EDEN BIOSCIENCE CORP, S-1/A, 2000-09-01

EDEN BIOSCIENCE CORP
S-1/A, 2000-09-01
AGRICULTURAL CHEMICALS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 1, 2000

REGISTRATION 333-41028
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2

TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

EDEN BIOSCIENCE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
WASHINGTON 2879 91-1649604
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

11816 NORTH CREEK PARKWAY NORTH
BOTHELL, WASHINGTON 98011-8205
(425) 806-7300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

JERRY L. BUTLER
CHIEF EXECUTIVE OFFICER AND PRESIDENT
EDEN BIOSCIENCE CORPORATION
11816 NORTH CREEK PARKWAY NORTH
BOTHELL, WASHINGTON 98011-8205
(425) 806-7300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------

COPIES TO:

<TABLE>
<S> <C>
ANDREW BOR, ESQ. MICHAEL L. FITZGERALD, ESQ.
ANDREW B. MOORE, ESQ. BROWN & WOOD LLP
PERKINS COIE LLP ONE WORLD TRADE CENTER
1201 THIRD AVENUE, SUITE 4800 NEW YORK, NEW YORK 10048-0557
SEATTLE, WASHINGTON 98101-3099 (212) 839-5300
(206) 583-8888
</TABLE>

------------------------

Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
---------------

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
---------------

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
---------------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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--------------------------------------------------------------------------------
<PAGE> 2

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED SEPTEMBER 1, 2000

PROSPECTUS

5,800,000 SHARES

[EDEN BIOSCIENCE LOGO]

COMMON STOCK
----------------------

This is EDEN Bioscience Corporation's initial public offering. EDEN is
selling all of the shares.

We expect the public offering price to be between $12.00 and $14.00 per
share. Currently, no public market exists for the shares. After pricing the
offering, we expect that the shares will be quoted on the Nasdaq National Market
under the symbol "EDEN."

INVESTING IN THE COMMON STOCK INVOLVES RISKS THAT ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 8 OF THIS PROSPECTUS.

----------------------

<TABLE>
<CAPTION>
PER SHARE TOTAL
---------- ----------
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to EDEN.......................... $ $
</TABLE>

The underwriters may also purchase up to an additional 870,000 shares at
the public offering price, less the underwriting discount, within 30 days from
the date of this prospectus to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The shares will be ready for delivery on or about , 2000.

----------------------

MERRILL LYNCH & CO. STEPHENS INC.

GEORGE K. BAUM & COMPANY

RAGEN MACKENZIE INCORPORATED

----------------------

The date of this prospectus is , 2000.

The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer
or sale is not permitted.
<PAGE> 3
Inside cover artwork: [Graphic: Eden's logo and a collage of photographs
depicting packages of Messenger on an assembly line and various crops, including
tomato, citrus, cotton, wheat, peach, rose, strawberry, watermelon, corn,
soybean, apple, pepper and peanut, with the following captions: "Messenger(R)
uses a fundamentally new, patented technology that has demonstrated an ability
to significantly improve plant protection and crop production on a wide array
of crops grown worldwide" and "Messenger received EPA approval in April 2000.
Commercial sales began in August 2000."]

<PAGE> 4

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 8
Use of Proceeds............................................. 17
Dividend Policy............................................. 17
Special Note Regarding Forward-Looking Statements........... 17
Capitalization.............................................. 18
Dilution.................................................... 19
Selected Financial Data..................................... 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 21
Business.................................................... 25
Management.................................................. 39
Certain Relationships and Related Party Transactions........ 49
Principal Shareholders...................................... 51
Description of Capital Stock................................ 53
Shares Eligible for Future Sale............................. 56
Underwriting................................................ 58
Legal Matters............................................... 62
Experts..................................................... 62
Where You Can Find More Information......................... 62
Index to Financial Statements............................... F-1
</TABLE>

----------------------

You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different
information, you should not rely on it. We are not, and the underwriters are
not, making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. You should assume that the information appearing
in this prospectus is accurate only as of the date on the front cover of this
prospectus. Our business, financial condition, results of operations and
prospects may have changed since that date.

EDEN(R), EDEN Bioscience(R) and Messenger(R) are registered trademarks of
EDEN.
<PAGE> 5

PROSPECTUS SUMMARY

This summary highlights information that we present more fully in the
rest of this prospectus. This summary does not contain all the information you
should consider before buying shares in this offering. You should read the
entire prospectus carefully, including the "Risk Factors" section and the
financial statements and the notes to those statements.

EDEN BIOSCIENCE CORPORATION

We are a plant technology company focused on developing, manufacturing
and marketing innovative natural products for agriculture. We have a
fundamentally new, patented and proprietary technology that we believe will
significantly improve plant protection and crop production worldwide. We believe
our technology and our initial product, Messenger, allow us to offer superior
alternatives to existing plant protection and crop yield enhancement products in
terms of both performance and safety and, importantly, to avoid the substantial
public resistance to many chemical pesticides and genetically modified plants.
We are aware of no other product or technology currently being marketed, under
development or described in scientific literature that generates the
comprehensive set of beneficial results that Messenger produces on such a wide
array of crops.

Our Core Harpin Technology

Our core harpin and harpin-related technology is based on an
understanding of innate complex plant defense and growth systems and the
discovery of how these systems are activated in nature. In recent years,
researchers have begun to recognize the critical role these natural systems play
in determining plant health, growth and survival, but there has been no
effective means to reliably activate these mechanisms without toxic effects to
the plant.

Through the discovery of a new class of nontoxic, naturally occurring
proteins called harpins, we have been able to activate these previously
inaccessible plant mechanisms. Harpin proteins trigger a plant's natural defense
systems to protect against disease and pests, and simultaneously activate plant
growth systems, leading to increased biomass, photosynthesis, nutrient uptake
and root development and, ultimately, to greater crop yield and quality. We own
or have obtained exclusive worldwide rights to patents and patent applications
that cover our core harpin and harpin-related technology.

Messenger -- Our Initial Product

Commercial sales of Messenger began in August 2000. Based on our harpin
technology, Messenger can be used for both plant protection and yield
enhancement on a wide variety of crops. Messenger is a water-soluble, granular
powder that is topically applied either independently or in conjunction with
traditional chemical pesticides. Once applied, Messenger degrades rapidly and
leaves no detectable residue. In field trials on over 40 crops, Messenger has
generally reduced, or even eliminated, the need for traditional chemical
pesticides. In addition, Messenger has been shown to be effective in
simultaneously:

- improving crop yields generally by 10% to 20%;

- protecting against a broad array of viral, fungal and bacterial
diseases, including some diseases for which there is currently no
effective treatment;

- reducing damage caused by a variety of pests; and

- enhancing plant growth and crop quality.

Unlike traditional chemical pesticides, Messenger and other products we
are developing have no direct killing effect on pests and pathogens. Instead,
Messenger activates the plant's own defense and growth systems. Furthermore,
unlike genetically modified plants, Messenger delivers the advantages of

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<PAGE> 6

modern biotechnology without altering the plant's DNA. Messenger offers several
other key advantages over existing plant protection and yield enhancement
alternatives, including:

- improved food safety;

- reduced risk of environmental damage;

- improved worker safety; and

- reduced likelihood of pest resistance.

Messenger received conditional EPA approval for full commercial use in
April 2000. The EPA approval requires that we submit the results of four
additional studies relating to the safety of the product by April 19, 2001. We
have completed three of the required studies and believe they meet the EPA's
requirements, and we are in the process of completing the remaining required
study. If we are unable to meet the conditions imposed by the EPA within the
time frames specified by the EPA, the agency could revoke our registration or
impose use restrictions that are not currently applicable to Messenger, such as
restrictions on frequency or method of application.

Business Strategy

The increasing scarcity of agricultural resources and growing global
demand for food, together with concerns regarding the use of traditional
chemical pesticides and genetically modified plants, are forcing growers to look
at new alternatives to traditional plant protection and yield enhancement
methods. Annual crop losses from pests are estimated to be $300 billion
worldwide. To mitigate these losses, growers worldwide spent approximately $30
billion for agricultural chemicals in 1999. Our strategy is to be a leading
provider of innovative plant protection and yield enhancement solutions to
growers throughout the world. We are focusing on the following key initiatives:

- commercialize Messenger and future products based on our proprietary
technology;

- promote the benefits of Messenger and our harpin and harpin-related
technologies;

- continue to develop Messenger product extensions and new products that
utilize natural plant defense and growth systems;

- control and protect our technology; and

- maintain control over product manufacturing.

Our near-term focus is the commercialization of Messenger for use on a
variety of crops. We are currently concentrating our efforts in the United
States on high-value crops, such as citrus, tomatoes, peppers, cucumbers,
strawberries and other horticultural and specialty crops, from which we expect
growers will derive the greatest economic benefit from Messenger. In 1999, over
121 million acres of horticultural and specialty crops were harvested worldwide,
including approximately 17 million acres of tomatoes, peppers, cucumbers and
strawberries and approximately 18 million acres of citrus. We plan to take
advantage of the Messenger brand developed in the use on these high-value crops
to penetrate traditional field crop markets, including cotton, wheat, rice, corn
and soybean. In 1999, approximately 2.0 billion acres of row crops were
harvested worldwide, with corn, wheat, cotton and rice accounting for
approximately 1.3 billion acres. We will continue to expand our sales and field
development specialist force to educate industry leaders on the benefits of
Messenger and maintain close relationships with large commercial growers and
independent agricultural product distributors. We also intend to continue to
conduct domestic and international field trials and aggressively pursue
international regulatory approvals to establish Messenger as a leading plant
protection and yield enhancement product in the global marketplace.

Prior to August 2000, we had derived all of our revenues from research
grants and from providing consulting services. Since 1997 we have not sought,
and do not intend to seek in the future, additional research grants, and since
January 2000 we no longer provide any consulting services. For the immediately
foreseeable future, we will be dependent on the successful development and
commercialization of

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<PAGE> 7

Messenger. To be successful, we must achieve broad market acceptance for
Messenger and differentiate it from products that genetically modify plants,
which have been subject to public concerns and negative public attitudes,
particularly in Europe.

Research and Development

We will continue to focus significant resources on discovering and
developing new products based on our harpin and harpin-related technology
platform. These efforts will include Messenger product line extensions, such as
crop, disease and pest specific products. In addition, we have identified and
are currently performing efficacy studies on new harpin proteins that are
significantly more potent and may be effective against other classes of disease
or induce additional growth pathways. We believe that many of the additional
products and technologies currently under development will lead to significant
business opportunities in the future.

5
<PAGE> 8

THE OFFERING

Common stock offered by EDEN........... 5,800,000 shares

Common stock to be outstanding after
the offering........................... 22,732,707 shares

Use of proceeds........................ We estimate that our net proceeds
from this offering, assuming no
exercise of the underwriters' over-
allotment option, will be
approximately $69.0 million. We
intend to use a portion of the net
proceeds of this offering to expand
and enhance our manufacturing and
research and development facilities,
and the remainder for working
capital and general corporate
purposes, including expansion of our
sales and marketing capabilities for
the commercialization of Messenger
and for research and development
activities.

Risk factors........................... See "Risk Factors" and other
information included in this
prospectus for a discussion of
factors that you should carefully
consider before deciding to invest
in shares of the common stock.

Nasdaq National Market symbol.......... EDEN

The number of shares of common stock to be outstanding after this
offering is based on shares outstanding as of August 31, 2000 and excludes:

- 2,468,000 shares of common stock issuable under our 1995 combined
incentive and non-qualified stock option plan upon the exercise of
stock options outstanding as of August 31, 2000, at a weighted average
exercise price of $6.93 per share, and 326,334 shares of common stock
reserved for issuance under such plan;

- 331,953 shares of common stock issuable upon the exercise of warrants
outstanding as of August 31, 2000, at a weighted average exercise
price of $1.64 per share;

- 230,769 shares of common stock, assuming an initial public offering
price of $13.00 per share, issuable upon the exercise of currently
outstanding warrants associated with our two existing credit
facilities, at an exercise price equal to the public offering price of
shares sold in this offering; and

- 1,500,000 shares of common stock reserved for issuance under our 2000
stock incentive plan and 500,000 shares of common stock reserved for
issuance under our 2000 employee stock purchase plan.

In addition, except as otherwise noted, all information in this
prospectus is based on the following assumptions:

- the conversion of all outstanding shares of preferred stock into an
aggregate of 13,794,104 shares of common stock upon the effectiveness
of our registration statement; and

- no exercise of the underwriters' over-allotment option.

We were incorporated in the state of Washington in 1994. Our executive
offices are located at 11816 North Creek Parkway North, Bothell, Washington
98011-8205, and our telephone number is (425) 806-7300. Our Web site is located
at http://www.edenbio.com. Any information that is included on or linked to our
Web site is not a part of this prospectus.

6
<PAGE> 9

SUMMARY FINANCIAL DATA

The following tables set forth our summary financial data. When you read
this summary financial data, it is important that you also read our financial
statements and related notes included elsewhere in this prospectus, as well as
the section of this prospectus entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------------------- -----------------
1995 1996 1997 1998 1999 1999 2000
------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
Consulting services..................... $ 132 $ 178 $ 176 $ 121 $ 115 $ 43 $ --
Research grants......................... 110 42 7 -- -- -- --
------- ------- ------- ------- ------- ------- -------
Total revenues................... 242 220 183 121 115 43 --
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and development................ 990 1,643 2,865 5,322 7,555 3,713 5,116
General and administrative.............. 269 396 577 1,708 2,209 1,010 1,911
------- ------- ------- ------- ------- ------- -------
Total operating expenses......... 1,259 2,039 3,442 7,030 9,764 4,723 7,027
------- ------- ------- ------- ------- ------- -------
Loss from operations............. (1,017) (1,819) (3,259) (6,909) (9,649) (4,680) (7,027)
------- ------- ------- ------- ------- ------- -------
Interest and dividend income.............. 20 99 172 135 435 248 279
Interest expense.......................... (3) (27) (116) (162) (181) (93) (74)
------- ------- ------- ------- ------- ------- -------
Net loss.................................. $(1,000) $(1,747) $(3,203) $(6,936) $(9,395) $(4,525) $(6,822)
======= ======= ======= ======= ======= ======= =======
Historical basic and diluted net loss per
share................................... $ (0.57) $ (1.04) $ (1.90) $ (3.93) $ (5.23) $ (2.48) $ (2.38)
======= ======= ======= ======= ======= ======= =======
Weighted average shares outstanding used
in computation of historical basic and
diluted net loss per share.............. 1,742 1,681 1,681 1,765 1,902 1,823 2,863
======= ======= ======= ======= ======= ======= =======
Pro forma basic and diluted net loss per
share................................... $ (0.67) $ (0.41)
======= =======
Weighted average shares outstanding used
in computation of pro forma basic and
diluted net loss per share.............. 14,820 16,657
======= =======
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 2000
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 6,609 $ 75,648
Working capital............................................. 3,833 72,872
Total assets................................................ 11,601 80,640
Capital lease obligations, net of current portion........... 393 393
Deficit accumulated during development stage................ (29,797) (29,797)
Total shareholders' equity.................................. 8,093 77,132
</TABLE>

The table above presents balance sheet data as of June 30, 2000:

- on an actual basis; and

- on a pro forma as adjusted basis to reflect the sale of 5,800,000
shares of common stock offered by this prospectus at an assumed
initial public offering price of $13.00 per share (the midpoint of the
expected price range) and the receipt by EDEN of the estimated net
proceeds after deducting estimated underwriting discounts and
commissions and estimated offering expenses.
7
<PAGE> 10

RISK FACTORS

An investment in our common stock involves a high degree of risk. You
should carefully consider the risks described below together with all of the
other information included in this prospectus before making an investment
decision. If any of the following risks actually occur, our business, financial
condition or results of operations could be adversely affected. Any adverse
effect on our business, financial condition or results of operations could
result in a decline in the trading price of our common stock and the loss of all
or part of your investment.

WE ARE AT AN EARLY STAGE OF DEVELOPMENT AND ARE SUBJECT TO THE RISKS OF NEW
ENTERPRISES AND THE COMMERCIALIZATION OF A NEW TECHNOLOGY.

We began our operations in 1994 and have recently initiated marketing
activities designed to promote the distribution and sale of our first product,
Messenger, in the United States. We have not proven our ability to commercialize
any products. Our early stage of development, the newness of our technology and
the uncertain nature of the market in which we compete make it difficult to
assess our prospects or predict our future operating results. We are subject to
risks and uncertainties frequently encountered in the establishment of a new
business enterprise, particularly in the rapidly changing market for plant
protection and yield enhancement products. These risks include our inability to
transition from a company with a research focus to a company capable of
supporting commercial activities, including manufacturing, regulatory approval
and compliance, marketing, sales, distribution and quality control and
assurance. Our inability to adequately address these risks could cause us to be
unprofitable or to cease operations.

WE CURRENTLY DEPEND ON A SINGLE PRODUCT AND OUR DEVELOPMENT AND
COMMERCIALIZATION OF THAT PRODUCT MAY NOT BE SUCCESSFUL.

For the immediately foreseeable future we will be dependent on the
successful development and commercialization of one product, which is based on a
new technology. While Messenger has been subject to numerous field tests on a
wide variety of crops with favorable results, we have only recently begun sales
of Messenger, and Messenger could prove to be commercially unsuccessful.
Messenger may not prove effective or economically viable for all crops or
markets. For example, our potato field trials to date have shown inconsistent
results and, therefore, we have determined that the benefits of Messenger to
potato growers have not yet proven sufficient for marketing purposes. In
addition, because Messenger has not been put to widespread commercial use over
significant periods of time, no assurance can be given that adverse consequences
might not result from the use of Messenger, such as soil or other environmental
degradation, the development of negative effects on animals or plants or reduced
benefits in terms of crop yield or protection.

The markets for Messenger, and other harpin-based products we may
develop, are unproven. Messenger may not gain commercial acceptance or success.
If we are unable to successfully achieve broad market acceptance of Messenger,
we may not be able to generate enough product revenues in the future to achieve
profitability. A variety of factors will determine the success of our market
development and commercialization efforts and the rate and extent of market
acceptance of Messenger, including our ability to implement and maintain an
appropriate pricing policy for Messenger, and the rate and extent that growers,
regulatory authorities and the public accept new pest control practices and
products developed through biotechnology.

OUR PRODUCT DEVELOPMENT EFFORTS, WHICH ARE BASED ON AN INNOVATIVE TECHNOLOGY
THAT IS COMMERCIALLY UNPROVEN, MAY NOT BE SUCCESSFUL.

Our harpin and harpin-related technology is new, in an early stage of
development and commercially unproven. It may take years and significant capital
investment to develop viable enhancements to our Messenger product or new
products based on our harpin and harpin-related

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technology. Risks inherent in the development of products based on innovative
technologies include the possibility that:

- new products or product enhancements will be difficult to produce on a
large scale or will be uneconomical to market;

- proprietary rights of third parties will prevent us from marketing
products; and

- third parties will market superior or equivalent products or will
reach the market with their products first.

INABILITY TO PRODUCE A HIGH QUALITY PRODUCT AS WE INCREASE OUR MANUFACTURING
CAPACITY COULD IMPAIR OUR BUSINESS.

To be successful, we will have to manufacture Messenger in large
quantities at acceptable costs while also preserving high product quality. If we
cannot maintain high product quality on a large scale, we may be unable to
achieve market acceptance of our products and our sales would likely suffer.
Moreover, we do not have backup manufacturing systems and, as a result, a
failure of any component required in the manufacturing process could delay or
impair our ability to manufacture Messenger in the quantities that we may
require.

We intend to apply a portion of the net proceeds of this offering to
significantly expand our manufacturing facilities, a process that we expect will
take approximately 12 to 24 months to complete. We cannot assure you that we
will be successful in expanding our manufacturing activities. We may encounter
difficulties in scaling up production of our products, including problems
involving manufacturing yields, quality control and assurance, shortages of
qualified personnel and compliance with regulatory requirements. Even if we are
successful in developing our manufacturing capability and processes, we do not
know whether we will do so in time to meet our product commercialization
schedule or to satisfy the requirements of our distributors or customers.

WE HAVE A HISTORY OF LOSSES SINCE INCEPTION, WE EXPECT TO CONTINUE TO INCUR
LOSSES AND WE MAY NOT ACHIEVE OR SUSTAIN PROFITABILITY.

We have incurred operating losses in each quarter since inception and we
expect to continue to incur further operating losses for the foreseeable future.
From our inception in July 1994 to June 30, 2000, we have accrued an accumulated
deficit of $29.8 million. For the year ended December 31, 1999, we had a net
loss of $9.4 million and for the six months ended June 30, 2000, we had a net
loss of $6.8 million. To date, our limited revenues have been derived primarily
from consulting services and research grants. We expect our future revenues to
be primarily from the sale of Messenger and other products and these sales are
highly uncertain. We expect to continue to devote substantial resources to
expand our research and development activities, further increase manufacturing
capacity and expand our sales and marketing activities for the commercialization
of Messenger. As a result, we will need to generate significant revenues to
achieve and maintain profitability. We may never generate profits, and if we do
become profitable, we may be unable to sustain or increase profitability on a
quarterly or annual basis.

IF OUR ONGOING OR FUTURE FIELD TRIALS ARE UNSUCCESSFUL, WE MAY BE UNABLE TO
ACHIEVE MARKET ACCEPTANCE OR OBTAIN REGULATORY APPROVAL OF OUR PRODUCTS.

The successful completion of multiple field trials in domestic and
foreign locations on many crops is critical to the success of our product
development and marketing efforts. If our ongoing or future field trials are
unsuccessful or produce inconsistent results or unanticipated adverse side
effects or if we are unable to collect reliable data, regulatory approval of our
products could be delayed or we may be unable to achieve market acceptance of
our products. Although we have conducted successful field trials on a broad
range of crops, we cannot be certain that additional field trials conducted on a
greater number of acres, or on crops for which we have not yet conducted field
trials, will be successful. Moreover, the results of our ongoing and future
field trials are subject to a number of conditions beyond our control, including

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weather-related events such as drought or floods, severe heat or frost, hail,
tornadoes and hurricanes. Generally, we pay third parties, such as growers,
consultants and universities, to conduct our field tests for us. In addition,
incompatible crop treatment practices or misapplication of the product by the
growers that participate in our field trials could interfere with the success of
our field trials.

RAPID CHANGES IN TECHNOLOGY COULD RENDER OUR PRODUCTS UNMARKETABLE OR OBSOLETE.

We are engaged in an industry characterized by extensive research efforts
and rapid technological development. Our competitors, some of which have
substantially greater technological and financial resources than we do, may
develop plant protection and yield enhancement technologies and products that
are more effective than ours or that render our technology and products obsolete
or uncompetitive. To be successful, we will need to continually enhance our
products and to design, develop and market new products that keep pace with new
technological and industry developments.

INABILITY TO DEVELOP ADEQUATE SALES AND MARKETING CAPABILITIES COULD PREVENT US
FROM SUCCESSFULLY COMMERCIALIZING MESSENGER AND OTHER PRODUCTS WE MAY DEVELOP.

We currently have limited sales and marketing experience and
capabilities. Our internal sales and marketing staff consists primarily of sales
and marketing specialists and field development specialists who are trained to
educate growers and independent distributors on the uses and benefits of
Messenger. We will need to further develop our sales, marketing and field
development capabilities in order to enhance our commercialization efforts,
which will involve substantial costs. These specialists require a high level of
technical expertise and knowledge regarding Messenger's capabilities and other
plant protection and yield enhancement products and techniques. We cannot assure
you that our specialists and other members of our sales and marketing team will
successfully compete against the sales and marketing operations of our current
and future competitors that may have more established relationships with
distributors and growers. Failure to recruit, train and retain important sales
and marketing personnel, such as our sales and marketing specialists and field
development specialists, or the inability of new sales and marketing personnel
to effectively market and sell Messenger and other products we may develop,
could impair our ability to gain market acceptance of our products and cause our
sales to suffer.

WE MAY BE UNABLE TO ESTABLISH AND MAINTAIN SUCCESSFUL RELATIONSHIPS WITH
INDEPENDENT DISTRIBUTORS, WHICH COULD ADVERSELY AFFECT OUR SALES.

We intend to rely on independent distributors of agri-chemicals to
distribute and assist with the marketing and sale of Messenger and other
products we may develop. We are currently engaged in discussions with several
independent distributors and have signed our first agreement for the
distribution of Messenger. Our future revenue growth will depend in large part
on our success in establishing and maintaining these sales and distribution
channels. We are in the early stages of developing our distribution network and
we may be unable to establish these relationships in a timely or cost-effective
manner. Moreover, we cannot assure you that the distributors with which we
partner will focus adequate resources on selling our products or will be
successful in selling them. Many of our potential distributors are in the
business of distributing and sometimes manufacturing other, possibly competing,
plant protection and yield enhancement products and may perceive Messenger as a
threat to various product lines currently being manufactured or distributed by
them. In addition, the distributors may earn higher margins by selling competing
products or combinations of competing products. If we are unable to establish or
maintain successful relationships with independent distributors, we will need to
further develop our own distribution capabilities, which would be expensive and
time-consuming and the success of which would be uncertain.

INABILITY TO OBTAIN REGULATORY APPROVALS, OR TO COMPLY WITH ONGOING AND CHANGING
REGULATORY REQUIREMENTS, COULD DELAY OR PREVENT SALES OF MESSENGER AND OTHER
POTENTIAL PRODUCTS.

The field testing, manufacture, sale and use of plant protection and
yield enhancement products, including Messenger and other products we may
develop, are extensively regulated by the EPA and state, local and foreign
governmental authorities. These regulations substantially increase the cost and
time
10
<PAGE> 13

associated with bringing our products to market. If we do not receive the
necessary governmental approvals to test, manufacture and market our products,
or if the regulatory authorities revoke our approvals or grant them subject to
restrictions on their use, we may be unable to sell our products and our
business may fail.

We recently received conditional approval from the EPA to market and sell
our first product, Messenger, in the United States. We are required, however, to
obtain regulatory approval from certain state and foreign regulatory authorities
before we market Messenger in those jurisdictions. Although we are authorized to
sell Messenger in 44 states, we have not yet received approval for Messenger in
the remaining states, including California, and we have not yet obtained
authorization to sell Messenger in any foreign countries. Certain of these
jurisdictions may apply different criteria than the EPA in connection with their
approval processes.

If we make significant enhancements in Messenger's design as a result of
our ongoing research and development projects, additional EPA approvals may be
required. Moreover, we cannot assure you that we will be able to obtain approval
for marketing additional harpin-based products or product extensions that we may
develop. For example, while the EPA has in place a registration procedure for
products such as Messenger that is streamlined in comparison to the registration
procedure for chemical pesticides, there can be no assurance that all of our
products or product extensions will be eligible for the streamlined procedure or
that additional requirements will not be added by the EPA that could make the
procedure more time-consuming and costly for our future products.

Even after we obtain all necessary regulatory approvals to market and
sell Messenger and other products we develop, Messenger will be subject to
continuing review and extensive regulatory requirements. The EPA, as well as
state and foreign governmental authorities, could withdraw a previously approved
product from the market upon receipt of newly discovered information, including
an inability to comply with regulatory requirements, the occurrence of
unanticipated problems with the product or other reasons. In addition, federal,
state and foreign regulations relating to crop protection products developed
through biotechnology are subject to public concerns and political
circumstances, and, as a result, regulations have changed and may change
substantially in the future. These changes may result in limitations on the
manufacturing, marketing or use of Messenger or other products that we may
develop and commercialize.

INABILITY TO SATISFY THE CONDITIONS OF OUR EPA REGISTRATION COULD LIMIT OR
PREVENT SALES OF MESSENGER.

The EPA has conditioned its approval of our Messenger registration on the
requirement that we conduct four additional studies by April 2001 that are
designed to further demonstrate the safety of our product. If we are unable to
conduct the studies in a timely manner, or if the results of the studies are
unacceptable to the EPA, the EPA may revoke its approval or impose limitations
on the use of Messenger that could have a negative impact on our sales. Because
EPA approval is required for commercial sales of Messenger, the loss of EPA
approval for any reason, including our inability to satisfy the conditions of
our EPA registration, would prevent further sales of Messenger.

INABILITY TO COMPLY WITH REGULATIONS APPLICABLE TO OUR FACILITIES AND PROCEDURES
COULD DELAY, LIMIT OR PREVENT OUR RESEARCH AND DEVELOPMENT OR MANUFACTURING
ACTIVITIES.

Our research and development and manufacturing facilities and procedures
are subject to continual review and periodic inspection. To comply with the
regulations applicable to these facilities and procedures, we must spend funds,
time and effort in the areas of production, safety and quality control and
assurance to ensure full technical compliance. If the EPA or another regulator
determines that we are not in compliance, regulatory approval of our products
could be delayed or we may be required to limit or cease our research and
development or manufacturing activities or pay a monetary fine. If we are
required to limit or cease our research and development activities, our ability
to develop new products would be impaired. In addition, if we are required to
limit or cease our manufacturing activities, our ability to produce Messenger in
commercial quantities would be impaired or prohibited, which would have an
adverse effect on our sales.

