ECO SOIL SYSTEMS INC, DEF 14A, 1999-04-30

ECO SOIL SYSTEMS INC
DEF 14A, 1999-04-30
AGRICULTURAL SERVICES

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<PAGE>
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Eco-Soil Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11

(1) Title of each class of securities to which transaction applies:

------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:

------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

------------------------------------------------------------------------
(5) Total fee paid:

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

/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

------------------------------------------------------------------------
(3) Filing Party:

------------------------------------------------------------------------
(4) Date Filed:

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<PAGE>

ECO SOIL SYSTEMS, INC.

NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS AND PROXY STATEMENT

TO THE SHAREHOLDERS OF ECO SOIL SYSTEMS, INC.:

Notice is hereby given that the Annual Meeting of the Shareholders of Eco
Soil Systems, Inc. (the "Company" or "Eco Soil"), will be held at the Company's
corporate offices located at 10740 Thornmint Road, San Diego, California 92127
on Friday, June 4, 1999 at 3:00 p.m. for the following purposes:

1. To elect two directors for a three-year term to expire at the
2002 Annual Meeting of Shareholders. The present Board of Directors of
the Company has nominated and recommends for election as directors the
following two persons:

William B. Adams
Douglas M. Gloff

2. To approve an increase in the number of shares of Common Stock
available for issuance upon exercise of options granted under the 1998
Stock Option Plan of the Company from 1,000,000 to 1,600,000.

3. To approve the adoption of the 1999 Equity Participation Plan
of Eco Soil Systems, Inc. and the reservation of 1,600,000 shares of
Common Stock for issuance thereunder.

4. To transact such other business as may be properly brought
before the Annual Meeting or any adjournment thereof.

The Board of Directors has fixed the close of business on April 30, 1999
as the record date for the determination of shareholders entitled to notice
of and to vote at the Annual Meeting. A list of such shareholders shall be
open to the examination of any shareholder at the Annual Meeting and for a
period of ten days prior to the date of the Annual Meeting at the offices of
Eco Soil Systems, Inc., 10740 Thornmint Road, San Diego, California 92127.

Accompanying this Notice is a Proxy. WHETHER OR NOT YOU EXPECT TO BE AT
THE ANNUAL MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY. If you plan to attend the Annual Meeting and wish to vote your
shares personally, you may do so at any time before the Proxy is voted.

All shareholders are cordially invited to attend the meeting.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Mark D. Buckner
Mark D. Buckner
SECRETARY

San Diego, California
April 30, 1999

<PAGE>

ECO SOIL SYSTEMS, INC.
10740 THORNMINT ROAD
SAN DIEGO, CALIFORNIA 92127

PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
JUNE 4, 1999

The Board of Directors of Eco Soil Systems, Inc., a Nebraska corporation
(the "Company" or "Eco Soil") is soliciting the enclosed Proxy for use at the
Annual Meeting of Shareholders of the Company to be held on June 4, 1999 (the
"Annual Meeting"), and at any adjournments thereof. This Proxy Statement
will be first sent to shareholders on or about May 6, 1999. Unless contrary
instructions are indicated on the Proxy, all shares represented by valid
proxies received pursuant to this solicitation (and not revoked before they
are voted) will be voted for the election of the Board's nominees for
directors. As to any other business which may properly come before the
Annual Meeting and be submitted to a vote of the shareholders, Proxies
received by the Board of Directors will be voted in accordance with the best
judgment of the holders thereof.

A Proxy may be revoked by written notice to the Secretary of the
Company at any time prior to the Annual Meeting, by executing a later Proxy
or by attending the Annual Meeting and voting in person.

The Company will bear the cost of solicitation of Proxies. In addition
to the use of mails, Proxies may be solicited by personal interview,
telephone or telegraph, by officers, directors, and other employees of the
Company. The Company will also request persons, firms, and corporations
holding shares in their names, or in the names of their nominees, which are
beneficially owned by others to send or cause to be sent Proxy material to,
and obtain Proxies from, such beneficial owners and will reimburse such
holders for their reasonable expenses in so doing.

The Company's mailing address is 10740 Thornmint Road, San Diego,
California 92127.

VOTING

Shareholders of record at the close of business on April 30, 1999 (the
"Record Date") will be entitled to notice of and to vote at the Annual
Meeting or any adjournments thereof.

As of April 30, 1999, 16,901,130 shares of the Company's common stock,
$.005 par value per share ("Common Stock"), were outstanding, representing
the only voting securities of the Company. Each share of Common Stock is
entitled to one vote.

Votes cast by Proxy or in person at the Annual Meeting will be counted
by the persons appointed by the Company to act as Inspectors of Election for
the Annual Meeting. The Inspectors of Election will treat shares represented
by Proxies that reflect abstentions or include "broker non-votes" as shares
that are present and entitled to vote for purposes of determining the
presence of a quorum. Abstentions or "broker non-votes" do not constitute a
vote "for" or "against" any matter and thus will be disregarded in the
calculation of "votes cast." Any unmarked Proxies, including those submitted
by brokers or nominees, will be voted in favor of the nominees of the Board
of Directors, as indicated in the accompanying Proxy card.

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<PAGE>

PROPOSAL 1

ELECTION OF DIRECTORS

The Board of Directors currently consists of six members. The Company's
Bylaws provide for the classification of the Board of Directors into three
classes, as nearly equal in number as possible, with staggered terms of
office and provides that upon the expiration of the term of office for a
class of directors, nominees for such class shall be elected for a term of
three years or until their successors are duly elected and qualified. At
this meeting, two nominees for director are to be elected as Class III
directors. The nominees are William B. Adams and Douglas M. Gloff. The
Class I and Class II directors have one year and two years, respectively,
remaining on their terms of office. If no contrary indication is made,
proxies in the accompanying form are to be voted for such nominees or, in the
event any such nominee is not a candidate or is unable to serve as a director
at the time of the election (which is not currently expected), for any
nominee who shall be designated by the Board of Directors to fill such
vacancy. Both nominees are members of the present Board of Directors.

In voting for the election of directors of the Company under the
Nebraska Business Corporation Act, all shareholders may cumulate their votes
in the election of directors for any nominee if the nominee's name was placed
in nomination prior to the voting. Under cumulative voting, each shareholder
is entitled in the election of directors to vote one vote for each share held
by him multiplied by the number of directors to be elected, and he may cast
all such votes for a single nominee for director or may distribute them among
any two or more nominees as he sees fit. The candidates receiving the
highest number of votes, up to the number of directors to be elected, will be
elected. The Proxy solicited by the Board of Directors confers discretionary
authority on the proxies to cumulate votes so as to elect the maximum number
of directors. The Proxy may not be voted for more than two persons.

INFORMATION REGARDING DIRECTORS

The information set forth below as to each nominee for Director has been
furnished to the Company by the respective nominees for Director:

NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS

FOR A THREE-YEAR TERM EXPIRING AT THE
2002 ANNUAL MEETING OF SHAREHOLDERS

<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION WITH THE COMPANY
<S> <C> <C>
William B. Adams 52 Chairman of the Board, Chief Executive
Officer, and Director
Douglas M. Gloff 52 President, Chief Operating Officer
and Director
</TABLE>

WILLIAM B. ADAMS has served as Chairman of the Board and Chief Executive
Officer of the Company since March 1991. From 1985 to 1994, Mr. Adams was
Chairman of the Board of Chronimed, Inc., a publicly held medical products
company, and served as Chairman of the Board of Orphan Medical, Inc., a
publicly traded spinoff of Chronimed through December 1998. Prior to his
involvement with the Company, Mr. Adams founded WBA Consultants, Ltd., a
management consulting firm, in 1980 and participated as chief executive
officer in corporate turnarounds. From August 1989 to February 1991, Mr.
Adams was Executive Chairman of Printrak, Inc., a publicly held developer of
specialized identification systems used by the law enforcement community.
From April 1986 to April 1988, Mr. Adams was President and Chief Executive
Officer of Check Technology Corporation, a manufacturer of electronic
printing equipment. Mr. Adams received his B.A. from Texas Tech University.

DOUGLAS M. GLOFF joined the Company as Executive Vice President in
January 1994 and became a director of the Company in August 1995. Mr. Gloff
has served as the Company's President and Chief Operating Officer since April
1997. Mr. Gloff shares many of the executive management duties of the
Company with Mr. Adams. Prior to joining the Company, Mr. Gloff acted as a
consultant from 1992 until January 1994. From 1978 to 1992, he served in
various capacities with U.S. Surgical, Inc., a publicly held supplier of
medical instruments used in

3
<PAGE>

surgery, culminating in the position of Director of Sales for the western
area. Mr. Gloff received his B.A. and M.B.A. from Indiana University.

MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE

TERM EXPIRING AT THE
2000 ANNUAL MEETING OF SHAREHOLDERS

<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION WITH THE COMPANY
<S> <C> <C>
Fridolin Fackelmayer 56 Director
S. Bartley Osborn 58 Director
</TABLE>

FRIDOLIN FACKELMAYER has served as a director of the Company since June
1998. He is currently the President of Lombard Odier, Inc., the New York
office of Lombard Odier & Cie, one of the oldest and largest Swiss private
banks. Mr. Fackelmayer has 28 years of investment experience covering such
financial centers as Munich, Paris, London and New York. Prior to Lombard
Odier, where he has been employed since 1992, Mr. Fackelmayer spent
twenty-two years with Smith Barney, Salomon Brothers, Bear Stearns and Drexel
Burnham.

S. BARTLEY OSBORN has served as a director of the Company since November
1991. Mr. Osborn is currently Chairman of the Board of Directors of the
Fairway Foundation, a nonprofit foundation dedicated to teaching the game of
golf to inner-city children in Minneapolis and St. Paul, Minnesota. From
1965 through 1982 Mr. Osborn held various management positions at EcoLab,
Inc., a Fortune 500 specialty chemical manufacturer based in St. Paul,
Minnesota, culminating in the position of Executive Vice President. Mr.
Osborn is a trustee of the IC Koran foundation, which assists employees of
EcoLab through scholarships for its children and through financial hardship
assistance.

TERM EXPIRING AT THE
2001 ANNUAL MEETING OF SHAREHOLDERS

<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION WITH THE COMPANY
<S> <C> <C>
Edward C. Ford 70 Director
William S. Potter 55 Director
</TABLE>

EDWARD C. "WHITEY" FORD has served as a director of the Company since
June 1998. He is currently a Training Coach for the New York Yankees, an
organization with which he has been associated since 1950. As a Hall of Fame
pitcher for the Yankees, he had a career winning percentage of .690 over
eighteen seasons and played in eleven World Series.

WILLIAM S. POTTER served as a director of the Company since August 1992.
Since 1988, Mr. Potter has been President of Rugged Rigger, Inc., a personal
services corporation, which has created Pauma Valley Organics, a certified
organic produce farm. From 1970 to 1988, Mr. Potter worked in various
capacities for H.M. Stevens Incorporated, a national food service and
catering company specializing in sporting events, culminating in the
positions of Operational Vice President and Director.

4
<PAGE>

EXECUTIVE OFFICERS OF THE COMPANY

The directors, executive officers and key employees of the Company and
their ages as of April 1, 1999 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Mark D. Buckner 44 Senior Vice President, Finance, Chief Financial Officer and
Secretary
Dr. Thomas C. Quick 43 Vice President, Agriculture
Max D. Gelwix 48 Vice President, Marketing
Dr. David A. Odelson 43 Director of Research and Development
Kevin P. Lyons 42 Vice President and General Manager, Turf Partners
John C. Wells, Jr. 57 Vice President and General Manager, Agricultural Supply
</TABLE>

MARK D. BUCKNER joined the Company in April 1999 as Senior Vice
President Finance, Chief Financial Officer and Corporate Secretary. From
March 1996 to June 1998 Mr. Buckner served NextWave Telecom, Inc. as
Corporate Treasurer. From January 1995 through March 1996, Mr. Buckner served
as Chief Financial Officer of Communications TeleSystems International, Inc.
From January 1988 through May 1993, he served as Chief Financial Officer for
U.S. Long Distance Corp. He held the same position with The Southwest
Venture Partnerships, a firm financing high-growth companies from 1983
through 1988 and with Medical Polymers Technologies from June 1993 through
December 1994. Mr. Buckner practiced public accounting with Arthur Andersen
& Co. from 1977 through 1983. Between June 1998 and April 1999 Mr. Buckner
provided consulting services to communication and Internet service providers.
Mr. Buckner received his B.B.A. from Southern Methodist University. In
December 1998, NextWave Telecom, Inc. filed for protection under Chapter XI
of the Federal Bankruptcy Act.

DR. THOMAS C. QUICK has served as the Vice President, Agriculture of the
Company since September 1996. From October 1994 to August 1996, he served as
an International Product Manager, Biopesticides, for Abbott Laboratories, a
pharmaceutical company. Prior to that, he served in various capacities with
Mycogen Corporation, an agricultural bio-tech company, from May 1987 until
March 1994, culminating in the position of Technical Sales Representative.
Dr. Quick received his B.S. from the University of California, Riverside and
a Ph.D. in Agriculture from the University of Wisconsin, Madison.

