ALANCO ENVIRONMENTAL RESOURCES CORP, PRE 14A, 1998-09-30

ALANCO ENVIRONMENTAL RESOURCES CORP
PRE 14A, 1998-09-30
INDUSTRIAL & COMMERCIAL FANS & BLOWERS & AIR PURIFING EQUIP

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ALANCO ENVIRONMENTAL RESOURCES CORPORATION
15900 North 78th Street, Suite 101
Scottsdale, Arizona 85260
(602) 607-1010

PROXY STATEMENT

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held November 6, 1998

TO THE SHAREHOLDERS OF ALANCO ENVIRONMENTAL RESOURCES CORPORATION

NOTICE HEREBY IS GIVEN that the Annual Meeting of Shareholders of Alanco
Environmental Resources Corporation, an Arizona corporation (the "Company"),
will be held at the Company's offices, 15900 North 78th Street, Suite 101,
Scottsdale, Arizona 85260, Scottsdale, Arizona, on November 6, 1998, at 10:00
a.m., Mountain Standard Time, and at any and all adjournments thereof, for the
purpose of considering and acting upon the following Proposals:

Proposal No. 1. ELECTION OF DIRECTORS

Proposal No. 2. APPROVAL OF A PROPOSAL TO AUTHORIZE THE BOARD OF DIRECTORS
TO DECLARE, ONLY IF NECESSARY, A REVERSE SPLIT OF THE
OUTSTANDING COMMON STOCK ON THE BASIS OF ONE SHARE OF
COMMON STOCK FOR UP TO THREE SHARES OUTSTANDING. THE
EFFECTIVE DATE AND THE PRECISE NUMBER OF SHARES TO BE
CONVERTED TO BE DETERMINED BY THE COMPANY'S BOARD OF
DIRECTORS AT A LATER TIME. IF THE BOARD OF DIRECTORS HAS
NOT EFFECTED THE ACTION CONTEMPLATED HEREUNDER BY OCTOBER
31, 1999, THIS AUTHORIZATION WILL CEASE.

Proposal No. 3. APPROVAL OF THE ALANCO ENVIRONMENTAL RESOURCES CORPORATION
1998 STOCK OPTION PLAN

Proposal No. 4. APPROVAL OF THE ALANCO ENVIRONMENTAL RESOURCES CORPORATION
1998 DIRECTORS AND OFFICERS STOCK OPTION PLAN

This Annual Meeting is called as provided for by Arizona law and the Company's
By-laws.

Only holders of the outstanding Common Stock of the Company of record at the
close of business on October 7, 1998, will be entitled to notice of and to vote
at the Meeting or at any adjournment or adjournments thereof.

All shareholders, whether or not they expect to attend the Annual Meeting of
Shareholders in person, are urged to sign and date the enclosed Proxy and
return it promptly in the enclosed postage-paid envelope which requires no
additional postage if mailed in the United States. The giving of a proxy will
not affect your right to vote in person if you attend the Meeting.

BY ORDER OF THE BOARD OF DIRECTORS.

CYNTHIA L. CASTELLANO
SECRETARY

Scottsdale, Arizona
October 7, 1998<PAGE>

Alanco Environmental Resources Corporation
15900 North 78th Street, Suite 101
Scottsdale, Arizona 85260
(602)607-1010

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 6, 1998

GENERAL INFORMATION

The enclosed Proxy is solicited by and on behalf of the Board of Directors of
Alanco Environmental Resources Corporation, an Arizona corporation (the
"Company"), for use at the Company's Annual Meeting of Shareholders to be held
at the Company's offices, 15900 North 78th Street, Suite 101, Scottsdale,
Arizona 85260, Scottsdale, Arizona, on the 6th day of November, 1998 at 10:00
a.m., Mountain Standard Time, and at any adjournment thereof. It is
anticipated that this Proxy Statement and the accompanying Proxy will be mailed
to the Company's shareholders on or before October 9, 1998.

Any person signing and returning the enclosed Proxy may revoke it at any time
before it is voted by giving written notice of such revocation to the Company,
or by voting in person at the Meeting. The expense of soliciting proxies,
including the cost of preparing, assembling and mailing this proxy material to
shareholders, will be borne by the Company. It is anticipated that
solicitations of proxies for the Meeting will be made only by use of the mails;
however, the Company may use the services of its Directors, Officers and
employees to solicit proxies personally or by telephone without additional
salary or compensation to them. Brokerage houses, custodians, nominees and
fiduciaries will be requested to forward the proxy soliciting materials to the
beneficial owners of the Company's shares held of record by such persons, and
the Company will reimburse such persons for their reasonable out-of-pocket
expenses incurred by them in that connection.

All shares represented by valid proxies will be voted in accordance therewith
at the Meeting. Shares not voting as a result of a proxy marked to abstain
will be counted as part of total shares voting in order to determine whether or
not a quorum has been achieved at the Meeting. Shares registered in the name of
a broker-dealer or similar institution for beneficial owners to whom the
broker-dealer distributed notice of the Annual Meeting and proxy information
and which such beneficial owners have not returned proxies or otherwise
instructed the broker-dealer as to voting of their shares, will be counted as
part of the total shares voting in order to determine whether or not a quorum
has been achieved at the Meeting. Abstaining proxies and broker-dealer non-
votes will not be counted as part of the vote on any business at the Meeting on
which the shareholder has abstained.

The Company's Annual Report to Shareholders for the fiscal year ended June 30,
1998, has been previously mailed or is being mailed simultaneously to the
Company's shareholders, but does not constitute part of these proxy soliciting
materials.
SHARES OUTSTANDING AND VOTING RIGHTS

All voting rights are vested exclusively in the holders of the Company's Common
Stock with each common share entitled to one vote. Only shareholders of record
at the close of business on October 7, 1998 are entitled to notice of and to

1<PAGE>
vote at the Meeting or any adjournment thereof. On May 14, 1998, the Company
effected a 1 for 7 reverse split of the outstanding Common Stock. On October
7, 1998 the Company had 5,050,682 shares of its Common Stock outstanding, each
of which is entitled to one vote on all matters to be voted upon at the
Meeting, including the election of Directors. No fractional shares are
presently outstanding. A majority of the Company's outstanding voting stock
represented in person or by proxy shall constitute a quorum at the Meeting.
The affirmative vote of a majority of the votes cast, providing a quorum is
present, is necessary to elect the Directors. Cumulative voting in the
election of Directors is permitted.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND OF MANAGEMENT

The Company does not know of any person beneficially owning more than five
percent (5%) of the outstanding shares of the Registrant.

Current Directors and Officers

The following table sets forth the directors and officers and number of shares
of the Company's Common Stock beneficially owned as of September 1, 1998, by
individual directors and executive officers and by all directors and executive
officers of the Company as a group.
% of Shares
Name Title(1) Age Shares Outstanding
- -------------------- ------------------- ---- ----------- ---------------
Harold S. Carpenter Director 64 109,171 2.16%
James T. Hecker Director 41 11,987 0.24%
Edward J. Maley(2) Director 56 1 0.00%
Steven P. Oman Director 49 0 0.00%
Robert R. Kauffman Director/COB/CEO 58 40,000 0.79%
Joseph T. Connelly CFO 54 0 0.00%
Cynthia Castellano Secretary 36 0 0.00%

Officers and Directors as a Group (7 individuals) 161,159 3.19%

(1) COB is Chairman of the Board; CEO is Chief Executive Officer; CFO is Chief
Financial Officer.
(2) Edward Maley is also currently serving as President of Fry Guy Inc., a
wholly-owned subsidiary of the Company.

Committees: Meetings of the Board

The Company has a Compensation/Administration Committee and an Audit Committee.
The Compensation/Administration Committee and the Audit Committee were formed
in 1995. Messrs. Harold Carpenter and James Hecker comprise both the
Compensation/Administration Committee and the Audit Committee. The
Compensation/Administration Committee recommends to the Board the compensation
of executive officers and will serve as the Administrative Committee for the
Company's Stock Option Plan. The Audit Committee serves as a liaison between
the Board and the Company's auditor. The Compensation/Administration Committee
met three (3) times during the fiscal year ended June 30, 1998, and the Audit
Committee met two (2) times during the fiscal year ended June 30, 1998.

The Company's Board of Directors held eleven (11) meetings during the fiscal
year ended June 30, 1998, at which time all current Directors were present or
consented in writing to the action taken at such meetings.

2<PAGE>

Compliance with Section 16(a) of Securities Exchange Act of 1934

To the Company's knowledge, during the fiscal year ended June 30, 1998, the
Company's Officers and Directors complied with all applicable Section 16(a)
filing requirements. This statement is based solely on a review of the copies
of such reports furnished to the Company by its Officers and Directors and
their written representations that such reports accurately reflect all
reportable transactions.