11
<PAGE> 14

INTERNATIONAL EXPANSION WILL SUBJECT US TO RISKS ASSOCIATED WITH INTERNATIONAL
OPERATIONS, WHICH COULD ADVERSELY AFFECT BOTH OUR DOMESTIC AND OUR INTERNATIONAL
OPERATIONS.

Our success depends in part on our ability to expand internationally as
we obtain regulatory approvals to market and sell our products in other
countries. We have been conducting field trials in the People's Republic of
China and elsewhere, and we have recently established an office in Mexico City
to facilitate our Mexican operations. International expansion of our operations
could impose substantial burdens on our resources, divert management's attention
from domestic operations and otherwise adversely affect our business.
Furthermore, international operations are subject to several inherent risks,
especially different regulatory requirements and reduced protection of
intellectual property rights, that could adversely affect our ability to compete
in international markets and have a negative effect on our operating results.

INABILITY TO ADDRESS STRAIN ON OUR RESOURCES CAUSED BY GROWTH COULD RESULT IN
OUR INABILITY TO EFFECTIVELY MANAGE OUR BUSINESS.

As we add manufacturing, marketing, sales, field development and other
personnel, both domestically and internationally, during the commercialization
of Messenger, and expand our manufacturing and research and development
capabilities, we expect that our operating expenses and capital requirements
will increase. Our ability to manage growth effectively requires us to continue
to expend funds to improve our operational, financial and management controls,
reporting systems and procedures. In addition, we must effectively expand, train
and manage our employee base. We will be unable to effectively manage our
business if we are unable to timely and successfully alleviate the strain on our
resources caused by growth in our business, which could adversely affect our
operating results.

THE HIGH LEVEL OF COMPETITION IN OUR MARKET MAY RESULT IN PRICING PRESSURES,
REDUCED MARGINS OR THE INABILITY OF OUR PRODUCTS TO ACHIEVE MARKET ACCEPTANCE.

The market for plant protection and yield enhancement products is
intensely competitive, rapidly changing and undergoing consolidation. We may be
unable to compete successfully against our current and future competitors, which
may result in price reductions, reduced margins and the inability to achieve
market acceptance for our products.

Many entities are engaged in developing plant protection and yield
enhancement products. Our competitors include major international agri-chemical
companies, specialized biotechnology companies, and research and academic
institutions. Many of these organizations have significantly more capital,
research and development, regulatory, manufacturing, marketing, human and other
resources than we do. As a result, they may be able to devote greater resources
to the manufacture, promotion or sale of their products, receive greater
resources and support from independent distributors, initiate or withstand
substantial price competition, or take advantage of acquisition or other
opportunities more readily. Further, many of the large agri-chemical companies
have a more diversified product offering than we do, which may give these
companies an advantage in meeting customer needs by enabling them to offer
integrated solutions to plant protection and yield enhancement.

INABILITY TO PROTECT OUR PATENTS AND PROPRIETARY RIGHTS IN THE UNITED STATES AND
FOREIGN COUNTRIES COULD LIMIT OUR ABILITY TO COMPETE EFFECTIVELY SINCE OUR
COMPETITORS MAY TAKE ADVANTAGE OF OUR RESEARCH AND DEVELOPMENT EFFORTS.

Our success depends on our ability to obtain and maintain patent and
other proprietary-right protection for our technology and products in the United
States and other countries. If we are unable to obtain or maintain these
protections, we may not be able to prevent third parties from using our
proprietary rights. We also rely on trade secrets, proprietary know-how and
continuing technological innovation to remain competitive. We have taken
measures to protect our trade secrets and know-how, including the use of
confidentiality agreements with our employees, consultants and advisors. It is
possible that these agreements may be breached and that any remedies for a
breach will not make us whole. We generally control and limit access to, and the
distribution of, our product documentation and other

12
<PAGE> 15

proprietary information. Despite our efforts to protect these proprietary
rights, unauthorized parties may copy aspects of our products and obtain and use
information that we regard as proprietary. We also cannot guarantee that other
parties will not independently develop our know-how or otherwise obtain access
to our technology.

The laws of some foreign countries do not protect proprietary rights to
the same extent as the laws of the United States, and many companies have
encountered significant problems and costs in protecting their proprietary
rights in these foreign countries.

Patent law is still evolving relative to the scope and enforceability of
claims in the fields in which we operate. We are like most biotechnology
companies in that our patent protection is highly uncertain and involves complex
legal and technical questions for which legal principles are not yet firmly
established. Our patents and those patents for which we have license rights may
be challenged, narrowed, invalidated or circumvented. In addition, our issued
patents may not contain claims sufficiently broad to protect us against third
parties with similar technologies or products, or provide us with any
competitive advantage. We are not certain that our pending patent applications
will be issued. Moreover, our competitors could challenge or circumvent our
patents or pending patent applications.

The U.S. Patent and Trademark Office and the courts have not established
a consistent policy regarding the breadth of claims allowed in biotechnology
patents. The allowance of broader claims may increase the incidence and cost of
patent interference proceedings and the risk of infringement litigation. On the
other hand, the allowance of narrower claims may limit the value of our
proprietary rights.

OTHER COMPANIES MAY CLAIM THAT WE INFRINGE THEIR INTELLECTUAL PROPERTY OR
PROPRIETARY RIGHTS, WHICH COULD CAUSE US TO INCUR SIGNIFICANT EXPENSES OR BE
PREVENTED FROM SELLING OUR PRODUCTS.

Our success depends on our ability to operate without infringing the
patents and proprietary rights of third parties. Product development is
inherently uncertain in a rapidly evolving technological environment in which
there may be numerous patent applications pending, many of which are
confidential when filed, with regard to similar technologies. Future patents
issued to third parties may contain claims that conflict with our patents.
Although we believe that our current product does not infringe the proprietary
rights of any third parties, third parties could assert infringement claims
against us in the future. Any litigation or interference proceedings, regardless
of their outcome, would probably be costly and require significant time and
attention of our key management and technical personnel. Litigation or
interference proceedings could also force us to:

- stop or delay selling, manufacturing or using products that
incorporate the challenged intellectual property;

- pay damages; or

- enter into licensing or royalty agreements that may be unavailable on
acceptable terms.

IF WE DO NOT ADEQUATELY DISTINGUISH MESSENGER FROM GENETICALLY MODIFIED PLANTS
AND CERTAIN OTHER PRODUCTS, PUBLIC CONCERNS OVER THOSE PRODUCTS COULD NEGATIVELY
IMPACT MARKET ACCEPTANCE OF MESSENGER.

Claims that genetically engineered products are unsafe for consumption or
pose a danger to the environment have led to public concerns and negative public
attitudes, particularly in Europe. We intend to distinguish Messenger and
harpin-related technologies from products that genetically modify plants. While
our technology does involve genetic modification in the process of manufacturing
Messenger, Messenger and harpin-related technologies are topically applied and
do not genetically modify the plant's DNA. If the public or potential customers
perceive Messenger as a genetically modified product, Messenger may not gain
market acceptance. Similarly, countries that have imposed more restrictive
regulations on genetically modified plants, including Japan and certain members
of the European Union, may perceive Messenger as a genetically modified product.
If so, regulators in those countries may impose more restrictive regulations on
Messenger, which could delay, limit or impair our ability to market and sell
Messenger in those countries.

13
<PAGE> 16

WE MAY BE EXPOSED TO PRODUCT LIABILITY CLAIMS, WHICH COULD ADVERSELY AFFECT OUR
OPERATIONS.

We may be held liable or incur costs to settle liability claims if any
products we develop, or any products that use or incorporate any of our
technologies, cause injury or are found unsuitable during product testing,
manufacturing, marketing, sale or use. These risks exist even with respect to
products that have received, or may in the future receive, regulatory approval,
registration or clearance for commercial use. We cannot guarantee that we will
be able to avoid product liability exposure.

We currently maintain product liability insurance at levels we believe
are sufficient and consistent with industry standards for companies at our stage
of development. We cannot guarantee that our product liability insurance is
adequate, and, at any time, it is possible that such insurance coverage may not
be available on commercially reasonable terms or at all. A product liability
claim could result in liability to us greater than our assets and/or insurance
coverage. Moreover, even if we have adequate insurance coverage, product
liability claims or recalls could result in negative publicity or force us to
devote significant time and attention to matters other than those in the normal
course of business.

INABILITY TO RETAIN OUR KEY EMPLOYEES AND OTHER SKILLED MANAGERIAL AND TECHNICAL
PERSONNEL COULD IMPAIR OUR ABILITY TO MAINTAIN AND EXPAND OUR BUSINESS.

We are highly dependent on the efforts and abilities of our current key
managerial and technical personnel, particularly Jerry L. Butler, our Chief
Executive Officer and President, and Dr. Zhongmin Wei, our Vice President of
Research. Our success will depend in part on retaining the services of Mr.
Butler and Dr. Wei and our other existing key management and technical personnel
and on attracting and retaining new highly qualified personnel. Inability to
retain our existing key management and technical personnel or to attract
additional qualified personnel could, among other things, delay our product
development, marketing and sales efforts. Although Mr. Butler and Dr. Wei have
signed agreements with us that limit their ability to compete directly with us
in the future, nothing prevents either of them from leaving EDEN. Moreover, in
our field, competition for qualified management and technical personnel is
intense. In addition, many of the companies with which we compete for
experienced personnel have greater financial and other resources than we do. As
a result of these factors, we may be unable to recruit, train and retain
sufficient qualified personnel.

WE MAY HAVE TO REDUCE OPERATIONS IF WE ARE UNABLE TO MEET OUR FUNDING
REQUIREMENTS.

We will require substantial additional funding to continue our research
and development activities, increase manufacturing capabilities and
commercialize products. If we are unable to generate sufficient cash flow from
operations or obtain funds through additional financing, we may have to delay,
curtail or eliminate some or all of our research and development, field testing,
marketing and manufacturing programs. We believe that our existing capital
resources, together with the net proceeds of this offering, will be sufficient
to support our operations for at least the next year. Our future capital
requirements will depend on the success of our operations.

If our capital requirements vary from our current plans, we may require
additional financing sooner than we anticipate. Financing may be unavailable to
us when needed or may not be available to us on acceptable terms.

OUR OPERATING RESULTS ARE LIKELY TO FLUCTUATE, RESULTING IN AN UNPREDICTABLE
LEVEL OF EARNINGS AND POSSIBLY IN A DECREASE IN OUR STOCK PRICE.

based, in part, on our expectations regarding future sales. As a result, any
shortfall in sales relative to our expectations could cause significant changes
in our operating results from quarter to quarter. Other factors may also
contribute to the unpredictability of our operating results, including the size
and timing of significant customer transactions, the delay or deferral of
customer use of our products and the fiscal or quarterly budget cycles of our
customers. For example, customers may purchase large quantities of our products
in a particular quarter to store and use over long periods of time, or time
their purchases to coincide with their receipt of revenue or loan proceeds,
which may cause significant fluctuations in our operating results for a
particular quarter or year.

OUR STOCK PRICE MAY BE VOLATILE, AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES
AT OR ABOVE THE INITIAL PUBLIC OFFERING PRICE.

Prior to this offering, there has been no public market for our common
stock. The initial public offering price of our common stock, which will be
determined through negotiations between the representatives of the underwriters
and us, may not be indicative of future market prices. An active trading market
in our common stock may not develop or be sustained following this offering. As
a result, if you decide to purchase our shares, you may not be able to resell
your shares at or above the initial public offering price. Stock markets may
experience significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. The stock prices of biotechnology
companies and early-stage companies in particular have experienced extreme price
fluctuations, often unrelated to the operating performance of these companies.
The market price of our common stock is likely to be very volatile due to a
number of factors, including:

- the degree to which we successfully implement our business strategy;

- actual or anticipated variations in quarterly or annual operating
results;

- changes in securities analysts' earnings projections or securities
analysts' recommendations;

- governmental regulatory initiatives;

- patent or proprietary rights developments;

- results of our field trials;

- announcements of technological innovations or new products by us or
our competitors; and

- changes in business conditions affecting our competitors and us.

OUR EXECUTIVE OFFICERS, DIRECTORS AND MAJOR SHAREHOLDERS WILL CONTINUE TO HOLD A
SUBSTANTIAL PORTION OF OUR STOCK AFTER THIS OFFERING, AND THEY COULD INFLUENCE
EDEN IN A WAY THAT IS ADVERSE TO YOUR BEST INTERESTS.

Following the closing of this offering, our officers, directors and
affiliated entities together will beneficially own approximately 26.5% of the
outstanding shares of our common stock (25.6% if the underwriters'
over-allotment option is exercised in full). As a result, these shareholders
will be able to influence our management and affairs and all matters requiring
shareholder approval, including the election of directors and approval of
significant corporate transactions such as mergers, consolidations and sales of
assets. This concentration of ownership may delay, deter or prevent actions that
would result in a change of control, which in turn could reduce the market price
of our common stock.

OUR MANAGEMENT HAS BROAD DISCRETION AS TO THE USE OF THE NET PROCEEDS FROM THIS
OFFERING.

Our management has broad discretion as to the use of the net proceeds
that we will receive from this offering. We cannot assure you that management
will apply these funds effectively, nor can we assure you that the net proceeds
from this offering will be invested to yield a favorable return.

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<PAGE> 18

ANTITAKEOVER PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BYLAWS AND
PROVISIONS OF WASHINGTON LAW COULD DELAY OR PREVENT A CHANGE OF CONTROL THAT YOU
MAY FAVOR.

Provisions of our articles of incorporation and bylaws that will become
effective upon the closing of this offering and provisions of applicable
Washington law may discourage, delay or prevent a merger or other change of
control that shareholders may consider favorable. The provisions of our articles
of incorporation and bylaws, among other things, will:

- divide our board of directors into three classes, with members of each
class to be elected in staggered three-year terms;

- limit the right of shareholders to remove directors;

- regulate how shareholders may present proposals or nominate directors
for election at annual meetings of shareholders; and

- authorize our board of directors to issue preferred stock in one or
more series, without shareholder approval.

The provisions of our articles of incorporation and bylaws and certain
provisions of Washington law could:

- have the effect of delaying, deterring or preventing a change of
control of our company;

- discourage bids for our common stock at a premium over the market
price; or

- impede the ability of the holders of our common stock to change our
management.

NEW SHAREHOLDERS WILL INCUR SUBSTANTIAL DILUTION AS A RESULT OF THIS OFFERING.

The initial public offering price is substantially higher than the book
value per share of our outstanding common stock. As a result, investors
purchasing common stock in this offering will incur immediate and substantial
dilution in net tangible book value per share of the common stock from the
initial public offering price in the amount of $9.60 per share, based on the
assumed initial public offering price of $13.00 per share. In addition, we have
issued options and warrants to purchase common stock at prices significantly
below the assumed initial public offering price. To the extent these outstanding
options and warrants are ultimately exercised, there will be further dilution to
investors in this offering.

FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.

Sales of a large number of shares of our common stock, or the
availability of a large number of shares for sale, could adversely affect the
market price of our common stock and could impair our ability to raise funds in
additional stock offerings. Based on shares outstanding as of August 31, 2000,
upon completion of this offering we will have outstanding 22,732,707 shares of
common stock, assuming no exercise of options or warrants after August 31, 2000,
and the conversion of all shares of outstanding preferred stock into common
stock. Holders of 16,407,638 shares are subject to agreements with the
underwriters that restrict their ability to transfer their stock for 180 days
after the date of this prospectus. Merrill Lynch, Pierce, Fenner & Smith
Incorporated, on behalf of the underwriters, may in its sole discretion and at
any time waive the restrictions on transfer in these agreements during this
period. After these agreements expire, approximately 15,020,490 shares will be
eligible for sale in the public market assuming no exercise of stock options or
warrants after August 31, 2000.

16
<PAGE> 19

USE OF PROCEEDS

We expect to receive approximately $69.0 million in net proceeds from the
sale by us of the shares of common stock in this offering (approximately $79.6
million if the underwriters' over-allotment option is exercised in full), based
on an assumed initial public offering price of $13.00 per share (the midpoint of
the expected price range), and after deducting the underwriting discount and
commissions and the estimated offering expenses. We currently intend to use up
to approximately $20 million of the net proceeds of this offering to expand and
enhance our manufacturing and research and development facilities. We intend to
use the remaining portion of the net proceeds for working capital and general
corporate purposes, including the expansion of our sales and marketing
capabilities for the commercialization of Messenger and the expansion of our
research and development activities. Pending the uses described above, we will
invest the net proceeds in short-term, interest-bearing, investment-grade
securities.

DIVIDEND POLICY

We have never paid cash dividends on our common stock. We currently
intend to retain any future earnings to fund the development and growth of our
business. Therefore, we do not currently anticipate paying any cash dividends in
the foreseeable future.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "expect," "plan," "intend," "anticipate," "believe," "estimate,"
"predict," "potential" or "continue," the negative of these terms or other
terminology. These statements are only predictions. Actual events or results may
differ materially. In evaluating these statements, you should specifically
consider various factors, including the risks outlined in the Risk Factors
section above. These factors may cause our actual results to differ materially
from any forward-looking statement.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. We are under no duty to update
any of the forward-looking statements after the date of this prospectus to
conform these statements to actual results or to changes in our expectations.

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<PAGE> 20

CAPITALIZATION

The following table sets forth our capitalization as of June 30, 2000:

- on an actual basis;

- on a pro forma basis to reflect the conversion of all outstanding
shares of preferred stock into 13,794,104 shares of common stock upon
the effectiveness of our registration statement; and

- on a pro forma as adjusted basis to further reflect the sale of
5,800,000 shares of common stock offered by this prospectus at an
assumed initial public offering price of $13.00 per share (the
midpoint of the expected price range), and our receipt of the
estimated net proceeds after deducting the underwriting discount and
commissions and estimated offering expenses.

You should read this table in conjunction with our financial statements
and the notes thereto included elsewhere in this prospectus.

<TABLE>
<CAPTION>
JUNE 30, 2000
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C>
Liabilities:
Current portion of capital lease obligations................ $ 289 $ 289 $ 289
Capital lease obligations, net of current portion........... 393 393 393
Shareholders' equity:
Preferred stock, $0.01 par value per share:
10,000,000 shares authorized; 9,746,396 shares issued and
outstanding, actual; no shares issued and outstanding, pro
forma and pro forma as adjusted........................... 97 -- --
Common stock, $0.0025 par value per share: 30,000,000 shares
authorized; 3,106,000 shares issued and outstanding,
actual; 16,900,104 shares issued and outstanding, pro
forma; and 22,700,104 shares issued and outstanding, pro
forma as adjusted......................................... 8 42 57
Additional paid-in capital.................................. 37,945 38,008 107,032
Common stock subscriptions receivable....................... (61) (61) (61)
Deferred stock option compensation expense.................. (99) (99) (99)
Deficit accumulated during development stage................ (29,797) (29,797) (29,797)
-------- -------- --------
Total shareholders' equity.............................. 8,093 8,093 77,132
-------- -------- --------
Total capitalization............................... $ 8,775 $ 8,775 $ 77,814
======== ======== ========
</TABLE>

The information in the table above does not include:

- 331,953 shares of common stock issuable upon the exercise of warrants
outstanding as of August 31, 2000, at a weighted average exercise
price of $1.64 per share;

- 1,500,000 shares of common stock reserved for issuance under our 2000
stock incentive plan and 500,000 shares of common stock reserved for
issuance under our 2000 employee stock purchase plan.

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<PAGE> 21

DILUTION

If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share and the
adjusted pro forma net tangible book value per share after this offering. Our
historical net tangible book value as of June 30, 2000 was approximately $8.1
million, or $2.61 per share, based on the number of common shares outstanding as
of June 30, 2000. Historical net tangible book value per share is equal to the
amount of our total tangible assets less total liabilities, divided by the
number of shares of common stock outstanding as of June 30, 2000.

Our pro forma net tangible book value at June 30, 2000 was $8.1 million,
or $0.48 per share of common stock, after giving effect to the conversion of all
outstanding preferred stock into common stock upon the effectiveness of our
registration statement. Pro forma net tangible book value represents the amount
of total tangible assets less total liabilities, divided by the number of shares
of common stock outstanding after considering the conversion of all outstanding
preferred stock into common stock. After giving effect to the sale of 5,800,000
shares of common stock in this offering at an assumed initial public offering
price of $13.00 per share (less the estimated underwriting discount and
commissions and estimated expenses we expect to pay in connection with this
offering), our pro forma as adjusted net tangible book value at June 30, 2000
would have been $77.1 million, or $3.40 per share. This represents an immediate
increase in the adjusted pro forma net tangible book value of $2.92 per share to
existing shareholders and an immediate and substantial dilution of $9.60 per
share to new investors. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $13.00
Pro forma net tangible book value per share at June 30,
2000.................................................. $0.48
Increase per share attributable to new investors....... 2.92
-----
Pro forma as adjusted net tangible book value per share
after this offering....................................... 3.40
------
Dilution per share to new investors......................... $ 9.60
======
</TABLE>

The following table shows as of June 30, 2000, on the pro forma basis
described above, the differences between existing shareholders and the new
investors with respect to the number of shares of common stock purchased from
us, the total consideration paid and the average price per share paid before
deducting the underwriting discounts and commissions and our estimated offering
expenses.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders............... 16,900,104 74.4% $ 36,902,694 32.9% $ 2.18
New investors....................... 5,800,000 25.6% 75,400,000 67.1% $13.00
---------- ----- ------------ -----
Total..................... 22,700,104 100.0% $112,302,694 100.0%
===== ============ =====
</TABLE>

As of August 31, 2000, we had outstanding 2,468,000 shares of common
stock issuable under our 1995 combined incentive and non-qualified stock option
plan upon the exercise of stock options at a weighted average exercise price of
$6.93 per share, 331,953 shares of common stock issuable upon the exercise of
warrants at a weighted average exercise price of $1.64 per share and 230,769
shares of common stock, assuming an initial public offering price of $13.00 per
share, issuable upon the exercise of currently outstanding warrants associated
with our two existing credit facilities, at an exercise price equal to the
public offering price of the shares sold in this offering. In addition, we have
reserved 326,334 shares of common stock for issuance under our 1995 combined
incentive and non-qualified stock option plan. We have also reserved 1,500,000
shares of common stock reserved for issuance under our 2000 stock incentive plan
and 500,000 shares of common stock reserved for issuance under our 2000 employee
stock purchase plan. To the extent these options and warrants are exercised, and
to the extent we issue new options or rights under our stock plans or issue
additional shares of common stock in the future, new investors will experience
further dilution.

19
<PAGE> 22

SELECTED FINANCIAL DATA

The following selected financial data for each of the years ended 1995 to
1999 are derived from our audited financial statements. When you read this
selected financial data, it is important that you also read our financial
statements and related notes included elsewhere in this prospectus, as well as
the section of this prospectus entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Historical results are not
necessarily indicative of future results.

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
------- ------- ------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
Consulting services................. $ 132 $ 178 $ 176 $ 121 $ 115 $ 43 $ --
Research grants..................... 110 42 7 -- -- -- --
------- ------- ------- -------- -------- -------- --------
Total revenues.................... 242 220 183 121 115 43 --
------- ------- ------- -------- -------- -------- --------
Operating expenses:
Research and development............ 990 1,643 2,865 5,322 7,555 3,713 5,116
General and administrative.......... 269 396 577 1,708 2,209 1,010 1,911
------- ------- ------- -------- -------- -------- --------
Total operating expenses.......... 1,259 2,039 3,442 7,030 9,764 4,723 7,027
------- ------- ------- -------- -------- -------- --------
Loss from operations.............. (1,017) (1,819) (3,259) (6,909) (9,649) (4,680) (7,027)
------- ------- ------- -------- -------- -------- --------
Interest and dividend income.......... 20 99 172 135 435 248 279
Interest expense...................... (3) (27) (116) (162) (181) (93) (74)
------- ------- ------- -------- -------- -------- --------
Net loss.............................. $(1,000) $(1,747) $(3,203) $ (6,936) $ (9,395) $ (4,525) $ (6,822)
======= ======= ======= ======== ======== ======== ========
Historical basic and diluted net loss
per share........................... $ (0.57) $ (1.04) $ (1.90) $ (3.93) $ (5.23) $ (2.48) $ (2.38)
======= ======= ======= ======== ======== ======== ========
Weighted average shares outstanding
used in computation of historical
basic and diluted net loss per
share............................... 1,742 1,681 1,681 1,765 1,902 1,823 2,863
======= ======= ======= ======== ======== ======== ========
Pro forma basic and diluted net loss
per share........................... $ (0.67) $ (0.41)
======== ========
Weighted average shares outstanding
used in computation of pro forma
basic and diluted net loss per
share............................... 14,820 16,657
======== ========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
------- ------- ------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............. $ 759 $ 332 $ 1,633 $ 11,723 $ 13,107 $ 7,980 $ 6,609
Working capital....................... 2,586 1,369 2,505 10,174 11,014 6,539 3,833
Total assets.......................... 3,083 2,087 4,136 13,631 16,278 10,621 11,601
Capital lease obligations, net of
current portion..................... 32 261 280 712 523 682 393
Deficit accumulated during development
stage............................... (1,139) (2,887) (6,089) (13,025) (22,974) (17,550) (29,797)
Total shareholders' equity............ 2,767 1,473 3,241 11,345 13,600 8,412 8,093
</TABLE>

20
<PAGE> 23

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

We are a plant technology company focused on developing, manufacturing
and marketing innovative natural products for agriculture. We have a
fundamentally new, patented and proprietary technology that we believe will
significantly improve plant protection and crop production worldwide. We have
not yet generated significant revenue from the sale of products. However, we
recently initiated marketing activities designed to promote the distribution and
sale of Messenger and commercial sales of Messenger began in August 2000.
Although actual revenue recognition methods will ultimately depend on, among
other factors, the terms of distribution agreements, we currently expect to
recognize product revenue and related cost of goods sold when the product is
shipped to independent distributors.

Prior to August 2000, we had derived all of our revenues from providing
consulting services to growers in the analysis and diagnosis of plant and soil
diseases and from research grants. We terminated all consulting services in
January 2000 in order to focus on commercialization of Messenger. Since 1997, we
have not sought, and do not intend to seek in the future, additional research
grants.

We have incurred significant operating losses since inception. As of June
30, 2000, we had accrued an accumulated deficit of $29.8 million. For the year
ended December 31, 1999, we had a net loss of $9.4 million and for the six
months ended June 30, 2000, we had a net loss of $6.8 million. Operating
expenses were $4.7 million and $7.0 million for the six months ended June 30,
1999 and 2000, respectively, and $3.4 million, $7.0 million and $9.8 million for
the years ended December 31, 1997, 1998 and 1999, respectively. Operating
expenses increased $2.3 million, or 49%, from the six months ended June 30, 1999
to the six months ended June 30, 2000, and increased $3.6 million, or 104%, from
1997 to 1998 and $2.8 million, or 39%, from 1998 to 1999. We expect to incur
additional losses while we expand and enhance our manufacturing and research and
development activities, as well as our sales and marketing capabilities.

RESULTS OF OPERATIONS

Revenues

Revenues from consulting services were $43,071 and $0 for the six months
ended June 30, 1999 and 2000, respectively, and $175,921, $120,686 and $114,620
for the years ended December 31, 1997, 1998 and 1999, respectively. Revenues
from consulting services decreased $43,071, or 100%, from the six months ended
June 30, 1999 to the six months ended June 30, 2000 due to the termination of
these services in January 2000, and decreased $55,235, or 31%, from 1997 to 1998
and $6,066, or 5%, from 1998 to 1999 as we increased our focus on the
development of Messenger. Since 1997 we have not sought, and do not intend to
seek in the future, additional research grants because, given the limited amount
of research grant funds we have received in the past, we believe it is in our
best interest to devote our resources to commercializing Messenger rather than
to pursuing additional research grants.

Research and Development Expenses

Our research and development expenses consist primarily of personnel and
related expenses, field trial expenses, laboratory expenses and facility and
equipment expenses. Research and development expenses were $3.7 million and $5.1
million for the six months ended June 30, 1999 and 2000, respectively, and $2.9
million, $5.3 million and $7.6 million for the years ended December 31, 1997,
1998 and 1999, respectively. Research and development expenses increased $1.4
million, or 38%, from the six months ended June 30, 1999 to the six months ended
June 30, 2000, and increased $2.4 million, or 86%, from 1997 to 1998, and $2.3
million, or 42%, from 1998 to 1999. Research and development expenses have
increased primarily because we have increased staffing, conducted more field
trials, conducted extensive toxicology tests, developed and enhanced our
manufacturing processes and prepared and filed additional patent applications.
We expect substantial increases in research and development expenses as we
develop

21
<PAGE> 24

new products and attempt to maintain and enhance our harpin and harpin-related
technology platform. We intend to fund our research and development efforts
principally through internally generated funds.