MAX D. GELWIX joined the Company as Vice President in September 1998.
From 1979 through June 1996 he served as Executive Vice President of Arthur
J. Gallagher & Co., a risk management and insurance brokerage agency, and was
the President of Maxell Enterprises, a risk management consulting firm, from
June 1996 through September 1997. Mr. Gelwix received his B.S. degree from
Colorado State University.

DR. DAVID A. ODELSON joined the Company in November 1996 as the
Company's Director of Research and Development. From May 1995 to April 1996,
he was a Visiting Scientist at Pharmacia & Upjohn Co., a pharmaceutical
company. From September 1989 to April 1995, he worked as a Co-Investigator
at NSF Science and Technology Center for Microbial Ecology and as an
Assistant Professor at Central Michigan University. Dr. Odelson received his
B.S. in Microbiology from the University of Illinois and his Ph.D. in
Microbiology from Michigan State University.

KEVIN P. LYONS has served in various capacities with Turf Specialty
since October 1985, culminating in his current position of Vice President and
General Manager. The Company acquired Turf Specialty in May 1996. Prior to
joining Turf Specialty, he was a Senior Technical Representative for O.M.
Scott & Sons, Inc., a chemical and fertilizer manufacturer, from February
1980 until October 1985.

JOHN C. WELLS, JR. has served the Company as Vice President and General
Manager of Agricultural Supply, Inc. since April 1998. From 1978 through the
Company's April 1998 acquisition of Agricultural Supply, Inc., Mr. Wells
served as President of Agricultural Supply, Inc. He received a B.A. degree
from Claremont McKenna Collage.

5
<PAGE>

BOARD MEETINGS AND COMMITTEES

The Company's Board of Directors held four regularly scheduled meetings
during 1998. No nominee for director who served as a director during the
past year attended fewer than 75% of the aggregate of the total number of
meetings of the Board of Directors and the total number of meetings of
committees of the Board of Directors on which he served. The Board of
Directors has established a Compensation Committee and an Audit Committee.
The Company does not have a Nominating Committee.

COMPENSATION COMMITTEE

The Compensation Committee consists of Messrs. Osborn, Potter and Adams.
The Compensation Committee provides recommendations concerning salaries and
incentive compensation for the Company's officers and administers the
Company's benefit plans, other than the 1992 Stock Option Plan. The
Compensation Committee held two meetings during 1998.

AUDIT COMMITTEE

The Audit Committee consists of Messrs. Fackelmayer, Potter and Ford.
The Audit Committee recommends to the Board of Directors the engagement of
the Company's independent public accountants and reviews the scope and
results of their audits and other services. The Audit Committee meets with
management and with the independent public accountants to review matters
relating to the quality of the Company's financial reporting and internal
accounting control, including the nature, extent and results of the audits,
proposed changes to the Company's accounting principles and otherwise
maintains communications between the independent public accountants and the
Board of Directors. The Audit Committee held two meetings during 1998.

COMPENSATION OF DIRECTORS

The Company has not paid any cash compensation to a director in his
capacity solely as a director and has no present plan to pay directors' fees.
It is the Company's current policy to award non-employee directors an option
to purchase 10,000 shares of Common Stock at the then-current market price,
vesting over three years, upon becoming a director and options to purchase
3,000 shares of Common Stock at the then-current market price, vesting after
six months, on the date of each annual meeting of shareholders if the
director has served since the previous annual meeting of shareholders and has
been elected to an additional term, if applicable. All directors are
reimbursed for travel and other out-of-pocket expenses incurred in connection
with attendance at meetings of the Board of Directors.

RECOMMENDATION OF THE BOARD OF DIRECTORS

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE SLATE
OF NOMINEES SET FORTH ABOVE. PROXIES SOLICITED BY THE BOARD OF DIRECTORS
WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE ON THE ACCOMPANYING
PROXY.

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<PAGE>

EXECUTIVE COMPENSATION AND OTHER INFORMATION

EXECUTIVE COMPENSATION

The following table shows for each of the last three full fiscal years,
compensation awarded, paid to, or earned by the Company's Chief Executive
Officer; the Company's four most highly compensated executive officers other
than the Chief Executive Officer who were serving as executive officers at
the end of the last completed fiscal year; and one additional individual, Mr.
Schermerhorn, who would have been named but for the fact that he was not
serving as an executive officer at the end of the most recent fiscal year
(the "Named Executive Officers").

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
COMPENSATION AWARDS
--------------------------------------------- -----------------------
NAME AND YEAR SALARY($) BONUS ($) OTHER SECURITIES UNDERLYING
PRINCIPAL POSITION ANNUAL OPTIONS (#)
COMPENSATION
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

WILLIAM B. ADAMS........... 1998 150,000 0 0 50,000
Chairman of the Board and 1997 142,188 0 0 0
Chief Executive Officer 1996 75,000 0 0 5,556

KEVIN P. LYONS(1).......... 1998 171,346 5,000 0 5,000
Vice President and 1997 177,693 0 0 0
General Manager, 1996 85,000 80,000 0 10,000
Turf Partners, Inc.

DAVID W. SCHERMERHORN(1)... 1998 171,346 5,000 0 5,000
Vice President 1997 177,693 0 0 0
Turf Partners, Inc. 1996 85,000 80,000 0 10,000

DOUGLAS M. GLOFF........... 1998 150,000 0 0 20,000
President and 1997 142,188 0 0 0
Chief Operating Officer 1996 75,000 0 0 0

L. JEAN DUNN(2)............ 1998 126,979 15,000 4,800 (4) 15,000
Former Vice President, 1997 112,196 0 4,800 (4) 0
Finance and 1996 54,231 0 800 (4) 75,000
Chief Financial Officer

JOHN C. WELLS, JR.(3)...... 1998 121,071 12,544 3,807 (4) 50,000
Vice President and
General Manager,
Agricultural Supply, Inc.
</TABLE>
- ----------
(1) Messrs. Lyons and Schermerhorn became employees of the Company in May 1996
upon the acquisition by the Company of Turf Specialty, Inc. Turf
Specialty, Inc. was merged with and into Turf Partners, Inc. in December
1998.
(2) Mr. Dunn joined the Company in May 1996 and resigned on March 31, 1999.
(3) Mr. Wells became an employee of the Company in April 1998 upon the
acquisition by the Company of Agricultural Supply, Inc.
(4) Reflects auto allowances paid to Messrs. Dunn and Wells.

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<PAGE>

Stock Option Grants Table

The following table provides information concerning the grant of stock
options to the Named Executive Officers of the Company during fiscal 1998.
The Company does not have any outstanding stock appreciation rights.

<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE PER SHARE EXPIRATION
GRANTED (#) FISCAL YEAR(%) ($/SH) DATE
----------- -------------- --------------- ----------
<S> <C> <C> <C> <C>
William B. Adams 50,000 4.3% $5.00 12/17/02
Kevin P. Lyons 5,000 0.4 5.00 01/16/03
David W. Schermerhorn 5,000 0.4 5.00 01/16/03
Douglas M. Gloff 20,000 0.7 5.00 12/17/02
L. Jean Dunn 15,000 0.3 4.125 01/16/02
John C. Wells 50,000 4.3 9.625 04/03/03
</TABLE>

OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE

The following table provides information with respect to the Named
Executive Officers, concerning the exercise of stock options during fiscal
1998 and unexercised options held as of the end of fiscal 1998.

<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS
OPTIONS AT AT FY-END
FY-END (#) ($)(1)
------------ -------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- --------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
William B. Adams 100,000 $200,000 273,328/0 $ 1,660,888/$0
Kevin P. Lyons 0 N/A 10,000/5,000 57,500/18,750
David W. Schermerhorn 0 N/A 10,000/5,000 57,500/18,750
Douglas M. Gloff 0 N/A 335,556/50,000 2,039,447/312,500
L. Jean Dunn 0 N/A 75,000/45,000 431,250/69,375
John C. Wells 0 N/A 0/50,000 0/481,250
</TABLE>
- ------------
(1) Based on the closing sale price of the Common Stock on December 31, 1998
($8.75), as reported by the Nasdaq National Market, less the option
exercise price.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with certain
executive officers. A summary of the principal terms of such agreements is
set forth below.

On May 21, 1991, the Company entered into an employment agreement with
William B. Adams, setting forth his duties, compensation, employee benefits
and other terms of employment. The agreement, as amended in February 1997,
provided for an annual salary of $150,000 and was to terminate on December
31, 1998. The Company's Compensation Committee is currently in discussion
with an executive compensation consultant to

8
<PAGE>

structure a new agreement. In January 1998, the Company's Compensation
Committee approved an increase of Mr. Adams' annual salary to $175,000;
however, Mr. Adams elected not to accept this increase in his base salary.

On January 1, 1994, the Company entered into an employment agreement
with Douglas M. Gloff, setting forth his duties, compensation, employee
benefits and other terms of employment. The agreement, as amended in
February 1997, provided for an annual salary of $150,000 was to terminate on
December 31, 1998. The Company's Compensation Committee is currently in
discussions with an executive compensation consultant to structure a new
agreement. In January 1998, the Compensation Committee approved an increase
of Mr. Gloff's annual salary to $175,000; however, Mr. Gloff elected not to
accept this increase in his base salary.

On July 8, 1996, the Company entered into an employment agreement with
Kevin P. Lyons in connection with the Company's acquisition of Turf
Specialty. The employment agreement provides for a minimum annual salary of
$165,000 and terminates on July 7, 1999.

The Company entered into an employment agreement effective as of April
1, 1998 with John C. Wells, Jr. in connection with the Company's acquisition
of Agricultural Supply, Inc. The agreement provides for an annual salary of
$150,000 and states that Mr. Wells will be entitled to participate in the
Company's stock incentive programs. The term of the agreement expires
December 31, 2000, unless terminated earlier by one of the parties, upon
thirty (30) days written notice. Upon a termination without cause, Mr. Wells
would be entitled to receive his annual compensation, as well as continued
family medical insurance coverage, through the scheduled termination date.

COMPENSATION PLANS

1992 STOCK OPTION PLAN. In February 1992, the Company adopted a Stock
Option Plan (the "1992 Plan"), under which 125,000 shares of Common Stock were
initially reserved for issuance upon exercise of options granted to officers,
employees and directors of, and advisors and consultants to, the Company. The
1992 Plan provides for the grant of both stock options intended to qualify as
incentive stock options as defined in the Internal Revenue Code of 1986, as
amended (the "Code"), and nonqualified stock options. The 1992 Plan will
terminate on February 4, 2002, unless sooner terminated by the Board of
Directors. The Company's shareholders approved an increase in the number of
shares reserved for issuance under the Option Plan to 250,000 shares in August
1993, to 350,000 shares in April 1995, to 450,000 shares in May 1996, to 900,000
shares in November 1996 and to 1,100,000 shares in June 1997. The principal
purposes of the 1992 Plan are to provide incentives for officers, employees and
consultants of the Company and its subsidiaries through the granting of options,
thereby stimulating their personal and active interest in the Company's
development and financial success, and inducing them to remain in the Company's
employ.

The 1992 Plan provides for option grants covering up to 1,100,000 shares
of the Company's Common Stock. As of April 20, 1999, options to purchase an
aggregate of 703,723 shares of Common Stock at prices ranging from $3.00 to
$6.00 were outstanding under the 1992 Plan. No additional shares remain
available for grant under the 1992 Plan.

1996 DIRECTORS' OPTION PLAN. The 1996 Directors' Stock Option Plan (the
"Directors' Plan") provided for the automatic grant of nonstatutory stock
options to nonemployee directors. The Company initially reserved a total of
60,000 shares of Common Stock for issuance under the Directors' Plan. As of
April 20, 1999, no additional shares were available for the grant of options
under the Directors' Plan.

1998 STOCK OPTION PLAN. In February 1998, the Company adopted the 1998
Stock Option Plan of Eco Soil Systems, Inc. (the "1998 Plan"), under which
1,000,000 shares of Common Stock were initially reserved for issuance upon
exercise of options granted to officers, employees and directors of, and
consultants to, the Company. The Company's shareholders approved the adoption
of the 1998 Plan on June 19, 1998. The 1998 Plan provides for the grant of
both stock options intended to qualify as incentive stock options as defined
in the Code and nonqualified stock options. The 1998 Plan will terminate on
February 3, 2008, unless sooner terminated by the Board of Directors. The
Board of Directors approved an increase in the number of shares reserved for
issuance

9
<PAGE>

under the 1998 Plan to 1,400,000 shares in December 1998 and an increase in
the number of shares reserved for issuance under the 1998 Plan to 1,600,000
in April 1999. The shareholders are being asked to approve these increases in
the number of shares available for issuance under the 1998 Plan at the
Meeting. See "Proposal 2--Proposal to Approve an Increase in the Number of
Shares Available for Grant under the Company's 1998 Stock Option Plan." The
principal purposes of the 1999 Plan are to provide incentives for officers,
employees and consultants of the Company and its subsidiaries through the
granting of options, thereby stimulating their personal and active interest
in the Company's development and financial success, and inducing them to
remain in the Company's employ.

