stock Option Plan (the
"Directors' Plan") provides for the automatic grant of nonstatutory stock
options to purchase 10,000 shares of Common Stock to nonemployee directors at
the time of their election as director, and an option to purchase 3,000 shares
of Common Stock on the date of each subsequent annual shareholder meeting,
subject to certain limitations. Options granted on the date an individual is
elected as a director of the Company shall become vested and thereby
exercisable with respect to 33-1/3% on the date of such election, with respect
to 33-1/3% on the twelve month anniversary date after such election and with
respect to 33-1/3% on the date of the second twelve month anniversary date
after such election; provided, however, that an unvested portion of such
option grant shall only vest so long as the nonemployee director remains a
director on the date such portion vests, and that vested options shall
terminate two years after the date a director ceases to be a director of the
Company. Options granted on the date of each annual meeting of shareholders
become exercisable six months after the date of grant. The option price for
nonemployee directors is equal to the fair market value of a share of Common
Stock as of the date of grant. The Company has reserved a total of 60,000
shares of Common Stock for issuance under the Directors' Plan, all of which
are currently available for future grants.
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CERTAIN TRANSACTIONS
In July 1994, the Company entered into a $1,013,000 line of credit with
Peninsula Bank. The line of credit was secured by all of the Company's accounts
receivable and contract rights, as well as a pledge of personal assets by
William B. Adams, Rugged Rigger, Inc. (a company controlled by William S.
Potter), Douglas M. Gloff and Heartland Capital (a limited partnership, of which
Bradley K. Edwards is a general partner).
During the period from December 1994 to February 1995, Mr. Adams
converted $1.2 million of subordinated notes and shareholder advances into
400,000 shares of Common Stock.
On November 15, 1995, Mr. Gloff and Heartland Capital each purchased
$200,000 and Mr. Adams purchased $300,000 of collateralized subordinated
debentures from the Company. The debentures are secured by the assets of the
Company but are subordinated to any senior indebtedness of the Company. The
debentures bear interest at an 8% annual rate, payable on a quarterly basis, and
the entire principal balance is due on November 15, 1998.
On February 1, 1996, Mr. Adams loaned the Company $250,000 under the
terms of an 8% unsecured subordinated promissory note, with principal and
interest due upon demand.
On January 22 and 23, 1996, Mr. Adams purchased a total of $300,000 of
collateralized subordinated debentures from the Company. The debentures are
secured by the assets of the Company but are subordinated to any senior
indebtedness of the Company. The debentures bear interest at an 8% annual rate,
payable on a quarterly basis, and the entire principal balance is due on
November 15, 1998. In connection with these debentures, warrants were issued to
Mr. Adams to purchase 100,000 shares of Common Stock at an exercise price of
$3.00 per share. These warrants expire on the earlier of January 2003 or one
year after the closing date of the Company's initial public offering of Common
Stock.
On March 1, 1996, Rugged Rigger, Inc. loaned the Company $100,000. The
loan had an annual interest rate of 8%, payable monthly, and the entire
principal balance was due on November 15, 1998. In connection with this
subordinated unsecured note, warrants were issued to Mr. Potter to purchase
15,000 shares of Common Stock at an exercise price of $3.00 per share. These
warrants expire in March 1, 2001. The loan was repaid in full with the proceeds
from the sale of the Bridge Notes and the Bridge Warrants.
On March 15, 1996, Mr. Adams converted $300,000 of collateral that was
pledged to secure the Company's bank loan at Peninsula Bank into cash and used
the cash to reduce the Company's $1,013,000 principal loan at Peninsula Bank by
this amount. The Company in turn issued Mr. Adams a $300,000 secured
subordinated promissory note, which bears interest at an 8% annual rate, payable
on a quarterly basis, and the entire principal amount is due on March 15, 1998.
In connection with the promissory note, Mr. Adams was granted warrants to
purchase up to 100,000 shares of Common Stock at an exercise price of $3.00 per
share for a period of five years.
On March 15, 1996, Mr. Gloff and Heartland Capital converted $250,000
and $200,000, respectively, of collateral that was pledged to secure the
Company's bank loan at Peninsula Bank into cash and used the cash to reduce the
Company's $1,013,000 principal loan at Peninsula Bank by this amount. The
Company in turn issued a $250,000 secured subordinated promissory note to Mr.
Gloff and a $200,000 secured subordinated promissory note to Heartland Capital,
each bearing interest at an 8% annual rate, payable on a quarterly basis, and
the principal amount of each note is due on March 15, 1998. In connection with
the debentures, warrants were issued to Mr. Gloff and Heartland Capital to
purchase up to 83,333 shares and 66,667 shares, respectively, of Common Stock at
an exercise price of $3.00 per share. These warrants expire upon the earlier of
seven years from the date of issuance or one year after the closing date of the
Company's initial public offering of Common Stock.
On March 26, 1996, the Company entered into a $1,000,000 line of credit
agreement with Imperial Bank, $500,000 of which is a revolving line of credit
that expires on April 1, 1998 and $500,000 of which is a
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<PAGE> 13
revolving credit line extended to finance exports based on a guarantee extended
the Company by the California Export Finance Organization ("CEFO"). The entire
line of credit has been personally guaranteed by Mr. Adams. The term loan
portion of the line of credit bears interest at a rate of prime plus 2%. The
CEFO portion of the credit line bears interest at prime plus 1.5%. CEFO's
obligations are in turn guaranteed by Mr. Adams. In connection with the
revolving line of credit, warrants were issued to Imperial Bank to purchase
20,833 shares of Common Stock at an exercise price of $3.00 per share. These
warrants expire in March 2001.
Between March and July 1996, the Company loaned $72,000 to Rugged
Rigger, Inc. to enable it to exercise options to purchase Common Stock. The loan
bears interest at an annual rate of 5%, compounded annually, and is payable at
the earlier of two years from the date of the loan or upon the sale of the
underlying Common Stock. This loan will be repaid by Rugged Rigger upon the
earlier of (i) one year following the effective date of the public offering or
(ii) the sale of the underlying Common Stock.