In 1995, we issued 400,000 shares of our common stock to the Cornell
Research Foundation as partial consideration for an exclusive right to use
Cornell University's patents, patent applications and biological materials
relating to harpin proteins and related genes. The agreement allowed for
cancellation of some shares by us if we did not reach prescribed milestones in
product development. We recognized license expense equal to the value of the
shares at the time they vest. When we achieved milestones in 1998, we recorded
license expense of $240,000. On September 30, 1998, we amended the license
agreement to fully vest the remaining 120,000 shares and recorded license
expense of $420,000.

General and Administrative Expenses

Our general and administrative expenses consist of payroll and expenses
for executive, accounting and administrative personnel, marketing, recruiting,
professional fees and other corporate expenses. General and administrative
expenses were $1.0 million and $1.9 million for the six months ended June 30,
1999 and 2000, respectively, and $577,915, $1.7 million and $2.2 million for the
years ended December 31, 1997, 1998 and 1999, respectively. General and
administrative expenses increased $900,000, or 89%, from the six months ended
June 30, 1999 to the six months ended June 30, 2000, and increased $1.1 million,
or 196%, from 1997 to 1998, and $500,711, or 29%, from 1998 to 1999. Our general
and administrative expenses rose primarily due to increased salary expense,
marketing costs for the introduction of Messenger and our harpin and
harpin-related technology, the expense of hiring additional personnel and
increases in professional fees. We expect general and administrative expenses to
increase further as we hire additional personnel to support anticipated growth
and the commercialization of Messenger, enhance information systems, expand our
sales and marketing capability and incur costs associated with being a public
company.

Interest and Dividend Income

Interest and dividend income consists of earnings on our cash and cash
equivalents and short-term investments. Interest and dividend income was
$247,930 and $278,450 for the six months ended June 30, 1999 and 2000,
respectively, and $172,211, $135,009 and $435,742 for the years ended December
31, 1997, 1998 and 1999, respectively. Interest and dividend income increased
$30,520, or 12%, from the six months ended June 30, 1999 to the six months ended
June 30, 2000, and decreased $37,202, or 22%, from 1997 to 1998, and increased
$300,733, or 223%, from 1998 to 1999. The increase from the six months ended
June 30, 1999 to the same period in 2000 resulted from a higher average balance
of cash and cash equivalents during 2000 as a result of funds received from the
issuance of our preferred stock. The decrease from 1997 to 1998 resulted from a
lower average balance of cash and cash equivalents during 1998. The increase
from 1998 to 1999 is related to the increased average balance of cash
equivalents purchased with the proceeds from the sales of our preferred stock.

Interest Expense

Interest expense consists of interest we must pay on capital leases used
to finance our equipment purchases. Our interest expense was $92,599 and $73,575
for the six months ended June 30, 1999 and 2000, respectively, and $115,419,
$162,206 and $181,159 for the years ended December 31, 1997, 1998 and 1999,
respectively. Interest expense decreased $19,024, or 21%, from the six months
ended June 30, 1999 to the six months ended June 30, 2000, due to a lower
average capital lease principal balance in 2000. Interest expense increased
$46,787, or 41%, from 1997 to 1998, and increased $18,953, or 12%, from 1998 to
1999 because we financed additional equipment purchases with capital leases.

Income Taxes

We have realized a net loss from operations for each period since
inception. As of December 31, 1999, we had accumulated approximately $21.3
million of net operating loss carryforwards for federal

22
<PAGE> 25

income tax purposes. These carryforwards expire between 2009 and 2014. The
annual use of these net operating loss carryforwards may be limited in the event
of a cumulative change in ownership of more than 50%.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception, we have financed our operations primarily through
the private sale of our equity securities, resulting in net proceeds of $36.4
million through June 30, 2000. To a lesser extent, we have financed some of our
equipment purchases through lease financings. As of June 30, 2000, we had cash
and cash equivalents of $6.6 million. Our operating activities resulted in net
cash outflows of $2.9 million in 1997, $4.6 million in 1998, $7.8 million in
1999 and $6.2 million for the six months ended June 30, 2000. These operating
cash outflows resulted primarily from significant expenditures on research and
development and general and administrative expenses, all of which led to
operating losses.

Investing activities used cash of $1.0 million in 1997, $7,892 in 1998,
$2.2 million in 1999 and $1.5 million for the six months ended June 30, 2000,
primarily for the purchase of property and equipment and the sale and purchase
of cash equivalents.

Financing activities provided cash of $5.2 million in 1997, $14.7 million
in 1998, $11.4 million in 1999 and $1.1 million for the six months ended June
30, 2000, primarily from the sale of preferred stock and proceeds from
sale-leaseback of equipment, partially offset by payments of equipment leases
and notes payable and offering costs. As of December 31, 1999, our future
minimum payments under capital and operating leases totaled approximately $1.6
million and are payable over the next five years.

In August 2000, we established unsecured, multiple-advance, committed
credit facilities with Stephens Group, Inc. and the WBW Trust Number One. Under
the terms of the facilities, we may request at any time on or before December
31, 2000 that Stephens Group make advances to us during the term of the facility
of an aggregate maximum of up to $10 million and that the WBW Trust make
advances to us during the term of the facility of up to an aggregate maximum of
$5 million. Amounts borrowed under the facilities will bear interest at the
prime rate, as determined by reference to The Wall Street Journal, plus 2%,
payable on the first day of each month. All outstanding principal and accrued
interest will be due on the earlier of (a) December 31, 2001 or (b) the date
that we receive any cash proceeds from the issuance of any equity securities
after the date the facilities were established. Amounts repaid under the
facilities may not be reborrowed. The amounts borrowed under the facilities may
be used for general corporate purposes. As of August 31, 2000 we had not yet
borrowed any amounts under the facilities and we do not intend to borrow any
amounts before the closing of this offering. However, to the extent we draw on
the credit facilities prior to the closing of this offering, we will use a
portion of the proceeds from the offering to repay the indebtedness. The credit
facilities contain restrictive covenants, including provisions that prohibit us
from paying dividends or from incurring indebtedness for borrowed money and
capital leases that exceed $500,000 in the aggregate.

In connection with the establishment of the credit facilities, we paid a
loan commitment fee to Stephens Group of $200,000 and to the WBW Trust of
$100,000. In addition, we issued warrants to each of Stephens Group and the WBW
Trust to purchase a number of shares of our common stock equal to 20% of their
maximum loan commitments divided by the public offering price of the shares we
sell in this offering. The warrants may be exercised at any time after the 180th
day after the effective date of our registration statement relating to this
offering, at an exercise price per share equal to the public offering price of
the shares we sell in this offering. The warrants expire in August 2005. We
currently expect to incur a total expense of approximately $2 million related to
the loan commitment fee and the fair value of these warrants. This amount will
be reflected as interest expense over the period from August 2000 through
December 2000, or upon the closing of this offering if that occurs prior to the
end of December 2000.

We currently expect to substantially increase our operating expenses to
expand our sales and marketing capabilities and to continue to enhance our
manufacturing and research and development activities. In the next fiscal year,
we currently expect to spend approximately $8 million for sales and

23
<PAGE> 26

marketing activities, including personnel, promotional and advertising expenses.
We also expect to make capital expenditures of up to approximately $20 million
to expand and enhance our manufacturing and research and development facilities.
These additional operating expenses and capital expenditures will consume a
material amount of our cash resources, including a portion of the net proceeds
of this offering. We believe that the net proceeds from this offering, together
with our existing cash and cash equivalents, will be sufficient to meet our
anticipated cash needs for working capital and capital expenditures for at least
the next year. Our future capital requirements will depend on the success of our
operations.

In the future, we may require additional funds to support our working
capital requirements or for other purposes and may seek to raise such additional
funds through public or private equity financing or from other sources. We may
be unable to obtain adequate or favorable financing at that time. Any financing
we obtain may dilute your ownership interest.

QUARTERLY RESULTS OF OPERATIONS

Our operating results for a particular quarter or year are likely to
fluctuate, which could result in uncertainty surrounding our level of earnings
and possibly in a decrease in our stock price. Numerous factors will contribute
to the unpredictability of our operating results. In particular, our sales are
expected to be highly seasonal. Sales of plant protection and yield enhancement
products are dependent on planting and growing seasons, climatic conditions and
other variables, which we expect to result in substantial fluctuations in our
quarterly sales and earnings. In addition, most of our expenses, such as
employee compensation and lease payments for facilities and equipment, are
relatively fixed. Our expense levels are based, in part, on our expectations
regarding future sales. As a result, any shortfall in sales relative to our
expectations could cause significant changes in our operating results from
quarter to quarter. Other factors may also contribute to the unpredictability of
our operating results, including the size and timing of significant customer
transactions, the delay or deferral of customer use of our products and the
fiscal or quarterly budget cycles of our customers. For example, customers may
purchase large quantities of our products in a particular quarter to store and
use over long periods of time, or time their purchases to coincide with their
receipt of revenue or loan proceeds, which may cause significant fluctuations in
our operating results for a particular quarter or year.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not currently hold any derivative instruments and we do not engage
in hedging activities. Also, we do not have any outstanding variable interest
rate debt and currently do not enter into any material transactions denominated
in a foreign currency. Therefore, our direct exposure to interest rate and
foreign exchange fluctuation is currently minimal. We believe that the market
risk arising from holdings of our financial instruments is not material.

24
<PAGE> 27

BUSINESS

OVERVIEW

Our proprietary technology is based on a new class of nontoxic, naturally
occurring proteins called harpins. Harpin proteins trigger a plant's natural
defense systems to protect against disease and pests, and simultaneously
activate certain plant growth systems, leading to increased biomass,
photosynthesis, nutrient uptake and root development and, ultimately, to greater
crop yield and quality.

Messenger received conditional EPA approval in April 2000, and we began
sales of the product in August 2000. Utilizing our harpin and harpin-related
technology, Messenger simultaneously activates the plant's natural defense and
growth systems, providing broad protection against disease, reduced damage
caused by pests and improved plant growth, crop yield and quality. Messenger is
a water-soluble, granular powder that is topically applied either independently
or in conjunction with traditional chemical pesticides. Once applied, Messenger
degrades rapidly and leaves no detectable residue. Unlike traditional chemical
pesticides, Messenger and other products we are developing have no direct
killing effect on pests and pathogens, reducing the likelihood of pest
resistance. In addition, unlike genetically modified plants, Messenger does not
alter the plant's DNA.

Our near-term focus is the commercialization of Messenger for use on a
wide variety of crops. We are currently concentrating our efforts in the United
States on high-value crops, such as citrus, tomatoes, peppers, cucumbers,
strawberries and other horticultural and specialty crops, from which we expect
growers will derive the greatest economic benefit from Messenger. We plan to
take advantage of the Messenger brand developed in the use on these high-value
crops to penetrate traditional field crop markets, including cotton, wheat,
rice, corn and soybean.

In conjunction with the commercialization of Messenger, we will continue
to focus significant resources on research and development activities to develop
and commercialize new products based on our harpin and harpin-related
technology. We believe that many of the additional products and technologies
currently under development will lead to significant business opportunities in
the future.

INDUSTRY OVERVIEW

In order to meet growing food demand and remain competitive in the global
agricultural marketplace, growers are consistently challenged to increase
productivity by improving crop yield and quality. Over the last several decades,
growers have relied on the development of more effective farming practices and
improved plant protection and yield enhancement methods and products to limit
agricultural crop losses and to increase the yield and quality of their crops.
In recent years, however, the rate at which growers have been able to further
improve crop productivity has declined as improved farming practices have become
more fully implemented, as land suitable for conversion to farming has become
more scarce and as concerns about the environmental impact of farming have
increased. Moreover, growers today face increasing scarcity of available
resources, such as labor, water and land, and increasing restrictions on the use
of traditional chemical pesticides. At the same time, the global demand for food
and increased food quality continues to increase with population growth and
generally rising standards of living.

25
<PAGE> 28

In today's competitive agricultural environment, growers must maximize
crop productivity by enhancing yield and minimizing crop losses. The Food and
Agriculture Organization of the United Nations estimates annual crop losses from
pests to be $300 billion worldwide. In addition to basic agronomic practices
such as crop rotation, cultivation or variety selection, growers generally have
two alternatives to limit these economic losses and increase yields. The first
approach is to use traditional chemical pesticides, and the second is to grow
genetically modified plants that are engineered to resist disease and
infestation or to tolerate applications of nonselective herbicides. Each of
these approaches has come under increasing criticism from a variety of sources
worldwide including environmental groups, government regulators, consumers and
labor advocacy groups.

Traditional Chemical Pesticides

Growers use traditional chemical pesticides to kill insects,
microorganisms and other pests. Although generally effective in killing targeted
pests, traditional pesticides often have serious adverse side effects. Many of
these chemicals are suspected carcinogens and many are acutely toxic. Pesticide
applicators and field workers face significant risks from direct exposure to
toxic chemical pesticides. In addition, use of chemical pesticides often
suppresses beneficial insects and microorganisms that otherwise provide a degree
of natural protection.

Over time, many pathogens and pests develop resistance to chemical
pesticides. As pest resistance increases, and beneficial predators and parasites
decline, growers often escalate the application of pesticides to maintain an
acceptable level of disease and pest control. As a result, chemical pesticides
or their byproducts may contaminate the soil, surface water and groundwater
resources. In addition, chemical pesticides can enter the food chain, adversely
affecting animal populations, and can be directly ingested by humans or by
livestock intended for human consumption.

Over the past 50 years, increased use of pesticides, with their potential
risks and problems, has heightened public awareness and concern over their
environmental and health hazards. As a result, the U.S. government and various
state and foreign governments have imposed increasingly stringent regulations on
the manufacture and use of chemical pesticides.

Regulatory and public pressure is forcing manufacturers to remove many
traditional chemical pesticides from the market. Over the last 15 years,
numerous pesticide products have been removed from the marketplace or have been
severely restricted in their allowable uses. Currently, many widely used
pesticides are subject to extensive and costly re-registration requirements
mandated by changes in federal pesticide laws. As a result of these regulatory
constraints as well as other economic pressures, growers have increasingly
sought new technologies to protect crops and maintain profit margins.

Genetically Modified Plants

Scientific advances, coupled with the health and environmental problems
associated with conventional chemical pesticides, led to the introduction of
genetically modified plants in the early 1990s. These products can provide a
variety of pesticidal and other benefits. Genetically modified plants have been
developed to produce herbicide-tolerant, insect-resistant or virus-resistant
crops. In addition, improved output traits, including those designed to create
higher-quality animal feed, have been introduced into the market. For the 1999
growing season, 55% of all cotton fields, 57% of all soybean fields and 33% of
all cornfields in the United States were planted with genetically modified seed
varieties.

While genetically modified plants have been widely used, environmental
groups, some scientists and consumers, especially in Europe, are raising
questions regarding the potential adverse side effects, long-term risks and
uncertainties associated with genetically modified plants. Some countries,
primarily in the European Union, have established restrictions on the planting
of certain genetically modified seeds or on the importation of grain produced
from these seeds. Moreover, some countries, including Japan and certain members
of the European Union, have imposed labeling requirements on genetically
modified food products, and federal legislation requiring such labeling has been
proposed in the United States. Several food-related companies have indicated
that they will not use genetically modified crops in their products.

26
<PAGE> 29

Market Opportunity for New Plant Protection and Yield Enhancement Products

Based on data collected by the Food and Agricultural Organization of the
United Nations, in 1999, over 121 million acres of horticultural and specialty
crops were harvested worldwide, including nearly 17 million acres of tomatoes,
peppers, cucumbers and strawberries and approximately 18 million acres of
citrus. In addition, in 1999, approximately 2.0 billion acres of row crops were
harvested worldwide, with corn, wheat, cotton and rice accounting for
approximately 1.3 billion acres. Based on data from Allan Woodburn Associates,
worldwide expenditures on agricultural chemicals to protect these and other
crops in 1999 were approximately $30 billion. We believe growers worldwide are
seeking new plant protection and yield enhancement products to replace or reduce
the need for traditional agricultural chemicals, and that allow them to manage
plant disease and improve crop yield and quality without modifying a plant's
DNA.

THE EDEN SOLUTION AND ADVANTAGES

Utilizing our harpin and harpin-related technology, we are developing
products that activate a plant's natural defense and growth systems without
altering the plant's DNA. We believe our harpin and harpin-related technology
provides the following advantages over current plant protection and yield
enhancement products:

- Simultaneous activation of natural plant systems to:

- Protect against a broad array of viral, fungal and bacterial
diseases. Our technology has demonstrated an ability to activate a
plant's natural defense systems against a broad spectrum of viral,
fungal and bacterial diseases, including some diseases for which
there is currently no effective treatment. We believe that our
harpin-based products will reduce or eliminate the need for certain
traditional chemical pesticides.

- Reduce damage caused by a variety of pests. Our technology has
shown an ability to reduce crop infestation and damage caused by
certain harmful insects and other pests. Unlike chemical
pesticides, however, our technology has no direct killing effect
and, therefore, we believe that beneficial insects and
microorganisms will not be adversely affected by our products.

- Improve plant growth, crop yield and quality. We have demonstrated
an ability to improve plant growth as evidenced by one or more of
the following: increased biomass, photosynthesis, nutrient uptake
and root development. The improved plant growth observed in our
Messenger field trials leads to increased plant quality and
generally increased yields of 10% to 20% over current agronomic
practices using traditional chemicals.

- Effectiveness across a wide array of crops. Our technology has proven
effective in activating natural plant defense and growth systems in
over 40 crops, including high-value crops such as citrus, tomatoes,
peppers, cucumbers and strawberries; traditional field crops such as
cotton, wheat, rice, corn and soybean; and ornamental crops such as
rose.

- Improved food safety. Our technology allows us to use small amounts of
harpin protein, our active ingredient. Generally, only two to four
grams of harpin protein are required to treat one acre. Once applied,
harpin protein degrades rapidly and leaves no detectable residue. As a
result, we believe harpin-based products will improve food safety
compared to food harvested from crops treated with traditional
chemical pesticides.

- Reduced risk of environmental damage and increased worker
safety. Based on independent toxicology studies, in-house laboratory
tests and extensive field testing, we believe harpin protein has
little, if any, impact on the environment. As a result, we believe
harpin-based products have significant advantages over traditional
chemical pesticides in terms of worker safety and environmental
damage.

- Reduced likelihood of pest resistance. Over time, the direct killing
function associated with chemical pesticides sometimes results in pest
and pathogen resistance. Because the mode of action of our technology
has no direct killing effect, we believe it is less likely that pests
and pathogens will develop resistance to our products.

27
<PAGE> 30

OUR BUSINESS STRATEGY

Our objective is to utilize our proprietary technology to develop and
market products that enhance plant protection and crop yield. We plan to achieve
this goal by implementing the following key strategies:

- Commercialize Messenger and future products based on our proprietary
technology worldwide. We have initiated marketing activities designed
to promote the distribution and sale of our first product, Messenger,
and made our first commercial sales of the product in August 2000. We
plan to commercialize Messenger and future products worldwide
beginning in the United States and expanding to foreign countries as
we obtain regulatory approvals. We intend to distribute these products
through established agri-chemical distributors and retailers in order
to leverage their existing sales forces and grower relations. We
intend to continue to expand our team of field development specialists
to maintain close relationships with growers and educate industry
leaders and distributors.

- Promote the benefits of Messenger and our harpin and harpin-related
technology. We intend to use our existing and growing body of field
trial results to promote the use of Messenger and the benefits of our
proprietary technology. We plan to build market awareness through a
wide range of programs, materials and events, including conference and
trade show appearances and the dissemination of sales literature and
promotional materials.

- Continue to develop Messenger product extensions and new products that
utilize natural plant defense and growth systems. We will continue to
focus significant resources on research and development activities to
develop and commercialize new products based on our harpin and
harpin-related technology platform. These efforts will include
Messenger product line extensions, such as crop, disease and pest
specific products. In addition, we have identified and are currently
performing efficacy studies on new harpin proteins that may be
significantly more potent and may be effective against other classes
of disease or induce additional growth pathways.

- Control and protect our technology. We own or have obtained exclusive
worldwide rights to patents and patent applications that cover
Messenger and its use and other related technologies. We have not
granted any geographic, crop or technology rights, other than for
experimental and limited field trials, to these patents and patent
applications. We plan to aggressively protect our control of these
technologies by enforcing our current patents and filing additional
patent applications in many countries worldwide. Where appropriate, we
will continue to file patent applications jointly with Cornell
University or other institutions.

- Maintain control over product manufacturing. In order to control the
quality and supply of our products and help maintain our proprietary
position, we intend to retain control over the manufacturing of our
products. We expect to expand our manufacturing capabilities as
necessary to meet market demand. We have established comprehensive and
detailed quality control and assurance systems to ensure that we sell
the highest quality product. We will only use independent
manufacturing arrangements when we can assure ourselves that we can
maintain our quality standards.

CORE TECHNOLOGY PLATFORM

The active ingredient in our initial product, Messenger, is one of a
class of environmentally safe, nontoxic proteins called harpins, which were
discovered by Dr. Zhongmin Wei, our Vice President of Research, and his
colleagues while at Cornell University. Science magazine recognized the
importance of the harpin discovery and published the related study as its cover
story in July 1992. The USDA also recognized the discovery, describing it as a
"scientific breakthrough" in understanding how plants respond to pathogens.

Plants have powerful natural defense mechanisms. Plants generally resist
pathogens, or restrict their proliferation, by causing localized necrosis, or
death of tissues, to a small zone surrounding the site of infection. This
resistance by the plant is called the hypersensitive response. In addition to
the localized

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hypersensitive response, plants respond to infection by activating defenses in
parts of the plant that were not infected by the original pathogen, increasing
resistance to further or secondary infections by the same and other pathogens.
The activation and maintenance of defense systems in the uninfected regions of a
plant are referred to as systemic acquired resistance. Systemic acquired
resistance confers long-lasting systemic disease resistance against a broad
spectrum of pathogens.

Researchers have studied these natural defense mechanisms for over 30
years seeking to understand how plants recognize an infection and what activates
their defense systems. Dr. Wei and his colleagues were able to isolate and
characterize the harpin protein, a previously undescribed class of proteins
associated with activating these responses. They established that when certain
bacterial infections occur, the bacteria secrete a harpin protein, which, in
turn, signals the plant to generate a defense against the infection. Dr. Wei
later discovered that direct topical application of trace amounts of harpin to
the surface of the plant leaf or seed signals the plant to activate multiple
pest-resistant and growth-enhancing responses without visible hypersensitive
response.

How Harpin Works

Description of "How Harpin Works" Chart (p. 29)

[GRAPHIC -- Depiction of how harpin works. Under the "Topical Application"
heading, a harpin protein is depicted bonding to a plant receptor, initiating an
ion-exchange. Under the "Simultaneous Plant Reactions heading, the ion-exchange
is depicted causing signal amplification, resulting in the following responses
in the plant: (1) systemic acquired resistance pathway activation, (2) jasmonic
acid/ethylene pathway activation and (3) increased photosynthesis and nutrient
uptake. Under the "Benefits" heading, the effects of such plant responses are
disease resistance, pest resistance and improved plant growth.]

[DIAGRAM]

As shown above, the harpin protein serves to initiate several key plant
reactions that generally result in improved disease and pest resistance and
plant growth. Once a harpin protein is applied to a plant and binds to a plant
receptor, production of hydrogen peroxide, an important mechanism of plant
defense, is induced in plant cells and a series of ion exchanges are stimulated
in the cell membrane. Then, a series of reactions occur that result in the
following benefits:

- Disease resistance and pest resistance. The systemic acquired
resistance pathway is broadly classified as encoding
pathogenesis-related proteins, which play an active role in disease
resistance. In addition, our researchers have demonstrated that harpin
proteins induce the jasmonic acid/ethylene dependent pathway that
plays an important role in disease and pest defense.

- Improved plant growth, crop yield and quality. Activation of a plant's
growth systems has been noted even in the absence of disease.
Activation of plant growth and related pathways results in increased
photosynthesis and nutrient uptake. Harpin-treated plants generally
show increased biomass, root development, earlier flowering and fruit
maturation, as well as increased crop yield and quality.

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The first harpin was isolated from Erwinia amylovora, a pathogenic
bacterium that causes fire blight in apple, pear and other rosaceous plants.
Since then, EDEN and Cornell University, as well as other research institutions,
have isolated several harpin or harpin-like proteins from other major groups of
plant pathogenic bacteria.

MESSENGER -- OUR INITIAL PRODUCT

Utilizing our proprietary harpin and harpin-related technology, we have
developed our first product, Messenger, which activates natural plant defense
and growth systems without altering the plant's DNA or having a direct killing
effect on targeted pests or pathogens. Messenger received conditional approval
from the EPA in April 2000, and we have initiated marketing activities to
promote the distribution and sale of Messenger in the United States. We are
currently manufacturing Messenger for sale in commercial quantities and began
commercial sales of the product in August 2000. Messenger is a water-soluble,
granular powder that is topically applied either independently or in conjunction
with traditional chemical pesticides. Once applied, Messenger degrades rapidly
and leaves no detectable residue. Messenger provides all the advantages of our
core technology, including:

- simultaneous activation of natural plant systems to:

- protect against a broad array of viral, fungal and bacterial
diseases, including some diseases for which no effective treatment
is currently available;

- reduce damage caused by a variety of pests; and

- improve plant growth, crop yield and quality;

- effectiveness across a wide array of crops;

- improved food safety;

- reduced risk of environmental damage;

- increased worker safety; and

- reduced likelihood of pest resistance.

In addition to these key advantages of our proprietary technology,
Messenger provides the following additional benefits:

- Low dosage and quick activation of plant systems. Generally, only two
to four grams of harpin protein, Messenger's active ingredient, are
required to treat one acre. Upon application, Messenger generally
initiates the activation of the plant's defense and growth systems
within five to ten minutes, with full activation occurring within
three to five days. The presence of Messenger initiates the plant
response. The continued presence of Messenger is not required for full
activation, reducing the need for re-application due to rain or other
environmental conditions.

- Simple application. Messenger can be applied using standard equipment
and a variety of simple application methods, such as direct foliar
sprays, seed treatments and soil drenches. For foliar spray
applications, Messenger is mixed with water, either alone or in
combination with other plant treatments, and applied using
conventional spray equipment. In contrast to many traditional
pesticides, which generally require that each individual plant leaf be
sprayed, it is not necessary to spray the entire plant for Messenger
to be effective.

- Extended effect. In certain crops, such as wheat and rice, we believe
only one application of Messenger per season is necessary. For other
crops, such as fresh vegetables and ornamentals, repeat applications
at a rate equal to or less than traditional chemical pesticides have
been shown to enhance the defense and growth benefits of Messenger.

- Reduced use restrictions and ease of disposal. Many chemical
pesticides have restrictions that prohibit farm workers from
re-entering treated fields or greenhouses for periods of 24 to 48
hours, which may cause significant delays in grower activities.
Messenger, on the other hand,

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qualifies for the EPA's minimum restricted entry interval of four
hours. Similarly, many chemical pesticides are subject to restrictions
that impose minimum time periods, ranging from a few days to several
weeks, between the product's last application and the time of harvest.
Because Messenger is virtually nontoxic and leaves no detectable
residues on treated crops, there is no pre-harvest interval. In
addition, in contrast to most traditional chemical pesticides,
personal protective equipment, such as respirators, rubber gloves,
boots and complete suits of protective outerwear, is not required for
workers applying Messenger. Unlike products containing toxic
chemicals, Messenger's packaging materials can be easily disposed of
in traditional municipal or county waste collection systems.

Messenger's Performance in Field Trials

We conduct both small scientifically oriented field trials and large
demonstration field trials to test the efficacy and performance of Messenger, to
educate growers and their advisors regarding the value and use of Messenger, and
to generate data to enable us to improve application rates and timing. In
addition, we conduct field trials in connection with our research and
development of new products. Field trials are conducted with major growers,
universities and consultants. Generally, we pay these independent third parties
to execute, evaluate and report on our trials pursuant to specific protocols
agreed to by such parties. Compliance with such protocols is monitored by our
field development specialists.

Since 1996, we have completed in excess of 400 field trials on over 40
crops in the United States, the People's Republic of China and other countries.
The majority of trials were conducted on citrus, cotton, cucumber, peppers,
strawberries, tobacco, tomatoes and wheat. Our field trials generally
demonstrated that there is an increase of 10% to 20% in the yields of crops
treated with Messenger over the yields of crops grown under current agronomic
practices. In addition, Messenger generally provided better or equal disease
control over traditional chemicals, even when compared to crops treated
simultaneously with a combination of two or more traditional pesticides. In
large-scale demonstration field trials on citrus, fresh tomatoes, strawberries
and other crops, traditional pesticide use was generally reduced by 70% to 90%.