The 1998 Plan provides for option grants covering up to 1,600,000 shares
of the Company's Common Stock (subject to shareholder approval of an increase
from 1,000,000 to 1,600,000 shares). As of April 20, 1999, options had been
grant (net of those canceled) to purchase an aggregate of 1,156,036 shares of
Common Stock at prices ranging from $4.00 to $11.44 under the 1998 Plan.
443,964 additional shares remain available for grant under the 1998 Plan,
(subject to shareholder approval of the increase in the number of shares
available for issuance under the 1998 Plan).

CERTAIN TRANSACTIONS

In January 1999, the Company paid $111,000 to Mr. Adams, $111,000 to Mr.
Gloff and $60,000 to Mr. Gelwix to satisfy a contingent payment obligation
agreed to by the Company in December 1997 relating to the Company's new
headquarters facility. In the fall of 1997, the Board of Directors
determined that the Company needed a new headquarters facility but that the
Company should not make a long term commitment of its financial resources to
ownership of the new facility. With this understanding, Messrs. Adams, Gloff
and Gelwix sought out and found a new facility that would meet the Company's
needs. They then entered into an agreement to purchase the facility with the
intent of leasing space to the Company. The Company, however, elected not to
move forward on this basis. Instead, the Company elected to acquire the
rights of Messrs. Adams, Gloff and Gelwix to purchase the facility and then
seek an unrelated third party with whom the Company could enter into a
sale-leaseback transaction. The transfer to the Company of the purchase
rights occurred in December 1997, and as consideration for the transfer the
Company agreed to pay Messrs. Adams, Gloff and Gelwix the amount, if any, by
which the Company's ultimate profit on a sale to a third-party purchaser
exceeded $420,000. The Company closed the purchase, sale and leaseback of
the facility in December 1998, and the payments described above were made
shortly thereafter in satisfaction of the contingent payment obligation
related to such sales.

Management of the Company believes that the terms of the transactions
described above were no less favorable to the Company than would have been
obtained from an unaffiliated third party. Any future material transactions
and loans with officers, directors or 5% beneficial shareholders of the
Company's Common Stock, or affiliates of such persons, will be on terms no
less favorable to the Company than could be obtained from unaffiliated third
parties and will be approved by a majority of the outside members of the
Company's Board of Directors who do not have an interest in the transactions.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors (the "Committee")
establishes the general compensation policies of the Company and the
compensation plans and the specific compensation levels for senior
executives, including the Company's Chief Executive Officer.

GENERAL COMPENSATION PHILOSOPHY

The primary objectives of the Company's executive compensation policies
include the following:
- To attract, motivate, and retain a highly qualified executive
management team;
- To link executive compensation to the Company's financial performance
as well as to defined individual management objectives established by
the Committee;
- To compensate competitively with the practices of similarly situated
companies; and
- To create management incentives designed to enhance stockholder value.

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<PAGE>

The Company competes in an aggressive industry and, as a result, believes
that finding, motivating, and retaining quality employees, particularly senior
managers, sales personnel, and operational personnel are key factors to the
Company's future success. The Committee's compensation philosophy seeks to align
the interests of stockholders and management by tying compensation to the
Company's achievement of strategic objectives and to financial performance.
Therefore, the Company positions its senior managers' base salaries below
competitive levels and provides for annual cash and equity bonuses to
significantly reward the achievement of financial and strategic objectives. The
Company and the Committee believe this philosophy will motivate the executives
and, thereby, reinforce the accomplishments of the Company's strategic and
financial goals.

ELEMENTS OF THE COMPENSATION PROGRAM

CASH COMPENSATION: The Company seeks to provide cash compensation to
its executive officers, including base salary and an annual cash bonus, at
levels that are slightly below the median level of the cash compensation of
executives with comparable responsibility at similarly situated companies.
Annual increases in base salary are determined on an individual basis based
on market data and a review of the officer's performance and contribution to
various individual, departmental, and corporate objectives. Cash bonuses are
intended to provide additional incentives to achieve such objectives.

ANNUAL INCENTIVE PLAN: The Company has not established an annual
incentive plan.

LONG-TERM INCENTIVES: The objectives of the Company's long-term
incentive program are to offer opportunities for stock ownership that are
competitive with those at the peer companies and to encourage and create
ownership and retention of the Company's stock by key employees. Grant levels
under the Company's employee stock option plans are made in consideration of
awards to officers within peer companies and an assessment of the executive's
tenure, responsibilities and accomplishments of individual strategic and
financial objectives.

CEO COMPENSATION

In January 1998, the Company's Compensation Committee approved an
increase of Mr. Adams' annual salary to $175,000; however, Mr. Adams elected
not to accept this increase in his base salary. Mr. Adams received base
salary of $150,000 during 1998 and did not receive any cash bonus during the
year. This salary level is below that of CEO salaries at comparable
companies. Mr. Adams abstained from all Compensation Committee matters
relating to his compensation.

TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION

Section 162(m) of the Internal Revenue Code limits the federal income
tax deductibility of compensation paid to the Company's Chief Executive
Officer and to each of the other four most highly-compensated executive
officers. The Company may deduct such compensation only to the extent that
during any fiscal year the compensation paid to such individual does not
exceed $1 million or meet certain specified conditions (including stockholder
approval). Based on the Company's current compensation plans and policies and
proposed regulations interpreting this provision of the Code, the Company and
the Committee believe that, for the foreseeable future, there is little risk
that the Company will lose any significant tax deduction for executive
compensation.

THE COMPENSATION COMMITTEE
William S. Potter
S. Bartley Osborn
William B. Adams

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PERFORMANCE GRAPH

The following graph presents a comparison of the cumulative total return
of the Company's Common Stock since the Company's January 17, 1997 initial
public offering, the Russell 2000 Index and the Index of Crop Service
Companies (SIC Code 0721). The graph assumes an initial investment of $100
at January 17, 1997 and the reinvestment of all dividends.

COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS

--------- FISCAL YEAR ENDING ----------
COMPANY/INDEX/MARKET 1/17/1997 12/31/1997 12/31/1998
<S> <C> <C> <C>

Eco Soil Systems 100.00 113.20 194.44

Crop Services 100.00 87.63 42.70

Russell 2000 Index 100.00 119.94 116.58

</TABLE>

Note: Base price date is 1/17/1997

SOURCE: MEDIA GENERAL FINANCIAL SERVICES
P.O. BOX 85333
RICHMOND, VA 23293
PHONE: 1-(800) 446-7922
FAX: 1-(804) 649-6826

PROPOSAL 2

PROPOSAL TO APPROVE AN INCREASE IN THE NUMBER OF SHARES AVAILABLE
FOR GRANT UNDER THE COMPANY'S 1998 STOCK OPTION PLAN

On February 3, 1998, the Company's Board of Directors adopted the 1998
Stock Option Plan of Eco Soil Systems, Inc. (the "1998 Plan"), under which
1,000,000 shares of Common Stock were initially reserved for issuance upon
exercise of options granted to officers, employees and directors of, and
consultants to, the Company. The Company's shareholders approved the adoption
of the 1998 Plan in June 1998. In December 1998, the Board of Directors
authorized an amendment to the 1998 Plan which increased the number of shares
of Common Stock available for issuance thereunder to 1,400,000 shares. In
April 1999, the Board of Directors approved a second amendment to the 1998
Plan which further increased the number of shares of Common Stock available
for issuance thereunder to 1,600,000 shares.

As of April 20, 1999, options had been granted (net of those canceled)
to purchase an aggregate of 1,156,036 shares of Common Stock under the 1998
Plan. The Board of Directors believes that increasing the number of shares
available for issuance under the 1998 Stock Option Plan is necessary in order
for the Board to have sufficient flexibility to carry out its
responsibilities to (i) establish compensation programs that attract,
motivate and retain executive and other key employees of the Company and (ii)
administer such programs in a manner that benefits the long-term interests of
the Company and its shareholders.

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THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES OF THE COMPANY'S COMMON
STOCK REPRESENTED AND VOTING AT THE ANNUAL MEETING WILL BE REQUIRED FOR
APPROVAL OF THE AMENDMENTS TO THE 1998 PLAN. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENTS TO THE 1998 PLAN.

The following is a description of the material provisions of the 1998
Plan. A copy of the 1998 Plan, as amended, is set forth in Appendix "A" to
this Proxy Statement. The summary which follows is not intended to be
complete and reference should be made to the 1998 Plan for a complete
statement of its terms and provisions.

The principal purposes of the 1998 Plan are to provide incentives for
independent directors, key employees and consultants of the Company and its
subsidiaries through granting of options, thereby stimulating their personal
and active interest in the Company's development and financial success, and
inducing them to remain in the Company's employ.

Under the 1998 Plan, the maximum number of shares which may be subject
to options granted under the 1998 Plan to any individual in any fiscal year
cannot exceed 100,000. The shares available under the 1998 Plan upon
exercise of stock options may be either previously unissued shares or
treasury shares, and may be equity securities of the Company other than
Common Stock. The 1998 Plan provides for appropriate adjustments in the
number and kind of shares subject to the 1998 Plan and to outstanding grants
thereunder in the event of a distribution, stock dividend or certain other
types of recapitalizations, including restructuring.

If any portion of a stock option terminates or lapses unexercised, or is
canceled upon grant of a new option (which may be at a higher or lower
exercise price than the option so canceled), the shares which were subject to
the unexercised portion of such option will continue to be available for
issuance under the 1998 Plan.

ADMINISTRATION

The 1998 Plan is administered by the Compensation Committee or a
subcommittee thereof (referred to herein as the "Committee"), consisting of
at least two members of the Board, none of whom is an officer or employee of
the Company. However, most decisions regarding independent directors under
the 1998 Plan will be made by the Board of Directors. The Committee (or the
Board of Directors in the case of independent directors) is authorized to
select from among the eligible employees, directors and consultants the
individuals to whom options are to be granted and to determine the number of
shares to be subject thereto and the terms and conditions thereof, consistent
with the 1998 Plan. The Committee is also authorized to adopt, amend and
rescind rules relating to the administration of the 1998 Plan.

PAYMENT FOR SHARES

The exercise or purchase price for all options to acquire shares of the
Company's Common Stock, together with any applicable tax required to be
withheld, must be paid in full in cash at the time of exercise or purchase or
may, with the approval of the Committee, be paid in whole or in part in
Common Stock of the Company owned by the Optionee (or issuable upon exercise
of the option) and having a fair market value on the date of exercise equal
to the aggregate exercise price of the shares so to be purchased. The
Committee may also provide, in the terms of an option or other right, that
the purchase price may be payable within thirty days after the date of
exercise. The Committee may also authorize other lawful consideration to be
applied to the exercise or purchase price of an award.

AMENDMENT AND TERMINATION

Amendments to the 1998 Plan to increase the number of shares as to which
options may be granted in the aggregate or to any individual (except for
adjustments) require the approval of the Company's shareholders. In all
other respects the 1998 Plan can be amended, modified, suspended or
terminated by the Committee, unless such action would otherwise require
shareholder approval as a matter of applicable law, regulation or rule.
Amendments of the 1998 Plan will not, without the consent of the participant,
affect such person's rights under an award previously granted, unless the
award itself otherwise expressly so provides. No termination date is
specified for the 1998 Plan.

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<PAGE>

ELIGIBILITY

Options under the 1998 Plan may be granted to individuals who are then
officers or other employees of the Company or any of its present or future
subsidiaries and who are determined by the Committee to be key employees.
Such awards also may be granted to consultants of the Company selected by the
Committee and independent directors selected by the Board of Directors for
participation in the 1998 Plan. Approximately 175 officers and other
employees are eligible to participate in the 1998 Plan. More than one option
may be granted to a key employee, independent director or consultant, but the
aggregate fair market value (determined at the time of grant) of shares with
respect to which an Incentive Stock Option is first exercisable by an
Optionee (i.e. "vests") during any calendar year cannot exceed $100,000.

AWARDS UNDER THE 1998 PLAN

The 1998 Plan provides that the Committee may grant or issue stock
options. Each grant or issuance will be set forth in a separate agreement
with the person receiving the award and will indicate the type, terms and
conditions of the award.

Nonqualified stock options ("NQSOs") will provide for the right to
purchase Common Stock at a specified price which may not be less than 85% of
the fair market value on the date of grant and usually will become
exercisable (in the discretion of the Committee) in one or more installments
after the grant date. NQSOs may be granted for any term specified by the
Committee.