On April 1, 1996, Mr. S. Bartley Osborn loaned the Company $100,000.
The loan had an annual interest rate of 10%, payable upon demand, and the entire
principal balance was due on July 1, 1996. In connection with this unsecured
note, warrants were issued to Mr. Osborn to purchase 15,000 shares of Common
Stock at an exercise price of $3.00 per share. These warrants expire in April
2001. The loan was repaid in full with the proceeds from the sale of the Bridge
Notes and the Bridge Warrants.
On May 15, 1996, Mr. Gloff converted the entire principal balance of
his $100,000 unsecured promissory note into 100,000 shares of Common Stock.
On May 24, 1996, the Company issued three convertible unsecured $50,000
promissory notes for the purpose of providing short-term financing until the
proceeds of this initial public offering can be received, one from each of Mr.
Adams, Mr. Gloff and Heartland Capital. Each note is payable upon demand and
bears interest at an annual rate of 8%. In connection with these promissory
notes, warrants were issued to each of Messrs. Adams and Gloff and Heartland
Capital to purchase 7,500 shares of Common Stock at an exercise price of $3.00
per share. These warrants expire in May 2001.
In May 1996, the Company acquired from Kevin P. Lyons and David W.
Schermerhorn, the only shareholders of Turf Specialty, all of the stock of Turf
Specialty for a total of $500,000 in cash and 647,650 shares of Common Stock. In
addition, the Company agreed to pay to Messrs. Lyons and Schermerhorn a total of
$1,000,000 if Turf Specialty earns a pre-tax profit for the year ending December
31, 1996 of at least $900,000, with lesser payments due if Turf Specialty earns
less than $900,000 in pre-tax profit for the year ending December 31, 1996.
Turf Specialty achieved $979,161 in pre-tax profits for the year ending
December 31, 1996.
In connection with the acquisition of Turf Specialty, effective July 8,
1996, the Company entered into employment agreements with each of Messrs. Lyons
and Schermerhorn providing for minimum annual salary levels of $165,000 and the
right to participate in any incentive compensation plans sponsored by Turf
Specialty. The employment agreements for Messrs. Lyons and Schermerhorn expire
on July 7, 1999 and July 8, 1999, respectively. Pursuant to these agreements,
the Company has agreed to loan $250,000 to each of these individuals on or about
December 15, 1996. These loans do not have to be repaid and will be forgiven on
July 1, 1999 if these officers are employed by the Company at that time. If
either officer's employment is terminated by the Company before that date, such
officer will be obligated to repay a portion of the loan prorated to the number
of days worked from July 2, 1996 to the effective date of the termination of his
employment. Compensation expense will be recorded by the Company over the period
of forgiveness.
The Company leases its headquarters facility from Mr. Arthur Arns, who
owns 10,000 shares of Common Stock. The Company's lease for this facility
provides for base lease payments of $13,200 per month, plus operating expenses,
and expires in December 1999.
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Management of the Company believes that the terms of the transactions
described above were no less favorable to the Company than would have been
obtained from an unaffiliated third party. Any future material transactions and
loans with officers, directors or 5% beneficial shareholders of the Company's
Common Stock, or affiliates of such persons, will be on terms no less favorable
to the Company that could be obtained from unaffiliated third parties and will
be approved by a majority of the outside members of the Company's Board of
Directors who do not have an interest in the transactions.
The Company has agreed with the Minnesota Department of Commerce that
so long as the Company's securities are registered in the State of Minnesota, or
one year from January 17, 1997, whichever is longer, the Company will not make
loans to its officers, directors, employees, or principal shareholders, except
for loans made in the ordinary course of business, such as travel advances,
expense account advances, relocation advances, or reasonable salary advances.
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PROPOSAL 2
AMENDMENT OF THE 1992 STOCK OPTION PLAN
DESCRIPTION OF THE 1992 STOCK OPTION PLAN
General Nature and Purpose. In 1992, the Company adopted a Stock Option
Plan, under which 125,000 shares of Common Stock were initially reserved for
issuance upon exercise of options granted to officers, employees and directors
of, and advisors and consultants to, the Company. The Option Plan provides for
the grant of both stock options intended to qualify as incentive stock options
as defined in the Internal Revenue Code of 1986, as amended (the "Code"), and
nonqualified stock options. The Option Plan will terminate on February 5, 2002,
unless sooner terminated by the Board of Directors. The Company's shareholders
approved an increase in the number of shares reserved for issuance under the
Option Plan to 250,000 shares in August 1993, to 350,000 shares in April 1995,
to 450,000 shares in May 1996 and 900,000 shares in November 1996. The 1992
Stock Option Plan was adopted (i) to further the growth, development and
financial success of the Company by providing additional incentives to certain
of its officers and other key employees who have been or will be given
responsibility for the management or administration of the Company's business
affairs, by assisting them to become owners of the Company's Common Stock and
thus to benefit directly from the Company's growth, development and financial
success and (ii) to enable the Company to obtain and retain the services of the
type of professional, technical and managerial employees considered essential to
the long-range success of the Company by providing and offering them an
opportunity to become owners of the Common Stock. The 1992 Stock Option Plan
authorizes the grant of stock options that qualify as "incentive stock options"
under Section 422 of the Code (such qualified options being hereinafter referred
to as "Incentive Stock Options") and the grant of stock options that do not so
qualify ("Non-Qualified Options").
The principal features of the 1992 Stock Option Plan are summarized
below, but the summary is qualified in its entirety by reference to the full
text of the 1992 Stock Option Plan which is set forth as Exhibit A to this Proxy
Statement.