Field trials are subject to numerous environmental and human
circumstances beyond our control and results can vary significantly. Not all the
trials we have conducted have shown commercially significant results. For
example, our potato field trials to date have shown inconsistent results and,
therefore, we have determined that the benefits of Messenger to potato growers
have not yet proven sufficient for marketing purposes. We will continue to
research this crop and other crops that may prove to be unresponsive to
Messenger as we learn more about plant biochemistry through our research
programs.

Messenger's Safety

Independent toxicology studies, in-house laboratory tests and our
extensive field testing experience demonstrate that Messenger is virtually
nontoxic to humans and the environment. The following is a summary of the human
health and environmental safety attributes of Messenger:

- Negligible human dietary and environmental exposure. There is
virtually no human dietary or environmental exposure to Messenger
resulting from application of the product. Residues of Messenger on
treated crops are rapidly degraded by sunlight, rain and
microorganisms and are undetectable within three to ten days following
application, even when applied at rates far above our recommended
application rates.

- Safe for animals. The EPA requires that toxicology studies be
conducted to evaluate the impact of Messenger on selected animals. The
EPA-required mammalian toxicology testing placed Messenger in the
EPA's "Toxicity Category IV," a designation reserved for materials
with the lowest hazard potential. Further, only at dose levels
hundreds of times higher than would ever be present as a result of
recommended field applications is there any evidence of toxicity to
fish or other aquatic organisms. Unlike many plant protection and
yield

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enhancement products, Messenger requires no label warnings or special
use restrictions to protect animals.

- Nontoxic to plants. Messenger has never been observed to cause
toxicity or any other adverse effects in plants during the course of
hundreds of field trials conducted on a diversity of crops under a
wide variety of environmental conditions. Also, we have not observed
any adverse effects attributable to Messenger in numerous controlled
laboratory studies to evaluate its effects on seedling germination and
emergence.

- Safe for use in sensitive habitats. The EPA has expressed concern
about the use of crop protection products in or around highly
sensitive habitats such as estuaries and areas inhabited by threatened
or endangered plants and animals. Because Messenger exhibits such a
high degree of safety to plants and nontarget organisms, we believe it
is an ideal candidate for use within and adjacent to environmentally
sensitive areas and the Messenger label bears no restrictions or
precautions regarding such use.

COMMERCIALIZATION STRATEGY

We have initiated marketing activities designed to promote the
distribution and sale of Messenger, made our first sales of the product in
August 2000 and will continue to commercialize Messenger by implementing the
following strategies:

- Initially focus on high-value crops and large commercial growers. Our
initial commercialization efforts are focused on high-value crops in
the United States, such as citrus, tomatoes, peppers, cucumbers,
strawberries and other horticultural and specialty crops, from which
we expect growers will derive the greatest benefit from Messenger,
both in terms of its relative cost compared to the value of the crops
treated and the value of the expected increases in yields. In
addition, we are focusing on large commercial growers in the United
States who have significant purchasing power and are generally
considered early adopters of new technologies. We have recruited
leading growers and their consultants to participate in field trials,
enabling them to become familiar with Messenger and to experience its
benefits firsthand.

- Employ existing industry distribution channels and expand our sales
and field development team. We are employing established industry
methods to distribute Messenger and have received our first orders. In
addition, we intend to expand our team of sales and field development
specialists to educate growers and distributors and maintain close
relationships with commercial growers.

- Take advantage of the Messenger brand to promote the use of Messenger
on traditional field crops. We plan to take advantage of the Messenger
brand developed in the use on high-value crops and apply it in
marketing Messenger to traditional field crops, such as cotton, wheat,
rice, corn and soybean.

- Capitalize on international opportunities. We intend to conduct
additional international field trials, pursue regulatory approval in
international markets and establish distribution relationships with
multinational agri-chemical companies in an effort to capitalize on
global opportunities and to establish Messenger as a leading plant
protection and yield enhancement product in the global marketplace.

SALES, MARKETING AND DISTRIBUTION

We intend to market and sell our products worldwide as an attractive
alternative or complement to traditional chemical pesticides and genetically
modified plants. We plan to utilize traditional industry distribution channels
in our sales efforts, as well as to employ sales, marketing and field
development specialists, to market and sell our products to large commercial
growers.

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Our distribution strategy is to focus initially on large, nationwide
independent distributors. As our markets become more established we expect to
expand our distribution base to add regional distributors. We will be highly
selective in choosing distributors and retailers to represent our products. They
will be selected based on commitment to our product, technical expertise, local
market knowledge and financial stability. We believe our distributors and
retailers will have the opportunity to achieve attractive profit margins selling
our products and, therefore, will have an incentive to promote Messenger and
other products we may develop. To ensure that they have adequate selling
incentives, however, we may also offer volume discounts or establish other
programs designed to motivate our distributors and retailers. We are currently
engaged in discussions with several independent distributors regarding the
distribution of Messenger and have signed our first agreement for the
distribution of Messenger.

Our sales and marketing staff consists of sales and marketing specialists
and field development specialists who possess a high level of technical
expertise and knowledge regarding Messenger and our harpin and harpin-related
technology as well as competing plant protection and yield enhancement products
and techniques. Our specialists support our products and educate growers and
independent distributors on the uses and benefits of our technology. Our sales
and marketing staff is organized into separate business units that focus on
particular regions and crops. To date, we have established three business units.
Our Florida business unit currently consists of ten sales and field development
personnel and is focused on citrus and fresh vegetable crops. Our Southeastern
business unit currently consists of ten sales and field development personnel
and is focused on cotton, tobacco and peanut crops. Our California and Mexico
business unit consists of five field development personnel and is focused on
strawberries, process vegetables and small grain crops.

In order to enhance our commercialization efforts, we expect to continue
to expand our sales, marketing and field development capabilities and to
continue to establish separate business units in various regional markets that
will focus on the needs relating to that region or specific crops. We are also
beginning to leverage the sales and marketing efforts of independent
distributors by actively training their sales and marketing personnel in the
uses and benefits of Messenger.

We conduct a number of marketing programs to support the sale and
distribution of Messenger. Our current programs are designed to educate major
commercial growers and their pest and disease control advisors about the
benefits of Messenger and allow them to test it in their fields. Our field
development specialists conduct field trials with these influential groups to
further evaluate product efficacy, timing of application, combination treatments
incorporating other pesticide products, and use in integrated pest and disease
management programs.

We also target crop specialists and university agricultural research
personnel in an effort to increase industry awareness of our harpin and
harpin-related technology and its potential benefits. We have sponsored field
trials for these groups, who independently test Messenger, report their results
to us and make recommendations to growers on inclusion of Messenger in
integrated pest and disease management programs.

MANUFACTURING

We believe that we have the manufacturing capacity to meet our currently
anticipated near-term commercial requirements. We intend to use a portion of the
proceeds of this offering to expand our manufacturing capabilities. To ensure
the quality and supply of our products and to protect our proprietary
technology, we intend to retain control over the manufacturing process. We have
established comprehensive and detailed quality control and assurance systems to
ensure that we sell the highest quality product. We currently conduct numerous
quality control tests on each Messenger production lot. We will use independent
manufacturing arrangements only when we can assure ourselves that we can
maintain our strict quality standards.

We have designed and developed a water-based fermentation process to
manufacture Messenger and other harpin-based products. First, we place the
harpin gene into a benign form of common laboratory bacteria, Escherichia coli,
which is frequently used in pharmaceutical production and is nonpathogenic and

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nutritionally deficient and cannot survive in normal environmental conditions.
Once the harpin protein has been produced, the bacteria is destroyed and the
harpin protein is extracted and dried. We do not create harmful intermediates in
the production of Messenger or other harpin-based products we are developing.
Further, waste materials are biodegradable and are easily disposable. The raw
materials used in the manufacture of our products are readily available from
multiple sources. We do not currently depend on any single supplier for the raw
materials necessary for the manufacture of Messenger.

Approximately half of our 27,400-square-foot Bothell, Washington
facilities are dedicated to the manufacture, packaging, warehousing and shipment
of Messenger. The manufacturing portion of our facility is monitored and
regulated by a number of different governmental agencies including local, state
and federal authorities. We believe that we are in compliance with all
regulatory requirements relating to our facilities.

RESEARCH AND DEVELOPMENT PROGRAMS

Our research and development efforts utilize protein and organic
chemistry, analytical chemistry, recombinant technologies and traditional
water-based fermentation techniques, among others. As of August 31, 2000, we
employed 22 researchers and support staff, eight of whom hold doctoral degrees.

Through our extensive knowledge of harpin effects and harpin receptors
and intensive research program, we believe that we will continue to discover and
develop new products that will significantly improve plant protection and yield
enhancement in the future. We intend to continue to focus our research and
development efforts in the following areas:

- Additional Messenger products and product extensions. We are currently
developing additional Messenger products and product extensions that
are crop, disease or pest specific, or that can be applied to seeds
before planting.

- New harpin proteins. We have identified and are currently performing
efficacy studies on new harpin proteins that we have shown to be many
times more potent than our current product, and are also expected to
have effects on other classes of disease or induce additional growth
pathways in plants.

- Harpin protein fragments. We have discovered that small sections, or
fragments, of the harpin protein are responsible for separate and
distinct harpin-induced effects such as growth enhancement and disease
control. We are identifying which of these fragments correspond to
each separate harpin effect and, in some cases, we are now able to
selectively "switch on" individual characteristics in plants. Products
incorporating this technology may be useful in circumstances in which
it is desirable to control disease without activating plant growth
systems.

- The plant receptor system. We believe that our scientists are leading
the effort in the international research community to understand how
the harpin protein message is received by the plant's receptors and
carried throughout the plant and which biochemical pathways are
activated in that process. We believe this research will allow us to
better understand the potential use of harpin and other harpin-related
products.

In addition, we conduct in-house research and development activities with
respect to genetically modified plants, principally to increase our
understanding of harpin and harpin-related technology. While we currently do not
intend to manufacture and sell products that modify a plant's DNA in the
foreseeable future, no assurance can be given that we will not manufacture and
sell these products if market conditions become favorable.

CONTINUING CORNELL UNIVERSITY RELATIONSHIP

In May 1995, we entered into a license agreement with the Cornell
Research Foundation, whereby we acquired worldwide exclusive rights to Cornell
University's technology relating to harpin

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proteins and related genes. Since then, our researchers and researchers at
Cornell University have worked together to continue the development of harpin
protein technologies, designing research programs and regularly exchanging and
discussing information relating to the technology.

The license agreement grants us exclusive rights to make, have made, use
and sell any product or use claimed in the licensed patents and patent
applications, or that incorporates the licensed biological materials. In
consideration of these exclusive rights, we agreed to fund research and
development activities at Cornell University, and we issued the Cornell Research
Foundation 400,000 shares of our common stock. We further agreed to pay a
royalty on net sales of licensed products and to make certain minimum annual
royalty payments.

Currently, we have exclusive rights under the license agreement to eight
U.S. patents and 14 U.S. patent applications. The patents and patent
applications include claims that protect Messenger and, accordingly, our ability
to market and sell Messenger depends on the license agreement. Future inventions
may be added to the license agreement based on inventorship, our funding of the
research at Cornell that produced the invention and the relationship of
potential patent claims of the invention to the claims of the licensed patents
or licensed patent applications.

The license agreement terminates on the expiration date of the
last-to-expire licensed patent. Currently, the last-to-expire licensed patent
will expire in February 2018. However, if additional patents are added to the
license agreement in connection with the development of future products, the
term of the license agreement would be extended to the date of the
last-to-expire of the additional patents. The Cornell Research Foundation may
terminate the license agreement prior to the expiration of the term, but only if
we are in substantial noncompliance with any of the material terms and
conditions of the license agreement and we fail to remedy the noncompliance
within six months after being notified in writing of the noncompliance.

We are currently responsible for the management of patent prosecution and
maintenance activities relating to the licensed patent applications and any
patents issuing therefrom. We are obligated to pay all expenses of this
prosecution and maintenance, both in the United States and in the foreign
jurisdictions that we designate for filing counterpart applications. In
addition, we continue to fund research and development activities at Cornell
University.

PATENTS AND PROPRIETARY RIGHTS

We own or have exclusive rights to 152 U.S. and foreign patents and
patent applications, consisting of ten U.S. and foreign issued patents and 142
patent applications pending in the U.S. and abroad. Protection of our
proprietary rights is vital to our business. In addition to our policy of
seeking patents on our inventions, we rely on trade secrets, know-how that is
not patented, and continuing technological innovation to develop and maintain
our competitive position. In addition, we maintain a policy of acquiring
licenses under selected patents or patent applications from third parties, and
entering into confidential information and invention assignment agreements with
our employees, consultants and other third parties.

Through our license agreement with the Cornell Research Foundation, we
have exclusive rights to eight U.S. patents and 14 pending U.S. patent
applications either owned solely by the Cornell Research Foundation or jointly
with us. Four of the pending U.S. patent applications have received Notices of
Allowance from the U.S. Patent & Trademark Office. We also own or have exclusive
rights to two foreign patents and 120 foreign patent applications corresponding
to the issued patents or pending U.S. filings. We have filed eight additional
U.S. patent applications covering products which have been invented solely by
our researchers.

Our Messenger product is covered by the U.S. patents to which we have
exclusive rights. These patents, which include claims for the harpin family of
proteins generally, and for various specific harpins, and the use of harpin
proteins to impart disease resistance and to control insects in plants, will
expire between 2013 and 2018. We believe these patents preclude our competitors
and other entities from

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making, using or selling harpin proteins and using harpin proteins to impart
disease resistance and to control insects in plants.

Our pending patent applications include claims to several specific harpin
proteins, the use of harpin proteins to enhance plant growth and improve yields,
and methods to apply harpin proteins to seeds or insert harpin genes into plants
to impart disease resistance. In addition, we have filed for patent protection
on imparting tolerance to environmental or chemical stress, segments of harpin
proteins and receptor technologies.

Patent law is still evolving relative to the scope and enforceability of
claims in the fields in which we operate. Like many biotechnology companies, our
patent protection is highly uncertain and involves complex legal and technical
questions for which legal principles are not yet firmly established. Therefore,
our patent applications may be rejected. Even if we are issued patents, they may
be insufficient to protect the technology underlying our products.

EDEN Bioscience(R) and Messenger(R) are registered trademarks in the
United States, the People's Republic of China, Mexico, the European Union and
other key foreign countries. EDEN(R) is also a registered trademark in the
United States and certain foreign countries. Applications to register those
trademarks are pending in other key foreign jurisdictions.

GOVERNMENT REGULATION AND PRODUCT REGISTRATION

Messenger is regulated under the Federal Insecticide, Fungicide, and
Rodenticide Act (FIFRA) and under the Federal Food, Drug, and Cosmetic Act
(FFDCA) by the U.S. Environmental Protection Agency. The EPA has determined that
Messenger is a biochemical pesticide, a subset of biopesticides. Compared to
traditional chemical pesticides, biopesticides are generally subjected to
significantly fewer data requirements to support registration under FIFRA.

On April 19, 2000, the EPA granted conditional registration for the full
commercial use of Messenger. Our Messenger registration will automatically
expire two years from the date it was granted. Before the expiration date, the
EPA will reevaluate the registration and determine whether to convert the
product to a non-expiring registration. We will not be permitted to continue
sales of Messenger if we do not receive a non-expiring registration.

The EPA also granted EDEN an exemption from tolerance under the FFDCA,
meaning that it was not necessary to establish a maximum level of harpin residue
that may be present on food or animal feed. Now that Messenger is registered by
the EPA, the Food and Drug Administration is responsible for monitoring and
enforcing Messenger's exemption from tolerance.

The registration requires us to submit the revised printed label for
Messenger prior to releasing the product for shipment, to submit Messenger
product information for fiscal year 2000 by November 15, 2000, and to submit or
cite data if required by the EPA.

Our registration is conditioned on the requirement that by April 19,
2001, we submit:

- the results of one additional laboratory study on a highly sensitive
aquatic species to confirm that Messenger poses no foreseeable hazard
to nontarget organisms;

- the results of two additional assays to assess product purity; and

- the results from assays of five Messenger production batches to verify
our quality standards to protect against potential microbial
contamination.

We have completed the laboratory study on the aquatic species and the
assays to assess product purity and believe the results of the study and the
assays will meet the EPA's requirements. We are currently in the process of
developing the remaining information required by the EPA. Upon review and
acceptance of this information, we expect the EPA to convert our Messenger
registration to unconditional. However, if we are unable to meet the conditions
specified by the EPA within the time frames specified in the EPA's notice of
pesticide registration, the agency could revoke our registration or impose use

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restrictions that are not currently applicable. The conditional status of our
registration does not currently impact our ability to market and sell Messenger.

Even upon satisfying the conditions imposed by the EPA and the conversion
of our registration to a non-expiring registration, Messenger will be subject to
continuing review by the EPA and extensive regulatory requirements. The EPA
could at any time revoke our registration or impose limitations on the use of
Messenger upon receipt of newly discovered information, including an inability
to comply with regulatory requirements or the occurrence of unanticipated
problems with the product.

Although pesticides themselves are exempt from the Toxic Substances
Control Act (TSCA), TSCA does regulate pesticide raw materials such as the
bacteria we use to produce harpin protein. However, the EPA has established an
exemption from TSCA regulation for the category of bacteria we use to produce
harpin if it is used in a contained environment in a limited access facility.
The bacteria we use and our facilities comply with these requirements and,
therefore, we are exempt from the requirements of this law.

We are required to obtain regulatory approval from certain state and
foreign regulatory authorities before we market Messenger in those
jurisdictions. Although we are authorized to sell Messenger in 44 states, we
have not yet received approval for Messenger in the remaining states, including
California, and we have not yet obtained authorization to sell Messenger in any
foreign countries. Certain of these jurisdictions may apply different criteria
than the EPA in connection with their approval processes.

Our manufacturing operations are subject to regulation and periodic
inspection by the EPA and other federal and state regulatory agencies.

COMPETITION

The crop protection and treatment industry is highly competitive and is
dominated by multinational chemical and pharmaceutical companies, including
Novartis AG and AstraZeneca PLC (which plan to combine their agribusinesses as a
new company, to be called Syngenta), Aventis S.A., Monsanto Company, BASF AG,
Bayer AG, E.I. DuPont de Nemours and Company and The Dow Chemical Company. Many
of these companies have substantially greater financial, technical, distribution
and marketing resources than we do. Competition is based primarily on price and
efficacy, which is generally measured by crop yield and overall cost of use to
the grower. In addition, attracting and retaining qualified personnel,
developing production and marketing expertise, developing proprietary products
or processes and obtaining regulatory approvals on a timely basis are essential
to establishing a competitive market position.

Many of the large chemical pesticide companies are also developing
products that they believe are less environmentally harmful than traditional
chemical pesticides and that may directly compete with Messenger and other
products we may develop. Novartis AG, a large multinational company,
manufactures a product that is designed to induce disease-resistant systems in
wheat and, potentially, in other plants. Other small companies may also prove to
be significant competitors, particularly through collaborative arrangements with
large and established companies. Furthermore, academic institutions, government
agencies and other public and private research organizations may also conduct
research, seek patent protection and establish collaborative arrangements for
discovery, research, development and marketing of products similar to ours.

We expect competition within the plant protection and yield enhancement
industry to intensify as regulatory pressures on traditional chemical solutions
increase. We believe this will occur as advances in biological crop protection
and yield enhancement technologies, such as that incorporated in Messenger,
become more widely known. We may be unable to compete successfully against our
current competitors or new market entrants may develop products that compete
directly with our products and are more effective, less expensive or more widely
accepted than our products.

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FACILITIES

Our principal facility, which includes our manufacturing, research and
administration functions, is approximately 17,900 square feet and is located in
Bothell, Washington. We have entered into a lease to occupy this space through
December 31, 2001, at which time we have an option to extend the lease for an
additional 18 months. We also lease approximately 5,500 square feet of
additional warehouse and office space adjacent to our principal office through
March 31, 2001. In April 2000, we leased an additional 4,000 square feet for
research and office space through June 2003. We also lease office space in
Melbourne, Florida, Annapolis, Maryland and Mexico City on a short-term basis.
We anticipate that we will require additional manufacturing and research space
within the next 24 months, but that suitable additional space will be available
on commercially reasonable terms, although there can be no assurance in this
regard. We do not own any real estate.

EMPLOYEES

As of August 31, 2000, we employed 74 persons, 48 located at our
corporate headquarters in Bothell, Washington, and 26 located elsewhere. Of
those employees, approximately 22 are engaged primarily in research and
development, 15 in manufacturing, 26 in sales and field development and 11 in
management and administration. None of our employees is covered by collective
bargaining agreements. We believe relations with our employees are good.

LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

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<PAGE> 41

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information regarding our
executive officers and directors as of August 31, 2000:

<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Jerry L. Butler............................ 51 Chief Executive Officer, President and
Director
Bradley S. Powell.......................... 40 Chief Financial Officer, Vice President of
Finance and Secretary
Zhongmin Wei, Ph.D......................... 43 Vice President of Research
Jon E. M. Jacoby(1)........................ 62 Director
Albert A. James(2)......................... 68 Director
Agatha L. Maza(2).......................... 60 Director
Oscar C. Sandberg(1)....................... 70 Director
John W. Titcomb, Jr.(1)(2)................. 49 Director
William T. Weyerhaeuser, Ph.D.(2).......... 56 Director
</TABLE>

------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.

JERRY L. BUTLER has served as our Chief Executive Officer, President and
a director since our incorporation in July 1994. From January 1991 to December
1993, Mr. Butler served as Vice President of Finance, Chief Financial Officer
and Treasurer of Bainbridge Sciences Corporation, a biotechnology diagnostics
company. In 1985, Mr. Butler co-founded MicroProbe Corporation, also a
biotechnology diagnostics company, and served as its Executive Vice President
and a director until November 1990. From 1981 to 1984, Mr. Butler served as
Treasurer of Genetic Systems Corporation, a biotechnology diagnostics company.
Mr. Butler received B.S. and M.A. degrees from Brigham Young University.

BRADLEY S. POWELL has served as our Chief Financial Officer and Vice
President of Finance since July 1998 and as our Secretary since June 2000. From
March 1994 to July 1998, he served as Vice President and Corporate Controller of
Omega Environmental, Inc., a provider of products and services to owners of
underground storage tanks. In 1983, Mr. Powell joined KPMG Peat Marwick, an
international public accounting firm, as a certified public accountant and, from
1990 to March 1994, served as a Senior Audit Manager. Mr. Powell received a B.S.
degree from Central Washington University.

ZHONGMIN WEI, PH.D., has served as our Vice President of Research since
May 1998, as Director of Research from April 1997 to May 1998 and as Senior
Scientist from June 1996 to April 1997. From November 1995 to April 1996, Dr.
Wei served as Principal Investigator at the Institute of Molecular Agrobiology
in Singapore, an agricultural biotechnology research organization. From July
1992 to June 1996, Dr. Wei served as a Research Scientist and, from September
1989 to September 1992, as a Post-Doctoral Associate at the Cornell University
School of Agricultural and Life Sciences. Dr. Wei received a B.S. degree from
Zhejiang University and M.S. and Ph.D. degrees from Nanjing Agricultural
University, both in the People's Republic of China.

ALBERT A. JAMES has served as one of our directors since May 1995 and as
our Secretary from May 1995 to June 2000. Mr. James is a private investor and
currently serves as a general partner in several real estate projects in the
Western United States. From 1982 to November 1997, Mr. James served as Managing
Partner of Bellevue Associates, a commercial real estate management company. He
served as Secretary and Treasurer of Anthony's Restaurants, a regional chain of
restaurants, from 1976 to June 1995 and, from 1981 to March 1994, Mr. James
served as Vice President of Alpine Industries, a window and laminated
glass-manufacturing company. In 1957, Mr. James founded a discount drug and
cosmetic business that merged with a chain of discount retail drug stores, which
was ultimately sold to Payless Drug

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<PAGE> 42

Stores Northwest in 1969. Mr. James received a B.S. degree in Pharmacy from the
University of Washington.

JOHN W. TITCOMB, JR., has served as one of our directors since May 1995
and as Assistant Secretary from December 1997 to June 2000. Mr. Titcomb is a
private investor and currently serves as a director of several privately held
companies involved in various technology, manufacturing, and real estate
businesses. Mr. Titcomb currently serves as a director of one publicly listed
company, Cray, Inc., a supercomputer manufacturer. Mr. Titcomb received an A.B.
degree from Harvard College and a J.D. degree from Harvard Law School.

JON E. M. JACOBY has served as one of our directors since February 1999.
Mr. Jacoby has been employed by Stephens Inc. and Stephens Group, Inc., both of
which engage in investment banking activities, since 1963 and is presently a
director and officer of each of those companies. He is also a director of Delta
& Pine Land Company, an agricultural products company, Beverly Enterprises,
Inc., an operator of nursing facilities, Power One, Inc., a power supplies
manufacturer, Sangamo Biosciences, a biotechnology company, and Energy
Exploration Technologies Inc., an oil and gas exploration company. Mr. Jacoby
received a B.S. degree from the University of Notre Dame and an M.B.A. degree
from Harvard Business School.

AGATHA L. MAZA has served as one of our directors since May 1995. From
February 1994 to October 1995, Ms. Maza served as Chief Executive Officer of the
National Testing Laboratory in Portland, a division of the American Red Cross
involved in biological testing of blood. From July 1991 to January 1994, she
served as Chief Executive Officer of Medical Arts Laboratory and, from January
1988 to December 1990, as Chief Executive Officer of Eastside Medical
Laboratory, both of which are medical diagnostics services laboratories. Ms.
Maza received a B.S. degree from Seattle University, an M.B.A. degree from City
University and has completed the Executive Marketing Management Program at
Stanford University.

OSCAR C. SANDBERG has served as one of our directors since May 1995.
Since August 1995, Mr. Sandberg has served as Secretary, Treasurer and a
director of Northwest Nissan Volvo, a retail automobile dealership. He has also
served as Secretary and Treasurer of Sandberg Oldsmobile Cadillac, a retail
automobile dealership, since March 2000. Mr. Sandberg has served as an officer
or director of several businesses, including First Western Bank, a financial
institution, and Drug Emporium, a chain of retail drug stores. He has also
served as a general partner in various real estate ventures. In 1954, Mr.
Sandberg co-founded House of Values, a chain of discount stores, which was sold
to Payless Drug Stores in 1969. Mr. Sandberg received a B.A. degree in business
administration from the University of Washington.

WILLIAM T. WEYERHAEUSER, PH.D., has served as one of our directors since
May 1999. Dr. Weyerhaeuser was in private practice as a clinical psychologist
from 1975 to 1999. From May 1993 to June 1994, he served as President of Rock
Island Company, a private investment company and from July 1994 to June 1998, as
Chairman of the Board and Chief Executive Officer. Dr. Weyerhaeuser currently
serves as a director of several privately held companies and foundations, and of
two publicly listed companies, Potlatch Corporation, a timber and paper products
company, and Columbia Banking System, Inc., a financial institution. Dr.
Weyerhaeuser received a B.A. degree from Stanford University, an M.A. degree
from Fuller Theological Seminary and a Ph.D. degree from the Fuller Graduate
School of Psychology.

NUMBER, TERM AND ELECTION OF DIRECTORS

Our articles of incorporation provide that the number of directors shall
be determined in the manner provided by our bylaws. Our bylaws provide that the
number of directors shall not be less than four or more than ten, with the
precise number to be determined by resolution of the board of directors. The
board of directors has determined that the number of directors shall be seven.

40
<PAGE> 43

Pursuant to our articles of incorporation and our bylaws, at our annual
shareholders' meeting in 2001, the board of directors will be divided into three
classes. Each director will serve for a three-year term and one class will be
elected each year by our shareholders, commencing at our annual shareholders'
meeting in 2001. Directors hold office until the election and qualification of
his or her successor or upon earlier resignation or removal.

COMMITTEES OF THE BOARD OF DIRECTORS

The compensation committee of the board of directors recommends, reviews
and approves the salaries, benefits and stock incentive plans for our executive
officers. The compensation committee also administers our compensation plans.
The members of the compensation committee are Messrs. James and Titcomb, Ms.
Maza and Dr. Weyerhaeuser.

The audit committee of the board of directors reviews, acts on and
reports to the board of directors with respect to various auditing and
accounting matters, including the recommendation of our auditors, the scope of
the annual audits, the fees to be paid to the auditors, the performance of our
independent auditors and our internal accounting practices. The members of the
audit committee are Messrs. Jacoby, Sandberg and Titcomb.