Incentive stock options, if granted, will be designed to comply with the
provisions of the Code and will be subject to restrictions contained in the
Code, including exercise prices equal to at least 100% of fair market value
of Common Stock on the grant date and a ten year restriction on their term,
but may be subsequently modified to disqualify them from treatment as an
incentive stock option. Incentive stock options may be granted only to
employees.

MISCELLANEOUS PROVISIONS OF THE 1998 PLAN

Options and other rights to acquire Common Stock of the Company granted
under the 1998 Plan may provide for their termination upon dissolution or
liquidation of the Company, the merger or consolidation of the Company into
another corporation, or the acquisition by another corporation of all or
substantially all of the Company's assets; but in such event the Committee
may also give Optionees the right to exercise their outstanding options or
rights in full during some period prior to such event, even though the
options or rights have not yet become fully exercisable. Options and other
rights granted under the 1998 Plan may provide that in the event of a "change
in control" of the Company (as defined in the option agreement) all
previously unexercisable options and rights become immediately exercisable
unless such options and rights, or portions thereof, are determined by the
Committee to constitute, when exercised, "excess parachute payments" (as
defined in Section 280G of the Code). If any option or other right does not
contain such limitation, and its exercisability is accelerated upon a change
in control, it is possible that an Optionee may be liable for an excise tax
on the amount attributable to such acceleration (and any other payments made
in connection with such change in control).

The 1998 Plan specifies that the Company may make loans to 1998 Plan
participants to enable them to exercise options granted under the 1998 Plan.
The terms and conditions of such loans, if any are made, are to be set by the
Committee.

In consideration of the granting of a stock option the employee,
independent director or consultant must agree in the written agreement
embodying such award to remain in the employ of, or to continue as a
consultant for, the Company or a subsidiary of the Company for at least one
year after the award is granted.

The dates on which options under the 1998 Plan first become exercisable and
on which they expire will be set forth in individual stock options or other
agreements setting forth the terms of the awards. Such agreements generally

14
<PAGE>

will provide that Options expire upon termination of the Optionee's status as
an employee, consultant or director, although the Committee may provide that
such options continue to be exercisable following a termination without
cause, or following a change in control of the Company, or because of the
Optionee's retirement, death, disability or otherwise. The period during
which the right to exercise an Option vests in the Optionee shall be set by
the Committee. However, unless the Committee states otherwise no Option will
be exercisable by an Optionee subject to Section 16 of the Exchange Act
within the period ending six months and one day after the date the Option is
granted. In addition, Options granted to independent directors shall become
exercisable in cumulative annual installments of 25% on each of the first,
second, third, and fourth anniversaries of the date of the Option grant.

No option to acquire Common Stock granted under the 1998 Plan may be
assigned or transferred by the Optionee, except by will or the laws of
intestate succession, although the shares underlying such rights may be
transferred if all applicable restrictions have lapsed. During the lifetime
of the holder of any option or right, the option or right may be exercised
only by the holder.

The Company requires participants to discharge withholding tax
obligations in connection with the exercise of any option or other right
granted under the 1998 Plan, or the lapse of restrictions on restricted
stock, as a condition to the issuance or delivery of stock or payment of
other compensation pursuant thereto. Shares held by or to be issued to a
participant may also be used to discharge tax withholding obligations related
to exercise of options, subject to the discretion of the Committee to
disapprove such use. In addition, the Committee may grant to employees a
cash bonus in the amount of any tax related to awards.

FEDERAL INCOME TAX CONSEQUENCES

The income tax consequences of the 1998 Plan under current federal law
are summarized below. The discussion is intended to provide only general
information. State and local income tax consequences are not discussed.

NON-QUALIFIED STOCK OPTIONS. Holders of non-qualified stock options
will not realize income for federal income tax purposes as a result of the
grant of the option, but normally will realize compensation income upon
exercise of the non-qualified stock option to the extent that the fair market
value of the shares on the date of exercise of the option exceeds the
aggregate option exercise price paid. The Company (or the corporation that is
the employer of the Optionee) is entitled to a deduction in the same amount
at the time of exercise of the option, provided that the Company (or the
corporation that is the employer of the Optionee) reports on a timely basis
the taxes on the ordinary income realized by an Optionee upon the exercise of
a non-qualified stock option.

Optionees who are subject to the short-swing profits restrictions of
Section 16(b) of the Exchange Act ("Insiders") may be affected by Section
83(c) of the Code. Section 83(c) provides generally that, unless the Insider
otherwise elects, so long as the sale of securities at a profit could subject
an Insider to suit under Section 16(b), the imposition and calculation of the
tax on any compensation income realized will be deferred until the six-month
Section 16(b) period expires. Amendments to the rules under Section 16 of the
Exchange Act, effective May 1, 1991, provide that option exercises will not
constitute "purchases" for Section 16(b) purposes. As a result, Section 83(c)
will no longer apply to option exercises (provided the option has been held
for six months or more) and Insiders will be taxed on the difference between
the option exercise price and the fair market value of the stock at the date
of exercise.

Pursuant to the 1998 Plan, a holder of non-qualified stock options may
exercise such options through delivery of shares of the Company's Common
Stock already held by such holder. The tax consequences resulting from the
exercise of non-qualified stock options through the delivery of already-owned
shares are not completely certain. The Internal Revenue Service in a
published ruling has taken the position that the tax consequences of
exercising options with shares of the Company's Common Stock must be
determined separately for the number of shares received upon exercise equal
to the number of shares surrendered (as a tax-free exchange of stock for
stock) and the remaining shares received upon exercise (as compensation
income). Specifically, to the extent the number of shares of the Company's
Common Stock acquired upon exercise of the options equals the number of
shares of Common Stock delivered, the Optionee will not recognize gain and
the Optionee's basis in the Common Stock

15
<PAGE>

acquired upon such exercise will equal the Optionee's basis in the
surrendered shares of the Common Stock. Any additional shares of the Common
Stock acquired upon such exercise will result in compensation income to the
Optionee in an amount equal to their then fair market value and, accordingly,
the basis in such additional shares of the Common Stock will be their fair
market value.

A holder exercising a non-qualified stock option may elect to pay
amounts required to be withheld under Federal, state or local law in
connection with the exercise of the option by having a portion of the shares
purchased upon exercise retained by the Company. The shares of stock retained
will be treated as sold to the Company and the holder generally will not
realize a gain on the sale, unless the option is exercised through the
delivery of already-owned shares. If the option is exercised through the
delivery of already-owned shares, the holder may realize gain on the shares
of stock retained by the Company to the extent the fair market value of the
shares retained on the date of exercise of the option exceeds the holder's
basis in such shares.

Also, a holder exercising a non-qualified stock option may elect to pay
for the shares of stock purchased upon exercise and all applicable
withholding taxes by having a portion of the shares of stock purchased upon
exercise sold by the holder's broker and the proceeds of the sale paid to the
Company. The holder will realize additional gain or loss on the sale of the
shares of stock by the holder's broker based on the difference between the
fair market value of the shares of stock on the exercise date and the sale
price.

INCENTIVE STOCK OPTIONS. Holders of incentive stock options will not
realize income for federal income tax purposes upon either the grant of the
option or its exercise. However, the amount by which the fair market value of
the shares purchased upon exercise of the option exceeds the option price
will be an "item of adjustment" for purposes of alternative minimum tax. Upon
the sale or other taxable disposition of the shares purchased upon exercise
of the option, long-term capital gain will normally be recognized in the full
amount of the difference between the amount realized and the option exercise
price if no disposition of the shares has taken place within either (i) two
years from the date of grant of the option or (ii) one year from the date of
transfer of the shares to the Optionee upon exercise. If the shares are sold
or otherwise disposed of before the end of such one-year or two-year periods,
the difference between the option price and the fair market value of the
shares on the date on which the option is exercised will be taxed as ordinary
income; the balance of the gain, if any, will be taxed as capital gain. If
there is a disposition of the shares before the expiration of such one-year
or two-year periods and the amount realized is less than the fair market
value of the shares at the date of exercise, the Optionee's ordinary income
is limited to the amount realized less the option exercise price paid. The
Company (or other employer corporation) will be entitled to a tax deduction
in regard to an incentive stock option only to the extent the Optionee has
ordinary income upon sale or other disposition of the shares received upon
exercise of the option.

As with non-qualified stock options, a holder of incentive stock options
may exercise such options through delivery of shares of the Company's Common
Stock already held by such holder. Although the analysis in this paragraph is
under study by the Internal Revenue Service, pursuant to Proposed Treasury
Regulation Section 1.422A-2, the tax consequences of exercising incentive
stock options with shares of the Company's Common Stock must be analyzed
separately for the number of shares received upon exercise equal to the
number of shares surrendered (as a tax-free exchange of stock for stock) and
the remaining shares received upon exercise (as an incentive stock option
transaction). Specifically, the Optionee's basis in the Company's Common
Stock acquired upon such exercise, to the extent of the number of shares
delivered, is equal to his or her basis in the surrendered shares. The
Optionee's basis in any additional shares of Common Stock acquired upon such
exercise is zero. If an Optionee delivers Common Stock acquired by the
exercise of incentive stock options to acquire other Common Stock in
connection with the exercise of incentive stock options, such Optionee will
recognize compensation income on the transaction if the delivered Common
Stock has not been held for the required one-year or two-year holding period.
In addition, any sale or other disposition of Common Stock acquired by
exercising the incentive stock options through delivery of the Company's
Common Stock, within the one-year or two-year period, will be viewed first as
a disposition of Common Stock with the zero basis.

A holder exercising an incentive stock option may elect to pay for the
shares of stock purchased upon exercise by having a portion of the shares of
stock purchased upon exercise sold by the holder's broker and the proceeds of
the sale paid to the Company. The sale of the shares of stock by the holder's
broker will be a disposition

16
<PAGE>

of the shares before the end of the one-year or two-year holding period. As a
result, the difference between the option price of the shares of stock sold
by the broker and the fair market value of the shares of stock, determined on
the date on which the option is exercised, will be taxed as ordinary income;
the balance of any gain will be taxed as capital gain. If the amount realized
on the sale of the stock sold by the broker is less than the fair market
value of the shares on the date of exercise, the holder's ordinary income is
limited to the amount realized less the option exercise price paid. The
Company (or other employer corporation) will be entitled to a tax deduction
to the extent the holder has ordinary income upon the sale of the shares of
stock sold by the holder's broker.

PROPOSAL 3

PROPOSAL TO APPROVE THE ADOPTION OF THE COMPANY'S
1999 EQUITY PARTICIPATION PLAN

At the Annual Meeting, the shareholders of the Company will be asked to
consider and vote upon a proposal to approve the adoption of The 1999 Equity
Participation Plan of Eco Soil Systems, Inc. (the "Equity Plan") of the
Company described herein. The Equity Plan was adopted by the Board of
Directors on April 19, 1999, subject to approval by the shareholders at the
Annual Meeting.

THE AFFIRMATIVE VOTE OF A MAJORITY OF THE COMPANY'S COMMON STOCK
REPRESENTED AND VOTING AT THE ANNUAL MEETING WILL BE REQUIRED FOR APPROVAL OF
THE ADOPTION OF THE EQUITY PLAN. THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" APPROVAL OF THE EQUITY PLAN.

GENERAL NATURE AND PURPOSES OF THE EQUITY PLAN

The principal purposes of the Equity Plan are to provide incentives for
members of the Company's senior management through granting of options and
stock purchase rights, thereby stimulating their personal and active interest
in the Company's development and financial success, and inducing them to
remain in the Company's employ.

A brief description of the principal features of the Equity Plan
follows, but the description is qualified in its entirety by reference to the
Equity Plan itself, a copy of which is included as Appendix "B" to this Proxy
Statement.

ADMINISTRATION OF THE PLAN

The Equity Plan will be administered by the Compensation Committee of
the Company's Board of Directors or a subcommittee thereof (the "Committee").
The Committee will consist of at least two members of the Board of
Directors, each of whom is a "non-employee director" for purposes of Rule
16b-3 under the Securities Exchange Act of 1934, as amended ("Rule 16b-3")
and an outside director for purposes of Section 162(m) of the Code. Subject
to the terms and conditions of the Equity Plan, the Committee has the
authority to select the persons to whom awards are to be made, to determine
the number of shares to be subject thereto and the terms and conditions
thereof, and to make all other determinations and to take all other actions
necessary or advisable for the administration of the Equity Plan. The
Committee is also authorized to adopt, amend, interpret and revoke rules
relating to the administration of the Equity Plan.

SECURITIES SUBJECT TO THE EQUITY PLAN

The aggregate number of shares of Common Stock which may be issued upon
exercise of options and stock purchase rights will not exceed 1,600,000.
Furthermore, the maximum number of shares which may be subject to options
granted under the Equity Plan to any individual in any calendar year cannot
exceed 500,000.