Administration. The 1992 Stock Option Plan is administered by the Board
of Directors of the Company (the "Board"). In addition to administering the 1992
Stock Option Plan, the Board is also authorized to interpret the terms of the
1992 Stock Option Plan and to adopt such rules for the administration,
interpretation and application of the 1992 Stock Option Plan as are consistent
therewith and to interpret, amend or revoke any such rules.
Eligibility. All employees of the Company, including officers of the
Company and directors who are employed by the Company (collectively,
"Employees"), and other persons or entities that provide services to the Company
("Consultants") are eligible to receive options under the 1992 Stock Option
Plan. Employees may receive Incentive Stock Options or Non-Qualified Options,
but Consultants may receive only Non-Qualified Stock Options. No person is
entitled to participate in the 1992 Stock Option Plan as a matter of right. Only
those Employees and Consultants who are selected from time to time to receive
options by the Board, acting in its absolute discretion, may participate in the
1992 Stock Option Plan.
Grant of Options; Purchase Price of Optioned Shares. The Board will
from time to time, in its absolute discretion, determine the number of shares to
be subject to options granted to Employee and Consultants, determine whether
such options are to be Incentive Stock Options or Non-Qualified Options, and
determine the terms and conditions of such options, consistent with the 1992
Stock Option Plan.
The purchase price of shares covered by an option granted under the
1992 Stock Option Plan shall be established by the Board, except that in the
case of an Incentive Stock Option granted to an individual then owning more
than 10% of the total combined voting power of all classes of stock of the
Company or any subsidiary (a "Significant Shareholder"), such purchase price
shall not be less than 110% of the fair market value of the Common Stock on
the date such option is granted.
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On April 28, 1997, the last reported sale price of the Common Stock as
reported by The Nasdaq Stock Market's SmallCap Market was $4.50 per share.
Terms and Exercise of Options. Options granted under the 1992 Stock
Option Plan may not be exercised more than ten years after the date of grant,
although the Board may grant options having shorter terms; provided that an
Incentive Stock Option granted to a Significant Shareholder shall not be
exercisable after five years from the date of grant. The Board is authorized
to determine the time or times and the conditions under which each option is
exercisable. In addition, the Board may accelerate the time at which any
option may be exercised.
Upon exercise of an option under the 1992 Stock Option Plan, the stock
purchased must be paid for in full in cash or by check or, if acceptable to the
Board of Directors, in stock or some other form.
Amendment of the Plan. The 1992 Stock Option Plan may be wholly or
partially amended or otherwise modified, suspended or terminated at any time and
from time to time by the Board. However, without approval of the shareholders of
the Company, the 1992 Stock Option Plan may not be amended to (i) increase the
maximum number of shares issuable upon exercise of options granted under the
1992 Stock Option Plan or (ii) change the class of Employees or Consultants
eligible to receive Options.
As a group, the Company's executive officers have received options to
purchase 155,000 shares of Common Stock under 1992 Stock Option Plan. All
employees of the Company, including all current officers who are not executive
officers, as a group have received options to purchase 683,100 shares of Common
Stock. L. Jean Dunn, Nicholas Spardy and Steve Trotter have received options to
purchase 75,000, 100,000 and 102,500 shares of Common Stock, respectively.
FEDERAL INCOME TAX CONSEQUENCES
The tax consequences of the 1992 Stock Option Plan under current
federal law are summarized in the following discussion which deals with the
general tax principles applicable to the 1992 Stock Option Plan, and is intended
for general information only. Alternative minimum tax and state and local income
taxes are not discussed and may vary depending on individual circumstances and
from locality to locality.
Non-Qualified Stock Options. For federal income tax purposes, the
recipient of Non-Qualified Stock Options granted under the 1992 Stock Option
Plan will not have taxable income upon the grant of the option, nor will the
Company then be entitled to any deduction. Generally, upon exercise of
Non-Qualified Stock Options, the optionee will realize ordinary income, and the
Company will be entitled to a deduction, in an amount equal to the difference
between the option exercise price and the fair market value of the stock at the
date of exercise. An optionee's basis for the stock for purposes of determining
his gain or loss on his subsequent disposition of the shares generally will be
the fair market value of the stock on the date of exercise of the Non-Qualified
Stock Option.
Incentive Stock Options. There is no taxable income to an employee when
an Incentive Stock Option is granted to him or when that option is exercised;
however, the amount by which the fair market value of the shares at the time of
exercise exceeds the option price will be an "item of tax preference" for the
optionee. Gain realized by an optionee upon sale of stock issued on exercise of
an Incentive Stock Option is taxable at capital gains rates, and no tax
deduction is available to the Company, unless the optionee disposes of the
shares within two years after the date of grant of the option or within one year
of the date the shares were transferred to the optionee. In such event, the
difference between the option exercise price and the fair market value of the
shares on the date of the option's exercise will be taxed at ordinary income
rates, and the Company will be entitled to a
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deduction to the extent the employee must recognize ordinary income. An
Incentive Stock Option exercised more than three months after an optionee's
retirement from employment, other than by reason of death or disability, will be
taxed as a Non-Qualified Stock Option, with the optionee deemed to have received
income upon such exercise taxable at ordinary income rates. The Company will be
entitled to a tax deduction equal to the ordinary income, if any, realized by
the optionee.
PROPOSED AMENDMENT TO THE 1992 STOCK OPTION PLAN
A total of 900,000 shares of Common Stock are currently reserved for
issuance under the 1992 Stock Option Plan, and under the terms of the 1992 Stock
Option Plan, the aggregate number of shares which may be issued upon exercise of
options may not exceed 900,000, subject to certain adjustments. The Board of
Directors recommends an amendment to the 1992 Stock Option Plan to increase the
number of shares available for issuance under the 1992 Stock Option Plan to
1,100,000.
As of April 25, 1997, options to purchase an aggregate of 848,100
shares of Common Stock had been granted under the 1992 Stock Option Plan.