Family Relationships

There is no family relationship between any Director, executive or person
nominated or chosen by the Company to become a Director or executive officer.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table shows for the fiscal year ending June 30, 1998, the
compensation awarded or paid by the Company to its Chief Executive Officer and
any of the executive officers of the Company whose total salary and bonus
exceeded $100,000 during such year (The "Named Executive Officers"):

Securities
Name and Underlying
Principal Fiscal Annual Compensation Options
Position Year Salary Bonus (#shares)
- ----------------- ---------- ----------- ------------- ----------------

Dennis Schlegel 1998 $ 62,500 - 42,858 (2)
C.E.O. (1) 17,143 (2)(3)

Edward J. Maley 1998 $100,642 - 5,715 (2)
C.E.O. (4)

(1) Mr. Schlegel was elected C.E.O. in April 1997 and resigned his position in
October, 1997.
(2) Reflecting reverse split effective May 14, 1998.
(3) See Section on Employment Agreements and Executive Compensation.
(4) Mr. Maley was elected temporary C.E.O. in November 1997 and resigned his
position June 30, 1998. Mr. Maley is currently serving as President of Fry Guy
Inc., a wholly-owned subsidiary of the Company.

Robert Kauffman was appointed CEO effective 7/1/98; therefore, no compensation
was paid to Mr. Kauffman for fiscal year ending June 30, 1998. No other
executive officer earned more than $100,000 during the current fiscal year.

Option Grants in Last Fiscal Year

The following table sets forth each grant of stock options made during the
fiscal year ended June 30, 1998, to each of the Named Executive Officers. This
table takes into consideration the reverse split effective May 14, 1998. No
stock appreciation rights ("SARs") have been granted by the Company.

<TABLE>
<CAPTION>
Individual Grants

<S> <C> <C> <C> <C> <C>
Percent of
Number of Total
Securities Options Mkt
Underlying Granted to Exer- Price
Options Employees cise Date
Granted in Fiscal Price of Expir
Name (#) Year ($/Sh) Grant Date
- --------------- ------------- ------------- ------------ ------------- ----------------
Dennis Schlegel 17,143 34.3% $4.69 $4.69 8/27/02
Wang Yee Lin 5,715 11.4% $6.16 $6.16 7/15/02
Edward Maley(1) 5,715 11.4% $6.16 $6.16 7/15/02
Other 21,433 42.9% $4.27-$6.16 $4.27-$6.16 7/15/02-9/25/02
------------- -------------
Total 50,006 100.0%

</TABLE>

The lowest option price of the Options granted in last fiscal year is
$4.27 or 763% of the current market price; therefore, the potential realizable
assumed annual rates of stock price appreciation for option term at 0%, 5% and
10% is zero.

(1) These options were surrendered to 1996 Directors & Officers Stock Option
Plan and canceled in August 1998. See Section on Option Grants Subsequent to
Fiscal Year End.

3<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End
Option/Values

The following table sets forth the number and value of the unexercised options
held by each of the Named Executive Officers at June 30, 1998. None of the
Named Executive Officers exercised options in the fiscal year ended June 30,
1998.

Number of
Unexercised
Options at Exercise
Shares Acquired Value FY-End (#) Price
Name On Exercise (#) Realized ($) Exercisable Per Share
- -------------------- ---------------- ------------- ------------ ------------
Dennis Schlegel 0 0 31,429 $4.69-6.30
Edward J. Maley (1) 0 0 5,715 $6.16
Harold Carpenter (1) 0 0 14,286 $6.30
Cynthia Castellano 0 0 1,072 $14.63
Wang Yee Lin 0 0 5,715 $6.16

(1) These options were surrendered to 1996 Directors & Officers Stock Option
Plan in August 1998. See Section on Option Grants Subsequent to Fiscal
Year End.
(2) The lowest option price of the Options granted in last fiscal year is
$4.69 or 838% of the current market price; therefore, the value of the
unexercised options at fiscal year end is zero.

Option Grants Subsequent to Fiscal Year End

Number of
Underlying
Securities
Options Date of Date Expiration Option
Name Granted Grant Exercisable Date Price
- ---------------------- -------- ---------- ------------ ------------- --------
Robert R. Kauffman(1) 500,000 8/25/98 8/25/98 8/25/08 (2)
Robert R. Kauffman(1) 250,000 8/25/98 1/1/99 8/25/08 (2)
Robert R. Kauffman(1) 250,000 8/25/98 7/1/99 8/25/08 (2)
John A. Carlson(1) 50,000 9/9/98 3/1/99 9/9/08 (2)
John A. Carlson(1) 50,000 9/9/98 9/1/99 9/9/08 (2)
Harold S. Carpenter(3) 20,000 8/12/98 8/12/98 8/11/03 $1.00
James T. Hecker(3) 20,000 8/12/98 8/12/98 8/11/03 $1.00
Steven P. Oman(3) 20,000 8/12/98 8/12/98 8/11/03 $1.00
Edward J. Maley(3) 7,500 8/12/98 8/12/98 8/11/03 $1.00

(1) Robert R. Kauffman and John A. Carlson stock options were not issued
pursuant to any pre-established compensation plan but issued pursuant to their
initial engagement of employment with the Company. Robert R. Kauffman was
elected as Chief Executive Officer effective July 1, 1998, and John A. Carlson
was appointed Senior Vice President, Corporate Development effective September
9, 1998.

(2) The option price shall be the lower of (i) $1.00 per share or (ii) the
price per share which is equal to the average low daily bid price of any ten
(10) consecutive trading days from July 1, 1998 until thirty (30) days
following the date of public release of the Company's Summary Financial Results
for its fiscal year ending June 30, 1998.

(3) Issued pursuant to the 1996 Directors & Officers Stock Option Plan.

Employment Agreements and Executive Compensation

Dennis Schlegel, Chief Executive Officer from April to October, 1997, had a two
year employment agreement with the Company whereby he was to receive during the
first year, $6,250 per month in regular compensation and options to purchase
7,143 shares of the Company stock at $4.69 per share, and during the second
year, a minimum of $10,000 per month in regular compensation and options to
purchase 10,000 shares of the Company stock at $4.69 per share. In January,
1998, Mr. Schlegel received six months of compensation and the vesting of his
options for the termination of his employment agreement.

Robert R. Kauffman is currently serving as an at will employee and the terms of
his employment include a base salary of $6,750 per month, $1,250 per month in
supplemental executive benefit reimbursement, stock options to purchase up to
1,000,000 shares of common stock (see section on Option Grants Subsequent to
Fiscal Year End), and eligibility to receive an annual cash bonus based on
performance to be determined at the discretion of the Board of Directors.
Pursuant to the terms of Mr. Kauffman's engagement, Mr. Oman was appointed to
the Board of Directors, and Mr. Oman and Mr. LaVoy have been nominated for the
slate of Directors presented herein.

4<PAGE>
1995 Stock Option Plan

On December 16, 1995, the Shareholders approved the Company's 1995 Stock Option
Plan (the Plan). The purpose of the Plan is to advance the business and
development of the Company and its shareholders by affording to the key
employees of the Company the opportunity to acquire a propriety interest in the
Company by the grant of Options to acquire shares of the Company's common
stock. The Options granted may be "Incentive Stock Options" within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended, for certain
key employees. The Plan is administered by an Administrative Committee whom
shall serve a one year term. The Administrative Committee is composed of the
Board's Compensation/Administration Committee. The current members of the
Compensation/Administration Committee are James Hecker and Harold Carpenter.
The Plan was approved by the Board of Directors on September 28, 1995, approved
by the Shareholders on December 16, 1995, and shall terminate on September 28,
2005.

The Plan was established in 1995 to issue Options to acquire up to 1,000,000
shares to Key Employees. As a result of the May, 1998 reverse split of the
outstanding common stock, the Plan was adjusted to allow approximately 142,857
shares to be issued. There are 81,573 shares remaining available for grant
under this Plan. The maximum number of shares subject to Options granted to any
one Key Employee shall not exceed 100,000 shares. The exercise price for
Options shall be set by the Administrative Committee but shall not be for less
than the fair market value of the shares on the date the Option is granted.
The period in which Options can be exercised shall be set by the Administrative
Committee not to exceed five years from the date of Grant. The Plan may be
terminated, modified or amended by the Board of Directors upon the
recommendation of the Administrative Committee. The issuance of options
pursuant to this Plan is not expected to be a taxable event for qualified
recipients until such time that the recipients elect to sell the shares
received upon exercise of the Option whereupon the recipients are expected to
recognize income to the extent the sales price of the shares exceeds the
exercise price of the option on the date of exercise. All Key Employees of the
Company and its subsidiaries are eligible to participate in the Incentive Stock
Options. A Key Employee is defined in the Plan as a Company employee who in
the judgement of the Administrative Committee has the ability to positively
affect the profitability and economic well-being of the Company. Part time
employees, independent contractors, consultants and advisors performing bona
fide services to the Company shall be considered employees for purposes of
participation in the Plan.