DIRECTOR COMPENSATION

Our directors do not receive cash compensation for their services as
directors or members of committees of the board of directors, but are reimbursed
for their reasonable expenses incurred in attending meetings of the board of
directors and its committees.

We have granted nonqualified stock options to our non-employee directors
pursuant to our 1995 combined incentive and nonqualified stock option plan. In
May 1996, the board of directors granted each of Ms. Maza and Messrs. James,
Titcomb and Sandberg a ten-year option to purchase 45,000 shares of our common
stock at an exercise price of $0.50 per share, which is fully vested, and, on
March 31, 1998, granted each of those directors an additional ten-year option to
purchase 45,000 shares of our common stock at an exercise price of $1.00 per
share, which is fully vested. On May 12, 1998, the board of directors granted
Dr. Weyerhaeuser a ten-year option to purchase 45,000 shares of our common stock
at an exercise price of $2.00 per share, which is fully vested. On February 18,
1999, the board of directors granted Mr. Jacoby a ten-year option to purchase
45,000 shares of our common stock at an exercise price of $4.00 per share, which
is fully vested. In August 2000, the board of directors granted each non-
employee director a ten-year option to purchase 30,000 shares of our common
stock at an exercise price of $14.00 per share, with each option to vest
annually in equal installments on the first, second and third anniversaries of
the date of grant.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Our compensation committee currently consists of Messrs. James and
Titcomb, Ms. Maza and Dr. Weyerhaeuser. None of our executive officers serves as
a member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of our board of directors
or its compensation committee.

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<PAGE> 44

At various times since December 31, 1996, members of our compensation
committee or their affiliates have purchased our securities, as follows:

<TABLE>
<CAPTION>
PREFERRED STOCK
COMMITTEE MEMBER COMMON STOCK SERIES D SERIES E SERIES F
---------------- ---------------- -------------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Albert A. James.......... 10,008 shares(1) 25,000 shares at 1,500 shares at 1,251.5 shares at
$2.00 per share $50.00 per share $120.00 per share

Agatha L. Maza........... 17,340 shares(1) 125,000 shares at 1,000 shares at 2,167.5 shares at
$2.00 per share $50.00 per share $120.00 per share

John W. Titcomb, Jr...... -- 25,000 shares at 1,000 shares at --
$2.00 per share $50.00 per share
Dr. William T.
Weyerhaeuser........... 22,548 shares(1) 50,000 shares at 10,000 shares at 2,818.5 shares at
$2.00 per share $50.00 per share $120.00 per share
</TABLE>

------------
(1) In November 1999, we conducted a private equity offering in which we issued
12 shares of common stock in exchange for warrants to purchase common stock
and cash as follows:

- one warrant to purchase four shares of common stock at an exercise price
of $5.00 per share;

- one warrant to purchase four shares of common stock at an exercise price
of $7.00 per share;

- one warrant to purchase four shares of common stock at an exercise price
of $9.00 per share; and

- $76.00 cash.

In August 2000, we established an unsecured, multiple-advance, committed
credit facility with the WBW Trust Number One, of which Dr. Weyerhaeuser is
trustee. Under the terms of the facility, we may request at any time on or
before December 31, 2000 that the WBW Trust make advances to us during the term
of the facility of an aggregate maximum of up to $5 million. Amounts borrowed
under the facility will bear interest at the prime rate, as determined by
reference to The Wall Street Journal, plus 2%, payable on the first day of each
month. All outstanding principal and accrued interest will be due on the earlier
of (a) December 31, 2001 or (b) the date that we receive any cash proceeds from
the issuance of any equity securities after the date the facility was
established. Amounts repaid under the facility may not be reborrowed. In
connection with the establishment of this facility, we paid a loan commitment
fee to the WBW Trust of $100,000. In addition, we issued a warrant to the WBW
Trust to purchase a number of shares of our common stock equal to 20% of its
maximum loan commitment divided by the public offering price of the shares we
sell in this offering. The warrant may be exercised at any time after the
180(th) day after the effective date of our registration statement relating to
this offering, at an exercise price per share equal to the public offering price
of the shares we sell in this offering. The warrant expires in August 2005.

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<PAGE> 45

EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation
received for services rendered to us in all capacities by our Chief Executive
Officer and President and our other two executive officers whose total salary
and bonus exceeded $100,000 during the fiscal year ended December 31, 1999. We
refer to these officers as our named executive officers in other parts of this
prospectus.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------
------------------------- NUMBER OF SECURITIES
NAME YEAR SALARY BONUS UNDERLYING OPTIONS
------------------------------------------------ ---- -------- ------- -----------------------
<S> <C> <C> <C> <C>
Jerry L. Butler................................. 1999 $175,000 $52,500 --
Bradley S. Powell............................... 1999 $135,000 $40,500 --
Zhongmin Wei.................................... 1999 $133,750 $42,000 50,000
</TABLE>

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information regarding stock options we
granted to our named executive officers during fiscal 1999.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------ ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR PRICE ($/SH) DATE 5% 10%
------------------------------- ---------- ------------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Zhongmin Wei................... 50,000 15.5% $4.00 6/17/09 $125,779 $318,743
</TABLE>

The figures above represent options granted under our 1995 combined
incentive and nonqualified stock option plan. We granted options to purchase
321,700 shares of our common stock in 1999. All options were granted at an
exercise price equal to the fair market value of the common stock on the date of
grant as determined by our board of directors. The options granted to our
employees, including the options set forth in the table above, typically vest
annually in approximately equal installments on the third, fourth and fifth
anniversaries of the date of grant. Options granted to the person listed above
expire ten years from the grant date.

The potential realizable value represents amounts, net of exercise price
before taxes, which may be realized upon exercise of the option immediately
prior to the expiration of the term assuming stock price appreciation of 5% and
10% over the option term. The 5% and 10% values are calculated based on rules
promulgated by the SEC and do not reflect our estimate of future stock price
growth. The actual value realized may be greater or less than the potential
realizable value set forth in the table.

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<PAGE> 46

FISCAL 1999 YEAR-END OPTION VALUES

No options were exercised by named executive officers during fiscal 1999.
The following table sets forth information regarding unexercised stock options
held by named executive officers as of December 31, 1999. The value of
unexercised in-the-money options at December 31, 1999 represents an amount equal
to the difference between an assumed initial public offering price of $13.00 per
share and the option exercise price, multiplied by the number of unexercised
in-the-money options. An option is in-the-money if the fair market value of the
underlying shares exceeds the exercise price of the option.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999
-------------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------------------ ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C>
Jerry L. Butler..................... 187,500 62,500 $2,250,000 $ 750,000
Bradley S. Powell................... -- 75,000 -- $ 750,000
Zhongmin Wei........................ 16,666 183,334 $ 208,325 $2,016,675
</TABLE>

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

Employment Agreements

In August 2000, we entered into employment agreements with Mr. Butler and
Dr. Wei. Pursuant to the agreements, we agreed to pay each executive a base
salary to be determined from time to time by our board of directors. In
addition, the agreements provide that each executive may be entitled to receive
an annual bonus in an amount to be determined by our board of directors.

Under the agreements, each executive is subject to noncompetition and
noninterference provisions during his employment and for 18 months following
termination of his employment, to a customary inventions assignment provision
during his employment and for three years after termination, and to a customary
confidentiality provision at all times during and after his employment. In
consideration for the noncompetition covenants, we will pay each executive his
then applicable annual base salary, and will reimburse Dr. Wei for health care
benefits for himself and his dependents, during the noncompetition period so
long as the executive complies with his noncompetition, noninterference,
inventions assignment and confidentiality obligations.

In addition to payments made in connection with his noncompetition
covenant, if we terminate Mr. Butler's employment other than for cause, as
defined in the agreement, he will be entitled to any unpaid annual base salary,
accrued vacation and deferred compensation. If we terminate Dr. Wei's employment
for any reason, all of his unvested options will accelerate and become fully
vested and exercisable, and he will be entitled to any unpaid annual base
salary, accrued vacation and deferred compensation in addition to any payments
made pursuant to his noncompetition provision. These employment agreements are
each effective for a term of three years, unless earlier terminated in
accordance with their terms.

Change-in-Control Agreements

In August 2000, we entered into change in control agreements with Messrs.
Butler and Powell and Dr. Wei. Upon a change in control, the agreements provide
that we would continue to employ the executives, and the executives would remain
in our employ, for a period of two years following the change in control. During
that time, the agreements provide that each executive's position, authority,
duties and responsibilities would be substantially the same as they were during
the 90-day period prior to the change in control, and that his annual base
salary would be at least equal to his annual base salary established by our
board of directors prior to the change in control.

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<PAGE> 47

If, during the two-year period, the executive's employment is terminated
by us other than for cause, as defined in the agreements, or by the executive
for good reason, as defined in the agreements, he would be entitled to receive:

- his annual base salary, and pro rata annual bonus, through the date of
termination, and any deferred compensation; and

- a severance payment equal to twice the sum of his annual base salary
and the average of his past three annual bonuses.

In addition, his unvested options granted under our 1995 combined
incentive and nonqualified stock option plan would accelerate and become fully
vested and exercisable. If the executive's employment is terminated by us for
cause or by the executive without good reason, he will receive only the amount
of his annual base salary or other deferred compensation then due.

Mr. Powell's and Dr. Wei's change in control agreements provide that each
is subject to noncompetition and noninterference provisions during employment
and for 18 months thereafter, to a customary inventions assignment provision
during employment and for three years thereafter, and to a customary
confidentiality provision at all times during and after employment.

COMPENSATION PLANS

2000 Stock Incentive Plan

Our board of directors has adopted our 2000 stock incentive plan. The
purpose of this plan is to enhance long-term shareholder value by offering
opportunities to selected persons to participate in our growth and success, to
encourage them to remain in the service of EDEN and to acquire and maintain
ownership in our company. Upon completion of this offering, the 2000 incentive
plan will replace our 1995 combined incentive and nonqualified stock option plan
for purposes of all future stock incentive awards. The board of directors may
suspend or terminate the 2000 stock incentive plan at any time. The plan will
expire on July 6, 2010, unless terminated earlier pursuant to its terms.

The 2000 stock incentive plan provides for awards of stock options,
shares of common stock or units denominated in common stock, all of which may be
subject to restrictions. The board of directors has reserved a total of
1,500,000 shares of common stock under the plan, plus an automatic annual
increase, to be added on the first day of our fiscal year beginning in 2002,
equal to the least of (1) 1,500,000 shares; (2) 5% of the outstanding shares of
common stock as of the end of our immediately preceding fiscal year on a fully
diluted basis; and (3) a lesser amount as may be determined by the board of
directors. Any shares from increases in previous years that are not actually
issued will be added to the aggregate number of shares available for future
issuance. As of the effective date of this offering, shares that have been
reserved but not yet subject to granted options under our 1995 combined
incentive and nonqualified stock option plan will be added to the shares
available under the 2000 stock incentive plan, as will shares subject to
outstanding options under the 1995 combined incentive and nonqualified stock
option plan that expire or are otherwise cancelled without being exercised, up
to an aggregate maximum of 2,824,834 shares.

Stock Option Grants. The board of directors or a committee appointed by
the board of directors will serve as the plan administrator of the 2000 stock
incentive plan. The plan administrator will have the authority to select
individuals to receive options under the 2000 stock incentive plan and to
specify the terms and conditions of each option granted, including the type of
option granted (incentive or nonqualified), the exercise price (which, for
incentive stock options, must be at least equal to the fair market value of the
common stock on the date of grant) and the vesting provisions. For purposes of
the 2000 stock incentive plan, fair market value means the closing sales price
as reported on the Nasdaq National Market on the date of grant or, if no
reported price exists for that date, the closing sales price on the last
preceding date on which a price exists. Unless the plan administrator decides
otherwise, and to the extent required for incentive stock options by the
Internal Revenue Code of 1986, as amended, an option

45
<PAGE> 48

granted under the 2000 stock incentive plan will expire ten years from the date
of grant, subject to earlier termination if an optionee terminates employment or
services with EDEN.

Stock Awards. The plan administrator is authorized under the 2000 stock
incentive plan to award shares of common stock or awards denominated in units of
common stock on such terms and conditions and subject to restrictions
established by the plan administrator in its sole discretion. The terms,
conditions and restrictions may be based on the manner in which shares subject
to stock awards must be held while restricted and the circumstances under which
stock awards will be forfeited or repurchased by EDEN if a holder's service with
us is terminated. Holders of restricted stock are shareholders of EDEN and have,
subject to certain restrictions, all the rights of shareholders with respect to
their shares.

Adjustments. The plan administrator will make proportional adjustments to
the number of shares issuable under the 2000 stock incentive plan and to
outstanding awards in the event of stock splits or other capital adjustments.

Corporate Transactions. In the event of certain corporate transactions,
such as a merger or sale of all or substantially all the assets of EDEN, each
outstanding award will be assumed or replaced with a comparable award by EDEN's
successor corporation or parent thereof. If the successor will not assume or
replace the awards, outstanding options will become 100% vested and exercisable
immediately before the corporate transaction. To the extent that options
accelerate due to a corporate transaction, the restrictions on restricted stock
awards also will lapse. If awards are assumed or replaced in a corporate
transaction, such awards will become fully vested and exercisable (and any
forfeiture or repurchase rights applicable to restricted stock awards will
lapse) if a holder's services are terminated in contemplation of the corporate
transaction or within three years of the corporate transaction, unless services
are terminated for cause or the holder terminates services without good reason.

2000 Employee Stock Purchase Plan

Our board of directors has adopted our 2000 employee stock purchase plan.
We will implement the 2000 employee stock purchase plan upon the effectiveness
of this offering to encourage employees to remain employed by EDEN or its
subsidiaries. We intend for this plan to qualify under Section 423 of the
Internal Revenue Code. The plan will be administered by our board of directors,
a committee of the board of directors or an executive officer appointed to
administer the plan.

This plan permits eligible employees of EDEN to purchase common stock
through payroll deductions of up to 15% of their annual compensation. Under this
plan, no employee may purchase common stock worth more than $25,000 in any
calendar year, valued as of the first day of each offering period. In addition,
no more than an aggregate of 125,000 shares can be purchased in any six-month
purchase period. Further, no employee may purchase more than 1,000 shares in any
six-month purchase period.

We will implement the 2000 employee stock purchase plan with twenty-four
month offering periods, each of which will consist of four six-month purchase
periods, with purchases being made on the last day of each such period, except
that the first offering period will begin on the effective date of this offering
and end on October 31, 2002. Subsequent offering periods will begin on each May
1 and November 1. The plan administrator may establish different offering and
purchase periods in the future.

The price of the common stock purchased under this plan will be the
lesser of 85% of the fair market value on the first day of an offering period
and 85% of the fair market value on the last day of a purchase period, except
that the purchase price for the first offering period will be equal to the
lesser of 100% of the initial public offering price of the common stock and 85%
of the fair market value on the last day of the purchase period. Under the
circumstances specified in the plan, the plan administrator may change the
purchase date during an offering period and terminate the plan at the end of any
purchase period to avoid incurring adverse accounting charges. This plan will
terminate ten years after the date of adoption by our board of directors, but
the board of directors may terminate it at any time.

Generally, employees will be eligible to participate in the plan if they
are employed customarily by EDEN or a domestic subsidiary for more than 20 hours
per week, and are not (and would not become as
46
<PAGE> 49

a result of being granted an option under the plan) 5% shareholders of EDEN.
Options granted under the plan are not transferable and are only exercisable
during the employee's lifetime.

The board of directors authorized the issuance under this plan of a total
of 500,000 shares of common stock, plus an automatic annual increase, to be
added on the first day of our fiscal year beginning in 2002, equal to the least
of (1) 250,000 shares; (2) 1% of the outstanding shares of common stock as of
the end of our immediately preceding fiscal year on a fully diluted basis; and
(3) a lesser amount determined by our board of directors. Any shares from
increases in previous years that are not actually issued will be added to the
aggregate number of shares available for issuance in future periods.

In the event of a merger, consolidation or acquisition by another
corporation of all or substantially all of our assets, each outstanding option
to purchase shares under the 2000 employee stock purchase plan will be assumed
or an equivalent option substituted by the successor corporation. If the
successor corporation refuses to assume or substitute for the option, the
offering period during which a participant may purchase stock will be shortened
to a specified date before the proposed transaction. Similarly, in the event of
a proposed liquidation or dissolution of EDEN, the offering period during which
a participant may purchase stock will be shortened to a specified date before
the date of the proposed liquidation or dissolution.

1995 Combined Incentive and Nonqualified Stock Option Plan

Our board of directors and shareholders approved our 1995 combined
incentive and nonqualified stock option plan in 1995. The 1995 plan provides for
grants of incentive stock options and nonqualified stock options to selected
individuals. We will not grant additional options under our 1995 plan after the
effectiveness of this offering. As of August 31, 2000, options to purchase
2,468,000 shares of our common stock were outstanding under the 1995 plan at
exercise prices ranging from $0.40 to $14.00 per share, and 326,344 shares
remained available for grant. Our board of directors has authorized, subject to
shareholder approval, an additional 1,000,000 shares of common stock for
issuance pursuant to our 1995 plan.

Corporate Transactions. In a stock-for-stock transaction involving a
merger, consolidation, acquisition of property or stock or a reorganization, the
board of directors and a successor company may determine that all outstanding
options will be converted into options to purchase shares of the other
corporation. If options are not assumed in a transaction, outstanding options
will become fully vested and exercisable and terminate upon the effectiveness of
the transaction. If options are converted into options to purchase stock of a
successor company, such options will become fully vested and exercisable if an
individual's services are terminated in contemplation of a transaction or within
three years of such transaction, unless services are terminated for cause or the
individual terminates services without good reason.

401(k) Plan

We maintain a tax-qualified employee savings and retirement plan, or
401(k) plan, that covers all employees who satisfy certain eligibility
requirements relating to minimum age and length of service. Under the 401(k)
plan, eligible employees may elect to contribute up to the lesser of 20% of
their annual compensation or the statutorily prescribed annual limit. The 401(k)
plan permits (but does not require) us to make matching and other contributions
to the plan. We have not made any such contributions to date and currently have
no plans to do so. The 401(k) plan is intended to qualify under Section 401 of
the Internal Revenue Code so that contributions by employees or by us to the
401(k) plan and income earned on plan contributions are not taxable until
withdrawn from the plan and so that our contributions can be deducted by us when
made. The 401(k) plan is available to our executive officers on terms that are
not more favorable than those offered to other employees of EDEN. The trustee
under the 401(k) plan, at the direction of each participant, invests the assets
of the 401(k) plan in a number of investment options.

DIRECTOR AND OFFICER INDEMNIFICATION AND LIABILITY

Our articles of incorporation limit the liability of directors to the
fullest extent permitted by the Washington Business Corporation Act as it
currently exists or as it may be amended in the future.
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<PAGE> 50

Consequently, subject to the Washington Business Corporation Act, no director
will be personally liable to EDEN or its shareholders for monetary damages
resulting from his or her conduct as a director of EDEN, except liability for:

- acts or omissions involving intentional misconduct or knowing
violations of law;

- unlawful distributions; or

- transactions from which the director personally receives a benefit in
money, property or services to which the director is not legally
entitled.

Our articles of incorporation also provide that we will indemnify any
individual made a party to a proceeding because that individual is or was a
director of EDEN and that we will advance or reimburse reasonable expenses
incurred by that individual in advance of the final disposition of the
proceeding to the full extent permitted by applicable law. Any repeal of or
modification to our articles of incorporation may not adversely affect any right
of a director of EDEN who is or was a director at the time of that repeal or
modification.

Our bylaws provide that we will indemnify our directors and officers and
may indemnify our employees and agents to the full extent permitted by law. In
addition, we have entered into separate indemnification agreements with our
directors and executive officers that could require us, among other things, to
indemnify them against certain liabilities that arise because of their status or
service as directors or executive officers and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified. We also maintain a liability insurance policy, pursuant to which
our directors and officers may be indemnified against liability they may incur
as a result of their service as directors and officers of EDEN.

To the extent the provisions of our articles of incorporation, bylaws and
indemnification agreements provide for indemnification of directors for
liabilities arising under the Securities Act, those provisions are, in the
opinion of the Securities and Exchange Commission, against public policy as
expressed in the Securities Act and are therefore unenforceable.

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<PAGE> 51

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

From January 1997 through July 2000 we have issued and sold in private
placement transactions shares of our common stock, preferred stock and warrants
for the purchase of our common stock to our executive officers, directors,
and/or greater than 5% shareholders as described below and as set forth in the
table that follows such description.

In May and June 1997, we issued and sold 2,664,185 shares of Series D
Convertible Preferred Stock at a purchase price of $2.00 per share. Our Series D
Convertible Preferred Stock converts into common stock at a ratio of one share
of common stock per share of preferred stock.

In August and September 1998, we issued and sold 130,488 shares of Series
E Convertible Preferred Stock at a purchase price of $50.00 per share. Our
Series E Convertible Preferred Stock converts into common stock at a ratio of
11.11 shares of common stock per share of preferred stock.

From December 1998 to January 1999 we issued and sold 79,082 shares of
Series F Convertible Preferred Stock and Common Stock Purchase Warrant Units at
a purchase price of $120.00 per unit plus a put obligation. One unit consisted
of:

- one share of Series F Convertible Preferred Stock;

- one warrant to purchase four shares of common stock with an exercise
price of $5.00 per share;

- one warrant to purchase four shares of common stock with an exercise
price of $7.00 per share; and

- one warrant to purchase four shares of common stock with an exercise
price of $9.00 per share.

Our Series F Convertible Preferred Stock converts into common stock at a
ratio of 24 shares of common stock per share of preferred stock.

According to the terms of the warrants, the exercise price of the $7.00
warrant increased to $7.50, and the exercise price of the $9.00 warrant
increased to $10.00, on the date we received notice from the EPA of its approval
of our Messenger product registration application and request for exemption from
tolerance. The consideration for each unit consisted of:

- $120.00 per unit; and

- an obligation under a put option agreement, to purchase at a price of
$120.00 per share, if required by us, up to an additional number of
Series F Convertible Preferred Stock equal to 50% of those shares
originally purchased by the investor as part of the unit.

In November 1999, we exercised the put option described above and issued
and sold 39,541 shares of Series F Convertible Preferred Stock at a purchase
price of $120.00 per share.

In November 1999, we completed a warrant exchange in which we issued an
aggregate of 831,882 shares of our common stock. Twelve shares of common stock
were issued in exchange for:

- one warrant to purchase four shares with an exercise price of $5.00
per share;

- one warrant to purchase four shares with an exercise price of $7.00
per share;

- one warrant to purchase four shares with an exercise price of $9.00
per share; and

- $76.00 cash.

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<PAGE> 52

Listed below for our directors, officers and holders of 5% or more of our
common stock are the securities they purchased in the above financings, taking
into account our exercise of the put option and the warrant exchange.

<TABLE>
<CAPTION>
NAME COMMON STOCK SERIES D SERIES E SERIES F
------------------------------------------------ ------------ -------- -------- --------
<S> <C> <C> <C> <C>
Jerry L. Butler................................. -- 500 40 --
Chief Executive Officer, President and
Director
Bradley S. Powell............................... 1,500 -- -- 187.5
Chief Financial Officer, Vice President of
Finance and Secretary
Albert A. James(1).............................. 10,008 25,000 1,500 1,251.0
Director
John W. Titcomb, Jr............................. -- 25,000 1,000 --
Director
Agatha L. Maza(2)............................... 17,340 125,000 1,000 2,167.5
Director
Oscar C. Sandberg(3)............................ 24,000 50,000 5,000 3,000.0
Director
William T. Weyerhaeuser(4)...................... 22,548 50,000 10,000 2,818.5
Director
Stephens Group, Inc.(5)......................... 600,000 -- -- 75,000.0
</TABLE>

------------
(1) Consists of shares held by the Albert A. James Living Trust (UTA 1/16/89),
of which Mr. James acts as trustee, and the Albert A. James Family
Partnership, of which Mr. James is a co-general partner.

(2) Includes shares held by the Agatha L. Maza Profit Sharing Plan, of which Ms.
Maza acts as trustee, the Agatha L. Maza IRA, owned by Ms. Maza and for
which Prudential Securities is custodian, and the Maza Family LLC, of which
Ms. Maza is a co-managing member.

(3) Consists of shares held by the Sandberg Family Living Trust, of which Mr.
Sandberg acts as trustee.

(4) Includes shares held by WBW Trust Number One, of which Dr. Weyerhaeuser acts
as trustee.

(5) Consists of shares held by Stephens-EBC, LLC. Jon E. M. Jacoby, a director
of EDEN, is a director and an executive vice president of Stephens Group,
Inc., which is the managing member of Stephens-EBC, LLC.

In August 2000, we established unsecured, multiple-advance, committed
credit facilities with Stephens Group, Inc., an entity that beneficially owns
more that 5% of our equity securities, and the WBW Trust Number One, of which
one of our directors, William T. Weyerhaeuser, is trustee. Jon E. M. Jacoby, a
director of EDEN, is a director and an executive vice president of Stephens
Group, Inc. Under the terms of the facilities, we may request at any time that
on or before December 31, 2000 that Stephens Group make advances to us during
the term of the facility of up to an aggregate maximum of $10 million and that
the WBW Trust make advances to us during the term of the facility of up to an
aggregate maximum of $5 million. Amounts borrowed under the facilities will bear
interest at the prime rate, as determined by reference to The Wall Street
Journal, plus 2%, payable on the first day of each month. All outstanding
principal and accrued interest will be due on the earlier of (a) December 31,
2001 or (b) the date that we receive any cash proceeds from the issuance of any
equity securities after the date the facilities were established. Amounts repaid
under the facilities may not be reborrowed.

Also in connection with the establishment of the credit facilities, we
issued warrants to each of Stephens Group and the WBW Trust to purchase a number
of shares of our common stock equal to 20% of their maximum loan commitments
divided by the public offering price of the shares we sell in this offering. The
warrants may be exercised at any time after the 180th day after the effective
date of our registration statement relating to this offering, at an exercise
price per share equal to the public offering price of the shares we sell in this
offering. The warrants expire in August 2005.

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<PAGE> 53

PRINCIPAL SHAREHOLDERS

The following table sets forth information regarding beneficial ownership
of our common stock as of August 31, 2000 by:

- each person or group known by us to own beneficially more than 5% of
our common stock;

- each of our directors;

- each of our named executive officers; and

- our current directors and executive officers as a group.

As of August 31, 2000, assuming conversion of all outstanding shares of
preferred stock into common stock, there were 16,932,707 shares of common stock
outstanding and 257 EDEN shareholders. Beneficial ownership is determined in
accordance with SEC rules. In computing the number of shares beneficially owned
by a person or a group and the percentage ownership of that person or group,
shares of our common stock subject to options currently exercisable or
exercisable within 60 days after August 31, 2000 are deemed outstanding. These
shares, however, are not deemed outstanding for computing the percentage
ownership of any other person. Except as otherwise indicated in the footnotes
below, we believe the beneficial owners of the common stock listed below, based
on information furnished by them, have sole voting and investment power with
respect to the number of shares listed opposite their names, subject to
community property laws where applicable. Unless otherwise indicated, the
address of each person listed below is c/o EDEN Bioscience Corporation, 11816
North Creek Parkway North, Bothell, Washington 98011-8205.

<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES BENEFICIALLY
NUMBER OF OWNED
SHARES --------------------
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED OFFERING OFFERING
---------------------------------------------------------- ------------ -------- --------
<S> <C> <C> <C>
5% SHAREHOLDERS:
Britannia Holdings Limited(1)............................. 2,650,000 15.5% 11.6%
Suites 3 and 4
Pollet House
Le Pollet, Guernsey GY14LA
Stephens Group, Inc.(2)................................... 2,400,000 14.2 10.6
111 Center Street
Suite 2500
Little Rock, AR 72201
Fred D. McElroy(3)........................................ 1,596,250 9.4 7.0
P.O. Box 43
Hansville, WA 98340

DIRECTORS AND EXECUTIVE OFFICERS:
Jerry L. Butler(4)........................................ 938,444 5.5 4.1
Oscar C. Sandberg(5)...................................... 761,556 4.5 3.4
Albert A. James(6)........................................ 551,699 3.3 2.4
John W. Titcomb, Jr.(7)................................... 296,111 1.7 1.3
Agatha L. Maza(8)......................................... 595,471 3.5 2.6
William T. Weyerhaeuser(9)................................ 471,303 2.8 2.1
Jon E. M. Jacoby(10)...................................... 45,000 * *
Zhongmin Wei(11).......................................... 33,333 * *
Bradley S. Powell......................................... 6,000 * *
All directors and executive officers as a group (9
persons)(12)............................................ 3,698,917 21.5 16.1
</TABLE>

51
<PAGE> 54

------------
* Less than 1%.