Accordingly, only 51,900 shares of Common Stock were available for the issuance
of new options. The Board of Directors believes that increasing the number of
shares available for issuance under the 1992 Stock Option Plan is necessary in
order for the Board to have sufficient flexibility to carry out its
responsibilities to (i) establish compensation programs that attract, motivate
and retain executive and other key employees of the Company and (ii) administer
such programs in a manner that benefits the long-term interests of the Company
and its shareholders.
REQUIRED VOTE FOR APPROVAL AND RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of a majority of the shares present in person or
represented by proxy and entitled to vote at the meeting is required to approve
the amendment to the 1992 Stock Option Plan. The Board of Directors unanimously
recommends that stockholders vote FOR approval of the amendment to the 1992
Stock Option Plan. Proxies solicited by the Board of Directors will be so voted
unless shareholders specify otherwise on their proxy cards.
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GENERAL
INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Ernst & Young LLP to serve as the
Company's independent accountants for the 1997 fiscal year.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act"), as amended, directors, officers and beneficial owners of 10
percent or more of the Company's Common Stock ("Reporting Persons") are required
to report to the Securities and Exchange Commission (the "Commission") on a
timely basis the initiation of their status as a Reporting Person and any
changes with respect to their beneficial ownership of the Company's Common
Stock. Based solely on its review of such forms received by it and the written
representations of its Reporting Persons, the Company has determined that no
Reporting Persons known to it were delinquent with respect to his or her
reporting obligations as set forth in Section 16(a) of the Exchange Act.
SHAREHOLDER PROPOSALS
A proposal to be considered for inclusion in the Company's proxy
statement for the next annual meeting shall be received at the Company's
principal executive offices not later than December 24, 1998.
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended December 31,
1996 will be mailed to shareholders of record on or about May 5, 1997. The
Annual Report does not constitute, and should not be considered, a part of this
Proxy solicitation material.
If any person who was a beneficial owner of Common Stock of the Company
on the record date for the Annual Meeting of Shareholders desires additional
information, a copy of the Company's Annual Report on Form 10-KSB will be
furnished without charge upon receipt of a written request identifying the
person so requesting a report as a shareholder of the Company at such date.
Requests should be directed to L. Jean Dunn, c/o Eco Soil Systems, Inc., 10890
Thornmint Road, Suite 200, San Diego, California 92127.
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OTHER MATTERS
The Board of Directors does not know of any matter to be presented at
the Annual Meeting which is not listed on the Notice of Annual Meeting and
discussed above. If other matters should properly come before the meting,
however, the persons named in the accompanying Proxy will vote all Proxies in
accordance with their best judgment.
ALL SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND
RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
Jeffrey A. Johnson
Secretary
Dated: April 30, 1997
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Appendix A
ECO SOIL SYSTEMS, INC.
STOCK OPTION PLAN
Article I. Establishment and Purpose
1.1 Establishment. Eco Soil Systems, Inc., a Nebraska Corporation
("Company"), hereby establishes a stock option plan for employees and others
providing services to the Company as described herein, which shall be known as
the "STOCK OPTION PLAN OF 1992" (the "Plan"). It is intended that certain of the
options issued pursuant to the Plan to employment of the Company may constitute
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code, and that other options issued pursuant to the Plan shall
constitute nonstatutory options. The Board shall determine which options are to
be incentive stock options and which are to be nonstatutory options and shall
enter into option agreements with recipients accordingly.
1.2 Purposes. The purpose of this Plan is to enhance stockholder
investment by attracting, retaining and motivating key employees and consultants
of the Company, and to encourage stock ownership by such employees and
consultants by providing them with a means to acquire a proprietary interest in
the Company's success.
Article II. Definitions
2.1 Definitions. Whenever used herein, the following terms shall have
the respective meanings set forth below, unless the context clearly requires
otherwise, and when said meaning is intended, the term shall be capitalized.
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Committee" shall mean the Committee provided for by
Article IV hereof, which may be created at the discretion
of the Board.
(d) "Company" means Eco Soil Systems, Inc., a Nebraska
Corporation.
(e) "Consultant" means any person or entity, including an
officer as director of the Company, who provides services
(other than as an Employee) to the Company.
(f) "Date of Exercise" means the date the Company receives
notice, by an Optionee, of the exercise of an Option
pursuant to section 8.1 of this Plan. Such notice shall
indicate the number of shares of Stock the Optionee
intends to exercise.
(g) "Employee" means any person, including an officer or
director of the Company, who is employed by the Company.
(h) "Fair Market Value" means the fair market value of Stock
upon which an option is granted under this Plan.
(i) "Incentive Stock Option" means an Option granted under
this Plan which is intended to qualify as an "incentive
stock option" within the meaning of Section 422 of the
Code.
(j) "Nonstatutory Option" means an Option granted under this
Plan which is not intended to qualify as an incentive
stock option within the meaning of Section 422 of the
Code. Nonstatutory Options may be granted at such times
and subject to such restrictions as the
<PAGE> 21
Board shall determine without conforming to the statutory
rules of Section 422 of the Code applicable to incentive
stock options.
(k) "Option" means the right, granted under this Plan, to
purchase Stock of the Company at the option price for a
specified period of time. For purposes of this Plan, an
Option may be either an Incentive Stock Option or a
Nonstatutory Option.
(l) "Optionee" means an Employee or consultant holding an
Option under the Plan.
(m) "Parent Corporation" shall have the meaning set forth in
Section 424(3) of the Code with the Company being treated
as the employer corporation for purposes of this
definition.
(n) "Subsidiary Corporation" shall have the meaning set forth
in Section 24(f) of the Code with the Company being
treated as the employer corporation for purposes of this
definition.
(o) "Significant Shareholder" means an individual who, within
the meaning of section 422(b)(6) of the Code, owns stock
possessing more than ten percent of the total combined
voting power of all classes of stock of the Company or of
any Parent Corporation or Subsidiary Corporation of the
Company. In determining whether an individual is a
Significant Shareholder, an individual shall be treated
as owning stock owned by certain relatives of the
individual and certain stock owned by corporations in
which the individual is a shareholder, partnerships in
which the individual is a partner, and estates or trusts
of which the individual is a beneficiary, all as provided
in Section 424(d) of the Code.