Compensation of Directors

Directors are entitled to receive reimbursement for all out-of-pocket expenses
incurred for attendance at Board of Directors meetings. In addition, all
Directors not otherwise employed or compensated by the Company are entitled to
receive $750 per meeting per day up to a maximum of $1,500, or $250 per
telephonic meeting, in cash, in common stock at the market price per share, or
in health insurance benefits. Pursuant to these Directors fees, no shares of
common stock were issued. On July 16, 1997, Wang Yee Lin and Edward Maley
were awarded options to acquire 5,715 shares each of stock pursuant to the
Company's 1996 Directors and Officers Stock Option Plan at an exercise price of
$6.16 per share. On August 12, 1998, additional options were granted to Harold
S. Carpenter, James T. Hecker, Edward J. Maley and Steven P. Oman (see section
on Option Grants Subsequent to Fiscal Year End).

Other Arrangements

There are no other arrangements pursuant to which the Company's Directors
receive compensation from the Company for services as Directors.

Termination of Employment and Change of Control Arrangement

There is no compensatory plan or arrangement with respect to any individual
named above which results or will result from the resignation, retirement or

5<PAGE>
any other termination of employment with the Company, or from a change in the
control of the Company.

Transactions with Management

In April, 1998 the Company entered into a Loan Agreement with Harold S.
Carpenter, a Director of the Company, and Keith V. Denner, a shareholder of the
Company, whereby Mr. Carpenter and Mr. Denner agreed to extend a ninety day
line of credit to the Company in the total amount of $300,000. Upon execution
of the Agreement, an initial draw of $100,000 was made and was repaid within
thirty days. The line of credit was secured by an assignment of the Company's
interest in the real estate sales contract dated June 6, 1997, with respect to
certain property located in Boone County, Iowa. As consideration for the line
of credit, Mr. Carpenter received interest at the rate of three percent (3%) of
the highest principal balance for every calendar month in which principal was
outstanding, resulting in $1,500 to Mr. Carpenter for his $50,000 portion of
the initial draw. Mr. Denner received five year warrants to acquire 60,715
shares of the Company's common stock exercisable at $2.80 per share which are
subject to adjustment in number and price for splits of the Company's common
stock and similar events. Mr. Denner also surrendered existing warrants to
acquire 60,715 shares of common stock.

On February 9, 1998, the Company loaned Edward J. Maley, then Chief Executive
Officer, $31,400 in the form of a Promissory Note which bears interest at 8%.
The Company anticipates this loan to be repaid in full by November 30, 1998.

PROPOSAL NO. 1. ELECTION AS DIRECTORS

The Articles presently provide for a Board of Directors of not more than nine
(9) members. The number of Directors of the Company has been fixed at five (5)
by the Company's Board of Directors. The Company's Board of Directors
recommends the election of Directors of the five (5) nominees listed below to
hold office until the next Annual Meeting of Shareholders or until their
successors are elected and qualified or until their earlier death, resignation
or removal. The persons named as "proxies" in the enclosed form of Proxy, who
have been designated by Management, intend to vote for the five (5) nominees
for election as Directors unless otherwise instructed in such proxy. If at the
time of the Meeting, any of the nominees named below should be unable to serve,
which event is not expected to occur, the discretionary authority provided in
the Proxy will be exercised to cumulatively vote for the remaining nominees, or
for a substitute nominee or nominees, if any, as shall be designated by the
Board of Directors.

Nominees

The following table sets forth the name and age of each nominee for Director,
indicating all positions and offices with the Company presently held by him,
and the period during which he has served as such:
Year
Name Age Position First Director
- ------------------------ ------- ------------------------- --------------
Harold S. Carpenter 64 Director 1995

James T. Hecker 41 Director 1997

Robert R. Kauffman 58 Director/C.O.B./C.E.O. 1998

Thomas C. LaVoy 39 Nominee for Director N/A

Steven P. Oman 49 Director 1998

Business Experience of Nominees

Robert R. Kauffman: Mr. Kauffman was appointed as Chief Executive Officer
and Chairman of the Board effective July 1, 1998. Mr. Kauffman was formerly

6<PAGE>
President and Chief Executive Officer of Nasdaq-listed Photocomm, Inc., from
1988 until 1997 (since renamed Golden Genesis, Inc.). Photocomm is the
nation's largest publicly owned manufacturer and marketer of wireless solar
electric power systems with annual revenues in excess of $35 million. Prior to
Photocomm, Mr. Kauffman was a senior executive of the Atlantic Richfield
Company (ARCO) whose varied responsibilities included Senior Vice President of
ARCO Solar, Inc., President of ARCO Plastics Company and Vice President of ARCO
Chemical Company. Mr. Kauffman earned an M.B.A. in Finance at the Wharton
School of the University of Pennsylvania, and holds a B.S. in Chemical
Engineering from Lafayette College, Easton, Pennsylvania.

Harold S. Carpenter: Mr. Carpenter is presently the President of Superiorgas
Co. , Des Moines, Iowa, which is engaged in the business of trading and
brokering bulk refined petroleum products with gross sales of approximately
$500 million per year. He is also the General Partner of Superiorgas L.P., an
investment company affiliated with Superiorgas Co. Mr. Carpenter founded
these companies in 1984 and 1980, respectively. Mr. Carpenter is also the
President of Carpenter Investment Company, Des Moines, Iowa, which is a real
estate investment company holding properties primarily in central Iowa. From
1970 until 1994, Mr. Carpenter was the Chairman of the George A. Rolfes Company
of Boone, Iowa, which manufactured air pollution control equipment. Mr.
Carpenter is currently a member of the Board of Directors of the Allied Group,
Inc., a publicly owned insurance company headquartered in Des Moines, Iowa.
Mr. Carpenter graduated from the University of Iowa in 1958 with a Bachelors of
Science and Commerce degree.

James T. Hecker. Mr. Hecker is both an Attorney and a Certified Public
Accountant. Since 1987 Mr. Hecker has been Treasurer and General Counsel of
Hawley and Wright, Inc., Evergreen, Colorado, a private capital management
company which manages a $60 million portfolio. He also served since 1992 as a
trustee of an $11 million charitable trust. From 1984 to 1987, Mr. Hecker was
the Controller of Northern Pump Company, Minneapolis, Minnesota, a multi-state
operating oil and gas company with more than 300 properties, with
responsibility of all accounting and reporting functions. Prior to that, from
1981 to 1984, Mr. Hecker was Audit Supervisor of Total Petroleum, Inc., Denver,
responsible for all phases of internal audit and development of audit and
systems controls. Mr. Hecker received a J.D. degree from the University of
Denver in 1992, and a B.B.A. degree in Accounting and International Finance
from the University of Wisconsin in 1979. He is a member in good standing of
the Colorado and the American Bar Associations, the Colorado Society of CPAs,
and the American Institute of CPAs.

Steven P. Oman: Mr. Oman was appointed to the Board in June 1998. Since 1991
Mr. Oman has been Managing Partner of Oman, Schulenburg & Politan, a Phoenix,
Arizona law firm. From 1986 to 1991, Mr. Oman served as Vice President and
General Counsel of Programmed Land, Inc., a Scottsdale-based diversified
holding company engaged in real estate, including ownership, development,
marketing and management of properties, as well as non-real estate subsidiaries
involved in the electronics and automotive industries. Prior to that, from
1978 to 1986, Mr. Oman was President and General Counsel of Charter
Development, Inc., a real estate development firm in St. Paul, Minnesota. Mr.
Oman received a J.D. degree, cum laude, in 1975 from William Mitchell College
of Law, St. Paul, and a Bachelor of Mechanical Engineering degree from the
University of Minnesota, Institute of Technology, Minneapolis, in 1970.

Thomas C. LaVoy: Thomas C. LaVoy has served as Chief Financial Officer of
SuperShuttle International, Inc., since July 1997 and as Secretary since March
1998. From September 1987 to February 1997, Mr. LaVoy served as Chief
Financial Officer of Nasdaq-listed Photocomm, Inc., (since renamed Golden
Genesis, Inc.), the nation's largest publicly owned manufacturer and marketer
of wireless solar electric power systems with annual revenues in excess of $35
million. Mr. LaVoy was a Certified Public Accountant with the firm of KPMG Peat
Marwick from 1980 to 1983. Mr. LaVoy has a Bachelor of Science degree in
Accounting from St. Cloud University, Minnesota, and is a Certified Public
Accountant.