(1) Includes 200,000 shares subject to a warrant that is exercisable within 60
days of August 31, 2000. The Duvall Trust is the sole shareholder of
Britannia Holdings Limited. The Elfin Trust Company Limited, a Guernsey
corporation, is the trustee of the Duvall Trust. Mr. Peter Howe is the
managing director for the Elfin Trust Company Limited.

(2) Consists of shares held by Stephens-EBC, LLC, of which Stephens Group, Inc.
is the sole managing member. Jon E. M. Jacoby, a director of EDEN, is a
director and an executive vice president of Stephens Group, Inc.
Stephens-EBC, LLC has contributed certain of its shares to a voting trust
pursuant to which the trustee of the trust, an individual not affiliated
with Stephens Group, Inc., has sole voting power. The trustee is required
to vote such shares "for" or "against" proposals submitted to our
shareholders in the same proportion as the votes cast "for" or "against"
such proposals by all other shareholders, excluding abstentions. The voting
trust agreement also imposes substantial limitations on the sale or other
disposition of the shares subject to the voting trust. The voting trust
agreement expires in 2010 or such earlier time as Stephens Inc. ceases to
be a market maker of our common stock. Stephens-EBC, LLC also holds 700,000
shares, representing 4.1% of our outstanding shares (or 3.1% after this
offering) that it has not contributed to the voting trust. Stephens Group,
Inc. is the parent company of Stephens Inc., an underwriter in this
offering.

(3) Includes 156,250 shares held by Mr. McElroy's spouse, Marilyn R. McElroy.

(4) Includes 187,500 shares subject to options that are exercisable within 60
days of August 31, 2000.

(5) Includes 601,556 shares held by the Sandberg Family Living Trust, of which
Mr. Sandberg is trustee, and 70,000 shares held by the O.C. Sandberg Family
Limited Partnership, of which Mr. Sandberg is the general partner.

(6) Includes 115,556 shares held by the Albert A. James Family Partnership and
436,143 shares held by the Albert A. James Living Trust (UTA 1/16/89), of
which Mr. James is trustee.

(7) Includes 62,500 shares held by John W. Titcomb, Jr., as custodian for the
benefit of his minor children. Mr. Titcomb disclaims beneficial ownership
of all such shares.

(8) Includes 45,000 shares subject to options that are exercisable within 60
days of August 31, 2000, 151,191 shares held by Prudential Securities as
custodian for the Agatha L. Maza IRA and 135,080 shares held by the Maza
Family LLC, of which Ms. Maza is a co-manager. Ms. Maza disclaims
beneficial ownership except to the extent of her pecuniary interest in
shares held by the Maza Family LLC.

(9) Includes 201,303 shares held by the WBW Trust Number One, of which Dr.
Weyerhaeuser is trustee.

(10) Does not include 2,400,000 shares beneficially owned by Stephens Group,
Inc., of which Jon E. M. Jacoby is a director and an executive vice
president.

(11) Includes 33,333 shares subject to options that are exercisable within 60
days of August 31, 2000.

(12) Includes 265,833 shares subject to options that are exercisable within 60
days of August 31, 2000.

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<PAGE> 55

DESCRIPTION OF CAPITAL STOCK

The following summary description of our capital stock is qualified in
its entirety by reference to our articles of incorporation and our bylaws,
copies of which are filed as exhibits to the registration statement of which
this prospectus forms a part. Our authorized capital stock consists of
30,000,000 shares of common stock, $0.0025 par value per share, and 10,000,000
shares of preferred stock, $0.01 par value per share.

COMMON STOCK

As of August 31, 2000 (assuming the conversion of all classes of then
outstanding preferred stock into common stock), there were 16,932,707 shares of
our common stock outstanding and held of record by 241 shareholders. There will
be 22,732,707 shares of our common stock outstanding after giving effect to the
sale of our common stock offered to the public hereby (assuming no exercise of
the underwriters' over-allotment option and no exercise of outstanding options
and warrants after August 31, 2000). The holders of our common stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of shareholders. Subject to preferences that may be applicable to any
outstanding shares of our preferred stock, the holders of our common stock are
entitled to receive ratably such dividends, if any, as may be declared by our
board of directors out of funds legally available for the payment of dividends.
In the event of a liquidation, dissolution or winding up of EDEN, the holders of
our common stock are entitled to share ratably in all assets remaining after
payment of liabilities and liquidation preferences of any outstanding shares of
our preferred stock. Holders of our common stock have no preemptive rights or
rights to convert their common stock into any other securities. There are no
redemption or sinking fund provisions applicable to our common stock. All
outstanding shares of our common stock are fully paid and nonassessable, and the
shares of our common stock to be issued upon completion of this offering will be
fully paid and nonassessable.

PREFERRED STOCK

Upon the effectiveness of our registration statement, all outstanding
shares of our preferred stock will be converted into common stock. Our Series A
through Series D Convertible Preferred Stock converts into common stock at a
ratio of one share of common stock per share of preferred stock. Our Series E
Convertible Preferred Stock converts into common stock at a ratio of 11.11
shares of common stock per share of preferred stock. Our Series F Convertible
Preferred Stock converts into common stock at a ratio of 24 shares of common
stock per share of preferred stock. Thereafter, pursuant to our articles of
incorporation, our board of directors will have the authority to issue up to
10,000,000 shares of our preferred stock in one or more series and to fix the
powers, designations, preferences, limitations and relative, participating,
optional or other rights thereof, including dividend rights, conversion rights,
voting rights, redemption terms, liquidation preferences and the number of
shares constituting each such series, without any further vote or action by our
shareholders. The preferred stock may be issued from time to time in one or more
series as may be determined from time to time by our board of directors and
stated in the resolutions providing for the issuance of these shares. Our board
of directors shall have the authority to fix and determine and to amend the
relative rights of the shares of any series that is not yet issued. The issuance
of our preferred stock could have one or more of the following effects:

- restrict common stock dividends if preferred stock dividends have not
been paid;

- dilute the voting power and equity interest of holders of our common
stock to the extent that any series of our preferred stock has voting
rights or is convertible into common stock; or

- prevent current holders of our common stock from receiving assets upon
liquidation until any liquidation preferences granted to holders of
our preferred stock are satisfied.

In addition, the issuance of our preferred stock may, upon certain
circumstances, have the effect of discouraging a change in control of EDEN by,
for example, granting voting rights to holders of our preferred stock that
require approval by the separate vote of the holders of our preferred stock for
any

53
<PAGE> 56

amendment to our articles of incorporation or any reorganization, consolidation
or merger (or other similar transaction involving us). As a result, the issuance
of our preferred stock may discourage bids for our common stock at a premium
over the market price therefor and could have a material adverse effect on the
market value of our common stock. Our board of directors does not presently
intend to issue any shares of preferred stock.

WARRANTS TO PURCHASE COMMON STOCK

As of August 31, 2000, we had outstanding warrants to purchase shares of
our common stock, as follows:

- 19,500 shares at an exercise price of $1.00 per share, expiring on
January 31, 2001;

- 200,000 shares at an exercise price of $1.00 per share, expiring on
March 20, 2001;

- 9,234 shares at an exercise price of $1.00 per share, expiring on
September 30, 2001;

- 66,555 shares at an exercise price of $2.00 per share, expiring on
June 14, 2002;

- 36,664 shares at an exercise price of $5.00 per share, expiring on
November 23, 2003; and

- 230,769 shares, assuming an initial public offering price of $13.00
per share, at an exercise price equal to the public offering price of
shares sold in this offering, expiring on August 31, 2005.

ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS IN ARTICLES OF INCORPORATION

Issuance of preferred stock

Our board of directors, without shareholder approval, will have the
authority under our articles of incorporation to issue preferred stock with
rights superior to the rights of the holders of common stock. As a result,
preferred stock could be issued quickly and easily, could adversely affect the
rights of holders of common stock and could be issued with terms calculated to
delay or prevent a change in control of EDEN or make removal of management more
difficult.

Election and removal of directors

Upon the closing of this offering and effective at the first annual
meeting of shareholders following this offering, our articles of incorporation
will provide for the division of our board of directors into three classes, as
nearly equal in number as possible. At the first election of our directors to
the classified board, each class 1 director will be elected to serve until the
next following annual meeting of shareholders, each class 2 director will be
elected to serve until the second following annual meeting of shareholders and
each class 3 director will be elected to serve until the third following annual
meeting of shareholders. At each annual meeting of shareholders following the
meeting at which the board would be initially classified, the successors to
directors whose terms are expiring will be elected to serve until the third
annual meeting of shareholders following their election. Directors serve until
their successors are elected and qualified or until their death, resignation or
removal from office. Our directors can be removed from office only for cause and
only by a two-thirds vote of the shareholders. Because this system of electing
and removing directors generally makes it more difficult for shareholders to
replace a majority of the board of directors, it may discourage a third party
from making a tender offer or otherwise attempting to gain control of EDEN and
may maintain the incumbency of the board of directors.

Shareholder meetings

Upon the closing of this offering, our articles of incorporation and
bylaws will provide that our shareholders may call a special meeting only upon
the written request of holders of at least 25% of the outstanding shares
delivered to us at least 20 days prior to the date of the meeting. Additionally,
the board of directors, the chairman of the board and the president may call
special meetings of shareholders. Also upon the closing of this offering, our
articles of incorporation and bylaws will provide that changes to

54
<PAGE> 57

certain provisions of our articles of incorporation, including those regarding
amendment of certain provisions of our bylaws or articles of incorporation,
classified board of directors and special meetings of shareholders, must be
approved by the holders of not less than two-thirds of the outstanding shares.

Requirements for advance notification of shareholder nominations and
proposals

Upon the closing of this offering, our bylaws will establish advance
notice procedures with respect to shareholder proposals and the nomination of
candidates for election as directors, other than nominations made by or at the
direction of the board of directors or a committee thereof.

WASHINGTON LAW

Washington law imposes restrictions on certain transactions between a
corporation and certain significant shareholders. Chapter 23B.19 of the
Washington Business Corporation Act prohibits a "target corporation," with
certain exceptions, from engaging in certain significant business transactions
with a person or group of persons that beneficially owns 10% or more of the
voting securities of the target corporation (an "Acquiring Person") for a period
of five years after such acquisition, unless the transaction or acquisition of
shares is approved by a majority of the members of the target corporation's
board of directors prior to the time of acquisition. Such prohibited
transactions include, among other things:

- a merger or consolidation with, disposition of assets to, or issuance
or redemption of stock to or from the Acquiring Person;

- termination of 5% or more of the employees of the target corporation
as a result of the Acquiring Person's acquisition of 10% or more of
the shares; or

- allowing the Acquiring Person to receive any disproportionate benefit
as a shareholder.

After the five-year period, a "significant business transaction" may take
place as long as it complies with certain "fair price" provisions of the
statute. A corporation may not "opt out" of this statute. This provision may
have the effect of delaying, deterring or preventing a change in control of
EDEN.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services, LLC.

QUOTATION ON THE NASDAQ NATIONAL MARKET

Application has been made for quotation of the shares on the Nasdaq
National Market under the symbol "EDEN."

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<PAGE> 58

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of common stock in the public market
could adversely affect prevailing market prices. Furthermore, since only a
limited number of shares will be available for sale shortly after this offering
because of contractual and legal restrictions on resale, sales of substantial
amounts of our common stock in the public market after the restrictions lapse
could adversely affect prevailing market prices and our ability to raise equity
capital in the future.

Upon completion of this offering, we will have 22,732,707 shares of
common stock outstanding, assuming no exercise of options or warrants after
August 31, 2000 and assuming the conversion of all shares of outstanding
preferred stock into common stock, based on shares outstanding as of August 31,
2000. Of these shares, the 5,800,000 shares sold in this offering, plus any
shares issued upon exercise of the underwriters' over-allotment option, will be
freely transferable without restriction or registration under the Securities
Act, except for shares purchased by any of our existing "affiliates," which
generally include officers, directors or 10% shareholders, as that term is
defined in Rule 144 under the Securities Act. The remaining 16,932,707 shares of
common stock outstanding upon completion of this offering are "restricted
securities" within the meaning of Rule 144 under the Securities Act. These
shares may be sold in the public market only if registered, or if they qualify
for an exemption from registration under Rule 144, 144(k) or 701 promulgated
under the Securities Act, each of which is summarized below.

Including our directors and officers, holders of a total of approximately
16,407,638 shares of common stock, including shares issuable upon automatic
conversion of the outstanding preferred stock, have entered into lock-up
agreements generally providing that they will not, without the prior written
consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated, directly or
indirectly, offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option, right or
warrant for the sale of, or otherwise dispose of or transfer any shares of
common stock or any securities convertible into or exercisable or exchangeable
for common stock, subject to certain exceptions, for a period of 180 days after
the date of this prospectus. We have entered into a similar agreement with
Merrill Lynch. As a result of these contractual restrictions, notwithstanding
possible earlier eligibility for sale under the provisions of Rules 144, 144(k)
and 701, shares subject to lock-up agreements will not be eligible for sale
until these agreements expire or are waived by Merrill Lynch. Taking into
account the lock-up agreements, and assuming Merrill Lynch does not release the
parties from these agreements, the following shares will be eligible for sale in
the public market at the following times:

- Beginning on the effective date of this offering, 474,603 shares will
be immediately available for sale in the public market;

- Beginning 90 days after the date of this prospectus, approximately
46,709 shares will be eligible for sale pursuant to Rules 144 and 701;

- Beginning 180 days after the date of this prospectus, the expiration
date of the lock-up agreements, approximately 15,020,490 shares will
be eligible for sale pursuant to Rules 144, 144(k) and 701;

- An additional 859,655 shares will become eligible for sale pursuant to
Rule 144 during the period beginning 180 days after the date of this
prospectus through August 2001, upon the expiration of various
one-year holding periods. Shares eligible to be sold by affiliates
pursuant to Rule 144 are subject to the volume restrictions described
below; and

- An additional 531,250 shares will become eligible for sale pursuant to
Rule 144 upon the expiration of one-year holding periods that will not
commence until certain notes received by us in exchange for the shares
are paid in full.

Rule 144. In general, under Rule 144 as currently in effect, beginning 90
days after the date of this prospectus, a person, or persons whose shares are
aggregated, who has beneficially owned restricted securities for at least one
year, including the holding period of any prior owner other than an affiliate,
is

56
<PAGE> 59

entitled to sell within any three-month period a number of shares that does not
exceed the greater of (1) 1% of our then outstanding shares of common stock,
approximately 227,327 shares immediately after this offering, or (2) the average
weekly trading volume of our common stock on the Nasdaq National Market during
the four calendar weeks preceding the date on which notice of the sale is filed
with the SEC. Sales under Rule 144 are also subject to manner of sale
provisions, notice requirements and the availability of current public
information about us. Under Rule 144(k), a person who is not deemed to have been
one of our affiliates at any time during the three months preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two
years, may sell such shares without complying with the manner of sale, public
information, volume limitation, or notice provisions of Rule 144.

Rule 701. Beginning 90 days after the effective date of this prospectus,
subject to contractual restrictions, any of our employees, consultants or
advisors who purchased shares from us prior to the closing of this offering
pursuant to a written compensatory plan or contract may be entitled to rely on
the resale provisions of Rule 701. Rule 701 permits affiliates to sell their
Rule 701 shares under Rule 144 without complying with the holding period
requirements of Rule 144. Rule 701 further provides that persons other than
affiliates may sell shares in reliance on Rule 144 without having to comply with
the holding period, public information, volume limitation, or notice provisions
of Rule 144.

Stock plan. As of December 31, 1999, options to purchase 1,480,200 shares
of common stock pursuant to our 1995 combined incentive and nonqualified stock
option plan were outstanding, of which 431,831 shares were exercisable, and
there were no options to purchase shares of common stock outside of our 1995
combined incentive and nonqualified stock option plan. After December 31, 1999
and as of August 31, 2000, we granted options to purchase an additional
1,303,950 shares under our 1995 combined incentive and nonqualified stock option
plan. As of August 31, 2000, there are 326,334 option shares remaining available
for grant under our 1995 combined incentive and nonqualified stock option plan.
In addition we have reserved 1,500,000 shares of common stock for future
issuance under our 2000 stock incentive plan and 500,000 shares of common stock
for future issuance under our 2000 employee stock purchase plan. No shares have
been issued to date under our 2000 stock incentive plan or 2000 employee stock
purchase plan.

After the closing of this offering, we intend to file registration
statements under the Securities Act to register shares to be issued pursuant to
our stock plans. Such registration statements are expected to become effective
immediately upon filing, and shares covered by such registration statements will
then become eligible for sale in the public market. As a result, shares issued
pursuant to our 1995 combined incentive and nonqualified stock option plan, our
2000 stock incentive plan and our 2000 employee stock purchase plan, after the
effectiveness of such registration statements, also will be freely transferable
in the public market, subject to Rule 144 limitations applicable to affiliates,
vesting restrictions and expiration of lock-up agreements.

Lock-up agreements. All of our officers and directors and holders of
approximately 97% of our stock have signed lock-up agreements. Under these
agreements, they have agreed, among other things, not to transfer or dispose of
any shares of our common stock, or securities convertible into shares of common
stock, for a period of 180 days after the date of this prospectus. Transfers or
dispositions can be made sooner with the prior written consent of Merrill Lynch.
This consent may be given at any time without public notice.

57
<PAGE> 60

UNDERWRITING

Merrill Lynch, Pierce, Fenner & Smith Incorporated, Stephens Inc., George
K. Baum & Company and Ragen MacKenzie Incorporated are acting as representatives
of the underwriters named below. Subject to the terms and conditions described
in a purchase agreement between us and the underwriters, we have agreed to sell
to the underwriters, and the underwriters severally and not jointly have agreed
to purchase from us, the number of shares listed opposite their names below.

<TABLE>
<CAPTION>
NUMBER
OF SHARES
U.S. UNDERWRITER ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Stephens Inc................................................
George K. Baum & Company....................................
Ragen MacKenzie Incorporated................................
---------
Total.......................................... 5,800,000
=========
</TABLE>

Subject to the terms and conditions in the purchase agreement, the
underwriters have agreed to purchase all the shares of our common stock being
sold under the purchase agreement if any of these shares of our common stock are
purchased. If an underwriter defaults, the purchase agreement provides that the
purchase commitments of the nondefaulting underwriter may be increased or the
purchase agreement may be terminated.

We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments the
underwriters may be required to make in respect of those liabilities.

The underwriters are offering the shares of our common stock, subject to
prior sale, when, as and if issued to and accepted by them, subject to approval
of legal matters by their counsel, including the validity of the shares, and
other conditions contained in the purchase agreement, such as the receipt by the
underwriters of officers' certificates and legal opinions. The underwriters
reserve the right to withdraw, cancel or modify offers to the public and to
reject orders in whole or in part.

COMMISSIONS AND DISCOUNTS

The representatives have advised us that the underwriters propose
initially to offer the shares of our common stock to the public at the initial
public offering price on the cover page of this prospectus and to dealers at
that price less a concession not in excess of $ per share. The underwriters
may allow, and the dealers may reallow, a discount not in excess of $ per
share to other dealers. After the initial public offering, the public offering
price, concession and discount may be changed.

The following table shows the public offering price, underwriting
discount to be paid by us to the underwriters and the proceeds, before expenses,
to us. This information assumes either no exercise or full exercise by the
underwriters of their over-allotment options.

<TABLE>
<CAPTION>
PER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- -----------
<S> <C> <C> <C>
Public offering price..................................... $ $ $
Underwriting discount..................................... $ $ $
Proceeds, before expenses, to EDEN........................ $ $ $
</TABLE>

The expenses of this offering, not including the underwriting discount,
are estimated at $1,083,000 and are payable by us.

58
<PAGE> 61

OVER-ALLOTMENT OPTION

We have granted an option to the underwriters to purchase up to 870,000
additional shares of our common stock at the initial public offering price less
the underwriting discount. The underwriters may exercise this option for 30 days
from the date of this prospectus solely to cover any over-allotments. If the
underwriters exercise this option, each will be obligated, subject to conditions
contained in the purchase agreement, to purchase a number of additional shares
of our common stock proportionate to that underwriter's initial amount reflected
in the above table.

RESERVED SHARES

At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 580,000 shares of our common stock offered hereby
to be sold as part of the underwritten offering to certain individuals and
entities designated by us. We have reserved shares for certain of our employees
and their families and friends and certain individuals and entities with which
we have a business relationship. If these individuals and entities purchase
reserved shares, this will reduce the number of shares available for sale to the
general public. Any reserved shares that are not orally confirmed for purchase
within one day of the pricing of this offering will be offered by the
underwriters to the general public on the same terms as the other shares offered
by this prospectus.

NO SALES OF SIMILAR SECURITIES

We, our executive officers and directors, and certain existing
shareholders have agreed, with exceptions, not to sell or transfer any shares of
our common stock for 180 days after the date of this prospectus without first
obtaining the written consent of Merrill Lynch. Specifically, we and these other
individuals have agreed not to directly or indirectly:

- offer, pledge, sell or contract to sell any common stock;

- sell any option or contract to purchase any common stock;

- purchase any option or contract to sell any common stock;

- grant any option, right or warrant for the sale of any common stock;

- lend or otherwise dispose of or transfer any common stock;

- request or demand that we file a registration statement related to any
common stock; or

- enter into any swap or other agreement that transfers, in whole or in
part, the economic consequences of ownership of any common stock
whether any such swap or transaction is to be settled by delivery of
shares or other securities, in cash or otherwise.

This lock-up provision applies to shares of our common stock and to
securities convertible into, or exchangeable or exercisable for, or repayable
with, shares of our common stock. Subject to certain exceptions, it also applies
to shares of our common stock owned now or acquired later by the person
executing the agreement or for which the person executing the agreement later
acquires the power of disposition.

Before this offering, there has been no public market for our common
stock. The initial public offering price will be determined through negotiations
between us and Merrill Lynch. In addition to prevailing market conditions, the
factors to be considered in determining the initial public offering price are:

- the valuation multiples of publicly traded companies that the
representatives believe to be comparable to us;

- our financial information;

- the history of, and the prospects for, our company and the industry in
which we compete;

59
<PAGE> 62

- an assessment of our management, its past and our present operations,
and the prospects for, and timing of, our future revenues;

- the present state of our development; and

- the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to ours.

An active trading market for the shares of our common stock may not
develop. It is also possible that after this offering the shares will not trade
in the public market at or above the initial public offering price.

The underwriters do not expect to sell more than 5% of the shares of our
common stock in the aggregate to accounts over which they exercise discretionary
authority.

QUOTATION ON THE NASDAQ NATIONAL MARKET

Application has been made for quotation of the shares on the Nasdaq
National Market under the symbol "EDEN."

PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS

Until the distribution of the shares of our common stock is completed,
SEC rules may limit underwriters and selling group members from bidding for and
purchasing our common stock. However, the representatives may engage in
transactions that stabilize the price of the common stock, such as bids or
purchases to peg, fix or maintain that price.

In connection with the offering, the underwriters may make short sales of
our common stock. Short sales involve the sale by the underwriters at the time
of the offering of a greater number of shares than they are required to purchase
in the offering. Covered short sales are sales made in an amount not greater
than the over-allotment option. The underwriters may close out any covered short
position by either exercising their over-allotment option or purchasing shares
in the open market. In determining the source of shares to close out the covered
short position, the underwriters will consider, among other things, the price of
shares available for purchase in the open market as compared to the public
offering price at which they may purchase the shares through the over-allotment
option.

Naked short sales are sales in excess of the over-allotment option. The
underwriters must close out any naked short position by purchasing shares in the
open market. A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure on the price of
the shares in the open market after pricing that could adversely affect
investors who purchase in the offering.

Similar to other purchase transactions, the purchases by the underwriters
to cover syndicate short positions may have the effect of raising or maintaining
the market price of the common stock or preventing or retarding a decline in the
market price of the common stock. As a result, the price of our common stock may
be higher than it would otherwise be in the absence of these transactions.

The representatives may also impose a penalty bid on underwriters and
selling group members. This means that if the representatives purchase shares of
our common stock in the open market to reduce the underwriter's short position
or to stabilize the price of such shares, they may reclaim the amount of the
selling commission from the underwriters and selling group members who sold
those shares. The imposition of a penalty bid may also affect the price of the
shares of our common stock in that it discourages resales of those shares.

Neither we nor any of the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters make any representation that the representatives

60
<PAGE> 63

or the lead managers will engage in these transactions or that these
transactions, once commenced, will not be discontinued without notice.

ELECTRONIC DISTRIBUTION

Merrill Lynch will be facilitating Internet distribution for this
offering to certain of its Internet subscription customers. Merrill Lynch
intends to allocate a limited number of shares for sale to its online brokerage
customers. An electronic prospectus is available on the Internet Web site
maintained by Merrill Lynch. Other than the prospectus in electronic format, the
information on the Merrill Lynch Web site is not a part of this prospectus.

OTHER RELATIONSHIPS

Some of the underwriters and their affiliates have engaged in, and may in
the future engage in, investment banking and other commercial dealings in the
ordinary course of business with us. They have received customary fees and
commissions for these transactions.

As previously discussed, Stephens - EBC, LLC, an affiliate of Stephens
Inc., owns 2.4 million shares, or 14.2% of the issued and outstanding shares of
our common stock as of August 31, 2000. Stephens Group, Inc. is the sole manager
of Stephens - EBC, LLC. In addition, Stephens Group, Inc. controls Stephens Inc.
Mr. Jon E. M. Jacoby, one of our directors, is also a director and executive
vice president of Stephens Inc. and Stephens Group, Inc. Stephens - EBC, LLC has
contributed certain of its shares to a voting trust pursuant to which the
trustee of the trust, an individual not affiliated with Stephens Group, Inc.,
has sole voting power. The trustee is required to vote such shares "for" or
"against" proposals submitted to our shareholders in the same proportion as the
votes cast "for" or "against" such proposals by all other shareholders,
excluding abstentions. The voting trust agreement also imposes substantial
limitations on the sale or other disposition of the shares subject to the voting
trust. The voting trust agreement expires in 2010 or such earlier time as
Stephens Inc. ceases to be a market maker of our common stock. Stephens - EBC,
LLC also holds 700,000 shares, representing 4.1% of our outstanding shares (or
3.1% after this offering) that it has not contributed to the voting trust.

61
<PAGE> 64

LEGAL MATTERS

The validity of the common stock offered by this prospectus will be
passed on for EDEN by Perkins Coie LLP, Seattle, Washington. Certain legal
matters will be passed on for the underwriters by Brown & Wood LLP, New York,
New York.

EXPERTS

The financial statements of EDEN Bioscience Corporation at December 31,
1998 and 1999 and for each of the three years in the period ended December 31,
1999, and for the period from inception, July 18, 1994, to December 31, 1999,
appearing in this prospectus and the registration statement have been audited by
Arthur Andersen LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon the authority of
such firm as experts in accounting and auditing in giving said reports.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the shares of common stock offered in this
prospectus. This prospectus, which forms a part of the registration statement,
does not contain all the information included in the registration statement.
Some information is omitted and you should refer to the registration statement
and its exhibits for that information. You may review a copy of the registration
statement, including exhibits and the schedule filed with it, at the SEC's
public reference facilities in Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the SEC located at
Seven World Trade Center, Suite 1300, New York, New York 10048, and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You may
also obtain copies of such materials from the Public Reference Room of the SEC,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a Web
site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants, such as EDEN, that file
electronically with the SEC.