The shares available under the Equity Plan upon exercise of stock
options and stock purchase rights may be either previously unissued shares or
treasury shares. The Committee has the discretion to make appropriate
adjustments in the number and kind of securities subject to the Equity Plan
and to outstanding options thereunder to reflect dividends or other
distributions; a recapitalization, reclassification, stock split, reverse
stock split, or

17
<PAGE>

reorganization, merger or consolidation of the Company; the split-up,
spin-off, combination, repurchase, liquidation or dissolution of the Company;
or disposition of all or substantially all of the assets of the Company or
exchange of Common Stock or other securities of the Company; or other similar
corporate transaction or event (an "extraordinary corporate event").

At April 20, 1999, no option had been granted under the Equity Plan, no
shares of Common Stock had been issued under the stock purchase provisions of
the Equity Plan, and 1,600,000 shares remained available for future grant
under the Equity Plan, assuming shareholder approval of the adoption of the
Equity Plan.

TERM OF EQUITY PLAN AND AMENDMENTS

The Equity Plan will expire on April 19, 2009, unless earlier
terminated. Amendments of the Equity Plan to increase the number of shares as
to which options and stock purchase rights may be made (except for
adjustments resulting from stock splits and the like, and mergers,
consolidations and other corporate transactions) require the approval of the
Company's shareholders. In all other respects the Equity Plan can be
amended, modified, suspended or terminated by the Committee or the Board of
Directors, unless such action would otherwise require shareholder approval as
a matter of applicable law, regulation or rule. Amendments of the Equity Plan
will not, without the consent of the participant, affect such person's rights
under an option or stock purchase right previously awarded, unless the
agreement governing such option or stock purchase right itself otherwise
expressly so provides.

ELIGIBILITY

Options and stock purchase rights under the Equity Plan may be granted
to individuals who are then executive officers of the Company or any of its
present or future subsidiaries. Approximately eight executive officers are
eligible to participate in the Equity Plan. More than one option or stock
purchase right may be granted to an officer, but to the extent the aggregate
fair market value of stock with respect to which ISOs (as defined herein)
(determined without regard to the vesting limitations contained in Section
422(d) of the Code) are exercisable for the first time by an optionee during
any calendar year exceeds $100,000, such options will be taxed as
nonqualified stock options. For this purpose, the fair market value of stock
will be determined as of the time the option is granted.

PAYMENT FOR SHARES

The exercise or purchase price for all options and Common Stock,
together with any applicable tax required to be withheld, must be paid in
full in cash at the time of exercise or purchase or may, with the approval of
the Committee, be paid in whole or in part in shares of Common Stock valued
at their fair market value on the date of exercise (which may include an
assignment of the right to receive the cash proceeds from the sale of Common
Stock subject to an option or other right pursuant to a "cashless exercise"
procedure) or by delivery of other property, or by a promissory note payable
to the Company, or by a combination of the foregoing.

AWARDS UNDER THE EQUITY PLAN

The Equity Plan provides that the Committee may grant or issue stock
options ("Options") and stock purchase rights to eligible participants.

NONQUALIFIED STOCK OPTIONS. NQSOs will provide for the right to
purchase Common Stock at a specified price which, except with respect to
NQSOs intended to qualify as performance-based compensation under Section
162(m) of the Code, may be less than fair market value on the date of grant
(but not less than 85% of the fair market value of the Common Stock on the
date of grant), and usually will become exercisable (in the discretion of the
Committee) in one or more installments after the grant date, subject to the
participant's continued provision of

18
<PAGE>

services to the Company and/or subject to the satisfaction of individual or
Company performance targets established by the Committee. NQSOs may be
granted for any term specified by the Committee.

INCENTIVE STOCK OPTIONS ("ISOS"). ISOs will be designed to comply with
applicable provisions of the Code and will be subject to certain restrictions
contained in the Code. Among such restrictions, ISOs must have an exercise
price not less than the fair market value of a share of Common Stock on the
date of grant, may only be granted to employees, must expire within a
specified period of time following the Optionee's termination of employment,
and must be exercised within the ten years after the date of grant; but may
be subsequently modified to disqualify them from treatment as ISOs. In the
case of an ISO granted to an individual who owns (or is deemed to own) at
least 10% of the total combined voting power of all classes of stock of the
Company, the Equity Plan provides that the exercise price for such ISO must
be at least 110% of the fair market value of a share of Common Stock on the
date of grant and the ISO must expire upon the fifth anniversary of the date
of its grant.

Options granted under the Equity Plan automatically will become fully
exercisable if during the term of the applicable Option any of the following
occur: (i) the transfer of more than fifty percent (50%) of the Company's
outstanding Common Stock to a person or entity other than a person or entity
who is directly or indirectly, controls, or is controlled by or is under
common control with the Company; (ii) a merger or consolidation in which the
Company is not the surviving entity, except for a transaction the principal
purpose of which is to change the state in which the Company is incorporated,
to form a holding company or to effect a similar reorganization as to form
whereupon the Equity Plan and all options granted thereunder are assumed by
the successor entity; or (iii) the sale, transfer, exchange or other
disposition of all or substantially all of the assets of the Company, in
complete liquidation or dissolution of the Company except for a transaction
the principal purpose of which is to change the state in which the Company is
incorporated, to form a holding company or to effect a similar reorganization
as to form whereupon the Equity Plan and all options granted thereunder are
assumed by the successor entity.

Each Option will be set forth in a separate agreement with the person
receiving the option or purchasing the stock and will indicate the type,
terms and conditions of the Option. The dates on which Options first become
exercisable and on which they expire will be set forth in individual option
agreements setting forth the terms of the Options. Such agreements generally
will provide that options expire upon termination of the participant's status
as an employee, although the Committee may provide that options granted to
employees continue to be exercisable following a termination without cause,
or following a Change in Control of the Company (as defined in the Equity
Plan), or because of the grantee's retirement, death, disability or otherwise.

In consideration of the granting of an Option under the Equity Plan, the
executive officer to whom such Option is granted will agree, in such
agreement, to remain in the employ of the Company or any subsidiary for a
period of at least one year (or such shorter period as may be fixed in the
agreement or by action of the Committee following the grant of the option)
after the option is granted. Nothing in the Equity Plan or in any such
agreement will confer upon any optionee any right to continue in the employ
of the Company or any subsidiary, or will interfere with or restrict in any
way the rights of the Company or any subsidiary to discharge any optionee at
any time for any reason whatsoever, with or without cause.

STOCK PURCHASE RIGHTS. The Committee may grant to any consultant or
employee the right to purchase shares of Common Stock under the Equity Plan
("Stock Purchase Rights") from time to time, in such amounts and subject to
such terms and conditions as the Committee may determine, and, at the
discretion of the Committee, such determinations may include determining
categories of employees and the number of shares to be made available to
employees in each such category. The Committee shall determine the purchase
price for Common Stock purchased pursuant to Stock Purchase Rights granted
under the Equity Plan; provided, that the purchase price for shares of Common
Stock purchased pursuant to any Stock Purchase Right granted under the Equity
Plan shall be no less than the fair market value of the Common Stock as of
the date of purchase.

A participant to whom the Committee has granted a Stock Purchase Right
may only purchase such Common Stock while he or she is an employee of the
Company. In addition, a participant may only purchase Common Stock pursuant
to a Stock Purchase Right upon delivery of all of the following to the
Secretary of the Company or his office (i) written notice complying with the
applicable rules established by the Committee stating

19
<PAGE>

the number of shares of Common Stock to be purchased; (ii) such
representations and documents as the Committee, in its absolute discretion,
deems necessary or advisable to effect compliance with all applicable
provisions of the Securities Act and any other federal or state securities
laws or regulations; and (iii) full cash payment to the Secretary of the
Company for the shares being purchased. However, the Committee may in its
discretion allow payment, in whole or in part, through the delivery of a full
recourse, limited recourse or non-recourse (as determined by the Committee)
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such
terms as may be prescribed by the Committee or the Board. The Committee may
prescribe the form of such promissory note and the security to be given for
such note. However, Common Stock may not be purchased pursuant to a Stock
Purchase Right by delivery of a promissory note or by a loan from the Company
when or where such loan or other extension of credit is prohibited by law or
by any agreement to which the Company is a party.

All Stock Purchase Rights are subject to shareholder approval of the
Plan. If such shareholder approval is not obtained within twelve months after
the date of the Board's initial adoption of the Plan, then all Common Stock
purchased by any participant pursuant to any Stock Purchase Right shall be
returned to the Company, all consideration paid to the Company shall be
returned to the employee, and all such purchases shall be canceled and be
null and void AB INITIO.

GENERAL TERMS OF AWARDS UNDER THE EQUITY PLAN

NON-ASSIGNABILITY. No option granted under the Equity Plan may be
assigned or transferred by the grantee, except by will, the laws of descent
and distributions or pursuant to a qualified domestic relations order,
although the shares underlying options may be transferred if all applicable
restrictions have lapsed. During the lifetime of the holder of any option,
the option may be exercised only by the holder.

ADJUSTMENTS UPON CHANGE IN CAPITALIZATION. The Committee has the
discretion to make appropriate adjustments in the number and kind of
securities subject to the Equity Plan and to outstanding awards thereunder to
reflect dividends or other distributions; a recapitalization,
reclassification, stock split, reverse stock split, or reorganization, merger
or consolidation of the Company; the split-up, spin-off, combination,
repurchase, liquidation or dissolution of the Company; or disposition of all
or substantially all of the assets of the Company or exchange of Common Stock
or other securities of the Company; or other similar corporate transaction or
event (an "extraordinary corporate event").

EXTRAORDINARY CORPORATE EVENTS. The Committee has discretion under the
Equity Plan to provide that options and other rights to acquire Common Stock
will expire at specified times following, or become exercisable in full upon,
the occurrence of certain specified "extraordinary corporate events"; but in
such event the Committee may also give optionees the right to exercise their
outstanding options or rights in full during some period prior to such event,
even though the options have not yet become fully exercisable.

TRANSFER RESTRICTIONS. The Committee, in its discretion, may impose
such restrictions on the transferability of the shares purchasable upon the
exercise of an option as it deems appropriate. Any such restriction shall be
set forth in the respective stock option agreement and may be referred to on
the certificates evidencing such shares. The Committee may require the
employee to give the Company prompt notice of any disposition of shares of
stock, acquired by exercise of an ISO, within two years from the date of
granting such option or one year after the transfer of such shares to such
employee. The Committee may direct that the certificates evidencing shares
acquired by exercise of an ISO refer to such requirement to give prompt
notice of disposition.

LOANS TO PLAN PARTICIPANTS. The Equity Plan specifies that the Company
may make loans to participants to enable them to exercise options or purchase
shares granted under the Equity Plan. The terms and conditions of such
loans, if any are made, are to be set by the Committee.

WITHHOLDING TAX OBLIGATIONS. As a condition to the issuance or delivery
of stock or payment of other compensation pursuant to the exercise or lapse
of restrictions of any Option or Stock Purchase Right granted under the
Equity Plan, the Company requires participants to discharge applicable
withholding tax obligations. Shares held

20
<PAGE>

by or to be issued to a participant may also be used to discharge tax
withholding obligations related to exercise of options, subject to the
discretion of the Committee to disapprove such use.

SECURITIES LAW

The Equity Plan is intended to conform to the extent necessary with all
provisions of the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and any and all regulations and rules
promulgated by the Securities and Exchange Commission thereunder, including
without limitation Rule 16b-3. The Equity Plan will be administered, and
options will be granted and may be exercised, only in such a manner as to
conform to such laws, rules and regulations. To the extent permitted by
applicable law, the Equity Plan and options granted thereunder shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES WITH RESPECT TO THE EQUITY PLAN

The tax consequences of the Equity Plan under current federal law are
summarized in the following discussion which deals with the general tax
principles applicable to the Equity Plan, and is intended for general
information only. Alternative minimum tax and state and local income taxes
are not discussed. Tax laws are complex and subject to change and may vary
depending on individual circumstances and from locality to locality. The tax
information summarized is not tax advice.

NONQUALIFIED STOCK OPTIONS. For federal income tax purposes, an
optionee generally will not recognize taxable income on the grant of an NQSO
under the Equity Plan, but will recognize ordinary income, and the Company
generally will be entitled to a deduction, upon the exercise of an NQSO. The
amount of income recognized (and the amount generally deductible by the
Company) generally will be equal to the excess, if any, of the fair market
value of the shares at the time of exercise over the aggregate exercise price
paid for the shares, regardless of whether the exercise price is paid in cash
or in shares or other property. An optionee's basis for the stock for
purposes of determining his or her gain or loss upon a subsequent disposition
of the shares generally will be the fair market value of the stock on the
date of exercise of the NQSO, and any subsequent gain or loss will generally
be taxable as capital gains or losses.