7<PAGE>
PROPOSAL NO. 2: APPROVAL OF A PROPOSAL TO AUTHORIZE THE BOARD OF
DIRECTORS TO DECLARE, ONLY IF NECESSARY, A REVERSE
SPLIT OF THE OUTSTANDING COMMON STOCK ON THE BASIS OF
ONE SHARE OF COMMON STOCK FOR UP TO THREE SHARES
OUTSTANDING. THE EFFECTIVE DATE AND THE PRECISE
NUMBER OF SHARES TO BE CONVERTED TO BE DETERMINED BY
THE COMPANY'S BOARD OF DIRECTORS AT A LATER TIME. IF
THE BOARD OF DIRECTORS HAS NOT EFFECTED THE ACTION
CONTEMPLATED HEREUNDER BY OCTOBER 31, 1999, THIS
AUTHORIZATION WILL CEASE.

On August 12, 1998, the Board of Directors approved submitting a reverse stock
split of the Company's Common Stock to the Company's Shareholders if Management
determines that a reverse split would be necessary to keep the Common Stock
eligible to be quoted on The Nasdaq Stock Market ("Nasdaq"). The Board is
requesting Shareholder authorization to declare up to 1 for 3 reverse stock
split of the Company's Common Stock, only if necessary, to keep the Common
Stock eligible to be quoted on The Nasdaq Stock Market ("Nasdaq"). The Board
of Directors desires not to effect such a reverse stock split but believes that
retaining the Company's listing on Nasdaq is crucial to Shareholder value and
liquidity and the Company's long term business prospects.

It is recommended that the shareholders give authorization until October
31,1999, to the Board of Directors to effect up to a 1 for 3 reverse stock
split of the Company's Common Stock. The Board of Directors will declare a
reverse split only upon notice from Nasdaq that it must achieve compliance with
the minimum bid price or be de-listed. Assuming that a reverse stock split
would cause the trading price of the Company's Common Stock to increase in the
same proportion as the amount of the split, a reverse stock split would result
in a proportionate increase in the quoted bid price of the Common Stock,
thereby maintaining Nasdaq eligibility of a bid price of not less than $1.00.
The reverse split will be effective within 10 days of the Company's notice to
Nasdaq that the Board has declared the reverse split.

As a result of the possible up to 1 for 3 reverse stock split, each three
issued shares of the Company's Common Stock held on the effective date will
automatically be converted into one share of Common Stock. No fractional
shares will be issued and no cash will be paid for fractional shares. Instead,
each fractional share would be rounded up to a whole share.

EFFECT OF REVERSE SPLIT ON HOLDERS OF ODD LOTS OF SHARES

If the maximum 1 for 3 reverse split is authorized and declared, the reverse
split would result in holders of 297 or fewer shares holding an "odd lot" of
less than 100 shares. The reverse split may also result in shareholders have
an odd lot of shares if their resulting total number of shares is not a
multiple of 100. A securities transaction of 100 or more shares is a "round
lot" transaction of shares for securities trading purposes and a transaction of
less than 100 shares is an "odd lot" transaction. Round lot transaction are
the standard size requirements for securities transactions and odd lot
transactions may result in higher transaction costs to the odd lot seller.

Proposal No. 3. APPROVAL OF THE ALANCO ENVIRONMENTAL RESOURCES
CORPORATION 1998 STOCK OPTION PLAN

On August 12, 1998 the Company's Board of Directors approved submitting the
Alanco Resources Corporation 1998 Stock Option Plan to the shareholders for
approval. The Board of Directors recommends approval of the Plan. The purpose
of the Plan is to advance the business and development of the Company and its
shareholders by affording to Employees of the Company the opportunity to
acquire an equity interest in the Company by the grant of Options to acquire
shares of the Company's common stock.

The Options granted to Employees can be either "Incentive Stock Options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, or
"Non-Statutory Options". The issuance of qualified Incentive Stock Options

8<PAGE>
pursuant to this Plan is not expected to be a taxable event for recipient until
such time that the recipient elects to sell the shares received from the
exercise whereupon the recipient is expected to recognize income to the extent
the sale price of the shares exceeds the exercise price of the option on the
date of sale. The issuance of Non-Statutory Stock Options pursuant to this
Plan is not expected to result in a tax liability to the recipient since the
options are granted at fair market value on date of grant. The recipient is
expected to recognize income to the extent the market price of the shares
exceeds the tax basis of the option on the date of exercise.

The Plan is administered by an Administrative Committee of the Board of
Directors. The Plan may issue Options to acquire up to 750,000 shares to
Employees. The Company will not receive any consideration for the grant of
options under the Plan and the approximate market value of the shares to be
reserved for the plan is $569,175 based upon the average thirty day closing
price for the Company's common stock for the period ending September 23, 1998.
The maximum number of shares subject to Incentive Stock Options granted to any
one Employee shall not exceed 100,000 shares. The exercise price for Options
shall be set by the Administrative Committee but shall not be for less than the
fair market value of the shares on the date the Option is granted. Fair market
value shall mean the average of the closing price for ten consecutive trading
days at which the Stock is listed in the NASDAQ quotation system ending on the
day prior to the date an Option is granted. The period in which Options can be
exercised shall be set by the Administrative Committee not to exceed ten years
from the date of Grant. Incentive Stock Options are exercisable once vested.
Twenty-five percent (25%) of the shares issuable under the Options shall vest
six months from date of Grant provided that the Optionee has remained an
Employee of the Company for not less than six months from date of Grant,
twenty-five percent (25%) of the shares issuable under the Options shall vest
one year from date of Grant provided that the Optionee has remained a Employee
of the Company for not less than one year from the date of Grant, and the
remaining fifty percent (50%) shall vest two years from date of Grant provided
that the Optionee has remained a Employee of the Company for not less than two
years from the date of Grant. Otherwise the Incentive Stock Options shall
lapse. The Incentive Stock Options must be exercised within 90 days following
termination of relationship with the Company, or within one (1) year following
death or permanent and total disablement of the Optionee. The vesting schedule,
and the exercise schedule following termination, death or total and permanent
disablement of the Optionee, of Non-Statutory Stock Options will be determined
by the Committee at the time of grant. The Plan may be terminated, modified or
amended by the Board of Directors upon the recommendation of the Administrative
Committee. Provided, however, if the Plan has been submitted to and approved
by the shareholders of the Company no such action by the Board may be taken
without approval of the majority of the shareholders of the Company which: (a)
increases the total number of shares of Stock subject to the Plan; (b) changes
the manner of determining the Option price; or (c) withdraws the administration
of the Plan from the Committee.

All Employees of the Company and its subsidiaries are eligible to participate
in the Plan. An Employee is defined in the Plan as a person, including
officers and directors, employed by the Company who in the judgment of the
Administrative Committee has the ability to positively affect the profitability
and economic well-being of the Company. Part time employees, independent
contractors, consultants and advisors performing bona fide services to the
Company shall be considered employees for purposes of participation in the
Plan. Neither the Board of Directors nor the Administrative Committee have
estimated the number of Options to be granted to Employees and are expected to
make this determination on a discretionary basis. The aggregate number of
shares within the Plan and the rights under outstanding Options granted
hereunder, both as to the number of shares and Option price, will be adjusted
accordingly in the event of a reverse split in the outstanding shares of the
Common Stock of the Company.

Proposal No. 4. APPROVAL OF THE ALANCO ENVIRONMENTAL RESOURCES
CORPORATION 1998 DIRECTORS AND OFFICERS STOCK OPTION
PLAN

9<PAGE>
On August 12, 1998, the Company's Board of Directors approved submitting the
Alanco Resources Corporation 1998 Directors And Officers Stock Option Plan to
the shareholders for approval. The Board of Directors recommends approval of
the Plan. The purpose of the Plan is to advance the business and development
of the Company and its shareholders by affording to the Directors and Executive
Officers of the Company the opportunity to acquire an equity interest in the
Company by the grant of Options to acquire shares of the Company's common
stock.

The Options granted are not "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended. The issuance of
such non-qualified options pursuant to this Plan is not expected to be a
taxable event for recipient until such time that the recipient elects to
exercise the option whereupon the recipient is expected to recognize income to
the extent the market price of the shares exceeds the exercise price of the
option on the date of exercise.