62
<PAGE> 65

EDEN BIOSCIENCE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Shareholders' Equity.......................... F-5
Statements of Cash Flows.................................... F-7
Notes to Financial Statements............................... F-8
</TABLE>

F-1
<PAGE> 66

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
EDEN Bioscience Corporation:

We have audited the accompanying balance sheets of EDEN Bioscience
Corporation (a Washington corporation in the development stage) as of December
31, 1998 and 1999 and the related statements of operations, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1999, and for the period from inception, July 18, 1994, to December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of EDEN Bioscience
Corporation as of December 31, 1998 and 1999, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999, and for the period from inception, July 18, 1994, to December 31, 1999, in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP
Seattle, Washington
March 10, 2000 (except with
respect to the matters discussed
in Note 9, as to which the
date is August 16, 2000)

F-2
<PAGE> 67

EDEN BIOSCIENCE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)

BALANCE SHEETS

<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, SHAREHOLDERS'
--------------------------- JUNE 30, EQUITY AS OF
1998 1999 2000 JUNE 30, 2000
------------ ------------ ------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 11,723,450 $ 13,107,250 $ 6,609,349
Other current assets............................ 24,177 61,367 338,524
------------ ------------ ------------
Total current assets.......................... 11,747,627 13,168,617 6,947,873
Property and equipment, net....................... 1,772,575 2,949,720 3,999,036
Other assets...................................... 110,540 159,711 654,212
------------ ------------ ------------
Total assets.................................. $ 13,630,742 $ 16,278,048 $ 11,601,121
============ ============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................ $ 797,733 $ 725,711 $ 569,377
Accrued expenses................................ 508,035 1,100,018 2,256,388
Current portion of capital lease obligations.... 268,061 329,085 289,435
------------ ------------ ------------
Total current liabilities..................... 1,573,829 2,154,814 3,115,200
Capital lease obligations, net of current
portion......................................... 711,848 522,966 393,273
------------ ------------ ------------
Total liabilities............................. 2,285,677 2,677,780 3,508,473
------------ ------------ ------------
Commitments and contingencies
Shareholders' equity:
Convertible preferred stock, $.01 par value,
10,000,000 shares authorized; 9,964,185 shares
designated as Series A through F;
Issued and outstanding shares -- 9,693,956
at December 31, 1998; 9,746,396 at
December 31, 1999 and June 30, 2000; no
shares pro forma;
Aggregate liquidation
preference -- $24,221,280 at December 31,
1998 and $30,514,080 at December 31, 1999
and June 30, 2000........................ 96,940 97,464 97,464 $ --
Common stock, $.0025 par value, 30,000,000
shares authorized; issued and outstanding
shares -- 1,822,916 and 2,694,798 at December
31, 1998 and 1999, respectively, 3,106,000 at
June 30, 2000 and 16,900,104 pro forma........ 4,557 6,737 7,765 42,250
Additional paid-in capital...................... 24,562,677 36,675,834 37,945,011 38,007,990
Common stock subscriptions receivable........... (54,647) (59,007) (61,057) (61,057)
Deferred stock option compensation expense...... (239,204) (146,336) (99,902) (99,902)
Deficit accumulated during development stage.... (13,025,258) (22,974,424) (29,796,633) (29,796,633)
------------ ------------ ------------ ------------
Total shareholders' equity.................. 11,345,065 13,600,268 8,092,648 $ 8,092,648
------------ ------------ ------------ ============
Total liabilities and shareholders'
equity................................... $ 13,630,742 $ 16,278,048 $ 11,601,121
============ ============ ============
</TABLE>

The accompanying notes are an integral part of these statements.
F-3
<PAGE> 68

EDEN BIOSCIENCE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
JULY 18, 1994 JULY 18, 1994
YEAR ENDED DECEMBER 31, (INCEPTION) TO SIX MONTHS ENDED JUNE 30, (INCEPTION) TO
--------------------------------------- DECEMBER 31, ------------------------- JUNE 30,
1997 1998 1999 1999 1999 2000 2000
----------- ----------- ----------- -------------- ----------- ----------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Consulting
services......... $ 175,921 $ 120,686 $ 114,620 $ 819,884 $ 43,071 $ -- $ 819,884
Research grants.... 7,500 -- -- 249,326 -- -- 249,326
----------- ----------- ----------- ------------ ----------- ----------- ------------
Total revenues... 183,421 120,686 114,620 1,069,210 43,071 -- 1,069,210
----------- ----------- ----------- ------------ ----------- ----------- ------------
Operating expenses:
Research and
development...... 2,864,822 5,321,563 7,555,295 18,598,160 3,712,507 5,116,156 23,714,316
General and
administrative... 577,915 1,707,775 2,208,486 5,206,432 1,010,444 1,910,928 7,117,360
----------- ----------- ----------- ------------ ----------- ----------- ------------
Total operating
expenses....... 3,442,737 7,029,338 9,763,781 23,804,592 4,722,951 7,027,084 30,831,676
----------- ----------- ----------- ------------ ----------- ----------- ------------
Loss from
operations..... (3,259,316) (6,908,652) (9,649,161) (22,735,382) (4,679,880) (7,027,084) (29,762,466)
----------- ----------- ----------- ------------ ----------- ----------- ------------
Other income
(expense):
Interest and
dividend
income........... 172,211 135,009 435,742 864,482 247,930 278,450 1,142,932
Interest expense... (115,419) (162,206) (181,159) (489,339) (92,599) (73,575) (562,914)
----------- ----------- ----------- ------------ ----------- ----------- ------------
Total other
income
(expense)...... 56,792 (27,197) 254,583 375,143 155,331 204,875 580,018
----------- ----------- ----------- ------------ ----------- ----------- ------------
Loss before income
taxes.............. (3,202,524) (6,935,849) (9,394,578) (22,360,239) (4,524,549) (6,822,209) (29,182,448)
Provision for income
taxes.............. -- -- -- -- -- -- --
----------- ----------- ----------- ------------ ----------- ----------- ------------
Net loss............. $(3,202,524) $(6,935,849) $(9,394,578) $(22,360,239) $(4,524,549) $(6,822,209) $(29,182,448)
=========== =========== =========== ============ =========== =========== ============
Historical basic and
diluted net loss
per share.......... $ (1.90) $ (3.93) $ (5.23) $ (2.48) $ (2.38)
=========== =========== =========== =========== ===========
Historical weighted
average shares
outstanding used to
compute net loss
per share.......... 1,681,250 1,765,126 1,902,281 1,822,916 2,862,661
=========== =========== =========== =========== ===========
Pro forma basic and
diluted net loss
per share.......... $ (0.67) $ (0.41)
=========== ===========
Weighted average
shares outstanding
used to compute pro
forma net loss per
share.............. 14,820,198 16,656,765
=========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.
F-4
<PAGE> 69

EDEN BIOSCIENCE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)

STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>

COMMON DEFERRED
OUTSTANDING SHARES STOCK STOCK
------------------------ ADDITIONAL SUBSCRIP- DEFERRED OPTION
PREFERRED COMMON PREFERRED COMMON PAID-IN TIONS LICENSE COMPEN-
STOCK STOCK STOCK STOCK CAPITAL RECEIVABLE EXPENSE SATION
---------- ----------- --------- ------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 18,
1994.................. -- -- $ -- $ -- $ -- $ -- $ -- $ --
Sale of common
stock............... -- 1,500,000 -- 3,750 41,250 (45,000) -- --
Sale of preferred
stock............... 2,760,000 -- 27,600 -- 617,400 -- -- --
Offering costs........ -- -- -- -- (19,472) -- -- --
Net loss.............. -- -- -- -- -- -- -- --
---------- ----------- -------- ------- ----------- -------- --------- ---------
Balance at December 31,
1994.................. 2,760,000 1,500,000 27,600 3,750 639,178 (45,000) -- --
Sale of cancelable
common stock for
license............. -- 400,000 -- 1,000 159,000 -- (160,000) --
Amortization of
license expense..... -- -- -- -- -- -- 16,000 --
Repurchase of common
stock............... -- (218,750) -- (547) (6,016) 6,563 -- --
Sale of preferred
stock............... 3,858,100 -- 38,581 -- 3,282,969 -- -- --
Offering costs........ -- -- -- -- (56,199) -- -- --
Net loss.............. -- -- -- -- -- -- -- --
---------- ----------- -------- ------- ----------- -------- --------- ---------
Balance at December 31,
1995.................. 6,618,100 1,681,250 66,181 4,203 4,018,932 (38,437) (144,000) --
Sale of preferred
stock............... 315,000 -- 3,150 -- 411,850 -- -- --
Offering costs........ -- -- -- -- (13,682) -- -- --
Interest on
subscriptions
receivable.......... -- -- -- -- -- (8,550) -- --
Increase in
fair-market value of
cancelable stock
issued for
license............. -- -- -- -- 36,000 -- (36,000) --
Amortization of
license expense..... -- -- -- -- -- -- 60,000 --
Net loss.............. -- -- -- -- -- -- -- --
---------- ----------- -------- ------- ----------- -------- --------- ---------
Balance at December 31,
1996.................. 6,933,100 1,681,250 69,331 4,203 4,453,100 (46,987) (120,000) --
Sale of preferred
stock............... 2,564,185 -- 25,642 -- 5,102,728 -- -- --
Offering costs........ -- -- -- -- (153,698) -- -- --
Interest on
subscriptions
receivable.......... -- -- -- -- -- (3,641) -- --
Increase in
fair-market value of
cancelable stock
issued for
license............. -- -- -- -- 120,000 -- (120,000) --
Net loss.............. -- -- -- -- -- -- -- --
---------- ----------- -------- ------- ----------- -------- --------- ---------
Balance at December 31,
1997.................. 9,497,285 1,681,250 94,973 4,203 9,522,130 (50,628) (240,000) --

<CAPTION>
DEFICIT
ACCUM-
ULATED TOTAL
DURING SHARE-
DEVELOPMENT HOLDERS'
STAGE EQUITY
------------ -----------
<S> <C> <C>
Balance at July 18,
1994.................. $ -- $ --
Sale of common
stock............... -- --
Sale of preferred
stock............... (48,659) 596,341
Offering costs........ -- (19,472)
Net loss.............. (80,159) (80,159)
------------ -----------
Balance at December 31,
1994.................. (128,818) 496,710
Sale of cancelable
common stock for
license............. -- --
Amortization of
license expense..... -- 16,000
Repurchase of common
stock............... (10,938) (10,938)
Sale of preferred
stock............... -- 3,321,550
Offering costs........ -- (56,199)
Net loss.............. (999,666) (999,666)
------------ -----------
Balance at December 31,
1995.................. (1,139,422) 2,767,457
Sale of preferred
stock............... -- 415,000
Offering costs........ -- (13,682)
Interest on
subscriptions
receivable.......... -- (8,550)
Increase in
fair-market value of
cancelable stock
issued for
license............. -- --
Amortization of
license expense..... -- 60,000
Net loss.............. (1,747,463) (1,747,463)
------------ -----------
Balance at December 31,
1996.................. (2,886,885) 1,472,762
Sale of preferred
stock............... -- 5,128,370
Offering costs........ -- (153,698)
Interest on
subscriptions
receivable.......... -- (3,641)
Increase in
fair-market value of
cancelable stock
issued for
license............. -- --
Net loss.............. (3,202,524) (3,202,524)
------------ -----------
Balance at December 31,
1997.................. (6,089,409) 3,241,269
</TABLE>

F-5
<PAGE> 70
EDEN BIOSCIENCE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)

STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>

COMMON DEFERRED
OUTSTANDING SHARES STOCK STOCK
------------------------ ADDITIONAL SUBSCRIP- DEFERRED OPTION
PREFERRED COMMON PREFERRED COMMON PAID-IN TIONS LICENSE COMPEN-
STOCK STOCK STOCK STOCK CAPITAL RECEIVABLE EXPENSE SATION
---------- ----------- --------- ------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1997.................. 9,497,285 1,681,250 94,973 4,203 9,522,130 (50,628) (240,000) --
Sale of preferred
stock............... 196,671 -- 1,967 -- 14,464,393 -- -- --
Offering costs........ -- -- -- -- (212,541) -- -- --
Interest on
subscriptions
receivable.......... -- -- -- -- -- (4,019) -- --
Exercise of stock
options............. -- 141,666 -- 354 69,812 -- -- --
Increase in fair
market value of
cancelable stock
issued for
license............. -- -- -- -- 420,000 -- (420,000) --
Amortization of
license expense..... -- -- -- -- -- -- 660,000 --
Unearned stock option
compensation........ -- -- -- -- 298,883 -- -- (298,883)
Amortization of stock
option compensation
expense............. -- -- -- -- -- -- -- 59,679
Net loss.............. -- -- -- -- -- -- -- --
---------- ----------- -------- ------- ----------- -------- --------- ---------
Balance at December 31,
1998.................. 9,693,956 1,822,916 96,940 4,557 24,562,677 (54,647) -- (239,204)
Sale of preferred
stock............... 52,440 -- 524 -- 6,292,276 -- -- --
Exercise of
warrants............ -- 831,882 -- 2,080 5,821,094 -- -- --
Offering costs........ -- -- -- -- (25,113) -- -- --
Interest on
subscriptions
receivable.......... -- -- -- -- -- (4,360) -- --
Exercise of stock
options............. -- 40,000 -- 100 24,900 -- -- --
Amortization of stock
option compensation
expense............. -- -- -- -- -- -- -- 92,868
Net loss.............. -- -- -- -- -- -- -- --
---------- ----------- -------- ------- ----------- -------- --------- ---------
Balance at December 31,
1999.................. 9,746,396 2,694,798 97,464 6,737 36,675,834 (59,007) -- (146,336)
Exercise of
warrants............ -- 167,702 -- 419 885,243 -- -- --
Offering costs........ -- -- -- -- (14,657) -- -- --
Interest on
subscriptions....... --
receivable.......... -- -- -- -- -- (2,050) -- --
Exercise of stock options... 243,500 -- 609 398,591 -- -- --
Amortization of stock
option compensation
expense............. -- -- -- -- -- -- -- 46,434
Net loss.............. -- -- -- -- -- -- -- --
---------- ----------- -------- ------- ----------- -------- --------- ---------
Balance at June 30, 2000
(unaudited)........... 9,746,396 3,106,000 97,464 7,765 37,945,011 (61,057) -- (99,902)
Pro forma conversion of
Preferred Stock to
Common Stock.......... (9,746,396) 13,794,104 (97,464) 34,485 62,979 -- -- --
---------- ----------- -------- ------- ----------- -------- --------- ---------
Pro forma balance at
June 30, 2000
(unaudited)........... -- 16,900,104 $ -- $42,250 $38,007,990 $(61,057) $ -- $ (99,902)
========== =========== ======== ======= =========== ======== ========= =========

<CAPTION>
DEFICIT
ACCUM-
ULATED TOTAL
DURING SHARE-
DEVELOPMENT HOLDERS'
STAGE EQUITY
------------ -----------
<S> <C> <C>
Balance at December 31,
1997.................. (6,089,409) 3,241,269
Sale of preferred
stock............... -- 14,466,360
Offering costs........ -- (212,541)
Interest on
subscriptions
receivable.......... -- (4,019)
Exercise of stock
options............. -- 70,166
Increase in fair
market value of
cancelable stock
issued for
license............. -- --
Amortization of
license expense..... -- 660,000
Unearned stock option
compensation........ -- --
Amortization of stock
option compensation
expense............. -- 59,679
Net loss.............. (6,935,849) (6,935,849)
------------ -----------
Balance at December 31,
1998.................. (13,025,258) 11,345,065
Sale of preferred
stock............... -- 6,292,800
Exercise of
warrants............ (554,588) 5,268,586
Offering costs........ -- (25,113)
Interest on
subscriptions
receivable.......... -- (4,360)
Exercise of stock
options............. -- 25,000
Amortization of stock
option compensation
expense............. -- 92,868
Net loss.............. (9,394,578) (9,394,578)
------------ -----------
Balance at December 31,
1999.................. (22,974,424) 13,600,268
Exercise of
warrants............ -- 885,662
Offering costs........ -- (14,657)
Interest on
subscriptions.......
receivable.......... -- (2,050)
Exercise of stock opti -- 399,200
Amortization of stock
option compensation
expense............. -- 46,434
Net loss.............. (6,822,209) (6,822,209)
------------ -----------
Balance at June 30, 2000
(unaudited)........... (29,796,633) 8,092,648
Pro forma conversion of
Preferred Stock to
Common Stock.......... -- --
------------ -----------
Pro forma balance at
June 30, 2000
(unaudited)........... $(29,796,633) $ 8,092,648
============ ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE> 71

EDEN BIOSCIENCE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
JULY 18, 1994 SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, (INCEPTION) TO JUNE 30, JULY 18, 1994
--------------------------------------- DECEMBER 31, ------------------------- (INCEPTION) TO
1997 1998 1999 1999 1999 2000 JUNE 30, 2000
----------- ----------- ----------- -------------- ----------- ----------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss................ $(3,202,524) $(6,935,849) $(9,394,578) $(22,360,239) $(4,524,549) $(6,822,209) $(29,182,448)
Adjustments to reconcile
net loss to cash used
in operating
activities:
Depreciation and
amortization........ 340,513 550,206 1,019,464 2,144,571 399,438 395,197 2,539,768
Amortization of
deferred license
expense............. -- 660,000 -- 736,000 -- -- 736,000
Amortization of stock
option compensation
expense............. -- 59,679 92,868 152,547 51,721 46,434 198,981
Interest income on
subscriptions
receivable.......... (3,641) (4,019) (4,360) (20,570) (2,138) (2,050) (22,620)
Loss on disposition of
fixed assets........ 20,437 13,339 11,859 44,208 -- 2,852 47,060
Changes in assets and
liabilities:
Other assets.......... (88,953) 40,245 (86,361) (149,078) (72,160) (771,658) (920,736)
Accounts payable...... (4,345) 676,944 (72,022) 600,381 (406,829) (156,334) 444,047
Accrued expense....... 69,961 299,563 591,983 1,180,134 299,670 1,156,370 2,336,504
----------- ----------- ----------- ------------ ----------- ----------- ------------
Net cash used in
operating
activities........ (2,868,552) (4,639,892) (7,841,147) (17,672,046) (4,254,847) (6,151,398) (23,823,444)
----------- ----------- ----------- ------------ ----------- ----------- ------------
Cash flows from investing
activities:
Purchases of property
and equipment......... (958,113) (1,378,161) (2,208,468) (5,179,022) (1,060,339) (1,447,365) (6,626,387)
Proceeds from sale of
equipment............. 1,419 -- -- 9,131 -- -- 9,131
Sale (purchase) of
short-term
investments, net...... (63,063) 1,370,269 -- -- -- -- --
----------- ----------- ----------- ------------ ----------- ----------- ------------
Net cash provided by
(used in)
investing
activities........ (1,019,757) (7,892) (2,208,468) (5,169,891) (1,060,339) (1,447,365) (6,617,256)
----------- ----------- ----------- ------------ ----------- ----------- ------------
Cash flows from financing
activities:
Proceeds from
sale-leaseback of
equipment............. 341,789 627,481 168,297 1,519,271 168,297 -- 1,519,271
Payments on capital
equipment leases...... (127,047) (213,197) (296,155) (667,220) (138,411) (169,343) (836,563)
Sales of preferred
stock................. 5,128,370 14,466,360 6,292,800 30,254,080 1,547,880 -- 30,254,080
Offering costs.......... (153,698) (212,541) (25,113) (480,705) (5,871) (14,657) (495,362)
Proceeds from exercise
of stock options...... -- 70,166 25,000 95,166 -- 399,200 494,366
Proceeds from exercise
of common stock
warrants.............. -- -- 5,268,586 5,268,586 -- 885,662 6,154,248
Payment of note payable
to stockholder........ -- -- -- (36,500) -- -- (36,500)
Other cash flows and
repurchase of common
stock................. -- -- -- (3,491) -- -- (3,491)
----------- ----------- ----------- ------------ ----------- ----------- ------------
Net cash provided by
financing
activities........ 5,189,414 14,738,269 11,433,415 35,949,187 1,571,895 1,100,862 37,050,049
----------- ----------- ----------- ------------ ----------- ----------- ------------
Net increase (decrease) in
cash and cash
equivalents............. 1,301,105 10,090,485 1,383,800 13,107,250 (3,743,291) (6,497,901) 6,609,349
Cash and cash equivalents
at beginning of
period.................. 331,860 1,632,965 11,723,450 -- 11,723,450 13,107,250 --
----------- ----------- ----------- ------------ ----------- ----------- ------------
Cash and cash equivalents
at end of period........ $ 1,632,965 $11,723,450 $13,107,250 $ 13,107,250 $ 7,980,159 $ 6,609,349 $ 6,609,349
=========== =========== =========== ============ =========== =========== ============
Supplemental disclosures:
Cash paid for
interest.............. $ 115,419 $ 162,206 $ 181,159 $ 489,339 $ 92,599 $ 73,575 $ 562,914
=========== =========== =========== ============ =========== =========== ============
</TABLE>

The accompanying notes are an integral part of these statements.
F-7
<PAGE> 72

EDEN BIOSCIENCE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)

NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 2000 IS
UNAUDITED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS

EDEN Bioscience Corporation ("EDEN" or the "Company") is a development
stage company that was incorporated on July 18, 1994. EDEN is a plant technology
company focused on developing, manufacturing and marketing innovative natural
products for agriculture. The Company has generated no revenues from product
sales. The Company's development activities involve inherent risks including,
among others, commercialization of products based on a new technology and the
ability to attract and retain qualified personnel. Expenses incurred have been
primarily for research and development activities and administration, resulting
in an accumulated deficit of $23.0 million through December 31, 1999.

ESTIMATES USED IN FINANCIAL STATEMENT PREPARATION

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Cash equivalents are
stated at cost, which approximates market.

SHORT-TERM INVESTMENTS

Short-term investments consist of treasury bills maturing within the next
12 months. Short-term investments are classified as available for sale
securities. Short-term investments are stated at cost, which approximates
market.

CONCENTRATIONS OF CREDIT RISK

The Company is subject to concentrations of credit risk from its cash
investments. The Company's credit risk is managed by investing its excess cash
in high-quality money market instruments and securities of the U. S. government.

PROPERTY AND EQUIPMENT

Equipment and leasehold improvements are stated at historical cost.
Improvements and replacements are capitalized. Maintenance and repairs are
expensed when incurred. The provision for depreciation and amortization is
determined using straight-line and accelerated methods, which allocate costs
over their estimated useful lives of two to ten years. Equipment under capital
leases is depreciated over the shorter of their estimated useful lives or lease
terms, which are between three and five years.

REVENUES

Revenues from research grants and consulting arrangements are recognized
as the Company performs activities under the terms of each agreement. No
revenues have been realized to date from the sale of any products.

F-8
<PAGE> 73
EDEN BIOSCIENCE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 2000 IS
UNAUDITED)

RESEARCH AND DEVELOPMENT EXPENSES

Research and development costs are expensed as incurred.

STOCK COMPENSATION

The Company has elected to apply the disclosure-only provisions of
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." Accordingly, the Company accounts for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No 25, "Accounting for Stock Issued to Employees," and
related interpretations.

INCOME TAXES

The Company accounts for income taxes using the asset and liability
method under SFAS No. 109, "Accounting for Income Taxes."

UNAUDITED PRO FORMA BALANCE SHEET INFORMATION

The unaudited pro forma balance sheet information at June 30, 2000
reflects the conversion of the convertible preferred stock into 13,794,104
shares of common stock, which will occur automatically on the effective date of
the Company's registration statement.

NET LOSS PER COMMON SHARE

Basic net loss per share is the adjusted net loss divided by the average
number of shares outstanding during the period. Diluted net loss per share is
the adjusted net loss divided by the sum of the average number of shares
outstanding during the period plus the additional shares that would have been
issued had all dilutive warrants and options been exercised, less shares that
would be repurchased with the proceeds from such exercise (Treasury Stock
Method). The effect of including outstanding options and warrants is
antidilutive for all periods presented. Therefore, options and warrants have
been excluded from the calculation of diluted net loss per share. The adjusted
net loss is the net loss adjusted for the amount of the inducement (discount
from the original exercise price) that was provided to certain holders of
warrants in exchange for their common stock warrants (See Note 2).

The pro forma basic and diluted net loss per share is calculated
presuming the conversion of all convertible preferred stock.

INTERIM FINANCIAL INFORMATION

The accompanying interim financial information as of and for the six
month period ended June 30, 1999 and 2000 is unaudited. In the opinion of the
Company's Management, the financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary to state fairly the
financial information set forth therein.

F-9
<PAGE> 74
EDEN BIOSCIENCE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 2000 IS
UNAUDITED)

The computation of diluted net income (loss) per common and common
equivalent share is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------- -------------------------
1997 1998 1999 1999 2000
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
HISTORICAL
Net loss as reported........... $(3,202,524) $(6,935,849) $(9,394,578) $(4,524,549) $(6,822,209)
Inducement to exercise
warrants..................... -- -- (554,588) -- --
----------- ----------- ----------- ----------- -----------
Adjusted net loss.............. (3,202,524) (6,935,849) 9,949,166 (4,524,549) (6,822,209)
Weighted average common shares
outstanding.................. 1,681,250 1,765,126 1,902,281 1,822,916 2,862,661
Historical basic and diluted
net loss per share........... $ (1.90) $ (3.93) $ (5.23) $ (2.48) $ (2.38)
=========== =========== =========== =========== ===========
PRO FORMA
Adjusted net loss.............. $ 9,949,166 $(6,822,209)
Weighted average common shares
outstanding.................. 1,902,281 2,862,661
Pro forma conversion of
convertible preferred
stock........................ 12,917,917 13,794,104
----------- -----------
Pro forma weighted average
shares outstanding........... 14,820,198 16,656,765
----------- -----------
Pro forma basic and diluted net
loss per share............... $ (0.67) $ (0.41)
=========== ===========
</TABLE>

Shares issuable pursuant to stock options and warrants that have not been
included in the above calculations because they are antidilutive totaled
1,034,882, 2,425,252, 1,982,358, 2,681,240 and 2,038,256 for the years ended
December 31, 1997, 1998, 1999 and the six months ended June 30, 1999 and 2000,
respectively.

2. SHAREHOLDERS' EQUITY

CONVERTIBLE PREFERRED STOCK

The Company has authorized 10,000,000 shares of preferred stock with a
par value of $0.01 per share. The Company has designated the following series of
convertible preferred stock:

<TABLE>
<CAPTION>
SHARES SHARES YEARS NET CASH LIQUIDATION CONVERSION
SERIES DESIGNATED ISSUED ISSUED PROCEEDS PREFERENCE RATIO
----------------------------- ---------- --------- ------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
A............................ 1,500,000 1,500,000 1994 $ -- $ 300,000 1:1
B............................ 2,400,000 2,333,100 1994-95 1,127,578 1,166,550 1:1
C............................ 3,000,000 3,000,000 1995-96 2,951,755 3,000,000 1:1
D............................ 2,664,185 2,664,185 1996-97 5,172,536 5,328,370 1:1
E............................ 250,000 130,488 1998 6,330,686 6,524,400 1:11.11
F............................ 150,000 118,623 1998-99 14,215,933 14,234,760 1:24
--------- --------- ----------- -----------
Total.............. 9,964,185 9,746,396 $29,798,488 $30,554,080
========= ========= =========== ===========
</TABLE>

F-10
<PAGE> 75
EDEN BIOSCIENCE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 2000 IS
UNAUDITED)

Each share of preferred stock is convertible into the number of shares of
common stock indicated in the conversion ratios above, as adjusted for stock
splits, non-cash dividends or other distributions as defined at the option of
the holder. The shares are subject to automatic conversion upon the effective
date of a registration statement for an initial public offering in which the
gross proceeds are greater than $5,000,000.

Each share of convertible preferred stock has voting rights. The Series
B, C and D shareholders have co-sale rights, whereby shares of the common stock
and Series A may be sold only if Series B, C and D shareholders have the right
to include a pro rata number of their shares in the sale. Also, in the event of
future securities offerings, Series B through F shareholders have the right to
maintain their ownership percentage by purchasing new shares at the offering
price. Both the co-sale rights and right to maintain ownership percentage expire
upon effectiveness of the Company's initial public offering.

COMMON STOCK

The Company has authorized 30,000,000 shares of common stock. Upon
inception, the Company issued to the founders 1,500,000 shares of common stock
in receipt for notes totaling $45,000 and bearing interest at 7.75% per annum,
due in July 2004 ("Founders' Shares").

During 1995, the Company issued 400,000 shares of common stock to Cornell
Research Foundation ("CRF") as partial consideration for an exclusive license
agreement for Cornell University's rights to certain patents, patent
applications and biological materials relating to harpin proteins and related
technology. These shares were subject to cancellation by the Company if the
agreement was terminated prior to sale of products under the license and if
certain milestones as set forth in the License Agreement were not achieved. The
Company recorded expense of $16,000, $60,000 and $240,000 as the fair market
value of the shares whose cancellation provision lapsed in 1995, 1996 and 1998,
respectively. These shares were valued at $0.40 per share, $0.50 per share and
$2.00 per share in 1995, 1996 and 1998, respectively.

In September 1998, the Company and CRF amended the exclusive license
agreement to reduce royalty fee arrangements in exchange for fully vesting CRF's
remaining shares of common stock subject to cancellation. The Company recorded
additional expense in 1998 of $420,000, or $3.50 per share, as the fair value of
vested shares.

STOCK COMPENSATION

During 1995, the shareholders and Board of Directors approved the 1995
Combined Incentive and Nonqualified Stock Option Plan (the "Plan"). The Board of
Directors has the authority to determine all matters relating to options to be
granted under the Plan, including designation as incentive or nonqualified stock
options, the selection of individuals to be granted options, the number of
shares to be subject to each grant, the exercise price, the term and the vesting
period, if any. Generally, options vest over periods ranging from three to five
years and expire ten years from the date of grant.