INCENTIVE STOCK OPTIONS. An optionee generally will not recognize
taxable income upon either the grant or exercise of an ISO; however, the
amount by which the fair market value of the shares at the time of exercise
exceeds the exercise price will be an "item of tax preference" for the
optionee for purposes of the alternative minimum tax. Generally, upon the
sale or other taxable disposition of the shares of the Common Stock acquired
upon exercise of an ISO, the optionee will recognize income taxable as
capital gains in an amount equal to the excess, if any, of the amount
realized in such disposition over the option exercise price, provided that no
disposition of the shares has taken place within either (a) two years from
the date of grant of the ISO or (b) one year from the date of exercise. If
the shares of Common Stock are sold or otherwise disposed of before the end
of the one-year and two-year periods specified above, the difference between
the ISO exercise price and the fair market value of the shares on the date of
exercise generally will be taxable as ordinary income; the balance of the
amount realized from such disposition, if any, generally will be taxed as
capital gain. If the shares of Common Stock are disposed of before the
expiration of the one-year and two-year periods and the amount realized is
less than the fair market value of the shares at the date of exercise, the
optionee's ordinary income generally is limited to excess, if any, of the
amount realized in such disposition over the option exercise price paid. The
Company (or other employer corporation) generally will be entitled to a tax
deduction with respect to an ISO only to the extent the optionee has ordinary
income upon sale or other disposition of the shares of Common Stock.

STOCK PURCHASE RIGHTS. A recipient of a Stock Purchase Right will not
recognize taxable income at the time of grant, and the Company will not be
entitled to a deduction at that time. After shareholder approval of the
Equity Plan has been obtained, upon the purchase of Common Stock pursuant to
a Stock Purchase Right by delivery of a full recourse promissory note or for
cash, the purchaser will recognize ordinary income at the date of purchase
equal to the excess, if any, of the fair market value of the Common Stock
purchased over the purchase price therefor and the Company will be entitled
to a deduction for the same amount.

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<PAGE>

Prior to the time that shareholder approval of the Equity Plan is
obtained, upon the purchase of Common Stock under the Equity Plan pursuant to
a Stock Purchase Right by delivery of a full recourse promissory note or for
cash, the purchaser will not recognize taxable income upon such purchase and
the Company generally will not then be entitled to a deduction, unless an
election is made under Section 83(b) of the Code. However, when shareholder
approval of the Equity Plan is obtained, such that shares of Common Stock are
no longer subject to a substantial risk of forfeiture, the purchaser
generally will recognize ordinary income and the Company generally will be
entitled to a deduction for an amount equal to the excess, if any, of the
fair market value of the Common Stock purchased as of the date shareholder
approval of the Equity Plan is obtained over the purchase price therefor. If
an election under Section 83(b) with respect to Common Stock purchased
pursuant to a Stock Purchase Right by delivery of a full recourse promissory
note or for cash is made prior to the time shareholder approval of the Equity
Plan is obtained, the purchaser generally will recognize ordinary income at
the date of purchase equal to the excess, if any, of the fair market value of
the Common Stock purchased as of the date of purchase over the purchase price
therefor and the Company will be entitled to a deduction for the same amount.

The federal income tax consequences of the purchase of Common Stock
pursuant to a Stock Purchase Right by delivery of a non-recourse or partially
recourse promissory note are less clear. Regulations promulgated under
Section 83 provide that if the purchase price for property transferred in
connection with the performance of services is an amount paid by indebtedness
secured by the property on which there is no personal liability to pay all or
a substantial part of such indebtedness, such a transaction may be treated
for federal income tax purposes in the same manner as a grant of a NQSO. In
such event, the purchase of Common Stock pursuant to a Stock Purchase Right
would be taxable in accordance with the rules described above in NONQUALIFIED
STOCK OPTIONS, with the option being treated as being exercised at the time
of payment by the purchaser of any non-recourse portion of the promissory
note. A purchaser of Common Stock pursuant to a Stock Purchase Right by
delivery of a non-recourse or partially recourse promissory note may not be
eligible to make an election under Section 83(b) with respect to the Common
Stock purchased.

SECTION 162(m) LIMITATION. In general, under Section 162(m) of the Code
("Section 162(m)"), income tax deductions of publicly held corporations may
be limited to the extent total compensation (including base salary, annual
bonus, stock option exercises, transfers of property and benefits paid under
nonqualified plans) for certain executive officers exceeds $1 million (less
the amount of any "excess parachute payments" as defined in Section 280G of
the Code) in any one year. However, under Section 162(m), the deduction
limit does not apply to certain "performance-based compensation."

Under Section 162(m), stock options will satisfy the "performance-based
compensation" exception if the Equity Plan is approved by shareholders at the
Meeting, the award of the options are made by a Board of Directors committee
consisting solely of two or more "outside directors," the plan sets the
maximum number of shares that can be granted to any person within a specified
period and the compensation is based solely on an increase in the stock price
after the grant date (I.E., the option exercise price is equal to or greater
than the fair market value of the stock subject to the award on the grant
date). The Equity Plan has been designed in order to permit the Committee to
grant stock options which will qualify as "performance-based compensation."

22
<PAGE>

SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of April 20, 1999, the number and
percentage ownership of the Company's Common Stock by: (i) each director of
the Company, (ii) each Named Executive Officer (as defined above) of the
Company, (iii) each person or entity known by the Company to own beneficially
more than five percent of the Company's Common Stock and (iv) all directors
and executive officers of the Company as a group.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE OF
NAME AND ADDRESS(1) BENEFICIAL OWNERSHIP OUTSTANDING SHARES
------------------- -------------------- -------------------
<S> <C> <C>

William B. Adams(2) 1,535,484 8.8%

Douglas M. Gloff(3) 789,056 4.5%

William S. Potter(4) 416,123 2.4%
13875 Old El Camino Real
San Diego, CA 92130

S. Bartley Osborn(5) 93,833 *
360 Orono Orchard Road
Wayzata, MN 55391

Edward C. Ford(6) 703,738 4.1%
38 Schoolhouse Lane
Lake Success, NY 11020

Fridolin Fackelmayer(7) 25,000 *
Lombard Odier, Inc.
12 East 492 Street
New York, NY 10017

Kevin P. Lyons(8) 338,825 2.0%

David W. Schermerhorn(9) 338,825 2.0%

L. Jean Dunn, Jr.(10) 75,000 *

John C. Wells, Jr. 206,074 1.2%

All executive officers and 4,721,891 25.2%
directors as a group
(12 persons)(11)

</TABLE>

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

(1) Except as indicated by footnote, each person or group identified has sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them. Except as otherwise indicated, the
address of each of the above persons is c/o Eco Soil Systems, Inc., 10740
Thornmint Road, San Diego, California 92127.

(2) Includes 488,058 shares of Common Stock subject to currently exercisable
options and warrants.

23
<PAGE>

(3) Includes 640,056 shares of Common Stock subject to currently exercisable
options and warrants.

(4) Includes 98,123 shares of Common Stock subject to currently exercisable
options. Also includes 100,000 shares of Common Stock subject to currently
exercisable warrants owned by Rugged Rigger, Inc., a California corporation
that is wholly owned by Mr. Potter. Also includes 218,000 shares of Common
Stock owned by Rugged Rigger.

(5) Includes 53,000 shares of Common Stock subject to currently exercisable
options and warrants.

(6) Includes 195,000 shares of Common Stock subject to currently exercisable
options and warrants. Includes 364,951 shares of Common Stock as to which
Mr. Ford shares voting power with his spouse. Also includes 143,787 shares
of Common Stock held in his spouse's Individual Retirement Account.

(7) Includes 25,000 shares of Common Stock subject to currently exercisable
options.

(8) Includes 15,000 shares of Common Stock subject to currently exercisable
options.

(9) Includes 15,000 shares of Common Stock subject to currently exercisable
options.

(10) Includes 75,000 shares of Common Stock subject to currently exercisable
options.

(11) See notes 1-10 above. Also includes 20,000 shares of Common Stock subject
to currently exercisable options held by Dr. Thomas C. Quick, 40,000 shares
of Common Stock subject to currently exercisable options held by Dr. David
A. Odelson, and 38,266 shares of Common Stock subject to currently
exercisable options and warrants held by Max D. Gelwix.

GENERAL
INDEPENDENT AUDITORS

The Board of Directors has selected Ernst & Young LLP to serve as the
Company's independent auditors for the 1999 fiscal year. Representatives of
Ernst & Young LLP will be present at the Annual Meeting and will have the
opportunity make a statement and to respond to appropriate questions.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act"), as amended, directors, officers and beneficial owners of 10 percent or
more of the Company's Common Stock ("Reporting Persons") are required to report
to the Securities and Exchange Commission (the "Commission") on a timely basis
the initiation of their status as a Reporting Person and any changes with
respect to their beneficial ownership of the Company's Common Stock. Based
solely on its review of such forms received by it and the written
representations of its Reporting Persons, the Company, to the Company's
knowledge, all of the Section 16(a) filings required to be made by Reporting
Persons with respect to 1998 were made on a timely basis, except for Forms 4
required to be filed in September and November by William B. Adams with respect
to shares of Common Stock he purchased in August and October, 1998.

SHAREHOLDER PROPOSALS

A proposal to be considered for inclusion in the Company's proxy statement
for the next annual meeting must be received by the Secretary of the Company not
later than December 31, 1999 to be considered for inclusion in the Company's
proxy statement and form of proxy relating to that meeting. A shareholder
proposal submitted after March 16, 2000 will not be considered timely. Holders
of proxies which expressly confer discretionary authority may vote for or
against an untimely proposal.

24
<PAGE>

ANNUAL REPORT

The Annual Report of the Company for the fiscal year ended December 31,
1998 will be mailed to shareholders of record on or about May 6, 1999. The
Annual Report does not constitute, and should not be considered, a part of
this Proxy solicitation material.

If any person who was a beneficial owner of Common Stock of the Company
on the record date for the Annual Meeting of Shareholders desires additional
information, a copy of the Company's Annual Report on Form 10-K will be
furnished without charge upon receipt of a written request identifying the
person so requesting a report as a shareholder of the Company at such date.
Requests should be directed to Mark D. Buckner, c/o Eco Soil Systems, Inc.,
10740 Thornmint Road, San Diego, California 92127.

OTHER MATTERS

The Board of Directors does not know of any matter to be presented at
the Annual Meeting which is not listed on the Notice of Annual Meeting and
discussed above. If other matters should properly come before the meting,
however, the persons named in the accompanying Proxy will vote all Proxies in
accordance with their best judgment.

ALL SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN
THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Mark D. Buckner
Mark D. Buckner
Secretary

Dated: April 30, 1999

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<PAGE>

APPENDIX A

AMENDED AND RESTATED
1998 STOCK OPTION PLAN
OF
ECO SOIL SYSTEMS, INC.

Eco Soil Systems, Inc., a Nebraska corporation (the
"Company"), has adopted The 1998 Stock Option Plan of Eco Soil Systems, Inc.
(the "Plan"), effective February 3, 1998, for the benefit of its eligible
employees, consultants and directors.

The purposes of this Plan are as follows:

(1) To provide an additional incentive for directors, key
Employees and consultants to further the growth, development and financial
success of the Company by personally benefiting through the ownership of Company
stock which recognizes such growth, development and financial success.

(2) To enable the Company to obtain and retain the services of
directors, key Employees and consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company which will reflect the growth, development and financial success of the
Company.

ARTICLE I.

DEFINITIONS

1.1. GENERAL. Wherever the following terms are used in this
Plan they shall have the meanings specified below, unless the context clearly
indicates otherwise.

1.2. AFFILIATE. "Affiliate" shall mean, with respect to any
Person, any Person or Person that, directly or indirectly, controls, or is
controlled by or is under common control with such Person. For the purpose of
this definition, "control" (including the terms "controlling", "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities or by contract or agency or otherwise.

1.3. AWARD LIMIT. "Award Limit" shall mean 100,000 shares of
Common Stock, as adjusted pursuant to Section 8.3.

1.4. BOARD. "Board" shall mean the Board of Directors of the
Company.

1
<PAGE>

1.5. CODE. "Code" shall mean the Internal Revenue Code of
1986, as amended.

1.6. COMMITTEE. "Committee" shall mean the Compensation
Committee of the Board, or another committee of the Board, appointed as provided
in Section 7.1.

1.7. COMMON STOCK. "Common Stock" shall mean the common stock
of the Company, $.005 par value per share, and any equity security of the
Company issued or authorized to be issued in the future, but excluding any
preferred stock and any warrants, options or other rights to purchase Common
Stock. Debt securities of the Company convertible into Common Stock shall be
deemed equity securities of the Company.

1.8. COMPANY. "Company" shall mean Eco Soil Systems, Inc., a
Nebraska corporation.

1.9. CORPORATE TRANSACTION. "Corporate Transaction" shall mean
any of the following shareholder-approved transactions to which the Company is a
party:

(a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated, to form a holding company
or to effect a similar reorganization as to form whereupon this Plan and all
Options are assumed by the successor entity;

(b) the sale, transfer, exchange or other disposition of all
or substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions to
clause (a), above; or

(c) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred or issued to a person or persons different from those who held such
securities immediately prior to such merger.