The Plan is administered by an Administrative Committee, which shall consist of
up to three (3) individuals appointed by the Board from among its members, at
least two (2) of which are non-employee Directors. The Plan may issue Options
to acquire up to 750,000 shares to Directors and Executive Officers. The
Company will not receive any consideration for the grant of options under the
Plan and approximate market value of the shares to be reserved for the plan is
$569,175 based upon the average thirty day closing price for the Company's
common stock for the period ending September 23, 1998. The exercise price for
Options shall be set by the Administrative Committee but shall not be for less
than the fair market value of the shares on the date the Option is granted.
Fair market value shall mean the average of the closing price for ten
consecutive trading days at which the Stock is listed in the NASDAQ quotation
system ending on the day prior to the date an Option is granted. The period in
which Options can be exercised shall be set by the Administrative Committee not
to exceed ten years from the date of Grant. Options are exercisable once
vested. All of the shares issuable under the Options shall vest one year from
date of Grant provided that Optionee has remained a Director or Executive
Officer of the Company for not less than one year from the date of Grant.
Otherwise, the Options shall lapse. The Plan may be terminated, modified or
amended by the Board of Directors upon the recommendation of the Administrative
Committee. Provided, however, if the Plan has been submitted to and approved
by the shareholders of the Company no such action by the Board may be taken
without approval of the majority of the shareholders of the Company which: (a)
increases the total number of shares of Stock subject to the Plan; (b) changes
the manner of determining the Option price; or (c) withdraws the administration
of the Plan from the Committee.

All Directors and Executive Officers of the Company are eligible to participate
in the Plan. The Company will grant to non-employee Directors newly appointed
to the Board of Directors an option to purchase 20,000 shares of common stock
at fair market value. Upon each subsequent anniversary of the election to the
Board of Directors, each non-employee Director will receive an option to
purchase 10,000 shares of common stock at fair market value. The Board of
Directors or the Administrative Committee have no known additional number of
Options to be granted to Directors and Executive Officers and may elect to make
this determination on an discretionary basis. The aggregate number of shares
within the Plan and the rights under outstanding Options granted hereunder,
both as to the number of shares and Option price, will be adjusted accordingly
in the event of a reverse split in the outstanding shares of the Common Stock
of the Company.

10<PAGE>

REQUEST FOR COPY OF FORM 10K

Shareholders may request a copy of the Form 10K by writing to the Company's
offices, 15900 N. 78th Street, Suite 101, Scottsdale, Arizona 85260.

DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS

Any proposal by a shareholder to be presented at the Company's next Annual
Meeting of Shareholders, including nominations for election as directors must
be received at the offices of the Company, 15900 N. 78th Street, Suite 101,
Scottsdale, Arizona 85260, no later than July 31, 1999.

CYNTHIA L. CASTELLANO

SECRETARY

Scottsdale, Arizona
October 7, 1998

11<PAGE>

Proxy Solicited by The Board of Directors of Alanco Environmental Resources
Corporation

The undersigned appoints Robert R. Kauffman (and Cynthia L. Castellano, if Mr.
Kauffman is unable to serve), as the undersigned's lawful attorney and proxy,
with full power of substitution and appointment, to act for and in the stead of
the undersigned to attend and vote all of the undersigned's shares of the
Common Stock of Alanco Environmental Resources Corporation, an Arizona
corporation, at the Annual Meeting of Shareholders to be held at the offices of
the Company, 15900 N. 78th Street, Suite 101, Scottsdale, Arizona, at 10:00am.
Mountain Standard Time, on November 6, 1998, and any and all adjournments
thereof, for the following purposes:

A SHAREHOLDER MAY USE CUMULATIVE VOTING FOR THE NOMINEES OF THAT PROPOSAL BY
VOTING THE NUMBER OF THE SHARES HELD TIMES THE NUMBER OF DIRECTORS BEING
ELECTED ON A SINGLE OR GROUP OF CANDIDATES. SHAREHOLDERS MAY ALSO WITHHOLD
AUTHORITY TO VOTE FOR A NOMINEE(S) BY DRAWING A LINE THROUGH THE NOMINEE'S
NAME(S). FOR EXAMPLE A SHAREHOLDER WITH 1,000 SHARES MAY CAST A TOTAL OF
5,000 VOTES (# OF SHARES X 5 DIRECTORS) FOR ALL, ONE OR A SELECT NUMBER OF
CANDIDATES.]

PROPOSAL NO. 1 ELECTION TO THE BOARD OF DIRECTORS

____ FOR Management nominees listed below equally among
all the nominees

OR VOTED AS FOLLOWS:
Harold S. Carpenter _________ Shares James T. Hecker ________ Shares

Robert R. Kauffman _________ Shares Thomas C. LaVoy ________ Shares

Steven P. Oman _________ Shares

____ AGAINST Management's nominees for the Board of
Directors,

MANAGEMENT INTENDS TO VOTE SHARES FOR ALL OF THE FIVE (5) NOMINEES NAMED ABOVE
UNLESS OTHERWISE INSTRUCTED IN THIS PROXY. IF AT THE TIME OF THE MEETING, ANY
OF THE NOMINEES SHOULD BE UNABLE TO SERVE, THE DISCRETIONARY AUTHORITY PROVIDED
IN THE PROXY WILL BE EXERCISED TO CUMULATIVELY VOTE FOR THE REMAINING NOMINEES,
OR FOR A SUBSTITUTE NOMINEE OR NOMINEES, IF ANY, AS SHALL BE DESIGNATED BY THE
BOARD OF DIRECTORS.

PROPOSAL NO. 2. APPROVAL OF A PROPOSAL TO AUTHORIZE THE BOARD OF DIRECTORS
TO DECLARE, ONLY IF NECESSARY, A REVERSE SPLIT OF THE
OUTSTANDING COMMON STOCK ON THE BASIS OF ONE SHARE OF
COMMON STOCK FOR UP TO THREE SHARES OUTSTANDING. THE
EFFECTIVE DATE AND THE PRECISE NUMBER OF SHARES TO BE
CONVERTED TO BE DETERMINED BY THE COMPANY'S BOARD OF
DIRECTORS AT A LATER TIME. IF THE BOARD OF DIRECTORS HAS
NOT EFFECTED THE ACTION CONTEMPLATED HEREUNDER BY OCTOBER
31, 1999, THIS AUTHORIZATION WILL CEASE.

____ FOR ____ AGAINST ____ ABSTAIN

IF THE SHAREHOLDER DOES NOT INDICATE A PREFERENCE, MANAGEMENT INTENDS TO VOTE
FOR THE PROPOSAL. <PAGE>

PROPOSAL NO. 3. APPROVAL OF THE ALANCO ENVIRONMENTAL RESOURCES CORPORATION
1998 STOCK OPTION PLAN

____ FOR ____ AGAINST ____ ABSTAIN

IF THE SHAREHOLDER DOES NOT INDICATE A PREFERENCE, MANAGEMENT INTENDS TO VOTE
FOR THE PROPOSAL.

PROPOSAL NO. 4. APPROVAL OF THE ALANCO ENVIRONMENTAL RESOURCES CORPORATION
1998 DIRECTORS AND OFFICERS STOCK OPTION PLAN
____ FOR ____ AGAINST ____ ABSTAIN

IF THE SHAREHOLDER DOES NOT INDICATE A PREFERENCE, MANAGEMENT INTENDS TO VOTE
FOR THE PROPOSAL.

SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCORDANCE
WITH THE SHAREHOLDER'S SPECIFICATION ABOVE. THIS PROXY CONFERS DISCRETIONARY
AUTHORITY IN RESPECT TO MATTERS FOR WHICH THE SHAREHOLDER HAS NOT INDICATED A
PREFERENCE OR IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE
MAILING OF THE NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS TO THE UNDERSIGNED.

In the Shareholder's discretion the Proxy is authorized to vote on such other
business as may properly be brought before the meeting or any adjournment or
postponement thereof.
The undersigned revokes any proxies heretofore given by the undersigned and
acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy
Statement furnished herewith and the Annual Report to Shareholders previously
provided.

Dated: ____________________________ , 199__ ______________________________

______________________________

Signature(s) should agree with the name(s) hereon. Executors, administrators,
trustees, guardians and attorneys should indicate when signing. Attorneys
should submit powers of attorney.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ALANCO
ENVIRONMENTAL RESOURCES CORPORATION. PLEASE SIGN AND RETURN THIS PROXY TO
ALANCO ENVIRONMENTAL RESOURCES CORPORATION, C/O AMERICAN SECURITIES TRANSFER,
INC., 938 QUAIL STREET, SUITE 101, LAKEWOOD, CO 80215-5513. THE GIVING OF A
PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.