(p) "Stock" means the one-half cent par value common stock of
the Company.
2.2 Gender and Number. Except when otherwise indicated by the context,
any masculine terminology when used in this Plan also shall include the feminine
gender, and the definition of any term herein in the singular also shall include
the plural.
Article III. Eligibility and Participation
3.1 Eligibility and Participation. All Employees are eligible to
participate in this Plan and receive Incentive Stock Options and/or Nonstatutory
Options hereunder. All Consultants are eligible to participate in this Plan and
receive Nonstatutory Options hereunder. Optionees in the Plan shall be selected
by the Board from among those Employees and Consultants who, in the opinion of
the Board, are in a position to contribute materially to the Company's continued
growth and development and to its long-term financial success.
Article IV. Administration
4.1 Administration. The Board shall be responsible for administering
the Plan.
The Board is authorized to interpret the Plan; to prescribe, amend, and
rescind rules and regulations relating to the Plan; to provide for conditions
and assurances deemed necessary or advisable to protect the interests of the
Company and to take all other determinations necessary or advisable for the
administration of the Plan, but only to the extent not contrary to the express
provisions of the Plan. Determinations, interpretations, or other actions made
or taken by the Board pursuant to the provisions of this Plan shall be final and
binding and conclusive for all purposes and upon all persons.
At the discretion of the Board, this Plan may be administered by a
Committee which shall be an executive committee of the Board, consisting of not
less than three (3) members of the Board. The members of such Committee may be
directors who are eligible to receive Options under this Plan, but Options may
be granted to such persons only by actions of the full Board and not by action
of the Committee. Such Committee shall have full
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power and authority, subject to the limitations of the Plan and any limitations
imposed by the Board, to construe, interpret and administer this Plan and to
make determinations which shall be final, conclusive and binding upon all
persons, including, without limitation, the Company, the stockholders, the
directors and any persons having any interests in any Options which may be
granted under this Plan, and, by resolution or resolution providing for the
creation and issuance of any such Option, to fix the terms upon which, the time
or times at or within which, and the price or prices at which any such shares
may be purchased from the Company upon the exercise of such Option, which terms,
time or times and price or prices shall, in every case, be set forth or
incorporated by reference to the instrument or instruments evidencing such
Option, and shall be consistent with the provisions of this Plan.
The Board may from time to time remove members from, or add members to,
the Committee. The Board may terminate the committee at any time. Vacancies on
the committee, howsoever caused, shall be filled by the Board. The Committee
shall select one of its members as Chairman, and shall hold meetings at such
times and places as the Chairman may determine. A majority of the Committee at
which a quorum is present, or acts reduced to or approved in writing by all of
the members of the Committee, shall be the valid acts of the Committee. A quorum
shall consist of two-thirds (2/3) of the members of the Committee.
Where the Committee has been created by the Board, references herein to
actions to be taken by the Board shall be deemed to refer to the committee as
well, except where limited by this Plan or by the Board.
The Board shall have all of the enumerated powers of the Committee, but
shall not be limited to such powers. No member of the Board or the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Option granted under it.
Article V. Stock Subject to the Plan.
5.1 Number. The total number of shares of Stock hereby made available
and reserved for issuance under the Plan shall be 1,1000,000. The aggregate
number of shares of Stock available under this Plan shall be subject to
adjustment as provided in section 5.3. The total number of shares of Stock may
be authorized but unissued shares of Stock, or shares acquired by purchase as
directed by the Board from time to time in its discretion, to be used for
issuance upon exercise of Options granted hereunder.
5.2 Unused Stock. If an Option shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares of Stock subject
thereto shall (unless the Plan shall have terminated) become available for other
Options under the Plan.
5.3 Adjustment in Capitalization. In the event of any change in the
outstanding shares of Stock by reason of a stock dividend or split,
recapitalization, reclassification, or another similar corporate change, the
aggregate number of shares of Stock set forth in section 5.1 shall be
appropriately adjusted by the Board, whose determination shall be conclusive;
provided however, that fractional shares shall be rounded to the nearest whole
share. In any such case, the number and kind of shares that are subject to any
Option (including any Option outstanding after termination of employment) and
the Option price per share shall be proportionately and appropriately adjusted
without any change in the aggregate Option price to be paid therefor upon
exercise of the Option.
Article VI. Duration of the Plan
6.1 Duration of the Plan. Subject to stockholder approval, the Plan
shall be in effect for ten years from the date of its adoption by the Board. Any
Options outstanding at the end of said period shall remain in effect in
accordance with their terms. The Plan shall terminate before the end of said
period, if all Stock subject to it has been purchased pursuant to the exercise
of Options granted under the Plan.
Article VII. Terms of Stock Options
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<PAGE> 23
7.1 Grant of Options. Subject to section 5.1, Options may be granted to
Employees or Consultants at any time and from time to time as determined by the
Board; provided, however, that consultants may receive only Nonstatutory
Options, and may not receive Incentive Stock Options. The Board shall have
complete discretion in determining the number of Options granted to each
Optionee. In making such determinations, the Board may take into account the
nature of services rendered by such Employees or Consultants, their present and
potential contributions to the Company, and such other factors as the Board in
its discretion shall deem relevant. The Board also shall determine whether an
Option is to be an Incentive Stock Option or a Nonstatutory Option.
In the case of Incentive Stock Options the total Fair Market Value
(determined at the date of grant) of shares of Stock with respect to which
incentive stock options granted after December 31, 1986 are exercisable for the
first time by the Optionee during any calendar year under all plans of the
Company under which Incentive Stock Options may be granted (and all such plans
of any Parent Corporations and any subsidiary Corporations of the Company) shall
not exceed $100,000. (Hereinafter, this requirement is sometimes referred to as
the "$100,000 Limitation".)