F-11
<PAGE> 76
EDEN BIOSCIENCE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 2000 IS
UNAUDITED)

The following table summarizes the Company's stock option activity:

<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
---------- ----------------
<S> <C> <C>
Balance at December 31, 1994................................ -- --
Options granted........................................... 175,000 $0.44
Options canceled.......................................... (41,000) 0.40
----------
Balance at December 31, 1995................................ 134,000 0.45
Options granted........................................... 264,000 0.50
Options canceled.......................................... (13,000) 0.42
----------
Balance at December 31, 1996................................ 385,000 0.48
Options granted........................................... 538,500 1.00
Options canceled.......................................... (36,500) 0.55
----------
Balance at December 31, 1997................................ 887,000 0.79
Options granted........................................... 573,000 2.33
Options canceled.......................................... (72,334) 0.90
Options exercised......................................... (141,666) 0.50
----------
Balance at December 31, 1998................................ 1,246,000 1.53
Options granted........................................... 321,700 4.88
Options canceled.......................................... (47,500) 2.78
Options exercised......................................... (40,000) 0.63
----------
Balance at December 31, 1999................................ 1,480,200 2.24
Options granted........................................... 506,450 6.35
Options canceled.......................................... (38,950) 3.50
Options exercised......................................... (243,500) 1.64
----------
Balance at June 30, 2000 (unaudited)........................ (1,704,200) 3.52
==========
</TABLE>

At December 31, 1999, the Company had reserved a total of 2,068,334
shares of common stock for issuance to its stock option holders and had 588,134
available for grant. At June 30, 2000, the Company had reserved a total of
1,824,834 shares of common stock for issuance to its stock option holders and
had 120,634 available for future grant.

The following table summarizes stock options information at December 31,
1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------- OPTIONS EXERCISABLE
WEIGHTED- ----------------------------
RANGE OF AVERAGE WEIGHTED- WEIGHTED-
EXERCISE NUMBER REMAINING AVERAGE NUMBER AVERAGE
---------------------------------- OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE OUTSTANDING EXERCISE PRICE
---------------------------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$0.40 - 1.00...................... 814,500 7.44 $0.89 383,499 $0.82
1.01 - 3.99...................... 348,500 8.50 2.98 48,332 3.03
4.00 - 6.00...................... 317,200 9.65 4.89 -- --
--------- -------
1,480,200 8.16 2.24 431,831 1.06
========= =======
</TABLE>

Stock options exercisable were 183,333, 242,997 and 431,831 at December 31,
1997, 1998 and 1999, respectively. The weighted-average exercise prices of
options exercisable were $0.50, $0.76 and $1.06 at December 31, 1997, 1998 and
1999, respectively.

F-12
<PAGE> 77
EDEN BIOSCIENCE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 2000 IS
UNAUDITED)

The Company records compensation expense over the vesting period for the
difference between the exercise price and the deemed fair market value for
financial reporting purposes of stock options granted. In conjunction with
grants made in 1998, the Company recognized compensation expense for these stock
options of $59,679 in 1998, $92,868 in 1999 and $46,434 for the six months ended
June 30, 2000. At December 31, 1999, the unearned compensation expense was
$146,336. The weighted average grant date fair value of these options was $2.81
per share.

The Company has adopted the disclosure-only provisions of SFAS No. 123. Had
compensation expense been recognized on stock options issued based on the fair
value of the options at the date of grant and recognized over the vesting
period, the Company's net loss would have been increased to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
DECEMBER 31, JULY 18, 1994
------------------------------------------ (INCEPTION) TO
1997 1998 1999 DECEMBER 31, 1999
----------- ------------ ----------- -----------------
<S> <C> <C> <C> <C>
Net Loss:
As reported...................... $(3,202,054) $(6,935,849) $(9,394,578) $(22,360,239)
Pro forma........................ $(3,212,103) $(6,972,423) $(9,487,569) $(22,505,685)
</TABLE>

The weighted average grant date fair value of options granted in 1997,
1998, 1999 and 2000 was $0.25, $0.38, $0.92 and $1.17, respectively. The fair
value of each option grant is estimated on the date of grant using the fair
value based method prescribed by SFAS No. 123 for private companies, which
considers only the time value of money. Assumptions used for the grants were:
expected life of three to five years, risk free interest rate of 4.5% to 6.6%
and no dividend yield.

COMMON STOCK WARRANTS

Purchasers of Series F shares received warrants to purchase 948,984
common shares at $5.00, $7.00 and $9.00 per share. The $7.00 and $9.00 purchase
price will increase to $7.50 and $10.00, respectively, when the Company receives
notice from the Environmental Protection Agency of its approval of the Company's
product registration application and request for exemption from tolerance. In
1999, the Company offered holders of $5.00, $7.00 and $9.00 warrants the
opportunity to exchange these warrants (one of each warrant) plus $76.00 cash
for 12 shares of common stock. A total of 831,882 warrants were exchanged under
this offer for total proceeds of $5,268,586 in 1999. A total of $554,588 has
been charged to deficit accumulated during development stage and credited to
additional paid-in capital for the effect of the inducement offered to warrant
holders.

The weighted average exercise price of the 117,102 warrants outstanding at
December 31, 1999 was $7.00. A total of 116,702 Series F warrants were exercised
in the six months ended June 30, 2000 for proceeds of $860,162. The remaining
400 warrants expired unexercised on June 30, 2000.

The Company also issued warrants to purchase 175,822 shares of common
stock at prices from $0.50 to $5.00 per share to placement agents for the sale
of convertible preferred stock. During the six months ended June 30, 2000,
51,000 warrants were exercised for proceeds of $25,500. The warrants are
exercisable immediately and expire from 2000 to 2003. In connection with the
sale of Series C shares in 1996, a purchaser of Series C shares received a
warrant to purchase 200,000 shares of our common stock at a price of $1.00 per
share. In October 1996, the Company issued warrants to purchase 9,234 shares of
common stock at a price of $1.00 per share to an equipment lessor. The weighted
average exercise price of these warrants outstanding at December 31, 1999 was
$1.50.

F-13
<PAGE> 78
EDEN BIOSCIENCE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 2000 IS
UNAUDITED)

3. LICENSE AGREEMENT

In May 1995, the Company entered into an exclusive worldwide license
agreement with the Cornell Research Foundation for certain patents, patent
applications and rights to biological material relating to harpin proteins and
related technology. The license agreement terminates on the expiration date of
the last-to-expire licensed patent covered by the agreement. As consideration
for the license, the Company issued 400,000 shares of common stock to the
Cornell Research Foundation, has funded certain research and development
activities at Cornell University and has agreed to pay certain minimum annual
royalty payments. The Company also agreed to pay a royalty on net sales of
products that incorporate the licensed technology. In 1998, the Company and the
Cornell Research Foundation amended the exclusive license agreement to reduce
royalty fee arrangements in exchange for fully vesting the Cornell Research
Foundation's remaining shares of common stock subject to cancellation, for which
the Company recorded amortization expense of $660,000 as a research and
development expense.

4. PROPERTY AND EQUIPMENT

Property and equipment, at cost, consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
Equipment................................................... $ 634,897 $ 2,183,012
Equipment under capital leases.............................. 1,648,563 1,392,383
Leasehold improvements...................................... 491,919 974,461
----------- -----------
2,775,379 4,549,856
Less accumulated depreciation and amortization.............. (1,002,804) (1,600,136)
----------- -----------
Net property and equipment.................................. $ 1,772,575 $ 2,949,720
=========== ===========
</TABLE>

5. LEASES

The Company has entered into non-cancelable lease agreements involving
equipment and facilities through the year 2004. Rent expense under these leases
totaled $229,569, $307,049, $313,659, and $183,887 for 1997, 1998, 1999, and the
six-month period ended June 30, 2000, respectively. Total rent expense under
these leases was approximately $949,973 for the period from July 18, 1994
(inception) to December 31, 1999. Future minimum payments under these leases, as
of December 31, 1999, are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
---------- ---------
<S> <C> <C>
2000........................................................ $ 459,406 $248,411
2001........................................................ 328,501 217,620
2002........................................................ 220,518 --
2003........................................................ 80,240 --
2004........................................................ 2,598 --
---------- --------
Total minimum lease payments................................ 1,091,263 $466,031
========
Less amount representing interest......................... (239,212)
----------
Present value of net minimum lease payments................. 852,051
Less current portion...................................... (329,085)
----------
Capital lease obligation, net of current portion............ $ 522,966
==========
</TABLE>

F-14
<PAGE> 79
EDEN BIOSCIENCE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 2000 IS
UNAUDITED)

6. ACCRUED EXPENSES

Accrued expenses consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1999 JUNE 30, 2000
-------- ---------- -------------
<S> <C> <C> <C>
Salaries and wages...................................... $167,198 $ 201,256 $ 238,578
Bonuses payable......................................... 148,000 395,497 367,889
Vacation payable........................................ 97,121 162,286 248,312
Toxicology studies...................................... -- 100,000 --
Field trial expenses payable............................ -- -- 296,265
Accrued offering costs.................................. -- -- 300,000
Public and media relations fees payable................. -- -- 308,160
Other................................................... 95,716 240,979 497,184
-------- ---------- ----------
Total accrued expenses............................. $508,035 $1,100,018 $2,256,388
======== ========== ==========
</TABLE>

7. PROFIT SHARING PLAN AND TRUST

The EDEN Bioscience Corporation 401(k) Plan and Trust (the Plan) was
established in 1997. The Plan covers all employees of the Company who have
completed at least three months of service and who are at least 21 years old.
The Plan includes a provision for a 401(k) deferral of up to 20% of participant
compensation, subject to IRS limitations, and a discretionary employer match at
an amount to be determined by the Company's Board of Directors. The Company has
made no contributions to the Plan.

8. INCOME TAXES

The Company did not record an income tax benefit for any of the periods
presented because it has experienced operating losses since inception. The
Company's total tax net operating loss carry forwards were approximately $21.3
million at December 31, 1999 which expire between 2009 and 2014. The significant
components of the deferred tax asset were as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
Net operating loss carry forward............................ $ 4,268,000 $ 7,256,000
Other....................................................... 76,000 207,000
----------- -----------
Deferred tax asset.......................................... 4,344,000 7,463,000
Deferred tax asset valuation allowance...................... (4,344,000) (7,463,000)
----------- -----------
Net deferred tax assets..................................... $ -- $ --
=========== ===========
</TABLE>

The valuation allowance on deferred tax assets increased by $2,330,000 and
$3,119,000 during 1998 and 1999, respectively. Pursuant to Sections 382 and 383
of the Internal Revenue Code, annual use of the Company's net operating loss and
credit carryforwards may be limited in the event of a cumulative change in
ownership of more than 50%.

9. SUBSEQUENT EVENTS

On June 15, 2000, the Company's Board of Directors authorized the Company
to file a Registration Statement with the Securities and Exchange Commission to
permit the Company to proceed with an initial public offering of its common
stock (the "Offering"). All outstanding shares of the

F-15
<PAGE> 80
EDEN BIOSCIENCE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 2000 IS
UNAUDITED)

Company's convertible preferred stock will be automatically converted to shares
of common stock upon the effective date of the Registration Statement.

On August 9, 2000, the Company's shareholders voted to amend the
Company's articles of incorporation and 1995 Combined Incentive and Nonqualified
Stock Option Plan and to adopt the 2000 Stock Inventive Plan and 2000 Employee
Stock Purchase Plan.

ARTICLES OF INCORPORATION

The Company's articles of incorporation were amended to increase the
number of shares of common stock authorized for issuance from 30,000,000 shares
to 100,000,000 shares.

1995 COMBINED INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN (THE "1995 PLAN")

Shareholders reserved an additional 1,000,000 shares of common stock for
issuance under the 1995 Plan. Amendments were also approved to change certain
provisions of the 1995 Plan relating to the effect of corporate transactions
(such as a merger) on outstanding options. Generally speaking, the amendments
provide that in a stock-for-stock transaction, the Company's Board of Directors
and a successor company may determine that all outstanding options will be
converted into options to purchase shares of the other corporation. If options
are converted into options to purchase stock of a successor company, such
options would become fully vested and exercisable if an individual's services
are terminated in contemplation of a transaction or within three years of such
transaction, unless services are terminated for cause or the individual
terminates services without good reason. On August 9, 2000, the Board of
Directors granted a total of 797,500 stock options, at an exercise price of $14
per share, to directors, officers and certain employees.

2000 STOCK INCENTIVE PLAN (THE "2000 PLAN")

The 2000 Plan provides for awards of stock options, shares of common
stock or units denominated in common stock, all of which may be subject to
restrictions. The Board of Directors has reserved a total of 1,500,000 shares of
common stock under the 2000 Plan, plus an automatic annual increase, beginning
on the first day of the Company's fiscal year beginning in 2002, equal to the
lesser of (1) 1,500,000 shares; (2) 5% of the outstanding shares of common stock
as of the end of the immediately preceding year on a fully diluted basis; and
(3) a lesser amount as may be determined by the Board of Directors.

The 2000 Plan will become effective only upon completion of the Offering,
at which time it will replace the 1995 Plan for purposes of all future stock
incentive awards. At such time, any reserved but ungranted shares under the 1995
Plan and any shares subject to outstanding options under the 1995 Plan that
expire or are otherwise cancelled without being exercised will be added to the
shares available under the 2000 Plan, subject to a maximum of 2,824,834 shares.

2000 EMPLOYEE STOCK PURCHASE PLAN (THE "2000 STOCK PURCHASE PLAN")

The 2000 Stock Purchase Plan will be implemented upon the completion of
the Offering to encourage employees to remain employed by the Company or its
subsidiaries. The 2000 Stock Purchase Plan will qualify under Section 423 of the
Internal Revenue Code and will be administered by the Board of Directors, a
committee of the Board of Directors or an executive officer appointed by the
Board of Directors. The 2000 Stock Purchase Plan allows eligible employees to
purchase common stock through payroll deductions of up to 15% of their annual
compensation. No employee may purchase common stock worth more than $25,000 in
any calendar year, valued as of the first day of each offering period. In

F-16
<PAGE> 81
EDEN BIOSCIENCE CORPORATION
(A DEVELOPMENT STAGE CORPORATION)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 2000 IS
UNAUDITED)

addition, no more than an aggregate of 125,000 shares can be purchased in any
six-month purchase period and no employee may purchase more than 1,000 shares in
any six-month purchase period.

The 2000 Stock Purchase Plan will be implemented with twenty-four month
offering periods, each of which will consist of four six-month purchase periods,
with purchases being made on the last day of each such period, except that the
first offering period will begin on the effective date of the Offering and end
on October 31, 2000. Subsequent offering periods will begin on each May 1 and
November 1. The price of the common stock purchased under the 2000 Stock
Purchase Plan will be the lesser of 85% of the fair market value on the first
day of an offering period and 85% of the fair market value on the last day of a
purchase period, except that the purchase price for the first offering period
will be equal to the lesser of 100% of the initial public offering price of the
common stock and 85% of the fair market value on the last day of the purchase
period.

The 2000 Stock Purchase Plan authorizes the issuance of a total of
500,000 shares of common stock, plus an automatic annual increase, to be added
on the first day of the Company's fiscal year beginning in 2002, equal to the
lesser of (1) 250,000 shares; (2) 1% of the outstanding shares of common stock
as of the end of the immediately preceding fiscal year on a fully diluted basis,
and (3) a lesser amount determined by the Board of Directors.

CREDIT FACILITIES

In August 2000, the Company established unsecured, multiple-advance,
committed credit facilities with Stephens Group, Inc. and the WBW Trust Number
One. Under the terms of the facilities, the Company may request at any time on
or before December 31, 2000 that Stephens Group make advances to EDEN of an
aggregate maximum of up to $10 million and that the WBW Trust make advances to
EDEN of up to $5 million. Amounts borrowed under the facilities will bear
interest at the prime rate, as determined by reference to the Wall Street
Journal, plus 2%, payable on the first day of each month. All outstanding
principal and accrued interest will be due on the earlier of (a) December 31,
2001 or (b) the date that the Company receives any cash proceeds from the
issuance of any equity securities after the date the facilities were
established. Amounts repaid under the facility may not be reborrowed. The
amounts borrowed under the facilities may be used for general corporate
purposes. As of August 31, 2000, the Company had not yet borrowed any amounts
under the facilities. The credit facilities contain restrictive covenants,
including provisions that prohibit EDEN from paying dividends or from incurring
indebtedness for borrowed money and capital leases that exceed $500,000 in the
aggregate.

In connection with the establishment of the credit facilities, the
Company paid a loan commitment fee to Stephens Group of $200,000 and to the WBW
Trust of $100,000. In addition, the Company issued warrants to each of Stephens
Group and the WBW Trust to purchase a number of shares of common stock equal to
20% of their maximum loan commitments divided by the public offering price of
the shares that are sold in the Company's initial public offering. The warrants
may be exercised at any time after the 180th day after the effective date of the
registration statement relating to this offering, at an exercise price per share
equal to the public offering price of the shares that are sold in this offering.
The warrants expire in August 2005. The Company currently expects to incur a
total expense of approximately $2,300,000 related to the loan commitment fee and
the fair value of these warrants. This amount will be reflected as interest
expense over the period from August 2000 through December 2000, or upon the
closing of this offering, if that occurs prior to the end of December 2000.

F-17
<PAGE> 82
Back cover artwork:

[Graphic: EDEN's logo and a collage of photographs depicting an EDEN lab
technician at work, the cover of the issue of Science magazine discussing the
harpin discovery, a Messenger-treated field and equipment used in the
manufacturing process, with the following captions: "Our research and
development team is at the forefront of discovering innovative natural solutions
for agriculture based on our core harpin and harpin-related technologies"; "We
have designed and built a manufacturing process to produce Messenger with a high
degree of quality assurance"; "Science magazine recognized the importance of
the harpin discovery and published the related story as its cover story"; and
"We have performed over 400 field trials on over 40 crops in the United States
and abroad to demonstrate Messenger's effectiveness."]
<PAGE> 83

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Through and including , 2000 (the 25th day after the
date of this prospectus), all dealers effecting transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

5,800,000 SHARES

[EDEN LOGO]

COMMON STOCK

---------------------------
PROSPECTUS
---------------------------

MERRILL LYNCH & CO.
STEPHENS INC.
GEORGE K. BAUM & COMPANY

RAGEN MACKENZIE INCORPORATED

, 2000

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 84

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than the
underwriting discount and commissions, payable by the registrant in connection
with the sale of our common stock being registered hereby. All amounts shown are
estimates, except the Securities and Exchange Commission registration fee, the
NASD filing fee and the Nasdaq National Market listing fee.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 24,660
NASD filing fee............................................. 9,838
Nasdaq National Market listing fee.......................... 95,000
Blue Sky fees and expenses.................................. 10,000
Printing and engraving expenses............................. 200,000
Legal fees and expenses..................................... 300,000
Accounting fees and expenses................................ 120,000
Directors and officers insurance............................ 300,000
Transfer Agent and Registrar fees........................... 10,000
Miscellaneous expenses...................................... 13,502
----------
Total............................................. 1,083,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act authorize a court to award, or a corporation's board of
directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended. Section 10 of
the registrant's bylaws provides for indemnification of the registrant's
directors, officers, employees and agents to the maximum extent permitted by
Washington law. The directors and officers of the registrant also may be
indemnified against liability they may incur for serving in that capacity
pursuant to a liability insurance policy maintained by the registrant for such
purpose.

Section 23B.08.320 of the WBCA authorizes a corporation to limit a
director's liability to the corporation or its shareholders for monetary damages
for acts or omissions as a director, except in certain circumstances involving
intentional misconduct, knowing violations of law or illegal corporate loans or
distributions, or any transaction from which the director personally receives a
benefit in money, property or services to which the director is not legally
entitled. Article 11 in the registrant's articles of incorporation contains
provisions implementing, to the fullest extent permitted by Washington law, such
limitations on a director's liability to the registrant and its shareholders.

The underwriting agreement provides for indemnification by the
Underwriters of the registrant and its executive officers and directors, and by
the registrant of the Underwriters, for certain liabilities, including
liabilities arising under the Securities Act, in connection with matters
specifically provided in writing by the underwriters for inclusion in this
registration statement.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since January 1, 1997, EDEN has issued and sold unregistered securities
as follows:

1. In May and June 1997, EDEN issued an aggregate of 2,664,185 shares of
Series D Preferred Stock to 107 investors, for consideration of $2.00 per share,
or an aggregate of $5,328,370 which was received between December 1996 and June
1997. The foregoing purchases and sales were exempt from registration under the
Securities Act pursuant to Rule 506 of Regulation D on the basis that all the
investors were "accredited investors" as defined in Rule 501(a) of Regulation D.

II-1
<PAGE> 85

2. On June 15, 1997, EDEN issued ten warrants to purchase an aggregate of
68,148 shares of our common stock, at an exercise price of $2.00 per share, to
ten placement agents, as partial consideration for services with a total value
of $272,595 rendered by such agents in connection with the private placement of
EDEN's Series D Preferred Stock as noted above. The foregoing issuances were
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof on the basis that the transactions did not involve a public offering.

3. In August, September and October 1998, EDEN issued an aggregate of
130,488 shares of Series E Preferred Stock to 101 investors, for a consideration
of $50.00 per share, or an aggregate of $6,524,400. The foregoing purchases and
sales were exempt from registration under the Securities Act pursuant to Rule
506 of Regulation D on the basis that all the investors were "accredited
investors" as defined in Rule 501(a) of Regulation D.

4. In November 1998, EDEN issued warrants to purchase an aggregate of
37,174 shares of our common stock, at an exercise price of $5.00 per share, to
six placement agents, as partial consideration for services with a total value
of $371,740 rendered by such agents in connection with the private placement of
the registrant's Series E Preferred Stock as noted above. The foregoing
issuances were exempt from registration under the Securities Act pursuant to
Section 4(2) thereof on the basis that the transactions did not involve a public
offering.

5. In December 1998 and January 1999, an aggregate of 79,082 Series F
Convertible Preferred Stock and Common Stock Purchase Warrants Units were sold
for $120.00 per Unit plus an obligation under a Put Option Agreement to
purchase, at a price of $120.00 per share, up to an additional number of Series
F Convertible Preferred Stock equal to 50% of the shares of Series F Convertible
Preferred Stock originally purchased by the investor as part of the Units. Each
Unit consists of one Series F Convertible Preferred Stock that is convertible to
common stock at one preferred share to 24 common shares and warrants to purchase
12 shares of our common stock at exercise prices ranging from $5.00 to $10.00
per share. EDEN issued an aggregate of 79,082 shares of Series F Preferred Stock
and warrants to purchase 948,984 common shares to 71 investors for an aggregate
consideration of $9,489,480. The foregoing purchases and sales were exempt from
registration under the Securities Act pursuant to Rule 506 of Regulation D on
the basis that all the investors were "accredited investors" as defined in Rule
501(a) of Regulation D.

6. In November 1999, EDEN exercised the Put Option and 39,541 additional
Series F shares were issued for an aggregate consideration of $4,744,920. The
foregoing purchases and sales were exempt from registration under the Securities
Act pursuant to Section 4(2) thereof on the basis that the transactions did not
involve a public offering.

7. In November 1999, EDEN issued 831,882 shares of common stock to
holders of $5.00, $7.00 and $9.00 warrants in exchange for those warrants and
cash for aggregate consideration of $5,268,586. The foregoing purchases and
sales were exempt from registration under the Securities Act pursuant to Section
4(2) thereof on the basis that the transactions did not involve a public
offering.

8. In August 2000, in connection with the establishment of two credit
facilities with Stephens Group, Inc. and the WBW Trust Number One, EDEN issued
warrants to each of Stephens Group and the WBW Trust to purchase a number of
shares of our common stock equal to 20% of their maximum loan commitments ($10
million and $5 million, respectively) divided by the public offering price of
the shares sold in this offering. The foregoing issuances were exempt from
registration under the Securities Act pursuant to Section 4(2) thereof on the
basis that the transactions did not involve a public offering.

9. From May 1995 to August 31, 2000, EDEN granted options to purchase
3,176,150 shares of our common stock, with exercise prices ranging from $0.40 to
$14.00 per share, to employees, consultants and directors pursuant to the 1995
Combined Incentive and Nonqualified Stock Option Plan. Of these options, options
for 252,484 shares have been canceled without being exercised, options for
455,666 shares have been exercised and options for 2,468,000 shares remain
outstanding. As of August 31, 2000, we have received $517,366 in the aggregate
from the exercise of options granted under the 1995 Combined

II-2
<PAGE> 86

Incentive and Nonqualified Stock Option Plan, $14,866 of which we received from
employees exercising stock options granted under the 1995 plan. The sale and
issuance of these securities were exempt from registration under the Securities
Act pursuant to Rule 701 promulgated thereunder on the basis that these options
were offered and sold pursuant to a written compensatory benefit plan.

All outstanding shares of our preferred stock are convertible, at their
respective conversion ratios, at any time into shares of our common stock. In
addition, all outstanding shares of our preferred stock will be converted
automatically, at their respective conversion ratios, into shares of our common
stock upon the effectiveness of our registration statement. The remaining
outstanding warrants may be exercised at any time before they expire, between
2001 and 2005, unless they earlier terminate by their terms.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
-------- ------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement.
3.1* Restated Articles of Incorporation of the Registrant.
3.2* Third Amended and Restated Bylaws of the Registrant.
5.1* Opinion of Perkins Coie LLP as to the legality of the
shares.
9.1* Form of Voting Trust Agreement between Stephens-EBC, LLC and
James Sommers, as Trustee.
10.1*+ Exclusive License Agreement, dated May 1, 1995, between
Cornell Research Foundation, Inc. and the Registrant, as
amended as of June 2, 2000.
10.2* Lease, dated November 4, 1996, between Koll Real Estate
Group for Knoll North Creek Business Park and the
Registrant.
10.3* 1995 Combined Incentive and Nonqualified Stock Option Plan.
10.4* 2000 Stock Incentive Plan.
10.5* 2000 Employee Stock Purchase Plan.
10.6* Form of Indemnification Agreement.
10.7* Employment Agreement, dated August 16, 2000, between the
Registrant and Jerry L. Butler.
10.8* Employment Agreement, dated August 16, 2000, between the
Registrant and Zhongmin Wei.
10.9* Change of Control Agreement, dated August 16, 2000, between
the Registrant and Jerry L. Butler.
10.10* Change of Control Agreement, dated August 16, 2000, between
the Registrant and Bradley S. Powell.
10.11* Change of Control Agreement, dated August 16, 2000, between
the Registrant and Zhongmin Wei.
10.12* Credit Agreement, dated August 16, 2000, between Stephens
Group, Inc. and the Registrant.
10.13* Credit Agreement, dated August 16, 2000, between WBW Trust
Number One, and the Registrant.
21.1* Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
23.2* Consent of Perkins Coie LLP (contained in the opinion filed
as Exhibit 5.1 hereto).
23.3* Consent of Allan Woodburn Associates.
24.1* Power of Attorney.
27.1* Financial Data Schedule.
</TABLE>

------------

* Previously filed.

+ Confidential treatment has been requested with respect to portions of this
exhibit.

II-3
<PAGE> 87

(b) Financial Statement Schedules

All schedules are omitted because they are inapplicable or the requested
information is shown in the financial statements of the registrant or related
notes thereto.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

The undersigned registrant hereby undertakes to provide to the
Underwriters, at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this Registration Statement as of the time
it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.

II-4
<PAGE> 88

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Amendment No. 2 to the registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bothell, State of Washington, on the 1st day of
September, 2000.

EDEN BIOSCIENCE CORPORATION

By: /s/ JERRY L. BUTLER
------------------------------------
Jerry L. Butler, President
and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to the registration statement has been signed by the
following persons in the capacities indicated below on the 1st day of September,
2000.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JERRY L. BUTLER President, Chief Executive Officer and
-------------------------------------------------------- Director (Principal Executive Officer)
Jerry L. Butler

*BRADLEY S. POWELL Vice President of Finance and Chief
-------------------------------------------------------- Financial Officer (Principal Financial and
Bradley S. Powell Accounting Officer)

*JON E. M. JACOBY Director
--------------------------------------------------------
Jon E. M. Jacoby

*ALBERT A. JAMES Director
--------------------------------------------------------
Albert A. James

*AGATHA L. MAZA Director
--------------------------------------------------------
Agatha L. Maza
</TABLE>

<TABLE>
<CAPTION>
*OSCAR C. SANDBERG Director
--------------------------------------------------------
Oscar C. Sandberg
<C> <S>
*JOHN W. TITCOMB, JR. Director
--------------------------------------------------------
John W. Titcomb, Jr.

*WILLIAM T. WEYERHAEUSER Director
--------------------------------------------------------
William T. Weyerhaeuser

*By: /s/ JERRY L. BUTLER
---------------------------------------------------
Jerry L. Butler
Attorney-in-Fact
</TABLE>

II-5
<PAGE> 89

INDEX TO EXHIBITS

------------

* Previously filed.

+ Confidential treatment has been requested with respect to portions of this
exhibit.