13<PAGE>

ALANCO ENVIRONMENTAL RESOURCES CORPORATION

1998 STOCK OPTION PLAN

ARTICLE I

DEFINITIONS

As used herein, terms have the meaning hereinafter set forth unless the
context should clearly indicate the contrary:

(a) "Board" shall mean the Board of Directors of the Company, or the
Executive Committee of such Board;

(b) "Committee" shall mean the Administrative Committee appointed by the
Board to oversee the administration of this Plan;

(d) "Director" shall mean a member of the Board;

(e) "Employee" shall mean any person, including officers and directors,
employed by the Company who in the judgment of the Committee has the ability to
positively affect the profitability and economic well-being of the Company.
Part-time employees, independent contractors, consultants and advisors
performing bonafide services to the Company shall also be deemed employees
solely for the purpose of participation under the Plan. The payment of a
director's fee by the Company shall not be sufficient to constitute
"employment" by the Company;

(f) "Fair market value" shall mean the average of the closing price for
ten consecutive trading days at which the Stock is listed in the NASDAQ
quotation system ending on the day prior to the date an Option is granted
hereunder;

(g) "Grant" means the issuance of an Option hereunder to an Optionee
entitling such Optionee to acquire Stock on the terms and conditions set forth
in a Stock Option Agreement to be entered into with the Optionee. "Grant" may
also include a direct grant of stock;

(h) "Incentive Stock Option" shall mean a compensatory Option provided to
an employee of the Company giving him or her the right to purchase Stock at a
predetermined price under a plan that meets certain Internal Revenue Code
requirements and involves registered stock;

(i ) "Non-Statutory Option" shall mean all Options which are not Incentive
Stock Options;

(j) "Option" shall mean the right granted to an Optionee to acquire Stock
of the Company pursuant to the Plan;

(k) "Optionee" shall mean an Employee of the Company to whom a Grant
hereunder has been made;

(l) "Plan" shall mean the Alanco Environmental Resources Corporation 1998
Stock Option Plan, the terms of which are herein set forth;<PAGE>
1998 STOCK OPTION PLAN
Page 2

(m) "Stock" shall mean the common stock of the Company or, in the event
the outstanding shares of stock are hereafter changed into or exchanged for
shares of different stock or securities of the Company or some other
corporation, such other stock or securities;

(n) "Stock Option Agreement" shall mean the agreement between the Company
and an Optionee under which an Optionee may acquire Stock pursuant to the Plan.

ARTICLE II

THE PLAN

2.1 NAME. The plan shall be known as the "Alanco Environmental
Resources Corporation 1998 Stock Option Plan."

2.2 PURPOSE. The purpose of the Plan is to advance the business and
development of the Company and its shareholders by affording to the Employees
of the Company the opportunity to acquire an equity interest in the Company by
the grant of Options to such persons under the terms herein set forth. By
doing so, the Company seeks to motivate, retain and attract highly competent,
highly motivated personnel whose judgment, initiative, leadership and continued
efforts will contribute to the success of the Company. The Options to be
granted hereunder are either "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended, or "Non-Statutory
Stock Options". However, at no time will the Plan be considered or operate as a
"tandem" option plan or will any Employee be subjected to a tandem option
provision.

2.3 EFFECTIVE DATE. The Plan shall become effective upon its adoption
by the Board of the Company. Thereafter, the Plan shall be submitted to the
shareholders of the Company for approval within 12 months after the date said
Plan is adopted by the Board.

2.4 TERMINATION DATE. The Plan shall terminate ten (10) years from the
date the Plan is adopted by the Board of the Company and at such time any
Options granted hereunder shall be void and of no further force or effect.

ARTICLE III

PARTICIPANTS

Any Employee of the Company, or of any of its wholly owned subsidiaries,
shall be eligible to be granted an Option under the Plan. The Committee shall
adopt criteria pursuant to which Options shall be granted. The Committee may
grant Options to any eligible Employee in accordance with such determinations
as the Committee may, from time to time, in its sole discretion make. A
Director of the Company or of a subsidiary who is not also an employee of the
Company will not be eligible to receive an "Incentive Stock Option" pursuant to
the Plan.

ARTICLE IV

ADMINISTRATION

persons those to whom and the time or times at which Options may be granted and
the number of shares of Stock to be subject to each Option. Subject to the
express provisions of the Plan, the Committee shall also have complete
authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations related to it and to determine the details and provisions of each
Stock Option Agreement and to make all other determinations necessary or
advisable in the administration of the Plan.

4.2 RECORDS OF PROCEEDINGS. The Committee shall maintain written
minutes of its actions which shall be maintained among the records of the
Company.

4.3 MAJORITY. A majority of the members of the Committee shall
constitute a quorum and any action taken by a majority present at such meeting
at which a quorum is present or any action taken without a meeting evidenced by
a writing executed by all members of the Committee shall constitute the action
of the Committee.

4.4 COMPANY ASSISTANCE. The Company shall supply full and timely
information to the Committee in all matters relating to eligible Optionees,
their status, death, retirement, disability and such other pertinent facts as
the Committee may require. The Company shall furnish the Committee with such
clerical and other assistance as is necessary in the performance of its duties.
All expenses of the Committee shall be paid by the Company.

4.5 COMPOSITION OF THE COMMITTEE. The Committee shall consist of up to
three (3) individuals appointed by the Board from among its members.
Appointment to the Committee shall be for a term of one (1) year or until new
individuals are appointed to the Committee by the Board. Any individual
designated and serving as a member of the Committee shall be entitled to
indemnification in relation to such service by the Company to the fullest
extent called for or permitted by Article X of the Bylaws of the Company.

4.6 COMMITTEE AUTHORITY. If the Committee deems it necessary or in the
best interest of the Company or its shareholders, the Committee may impose
restrictions of the subsequent transferability of Stock issued pursuant to
Options to be granted hereunder. In the event of the imposition of any such
conditions, the Stock of the Company to be issued pursuant to the exercise of
an Option shall have any such restrictions prominently displayed as a legend on
such certificate.

ARTICLE V

SHARES OF STOCK SUBJECT TO THE PLAN

5.1 LIMITATION. Subject to adjustment pursuant to the provisions of
Section 5.3 hereof, the number of shares of Stock which may be issued and sold
hereunder shall not exceed 750,000 shares. The Company shall take such action
as necessary to reserve the aforesaid number of shares for issuance pursuant to
the Plan.

5.2 OPTIONS GRANTED UNDER THE PLAN. Shares of stock with respect to
which an Option is granted hereunder, but which lapses prior to exercise, shall
be considered available for grant hereunder. Therefore, if Options granted
hereunder shall terminate for any reason without being wholly exercised, new
Options may be granted hereunder covering the number of shares to which such
terminated Options related.<PAGE>
1998 STOCK OPTION PLAN
Page 4

5.3 ANTI-DILUTION. In the event the Stock subject to Options hereunder is
changed into or exchanged for a different number or kind of stock or other
securities of the Company or of another organization by reason of merger,
consolidation or reorganization, recapitalization, reclassification,
combination of shares, stock split or stock dividend;

(a) The aggregate number of shares of Stock subject to Options which may
be granted hereunder shall be adjusted appropriately;

(b) Rights under outstanding Options granted hereunder, both as to the
number of subject shares and the Option price, shall be adjusted appropriately;

(c) Where dissolution or liquidation of the Company or any merger or
consolidation in which the Company is not a surviving corporation is involved,
each outstanding Option shall terminate and the Optionee holding such Option
shall have the right immediately prior to such dissolution, liquidation, merger
or combination to exercise his Option, in whole or in part, to the extent that
it shall not have been exercised without regard to any installment exercise
provision.

The manner of application of the foregoing provision shall be determined
solely by the Committee and any such adjustment may provide for the elimination
of fractional share interests.

ARTICLE VI

6.1 OPTIONS. Each Option granted hereunder shall be evidenced by
minutes of a meeting of or the written consent of the Committee and by a
written Stock Option Agreement dated as of the date of grant and executed by
the Company and the Optionee, which agreement shall set forth such terms and
conditions as may be determined by the Committee consistent with the Plan.

6.2 PARTICIPATION, LIMITATIONS.

(a) Options qualifying as "Incentive Stock Options" under Section 422 of
the Internal Revenue Code, as amended, may be granted from time to time to
Employees of the Company to purchase shares of the Company's Stock.

(1) The maximum number of shares for which an Incentive Stock Option
or Options may be granted under the Plan to any one Employee shall be 100,000.

(b) Options defined as "Non-Statutory Stock Options" which do not satisfy
the requisites of Section 422 of the Internal Revenue Code, as amended, may
also be granted under this Plan.

6.3 OPTION PRICE. The per share Option price for the stock subject to
each Option shall be determined by the Committee, but the per share exercise
price shall not be less than the Fair Market Value of the Stock on the date the
Option is granted.

6.4 OPTION PERIOD. Each Option granted hereunder must be granted within
ten (10) years from the effective date of the Plan. The period for the
exercise of each Option shall be determined by the Committee, but in no
instance shall such period exceed ten (10) years from the date of grant of the
Option. The Committee may prescribe such period after the grant of an Option
which must expire before such Option may be exercised as the Committee deems
appropriate.<PAGE>
1998 STOCK OPTION PLAN
Page 5

6.5 OPTION EXERCISE.

(a) Options granted hereunder may not be exercised until and unless the
Optionee shall meet the conditions precedent established by the Committee for
the Employees.