Nothing in this Article VII of the Plan shall be deemed to prevent the
grant of Options permitting exercise in excess of the maximum established by the
preceding paragraph where such excess amount is treated as Nonstatutory Option.
The Board is expressly given the authority to issue amended or
replacement options with respect to shares of Stock subject to an Option
previously granted hereunder. An amended Option amends the terms of an Option
previously granted and thereby supersedes the previous option. A replacement
Option is similar to a new Option granted hereunder except that it provides that
it shall be forfeited to the extent that a previously granted Option is
exercised, or except that its issuance is conditioned upon the termination of a
previously granted Option.
7.2 No Tandem Options. Where an Option granted under this Plan is
intended to be an Incentive Stock Option, the Option shall not contain terms
pursuant to which the exercise of the Option would affect the Optionee's right
to exercise another Option, or vice versa, such that the Option intended to be
an Incentive Stock Option would be deemed a tandem stock option within the
meaning of the regulations under Section 422 of the Code.
7.3 Option Agreement; Terms and Conditions to Apply Unless Otherwise
Specified. As determined by the board on the date of grant, each Option shall be
evidenced by an Option agreement (the "Option Agreement") that includes the
nontransferability provisions required by Section 10.2 hereof and specifies:
Whether the Option is an Incentive Stock Option or a Nonstatutory
Option; the Option Price; the duration of the Option; the number of shares of
Stock to which the Option applies; any vesting or exercisability restrictions
which the Board may impose; if appropriate, in the case of an Incentive Stock
Option, a provision implementing the $100,000 Limitation; and any other terms or
conditions which the Board may impose. All such terms and conditions shall be
determined by the Board at the time of grant of the Option.
If not otherwise specified by the Board, the following terms and
conditions shall apply to Options granted under the Plan:
(a) Term. The duration of the Option shall be five (5) years
from the date of grant. (The duration can never be more
than five (5) years in the case of an Incentive Stock
Option granted to a Significant Shareholder).
(b) Exercise of Option. Unless an Option is terminated as
provided hereunder, an Optionee may exercise his Option
for up to, but not in excess of, the amounts of shares
subject to the Option specified below, based on the
Optionee's number of years of continuous services with
the Company or a Subsidiary Corporation of the Company
from the date on which the Option is granted. In the case
of an Optionee who is an Employee, continuous service
shall mean continuous employment; in the case of an
Optionee who is a Consultant, continuous
4
<PAGE> 24
services shall mean the continuous provision of
consulting services. In applying said limitations, the
amount of shares, if any previously purchased by the
Optionee under the Option shall be counted in determining
the amount of shares the Optionee can purchase at any
time. The Optionee may exercise his Option in the
following accounts:
(i) After one (1) year of such continuous services for up
to but not in excess of one-third of the shares
originally subject to the Option;
(ii) After two (2) years of such continuous services, for
up to but not in excess of two-thirds of the shares
originally subject to the Option;
(iii) At the expiration of the third (3rd) year of such
continuous services the Option may be exercised at
any time and from time to time within its terms in
whole or in part, but it shall not be exercisable
after the expiration of five (5) years.
The Board shall be free to specify terms and conditions other than those set
forth above, in its discretion.
All Option Agreements shall incorporate the provisions of this Plan by
reference, with certain provisions to apply depending upon whether the Option
Agreement applies to an Incentive Stock Option or to a Nonstatutory Option.
7.4 Option Price. No Incentive Stock Option Granted pursuant to this
Plan shall have an Option price that is less than the Fair Market Value of Stock
on the date the Option is granted. Incentive Stock Options granted to
Significant Shareholders shall have an Option price of not less than 110 percent
of the Fair Market Value of Stock on the date of grant. The Option price for
Nonstatutory Options shall be established by the Board and shall not be subject
to the restrictions applicable to Incentive Stock Options.
7.5 Term of Options. Each Option shall expire at such time as the board
shall determine when it is granted provided however, that no Option shall be
exercisable later than the tenth anniversary date of this grant. By its terms,
an Incentive Stock Option granted to a Significant Shareholder shall not be
exercisable after five years from the date of grant.
7.6 Exercise of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Board shall in each instance approve, which need not be the same for all
Optionees.
7.7 Payment. Payment for all shares of Stock shall be made at the time
that an Option, or any part thereof, is exercised, and no shares shall be issued
until full payment therefor has been made. Payment shall be made (i) in cash, or
(ii) if acceptable to the Board, in stock or in some other form; provided,
however, in the case of an Incentive Stock Option, that said other form of
payment does not prevent the option from qualifying for treatment as an
"incentive stock option" within the meaning of the Code.
Article VIII. Written Notice, Issuance of Stock
Certificates, Stockholder Privileges
8.1 Written Notice. An Optionee wishing to exercise an Option shall
give written notice to the Company, in the form and manner prescribed by the
Board. Full payment for the shares exercised pursuant to the Option must
accompany the written notice.
8.2 Issuance of Stock Certificates. As soon as practicable after the
receipt of written notice and payment, the Company shall deliver to the Optionee
a certificate or certificates for the requisite number of shares of Stock.
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<PAGE> 25
8.3 Privileges of a Stockholder. An optionee or any other person
entitled to exercise an Option under this Plan shall not have stockholder
privileges with respect to any Stock covered by the Option until the date of
issuance of a stock certificate for such stock.
Article IX. Termination of Employment or Services
9.1 Death. If an Optionee's employment in the case of an Employee, or
provision of services as a Consultant, in the case of a consultant, terminates
by reason of death, the Option amy thereafter be exercised at any time prior to
the expiration date of the Option or within 12 months either the date of such
death, whichever period is the shorter, by the person or persons entitled too
under the Optionee's will or, if the Optionee shall fail to have a testamentary
disposition of an Option or shall die intestate, the Optionee's legal
representative or representatives. The Option shall be exercisable only to the
extent that such Option was exercisable as of the date of death.