1.10. DIRECTOR. "Director" shall mean a member of the Board.

2
<PAGE>

employment or consultant duties, or (ii) the absence of such Optionee from his
or her directorial, employment or consultant duties by reason of any mental or
physical illness, disability or incapacity for a period of six (6) months during
any twelve (12) month period; provided, however, in either case, that such
illness, disability or incapacity shall be reasonably determined to be of a
permanent nature by the Committee (or the Board in the case of Options granted
to Independent Directors).

1.12. EMPLOYEE. "Employee" shall mean any officer or other
employee (as defined in accordance with Section 3401(c) of the Code) of the
Company, or of any corporation which is a Subsidiary.

1.13. EXCHANGE ACT. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.

1.14. FAIR MARKET VALUE. "Fair Market Value" of a share of
Common Stock as of a given date shall be (i) the closing price of a share of
Common Stock on the principal exchange on which shares of Common Stock are then
trading, if any (or as reported on any composite index which includes such
principal exchange), on the trading day previous to such date, or if shares were
not traded on the trading day previous to such date, then on the next preceding
date on which a trade occurred; or (ii) if Common Stock is not traded on an
exchange but is quoted on NASDAQ or a successor quotation system, the mean
between the closing representative bid and asked prices for the Common Stock on
the trading day previous to such date as reported by NASDAQ or such successor
quotation system; or (iii) if Common Stock is not publicly traded on an exchange
and not quoted on NASDAQ or a successor quotation system, the Fair Market Value
of a share of Common Stock shall be established by the Committee (or the Board
in the case of Options granted to Independent Directors) acting in good faith,
giving predominate weight to the earnings history, book value and prospects of
the Company in light of market conditions generally.

1.15. INCENTIVE STOCK OPTION. "Incentive Stock Option" shall
mean an option which conforms to the applicable provisions of Section 422 of the
Code and which is designated as an Incentive Stock Option by the Committee.

1.16. INDEPENDENT DIRECTOR. "Independent Director" shall mean
a member of the Board who is not an Employee of the Company.

1.17. NON-QUALIFIED STOCK OPTION. "Non-Qualified Stock Option"
shall mean an Option which is not designated as an Incentive Stock Option by the
Committee.

1.18. OPTION. "Option" shall mean a stock option granted under
Article III of this Plan. An Option granted under this Plan shall, as determined
by the

3
<PAGE>

Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option;
provided, however that Options granted to Independent Directors and consultants
shall be Non-Qualified Stock Options.

1.19. OPTION SHARES. "Option Shares" shall mean shares of
Common Stock acquired by Optionees through the exercise of Options under this
Plan.

1.20. OPTIONEE. "Optionee" shall mean an Employee, consultant
or Independent Director granted an Option under this Plan.

1.21. PERSON. "Person" shall mean a corporation, an
association, a partnership, a trust, a limited liability company, an
organization, a business or an individual.

1.22. PLAN. "Plan" shall mean The 1998 Stock Option Plan of
Eco Soil Systems, Inc.

1.23. PUBLIC OFFERING. "Public Offering" shall mean the
registration of an offering of shares of Common Stock under the Securities Act
which becomes effective (other than by a registration on Form S-8 or any
successor or similar forms).

1.24. QDRO. "QDRO" shall mean a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.

1.25. RELATED PERSON. "Related Person" shall mean (a) in the
event of a Person's death, such Person's executors, administrators, testamentary
trustees, legatees or beneficiaries or the executors, administrators,
testamentary trustees, legatees or beneficiaries of a Person who has become a
holder of Options or Option Shares in accordance with the terms of this Plan; or
(b) a revocable trust or custodianship the beneficiaries of which may include
only such Person, spouse or lineal descendants by blood or adoption.

1.26. RULE 16B-3. "Rule 16b-3" shall mean that certain Rule
16b-3 under the Exchange Act, as such Rule may be amended from time to time.

1.27. SECURITIES ACT. "Securities Act" shall mean the
Securities Act of 1933, as amended.

1.28. SUBSIDIARY. "Subsidiary" shall mean any corporation in
an

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unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one (1) of the other corporations in such chain.

1.29. TERMINATION OF CONSULTANCY. "Termination of Consultancy"
shall mean the time when the engagement of an Optionee as a consultant to the
Company or a Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, by resignation, discharge, death,
Disability or retirement; but excluding terminations where there is a
simultaneous commencement of employment with the Company or any Subsidiary. The
Committee, in its absolute discretion, shall determine the effect of all matters
and questions relating to Termination of Consultancy, including, but not by way
of limitation, the question of whether a Termination of Consultancy resulted
from a discharge for good cause, and all questions of whether particular leaves
of absence constitute Terminations of Consultancy. Notwithstanding any other
provision of this Plan, the Company or any Subsidiary has an absolute and
unrestricted right to terminate a consultant's service at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.

1.30. TERMINATION OF DIRECTORSHIP. "Termination of
Directorship" shall mean the time when an Optionee who is an Independent
Director ceases to be a Director for any reason, including, but not by way of
limitation, a termination by resignation, failure to be elected, death,
Disability or retirement. The Board, in its sole and absolute discretion, shall
determine the effect of all matters and questions relating to Termination of
Directorship with respect to Independent Directors.

1.31. TERMINATION OF EMPLOYMENT. "Termination of Employment"
shall mean the time when the employee-employer relationship between an Optionee
and the Company or any Subsidiary is terminated for any reason, with or without
cause, including, but not by way of limitation, a termination by resignation,
discharge, death, Disability or retirement; but excluding (i) terminations where
there is a simultaneous reemployment or continuing employment of an Optionee by
the Company or any Subsidiary, (ii) at the discretion of the Committee,
terminations which result in a temporary severance of the employee-employer
relationship, and (iii) at the discretion of the Committee, terminations which
are followed by the simultaneous establishment of a consulting relationship by
the Company or a Subsidiary with the former employee. The Committee, in its
absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for good cause, and all questions of whether particular leaves of absence
constitute Terminations of Employment; provided, however, that, unless otherwise
determined by the Committee in its discretion, a leave of absence, change in
status from an employee to an independent contractor or other change in the
employee-employer

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relationship shall constitute a Termination of Employment if, and to the extent
that, such leave of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section. Notwithstanding
any other provision of this Plan, the Company or any Subsidiary has an absolute
and unrestricted right to terminate an Employee's employment at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.

1.32. TERMINATION FOR CAUSE. "Termination for Cause" shall
mean the time when the Independent Director-employer, employee-employer or
consultant-employer relationship between an Optionee and the Company or any
Subsidiary is terminated for cause, as termination for cause is defined in the
Optionee's directorial, employment or consultancy agreement; provided however,
that if termination for cause is not therein defined, it shall have such
meaning, in conformance with applicable law, as the Committee (or the Board in
the case of termination for cause of an Independent Director) shall determine is
appropriate.

ARTICLE II.

SHARES SUBJECT TO PLAN

2.1. SHARES SUBJECT TO PLAN.

(a) The shares of stock subject to Options shall be Common
Stock. The aggregate number of such shares which may be issued upon exercise of
such options under the Plan shall be 1,600,000. The shares of Common Stock of
the Company issuable upon exercise of such options may be either previously
authorized but unissued shares or treasury shares.

(b) The maximum number of shares which may be subject to
Options granted under the Plan to any individual in any fiscal year of the
Company shall not exceed the Award Limit. To the extent required by Section
162(m) of the Code, shares subject to Options which are canceled continue to be
counted against the Award Limit and if, after grant of an Option, the price of
shares subject to such Option is reduced, the transaction is treated as a
cancellation of the Option and a grant of a new Option and both the Option
deemed to be canceled and the Option deemed to be granted are counted against
the Award Limit.

2.2. ADD-BACK OF OPTIONS. If any Option to acquire shares of
Common Stock under this Plan expires or is canceled without having been fully
exercised, the number of shares subject to such Option but as to which such
Option was not exercised prior to its expiration, cancellation or exercise may
again be available for the granting of Options hereunder, subject to the
limitations of Section 2.1. Furthermore, any shares subject to Options which are
adjusted pursuant to Section 8.3 and become exercisable

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<PAGE>

with respect to shares of stock of another corporation shall be considered
canceled and may again be available for the granting of Options hereunder,
subject to the limitations of Section 2.1. Shares of Common Stock which are
delivered by the Optionee or withheld by the Company upon the exercise of any
Option under this Plan, in payment of the exercise price thereof, may again be
available for the granting of Options hereunder, subject to the limitations of
Section 2.1. Notwithstanding the provisions of this Section 2.2, no shares of
Common Stock may again be available for the granting of Options if such action
would cause an Incentive Stock Option to fail to qualify as an incentive stock
option under Section 422 of the Code.

ARTICLE III.

GRANTING OF OPTIONS

3.1. ELIGIBILITY. Any Independent Director, Employee or
consultant selected by the Committee (or the Board in the case of Options
granted to Independent Directors) pursuant to Section 3.4(a)(i) shall be
eligible to be granted an Option.

3.2. DISQUALIFICATION FOR STOCK OWNERSHIP. No person may be
granted an Incentive Stock Option under this Plan if such person, at the time
the Incentive Stock Option is granted, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any then existing Subsidiary unless such Incentive Stock Option
conforms to the applicable provisions of Section 422 of the Code.

3.3. QUALIFICATION OF INCENTIVE STOCK OPTIONS. No Incentive
Stock Option shall be granted to any person who is not an Employee.

3.4. GRANTING OF OPTIONS.

(a) The Committee (or the Board in the case of Options granted
to Independent Directors) shall from time to time, in its absolute discretion,
and subject to applicable limitations of this Plan:

(i) Determine which Employees are key Employees and
select from among the Independent Directors, key Employees and
consultants (including Independent Directors, Employees and consultants
who have previously received Options or other awards under this Plan)
such of them as in its opinion should be granted Options;

(ii) Subject to the Award Limit, determine the number
of shares to be subject to such Options granted to the selected
Independent Directors, key Employees and consultants;

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<PAGE>

(iii) Subject to Section 3.2, determine whether such
Options are to be Incentive Stock Options or Non-Qualified Stock
Options and whether such Options are to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code; and

(iv) Determine the terms and conditions of such
Options, consistent with this Plan; provided, however, that the terms
and conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the
Code.

(b) Upon the selection of an Independent Director, key
Employee or consultant to be granted an Option, the Committee (or the Board in
the case of Options granted to Independent Directors) shall instruct the
Secretary of the Company to issue the Option and may impose such conditions on
the grant of the Option as it deems appropriate. Without limiting the generality
of the preceding sentence, the Committee (or the Board in the case of Options
granted to Independent Directors) may, in its discretion and on such terms as it
deems appropriate, require as a condition on the grant of an Option to an
Independent Director, Employee or consultant that such Independent Director,
Employee or consultant surrender for cancellation some or all of the unexercised
Options or other rights which have been previously granted to such Independent
Director, Employee or consultant under this Plan or otherwise. An Option, the
grant of which is conditioned upon such surrender, may have an option price
lower (or higher) than the exercise price of such surrendered Option or other
award, may cover the same (or a lesser or greater) number of shares as such
surrendered Option or other award, may contain such other terms as the Committee
(or the Board in the case of Options granted to Independent Directors) deems
appropriate, and shall be exercisable in accordance with its terms, without
regard to the number of shares, price, exercise period or any other term or
condition of such surrendered Option or other award.

(c) Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such option from treatment as an
"incentive stock option" under Section 422 of the Code.

(d) Each Independent Director shall be automatically granted
an Option (an "Initial Grant") to purchase 10,000 Shares upon the date on which
such person first becomes a Director, whether through election by the
shareholders of the Company or appointment by the Board to fill a vacancy.
Options granted under this section 3.4(c)(ii) shall become vested and thereby
exercisable with respect to 33.33% of such Initial Grant on the twelve month
anniversary date of such Initial Grant and with respect to 33.33% at each
successive anniversary date; provided, however, an unvested portion of an
Initial Grant shall only vest so long as the Independent Director remains a
Director on the date such portion vests.

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<PAGE>

(e) Each Independent Director shall automatically receive, on
the date of each Annual Meeting of Shareholders, an Option to purchase 3,000
Shares of the Company's Common Stock, such Option to become exercisable six
months subsequent to the date of grant; provided, however, that such Option
shall only be granted to Independent Directors who have served since the date of
the last Annual Meeting of Shareholders and will continue to serve after the
date of grant of such Option.

ARTICLE IV.

TERMS OF OPTIONS

4.1. OPTION AGREEMENT. Each Option shall be evidenced by a
written Stock Option Agreement, which shall be executed by the Optionee and an
authorized officer of the Company and which shall contain such terms and
conditions as the Committee (or the Board in the case of Options granted to
Independent Directors) shall determine, consistent with this Plan. Stock Option
Agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code. Stock Option Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.