(b) Options may be exercised by Employees for whole shares only.
Optionees may exercise their Option in whole at any time, or in part from time
to time in each year on a cumulative basis with any portion not exercised to be
carried over for exercise in subsequent years. Options shall be exercised by
written notice of intent to exercise the Option with respect to a specified
number of shares delivered to the Company at its principal office and payment
in full to the Company at said office of the amount of the Option price for the
number of shares with respect to which the Option(s) are then being exercised.

(c) No person to whom Incentive Stock Options are granted hereunder shall
receive Options, first exercisable during any single calendar year, for Stock,
the fair market value of which (determined at the time of the grant of the
Options) exceeds $100,000.

(d) No Option may be exercised by any Optionee unless a registration
statement, such as form S-8, covering the Stock subject thereto has been filed
with and declared effective by the Securities and Exchange Commission and an
appropriate registration or exemption therefrom, is in effect or available in
the state of residence of the exercising Optionee.

6.6 NON-TRANSFERABILITY OF OPTION. No Option or any right relative
thereto shall be transferred by an Optionee otherwise than by will or by the
laws of descent and distribution. During the lifetime of an Optionee, the
Option shall be exercisable only by him or her.

6.7 EFFECT OF DEATH OR OTHER TERMINATION OF EMPLOYMENT.

(a) If the Employee's relationship with the Company shall be terminated,
with or without cause, or by the act of the Employee, the Optionee's right to
exercise such Incentive Stock Options shall terminate and all rights thereunder
shall cease three (3) months after the date on which such person's association
is terminated. Provided however, that if the Optionee shall die or become
permanently and totally disabled while employed by the Company, as solely
determined by the Committee in accordance with its policies, then either his or
her personal representatives or a transferee under the Optionee's will or
pursuant to the laws of descent and distribution, or the disabled Optionee may
exercise the Incentive Stock Options in full one (1) year from the date of such
death or disability. In the case of an Optionee's retirement in accordance
with the Company's established retirement policy, such Incentive Stock Options
shall remain exercisable by the Optionee for three (3) months from the date of
such retirement.

(b) The exercise schedule for Non-Statutory Stock Options following
termination, death or total and permanent disablement of the Optionee will be
determined by the Committee at the time of grant.

(c) No transfer of an Option by the Optionee by will or the laws of
descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with a written notice thereof and an
authenticated copy of the will and/or such other evidence as the Committee may<PAGE>
1998 STOCK OPTION PLAN
Page 6

deem necessary to establish the validity of the transfer and the acceptance by
the transferee or transferees of the terms and conditions of such Option.

6.8 RIGHTS AS A SHAREHOLDER/VESTING OF OPTIONS.

(a) An Optionee or a transferee of an Option shall have no rights as a
shareholder of the Company with respect to any shares subject to any
unexercised Options.

(b) Incentive Stock Options are exercisable once vested. Twenty-five
percent (25%) of the shares issuable under the Incentive Stock Options shall
vest six months from date of Grant provided that the Optionee has remained an
Employee of the Company for not less than six months from date of Grant,
twenty-five percent (25%) of the shares issuable under the Incentive Stock
Options shall vest one year from date of Grant provided that Optionee has
remained an Employee of the Company for not less than one year from the date of
Grant, and the remaining fifty percent (50%) of the shares issuable under the
Incentive Stock Options shall vest two years from date of Grant provided that
Optionee has remained an Employee of the Company for not less than two years
from the date of Grant. Otherwise the options shall lapse.

(c) Non-Statutory Stock Options are exercisable once vested. The vesting
schedule for Non-Statutory Stock Options will be determined by the Committee
when granted.

6.9 REQUIRED FILINGS. An Optionee to whom an Option is granted under
the terms of the Plan is required to file appropriate reports with the Internal
Revenue Service. As a condition of the receipt of an Option hereunder,
Optionee shall agree to make necessary filings with the Internal Revenue
Service. The Committee shall assist and cooperate with Optionee by providing
the necessary information required for compliance of this condition.

ARTICLE VII

STOCK CERTIFICATES

The Company shall not be required to issue or deliver any certificate for
shares of Stock purchased upon the exercise of any Option granted hereunder, or
any portion thereof, prior to the obtaining of any approval or clearance from
any federal or state governmental agency which the Committee shall, in its sole
discretion, determine to be necessary or advisable.

ARTICLE VIII

TERMINATION, AMENDMENT, OR MODIFICATION OF THE PLAN

The Board may at any time, upon recommendation of the Committee,
terminate, and may at any time and from time to time and in any respect amend
or modify the Plan. Provided, however, if the Plan has been submitted to and
approved by the shareholders of the Company no such action by the Board may be
taken without approval of the majority of the shareholders of the Company
which: (a) increases the total number of shares of Stock subject to the Plan,
except as contemplated in Section 5.3 hereof; (b) changes the manner of
determining the Option price; or (c) withdraws the administration of the Plan
from the Committee.

ARTICLE IX<PAGE>
1998 STOCK OPTION PLAN
Page 7

EMPLOYMENT

9.1 EMPLOYMENT. Nothing in the Plan or any Option granted hereunder or
in any Stock Option Agreement shall confer upon an Employee receiving such
Option or Stock Option Agreement the status as an employee of the Company.
Further, nothing in the Plan or any Option granted hereunder shall in any
manner create in any Optionee the right to continue their relationship with the
Company or create any vested interest in such relationship, including
employment.

9.2 OTHER COMPENSATION PLANS. The adoption of the Plan shall not effect
any other stock option, incentive, or other compensation plan in effect for the
Company or any of its subsidiaries, nor shall the Plan preclude the Company or
any subsidiary thereof from establishing any other forms of incentive or other
compensation for employees or non-employee Directors of the Company, or any
subsidiary thereof.

9.3 PLAN EFFECT. The Plan shall be binding upon the successors and
assigns of the Company.

9.4 TENSE. When used herein nouns in the singular shall include the
plural.

9.5 HEADINGS OF SECTIONS ARE NOT PART OF THE PLAN. Headings of articles
and sections hereof are inserted for convenience and reference and constitute
no part of the Plan.

As approved by the Shareholders on November 6, 1998.<PAGE>

ALANCO ENVIRONMENTAL RESOURCES CORPORATION

1998 DIRECTORS AND OFFICERS
STOCK OPTION PLAN

ARTICLE I

DEFINITIONS

As used herein, terms have the meaning hereinafter set forth unless the
context should clearly indicate the contrary:

(a) "Board" shall mean the Board of Directors of the Company;

(b) "Committee" shall mean the Administrative Committee appointed by the
Board to oversee the administration of this Plan;

(d) "Director" shall mean a member of the Board;

(e) "Fair market value" shall mean the average of the closing price for
ten consecutive trading days at which the Stock is listed in the NASDAQ
quotation system ending on the day prior to the date an Option is granted
hereunder;

(f) "Grant" means the issuance of an Option hereunder to an Optionee
entitling such Optionee to acquire Stock on the terms and conditions set forth
in a Stock Option Agreement to be entered into with the Optionee;

(g) "Officer" shall mean an Executive Officer of the Company;

(h) "Option" shall mean the right granted to an Optionee to acquire Stock
of the Company pursuant to the Plan;

(i) "Optionee" shall mean an Officer of the Company or a Director of the
Company to whom a Grant hereunder has been made;

(j) "Plan" shall mean the Alanco Environmental Resources Corporation 1998
Directors and Officers Stock Option Plan, the terms of which are herein set
forth;

(k) "Stock" shall mean the common stock of the Company or, in the event
the outstanding shares of stock are hereafter changed into or exchanged for
shares of different stock or securities of the Company or some other
corporation, such other stock or securities;

(l) "Stock Option Agreement" shall mean the agreement between the Company
and an Optionee under which an Optionee may acquire Stock pursuant to the Plan.

ARTICLE II

THE PLAN

2.1 NAME. The plan shall be known as the "Alanco Environmental
Resources Corporation 1998 Directors and Officers Stock Option Plan."

2.2 PURPOSE. The purpose of the Plan is to advance the business and
development of the Company and its shareholders by affording to the Directors<PAGE>
1998 DIRECTORS AND OFFICERS
STOCK OPTION PLAN
Page 2

and Officers of the Company the opportunity to acquire an equity interest in
the Company by the grant of Options to such persons under the terms herein set
forth. By doing so, the Company seeks to motivate, retain and attract highly
competent, highly motivated Executive Officers and Directors to lead the
Company through this critical time in its evolution and ensure the success of
the Company. The Options to be granted hereunder are Non-Statutory Options
made available to Directors and Officers of Alanco Environmental Resources
Corporation.