9.2 Termination Other Than For Cause or Due to Death. In the event of
an Optionee's termination of employment, in the case of an Employee, or
termination of the provision of services as a Consultant, in the case of a
Consultant, other than by reason of death, the Optionee may exercise such
portion of his Option as was exercisable by him at the date of such termination
(the "Termination Date") at any time within three (3) months of the Termination
Date; provided, however, that where the Optionee is an Employee, and is
terminated due to disability within the meaning of Code ss. 422, he may exercise
such portion of his Option as was exercisable by him on his Termination Date
within one year of his Termination Date. In any event, the Option cannot be
exercised after the expiration of the term of the Option. Options not exercised
within the applicable period specified above shall terminate.
In the case of an Employee, a change of duties or position within the
Company or an assignment of employment in a Subsidiary Corporation or Parent
Corporation of the Company, if any, or from such Corporation to the Company,
shall not be considered a termination of employment for purposes of this Plan.
The Option Agreements may contain such provisions as the Board shall
approve with reference to the effect of approved leaves of absence upon
termination of employment.
9.3 Termination for Cause. In the event of an Optionee's termination of
employment, in the case of an Employee, or termination of the provision of
services as a Consultant, in the case of a Consultant, which termination is by
the Company for cause, any Option or Options held by him under the Plan, to the
extent not exercised before such termination, shall forthwith terminate.
Article X. Rights of Optionees
10.1 Service. Nothing in this Plan shall interfere with or limit in any
way the right of the Company to terminate any Employee's employment, or any
Consultant's services, at any time, nor confer upon any Consultant any right to
continue to provide services to the Company.
10.2 Nontransferability. All Options granted under this Plan shall be
nontransferable by the OPtionee, other than by will or the laws of descent and
distribution, and shall be exercisable during the Optionee's lifetime only by
the Optionee.
Article XI. Optionee-Employee's Transfer of Leave of Absence
11.1 Optionee-Employee's Transfer of Leave of Absence. For Plan
purposes--
(a) A transfer of an Optionee who is an Employee from the Company
to a Subsidiary Corporation or Parent Corporation, or from one
such Corporation to another, or
(b) a leave of absence for such an Optionee (i) which is only
authorized in writing by the Company, and (ii) if the Optionee
holds an Incentive Stock Option, which qualifies
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<PAGE> 26
under the applicable regulations under the Code which apply in
the case of incentive stock options, shall not be deemed a
termination of employment. However, under no circumstances may
an Optionee exercise an Option during any leave of absence,
unless authorized by the Board.
Article XII. Amendment, Modification and Termination of the Plan
12.1 Amendment, Modification, and Termination of the Plan. The Board
may at any time terminate, and from time to time may amend or modify the Plan,
provided, however, that no such action of the Board, without approval of the
stockholders, may--
(a) increase the total amount of Stock which may be purchased
through Options granted under the Plan, except as provided in
Article V;
(b) change the class of Employees or Consultants eligible to
receive Options;
No amendment, modification, or termination of the Plan shall in any manner
adversely affect any outstanding Option under the Plan without the consent of
the Optionee holding the Option.
Article XIII. Acquisition, Merger, or Liquidation
13.1 Acquisition. In the event that an Acquisition occurs with respect
to the Company, the Company shall have the option, but not the obligation, to
cancel Options outstanding as of the effective date of Acquisition, whether or
not such Options are then exercisable, in return for payment to the Optionees of
an amount equal to a reasonable estimate of an amount (hereinafter the "Spread")
equal to the difference between the net amount per share payable in the
Acquisition, or as a result of the Acquisition, less the exercise price of the
Option. In estimating the Spread, appropriate adjustments to give effect to the
existence of the Options shall be made, such as deeming the Options to have been
exercised, with the Company receiving the exercise price payable thereunder, and
treating the shares receivable upon exercise of the Options as being outstanding
in determining the net amount per share. For purposes of this section, an
"Acquisition" shall mean any transaction in which substantially all of the
Company's assets are acquired or in which a controlling amount shall mean more
than 50% of the issued and outstanding shares of stock of the Company. The
Company shall have such an option regardless of how the Acquisition is
effectuated, whether by direct purchase, through a merger or similar corporate
transaction, or otherwise. In cases where the acquisition consists of the
acquisition of assets of the Company, the net amount per share shall be
calculated on the basis of the net amount receivable with respect to shares upon
a distribution and liquidation by the Company after giving effect to expenses
and charges, including but not limited to taxes, payable by the Company before
the liquidation can be completed.
Where the Company does not exercise its option under this Section 13.1
the remaining provisions of this Article XIII shall apply, to the extent
applicable.
13.2 Merger or Consolidation. Subject to any required action by the
stockholders, if the Company shall be the surviving corporation in any merger or
consolidation, any Option granted hereunder shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to the
option would have been entitled in such merger or consolidation.
13.3 Other Transactions. A dissolution or a liquidation of the Company
or a merger and consolidation in which the Company is not the surviving
corporation shall cause every Option outstanding hereunder to terminate as of
the effective date of such dissolution, liquidation, merger or consolidation.
However, the Optionee either (i) shall be offered a firm commitment whereby the
resulting or surviving corporation in a merger or consolidation will tender to
the Optionee an option (the "Substitute Option") to purchase its shares on terms
and conditions both as to the number of shares and otherwise, which shall
substantially preserve to the Optionee the rights and benefits of the Option
outstanding hereunder granted by the Company, or (ii) shall have the right
immediately prior to such dissolution, liquidation, merger, or consolidation to
exercise any unexercised
7
<PAGE> 27
Options whether or not then exercisable, subject to the provisions of this Plan.