2.3 EFFECTIVE DATE. The Plan shall become effective upon its adoption
by the Board of the Company. Thereafter, the Plan shall be submitted to the
shareholders of the company for approval within 12 months after the date said
Plan is adopted by the Board.

ARTICLE III

PARTICIPANTS

Only Officers and Directors of the Company shall be eligible to be granted
an Option under the Plan. The Committee may grant Options to any Director or
Officer in accordance with the terms hereunder and such other determinations as
the Committee may, from time to time, in its sole discretion make.

ARTICLE IV

ADMINISTRATION

4.1 DUTIES AND POWERS OF THE COMMITTEE. The Plan shall be administered
by the Committee. Subject to the express provisions of the Plan, the Committee
shall have the sole discretion and authority to determine from among eligible
persons those to whom and the time or times at which Options may be granted and
the number of shares of Stock to be subject to each Option. Subject to the
express provisions of the Plan, the Committee shall also have complete
authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations related to it and to determine the details and provisions of each
Stock Option Agreement and to make all other determinations necessary or
advisable in the administration of the Plan.

4.2 RECORDS OF PROCEEDINGS. The Committee shall maintain written
minutes of its actions which shall be maintained among the records of the
Company.

4.3 MAJORITY. A majority of the members of the Committee shall
constitute a quorum and any action taken by a majority present at such meeting,
when properly noticed, at which a quorum is present or any action taken without
a meeting evidenced by a writing executed by all members of the Board shall
constitute the action of the Committee.

4.4 COMPANY ASSISTANCE. The Company shall supply full and timely
information to the Committee in all matters relating to eligible Optionees,
their status, death, retirement, disability and such other pertinent facts as
the Committee may require. The Company shall furnish the Committee with such<PAGE>
1998 DIRECTORS AND OFFICERS
STOCK OPTION PLAN
Page 3

clerical and other assistance as is necessary in the performance of its duties.
All expenses of the Committee shall be paid by the Company.

4.5 COMPOSITION OF THE COMMITTEE. The Committee shall consist of up to
three (3) individuals appointed by the Board from among its members, at least
two (2) of which are non-employee Directors. Appointment to the Committee
shall be for a term of one (1) year or until new individuals are appointed to
the Committee by the Board.. Any individual designated and serving as a member
of the Committee shall be entitled to indemnification in relation to such
service by the Company to the fullest extent called for or permitted by Article
X of the Bylaws of the Company.

ARTICLE V

SHARES OF STOCK SUBJECT TO THE PLAN

(a) The aggregate number of shares of Stock subject to Options which may
be granted hereunder shall be adjusted appropriately;

(b) Rights under outstanding Options granted hereunder, both as to the
number of subject shares and the Option price, shall be adjusted appropriately;

The manner of application of the foregoing provision shall be determined
solely by the Committee and any such adjustment may provide for the elimination
of fractional share interests.

ARTICLE VI

6.1 OPTIONS.

(a) The Company will grant to non-employee Directors newly appointed to
the Board of Directors an option to purchase 20,000 shares of common stock at
fair market value.

(b) Upon each subsequent anniversary of the election to the Board of
Directors, the non-employee directors will be granted from the Company an
option to purchase 10,000 shares of common stock at fair market value.

(c) The Board of Directors or the Administrative Committee may grant
additional options to Directors and Executive Officers, setting forth such
terms, conditions, and exercise schedules as may be determined by the Committee
or Board of Directors.

(d) Each Option granted hereunder shall be evidenced by minutes of a
meeting of or the written consent of the Committee and by a written Stock
Option Agreement dated as of the date of grant and executed by the Company and
the Optionee, which agreement shall set forth such terms and conditions as may
be determined by the Committee consistent with the Plan.

6.2 LIMITATIONS. The Options granted hereunder are non-statutory
Options which do not satisfy the requisites of Section 422 of the Internal
Revenue Code, as amended.

6.3 OPTION PRICE. The per share Option price for the stock subject to
each Option shall be determined by the Committee, but the per share exercise
price shall not be less than the fair market value of the Stock on the date the
Option is granted.

6.5 OPTION EXERCISE.

(a) Options granted hereunder may not be exercised until and unless the
Optionee shall meet the conditions precedent established by the Committee for
Officers and Directors.

(b) Options may be exercised by Officers and Directors for whole shares
only. Officer and Director Optionees may exercise their Option in whole at any
time, or in part from time to time in each year on a cumulative basis with any
portion not exercised to be carried over for exercise in subsequent years.
Options shall be exercised by written notice of intent to exercise the Option
with respect to a specified number of shares delivered to the Company at its
principal office and payment in full to the Company at said office of the<PAGE>
1998 DIRECTORS AND OFFICERS
STOCK OPTION PLAN
Page 5

amount of the Option price for the number of shares with respect to which the
Option(s) are then being exercised.

(c) No Option may be exercised by any Optionee unless a registration
statement, such as form S-8, covering the Stock subject thereto has been filed
with and declared effective by the Securities and Exchange Commission and an
appropriate registration or exemption therefrom, is in effect or available in
the state of residence of the exercising Optionee.

6.7 EFFECT OF DEATH OR OTHER TERMINATION OF RELATIONSHIP.

(a) The exercise schedule for Non-Statutory Stock Options following
termination, death or total and permanent disablement of the Optionee will be
determined by the Committee at the time of grant.

(b) No transfer of an Option by the Optionee by will or the laws of
descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with a written notice thereof and an
authenticated copy of the will and/or such other evidence as the Committee may
deem necessary to establish the validity of the transfer and the acceptance by
the transferee or transferees of the terms and conditions of such Option.

6.8 RIGHTS AS A SHAREHOLDER/VESTING OF OPTIONS.

(a) An Optionee or a transferee of an Option shall have no rights as a
shareholder of the Company with respect to any shares subject to any
unexercised Options.

(b) Options are exercisable once vested. All of the shares issuable
under the Options shall vest one year from date of Grant provided that Optionee
has remained a Director or Executive Officer of the Company for not less than
one year from the date of Grant. Otherwise, the Options shall lapse.

6.9 REQUIRED FILINGS. An Optionee to whom an Option is granted under
the terms of the Plan is required to file appropriate reports with the
Securities and Exchange Commission and the Internal Revenue Service. As a
condition of the receipt of an Option hereunder, Optionees shall agree to make
the necessary filings. The Company shall assist and cooperate with Optionees
by providing the necessary information required for compliance of this
condition.

ARTICLE VII

STOCK CERTIFICATES

ARTICLE VIII<PAGE>
1998 DIRECTORS AND OFFICERS
STOCK OPTION PLAN
Page 6

TERMINATION, AMENDMENT, OR MODIFICATION OF THE PLAN

The Board may at any time terminate the plan, and may at any time and from
time to time and in any respect amend or modify the Plan. Provided, however, if
the Plan has been submitted to and approved by the shareholders of the Company
no such action by the Board may be taken without approval of the majority of
the shareholders of the Company which: (a) increases the total number of shares
of Stock subject to the Plan; (b) changes the manner of determining the Option
price; or (c) withdraws the administration of the Plan from the Committee.

ARTICLE IX

EMPLOYMENT

9.1 EMPLOYMENT. Nothing in the Plan or any Option granted hereunder or
in any Stock Option Agreement shall confer upon a non-employee Director
receiving such Option or Stock Option Agreement the status as an employee of
the Company. Further, nothing in the Plan or any Option granted hereunder
shall in any manner create in any Optionee the right to continue their
relationship with the Company or create any vested interest in such
relationship, including employment.

9.3 PLAN EFFECT. The Plan shall be binding upon the successors and
assigns of the Company.

9.4 TENSE. When used herein nouns in the singular shall include the
plural.

9.5 HEADINGS OF SECTIONS ARE NOT PART OF THE PLAN. Headings of articles
and sections hereof are inserted for convenience and reference and constitute
no part of the Plan.

As approved by the Shareholders on November 6, 1998.<PAGE>

DENNIS BROVARONE
ATTORNEY AND COUNSELOR AT LAW
11249 West 103rd Drive
Westminster, Colorado 80021
ph: 303 466 4092 / fax: 303 466 4826

September 30, 1998

U.S. Securities and Exchange Commission
Washington, D.C.

Re: Supplemental Information regarding
Registration Statement on Form S-8

Ladies and Gentlemen:

Pursuant to Item 10, Instruction 5 of Schedule 14A, please be advised that it
is the intention of Alanco Environmental Resources Corporation, (the
"Corporation") to file an S-8 registration statement for the shares of Common
Stock underlying of the compensation plans described in the Preliminary Proxy
to be submitted to the shareholders of the Corporation. Assuming that the
compensation plans are approved by the shareholders, the Corporation shall file
the S-8 registration statement on or before November 30, 1998.

Very truly yours,

/s/DENNIS BROVARONE
Dennis Brovarone <PAGE>