The Board shall have absolute and uncontrolled discretion to determine whether
the Optionee has been offered a firm commitment and whether the tendered
Substitute Option will substantially preserve to the Optionee the rights and
benefits of the Option outstanding hereunder. In any event, any Substitute
Option for an Incentive Stock Option shall comply with the requirements of Code
Section 424(a).
Article XIV. Securities Registration
14.1 Securities Registration. In the event that the Company shall deem
it necessary or desirable to register under the Securities Act of 1933, as
amended, or any other applicable statute, any Options or any Stock with respect
to which an Option may be or shall have been granted or exercised, or to qualify
any such Options or Stock under the Securities Act of 1933, as amended, or any
other statute, then the Optionee shall cooperate with the Company and take such
action as is necessary to permit registration or qualification of such Options
or Stock.
Unless the Company has determined that the following representation is
unnecessary, each person exercising an Option under the Plan may be required by
the Company, as a condition to the issuance of the shares pursuant to exercise
of the Option, to make a representation in writing (a) that he is acquiring such
shares for his own account for investment and not with a view to, or for sale in
connection with, the distribution of any part thereof, (b) that before any
transfer in connection with the resale of such shares, he will obtain the
written opinion of counsel for the Company, or other counsel acceptable to the
Company, that such shares may be transferred. The Company may also require that
the certificates representing such shares contain legends reflecting the
foregoing.
Article XV. Tax Withholding
15.1 Tax Withholding. Whenever shares of Stock are to be issued in
satisfaction of Options exercised under this Plan, the Company shall have the
power to require the recipient of the Stock to remit to the Company an amount
sufficient to satisfy federal, state, and local withholding tax requirements.
Article XVI. Indemnification
16.1 Indemnification. To the extent permitted by law, each person who
is or shall have been a member of the Board shall be indemnified and held
harmless by the Company against and from any loss, cost, liability, or expense
that may be imposed upon or reasonably incurred by him in connection with or
resulting from any claim, action, suit, or proceeding to which he may be a party
or in which he may be involved by reason of any action taken or failure to act
under the Plan and against and from any and all amounts paid by him in
settlement hereof, with the Company approval, or paid by him in satisfaction of
judgment in any such action, suit, or proceeding against him, provided he shall
give the Company an opportunity, at its own expense, to handle and defend the
same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such person may be entitled under the Company's
articles of incorporation or bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.
Article XVII. Requirements of Law
17.1 Requirements of Law. The granting of Options and the issuance of
shares of Stock upon the exercise of an Option shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
17.2 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of
California.
Article XVIII. Effective Date of Plan
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<PAGE> 28
18.1 Effective Date. The Plan shall be effective on February 5, 1992,
the date of its adoption by the Board.
Article XIX. Compliance with Code.
19.1 Compliance with Code. Incentive Stock Options granted hereunder
are intended to qualify as "incentive stock options" under Code ss. 422. If any
provision of this plan is susceptible to more than one interpretation, such
interpretation shall be given thereto as is consistent with Incentive Stock
Options granted under this Plan being treated as incentive stock options under
the Code.
Article XX. No Obligation to Exercise Option.
20.1 No Obligation to Exercise. The granting of an Option shall impose
no obligation upon the holder thereof to exercise such Option.
9
<PAGE> 29
ECO SOIL SYSTEMS, INC.
By: /s/ Jeffrey A. Johnson
Its President
10
<PAGE> 30
[FRONT OF PROXY CARD]
The undersigned shareholder(s) of Eco Soil Systems, Inc. (the "Company")
hereby constitutes and appoints Douglas M. Gloff and Jeffrey A. Johnson, and
each of them, attorneys and proxies of the undersigned, each with power of
substitution, to attend, vote and act for the undersigned at the Annual Meeting
of Shareholders of the Company to be held on June 3, 1997, and at any
adjournment or postponement thereof, according to the number of shares of Common
Stock of the Company which the undersigned may be entitled to vote, and with all
powers which the undersigned would possess if personally present, as follows:
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS: [ ] FOR all [ ] WITHHOLD
nominees listed AUTHORITY to vote
below (except as for all nominees listed
marked to the below
contrary below)
</TABLE>
Bradley K. Edwards
S. Bartley Osborn
(INSTRUCTION: To vote for all nominees listed above, mark the "FOR" box; to
withhold authority for all nominees listed above, mark the "WITHHOLD AUTHORITY"
box; and to withhold authority to vote for any individual nominee listed above,
mark the "FOR" box and write the nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED FOR THE ELECTION AS DIRECTOR OF ALL NOMINEES SET
FORTH IN THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT, UNLESS THE CONTRARY
IS INDICATED IN THE APPROPRIATE PLACE.
2. AMENDMENT OF THE 1992 STOCK OPTION PLAN:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THIS PROXY WILL BE VOTED FOR THE AMENDMENT OF THE 1992 STOCK OPTION PLAN AS
DESCRIBED IN THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT, UNLESS THE
CONTRARY IS INDICATED IN THE APPROPRIATE PLACE.
(Continued on reverse side)
<PAGE> 31
[REVERSE OF PROXY CARD]
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
The undersigned revokes any prior proxy at such meeting and ratifies all
that said attorneys and proxies, or any of them, may lawfully do by virtue
hereof. Receipt of the Notice of Annual Meeting of Shareholders and Proxy
Statement is hereby acknowledged.
Dated:________________________________, 1997
____________________________________________
____________________________________________
____________________________________________
(Signature(s) of shareholders)
Please sign exactly as name appears herein.
When shares are held by joint tenants, both
should sign; when signing as an attorney,
executor, administrator, trustee or
guardian, give full title as such. If a
corporation, sign in full corporate name by
President or other authorized officer. If a
partnership, sign in partnership name by
authorized partner.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ECO SOIL
SYSTEMS, INC. PLEASE COMPLETE, SIGN, DATE AND MAIL PROMPTLY IN THE
POSTAGE-PAID ENVELOPE ENCLOSED