4.2. OPTION PRICE. The price per share of the shares subject
to each Option shall be set by the Committee (or the Board in the case of
Options granted to Independent Directors); provided, however, that:

(a) Unless otherwise permitted by applicable securities laws,
such price shall be not less than eighty-five percent (85%) of the Fair Market
Value of the stock at the time the option is granted, except that the price
shall be one hundred and ten percent (110%) of the Fair Market Value of the
stock in the case of any person possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or its
Subsidiary;

(b) In the case of Incentive Stock Options and Options
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code, such price shall not be less than one hundred percent
(100%) of the Fair Market Value of a share of Common Stock on the date the
Option is granted; and

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<PAGE>

Subsidiary such price shall not be less than one hundred and ten percent (110%)
of the Fair Market Value of a share of Common Stock on the date the Option is
granted.

4.3. OPTION TERM. The term of an Option shall be set by the
Committee (or the Board in the case of Options granted to Independent Directors)
in its discretion; provided, however, that:

(a) No Option may have a term that extends beyond the
expiration of ten (10) years from the date the Option was granted;

(b) In the case of Incentive Stock Options, the term shall not
be more than ten (10) years from the date the Incentive Stock Option is granted,
or five (5) years from such date if the Incentive Stock Option is granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Subsidiary;

(c) Except as limited by requirements of Section 422 of the
Code and regulations and rulings thereunder applicable to Incentive Stock
Options, the Committee (or the Board in the case of Options granted to
Independent Directors) may extend the term of any outstanding Option in
connection with any Termination of Directorship, Termination of Employment or
Termination of Consultancy of the Optionee, or amend any other term or condition
of such Option relating to such a termination; and

(d) Unless otherwise permitted by applicable securities laws,
in the event of an Optionee's Termination of Directorship, Termination of
Employment or Termination of Consultancy for any reason except death, Disability
or Termination for Cause, the Optionee shall have at least thirty (30) days from
the date of such Termination of Directorship, Termination of Employment or
Termination of Consultancy to exercise the Option, and in the event of an
Optionee's Termination of Directorship, Termination of Employment or Termination
of Consultancy due to the Optionee's death or Disability, the Optionee shall
have at least six (6) months from the date of such Termination of Directorship,
Termination of Employment or Termination of Consultancy to exercise the Option.
Notwithstanding the forgoing, if an Optionee's Termination of Directorship,
Termination of Employment or Termination of Consultancy also qualifies as a
Termination for Cause, the Company, in its discretion, may terminate the
Optionee's right to exercise his or her Options on the date of such termination
or such other time as the Committee (or the Board in the case of Options granted
to Independent Directors), in its discretion, shall deem appropriate.

4.4. OPTION VESTING.

(a) The period during which the right to exercise an Option in
whole or in part vests in the Optionee shall be set by the Committee (or the
Board in the case of Options granted to Independent Directors) and the Committee
(or the Board in the case of Options granted to Independent Directors) may
determine that an Option may not be

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<PAGE>

exercised in whole or in part for a specified period after it is granted;
provided, however, that, subject to Section 4.4(b), (i) unless otherwise
permitted by applicable securities laws, each Option shall become exercisable no
later than five (5) years after such Option is granted and such Option shall
become exercisable with respect to at least twenty percent (20%) of the shares
of Common Stock subject to such Option, as determined by the Committee (or the
Board in the case of Options granted to Independent Directors) in its sole
discretion, on each anniversary of the date of the grant of such Option; (ii)
unless the Committee (or the Board in the case of Options granted to Independent
Directors) otherwise provides in the terms of the Stock Option Agreement or this
Plan otherwise so dictates, no Option shall be exercisable by any Optionee who
is then subject to Section 16 of the Exchange Act within the period ending six
months and one day after the date the Option is granted; and (iii) upon the
transfer of more than fifty percent (50%) of Common Stock to a Person who is not
an Affiliate of the Company during the term of the Option, immediately upon such
transfer, each outstanding Option shall automatically become fully exercisable
for all of the shares of Common Stock at the time subject to such Option;
provided, further, that Options may become fully exercisable, subject to
reasonable conditions such as continued directorship, employment or consultancy,
at any time or during any period established by the Committee (or the Board in
the case of Options granted to Independent Directors).

(b) No portion of an Option which is unexercisable at
Termination of Directorship, Termination of Employment or Termination of
Consultancy shall thereafter become exercisable, except as may be otherwise
provided by the Committee (or the Board in the case of Options granted to
Independent Directors) either in the Stock Option Agreement or by action of the
Committee (or the Board in the case of Options granted to Independent Directors)
following the grant of the Option.

(c) To the extent that the aggregate Fair Market Value of
stock with respect to which "incentive stock options" (within the meaning of
Section 422 of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by an Optionee during any calendar year (under
the Plan and all other incentive stock option plans of the Company and any
Subsidiary) exceeds $100,000, such Options shall be treated as Non-Qualified
Options to the extent required by Section 422 of the Code. The rule set forth in
the preceding sentence shall be applied by taking Options into account in the
order in which they were granted. For purposes of this Section 4.4(c), the Fair
Market Value of stock shall be determined as of the time the Option with respect
to such stock is granted.

4.5. CONSIDERATION. In consideration of the granting of an
Option, the Optionee shall agree, in the written Stock Option Agreement, to
remain in the employ (or to consult for or serve as an Independent Director, as
applicable) of the Company or any Subsidiary for a period of at least one (1)
year (or such shorter period as may be fixed in the Stock Option Agreement or by
action of the Committee (or the Board in the case of Options granted to
Independent Directors) following grant of the Option) after the Option is
granted (or, in the case of an Independent Director, until the next annual
meeting of the

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<PAGE>

shareholders of the Company). Nothing in this Plan or in any Stock Option
Agreement hereunder shall confer upon any Optionee any right to continue in the
employ (or to consult for or serve as an Independent Director, as applicable) of
the Company or any Subsidiary or shall interfere with or restrict in any way the
rights of the Company or any Subsidiary, which are hereby expressly reserved, to
discharge any Optionee at any time for any reason whatsoever, with or without
good cause.

4.6. FINANCIAL STATEMENTS. To the extent required by
applicable securities laws, each Optionee shall receive financial statements of
the Company at least annually.

ARTICLE V.

EXERCISE OF OPTIONS

5.1. PARTIAL EXERCISE. An exercisable Option may be exercised
in whole or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Committee (or the Board in the case of Options granted
to Independent Directors) may require that, by the terms of the Option, a
partial exercise be with respect to a minimum number of shares.

5.2. MANNER OF EXERCISE. All or a portion of an exercisable
Option shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company or such Secretary's office:

(a) A written notice complying with the applicable rules
established by the Committee (or the Board in the case of Options granted to
Independent Directors) stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion;

(b) Such representations and documents as the Committee (or
the Board in the case of Options granted to Independent Directors), in its
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee (or the Board in the case of
Options granted to Independent Directors) may, in its absolute discretion, also
take whatever additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates and issuing
stop-transfer notices to agents and registrars;

(c) In the event that the Option shall be exercised pursuant
to Section 8.1 by any person or persons other than the Optionee, appropriate
proof of the right of such person or persons to exercise the Option; and

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<PAGE>

(d) Full cash payment to the Secretary of the Company for the
shares and for payment of any applicable withholding or other applicable
employment taxes with respect to which the Option, or portion thereof, is
exercised. However, the Committee (or the Board in the case of Options granted
to Independent Directors), may in its discretion (i) allow a delay in payment up
to thirty (30) days from the date the Option, or portion thereof, is exercised;
(ii) allow payment, in whole or in part, through the delivery of shares of
Common Stock owned by the Optionee, duly endorsed for transfer to the Company
with a Fair Market Value on the date of delivery equal to the aggregate exercise
price of the Option or exercised portion thereof; (iii) allow payment, in whole
or in part, through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of Option exercise
equal to the aggregate exercise price of the Option or exercised portion
thereof; (iv) allow payment, in whole or in part, through the delivery of
property of any kind which constitutes good and valuable consideration; (v)
allow payment, in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Committee (or the Board in the case of Options
granted to Independent Directors); (vi) allow payment, in whole or in part,
through the delivery of a notice that the Optionee has placed a market sell
order with a broker with respect to shares of Common Stock then issuable upon
exercise of the Option, and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price and any applicable withholding or
other employment taxes; or (vii) allow payment through any combination of the
consideration provided in the foregoing subparagraphs (ii), (iii), (iv), (v) and
(vi). In the case of a promissory note, the Committee (or the Board in the case
of Options granted to Independent Directors) may also prescribe the form of such
note and the security to be given for such note. The Option may not be
exercised, however, by delivery of a promissory note or by a loan from the
Company when or where such loan or other extension of credit is prohibited by
law.

5.3. CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The Company
shall not be required to issue or deliver any certificate or certificates for
shares of stock purchased upon the exercise of any Option or portion thereof
prior to fulfillment of all of the following conditions:

(a) The admission of such shares to listing on all stock
exchanges, if any, on which such class of stock is then listed;

(b) The completion of any registration or other qualification
of such shares under any state or federal law, or under the rulings or
regulations of the Securities and Exchange Commission or any other governmental
regulatory body which the Committee or the Board shall, in its absolute
discretion, deem necessary or advisable;

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<PAGE>

(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee or the Board shall, in
its absolute discretion, determine to be necessary or advisable;

(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee or the Board may establish from time to
time for reasons of administrative convenience; and

(e) The receipt by the Company of full payment for such
shares, including payment of any applicable withholding tax.

5.4. RIGHTS AS SHAREHOLDERS. The holders of Options shall not
be, nor have any of the rights or privileges of, shareholders of the Company in
respect of any shares purchasable upon the exercise of any part of an Option
unless and until certificates representing such shares have been issued by the
Company to such holders.

ARTICLE VI.

RIGHTS AND RESTRICTIONS WITH RESPECT TO OPTION SHARES

6.1. TRANSFER RESTRICTIONS. No Optionee may transfer, assign,
pledge or otherwise encumber any Option Shares except as expressly provided
otherwise in this Article VI; provided, however, that Option Shares may be
transferred at any time to a Related Person, provided that the Related Person
agrees in writing to be bound by the terms of this Plan.

6.2. COMPANY'S RIGHT OF FIRST REFUSAL.

(a) An Optionee (a "Proposed Seller") shall be permitted to
transfer, assign, or sell any Option Shares in an arm's length transaction (a
"Proposed Transfer"); provided, however, such Optionee shall first offer to sell
such Option Shares to the Company under the procedure described in paragraphs
(b) and (c) of this Section 6.2.

(b) Prior to consummating any Proposed Transfer, the Proposed
Seller shall first notify the Company in writing that such Proposed Seller has
received a bona fide written offer to purchase Option Shares (a "Purchase
Offer") and shall offer to sell to the Company all Option Shares subject to the
Purchase Offer upon the terms and conditions (including credit terms, if any)
set forth in such Purchase Offer. Such notice (the "Offer Notice") shall set
forth: (A) the number of Option Shares proposed to be transferred, (B) the name
and address of the Proposed Seller and the proposed purchaser (the "Proposed
Purchaser"), and (C) the proposed amount of consideration and all other
applicable terms and conditions as set forth in, and shall be accompanied by a
copy of, the Purchase Offer.

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<PAGE>

(c) (i) The Company shall have the option for a period of
fifteen (15) days following the Company's receipt of the Offer Notice to agree
to purchase all of the Option Shares subject to the Purchase Offer, upon the
terms and conditions specified therein.

(ii) In the event the Company agrees to purchase
Option Shares pursuant to and in accordance with this Section 6.2, such purchase
shall occur at the principal office of the Company ten (10) days following the
expiration of the fifteen (15) day period specified in subparagraph (i) of this
paragraph (c). In no event shall the Proposed Seller be required to transfer any
Option Shares to the Company pursuant to this Section 6.2 unless the Company
purchases all of the Option Shares subject the Purchase Offer on the terms and
at the price stated therein and within the time periods specified herein.

(d) In the event the Company does not agree to purchase all of
the Option Shares offered to the Company by a Proposed Seller pursuant to this
Section 6.2, then the Proposed Seller shall have the right for a period of
thirty (30) days after the termination of the Company's right to purchase such
Option Shares (or after waiver by the Company of its option to purchase such
Option Shares) to transfer to the Proposed Purchaser all, but not less than all,
of such Option Shares in the manner and on the terms and conditions specified in
the Purchase Offer; provided, however, the Proposed Purchaser shall agree in
writing to be bound by this Plan.

6.3. LAPSE OF STOCK RESTRICTIONS AND RIGHTS. The provisions
set forth in Sections 6.1 and 6.2 shall terminate and cease to be of any further
force or effect upon the completion of a Public Offering, or a series of Public
Offerings, which result in public ownership of Common Stock of the Company
possessing at least twenty percent (20%) of the total combined voting power of
such Common Stock (or such lesser percentage as dictated by applicable
securities laws).

6.4. OWNERSHIP AND TRANSFER RESTRICTIONS. The Committee (or
the Board in the case of Options granted to Independent Directors), in its
absolute discretion, may impose additional restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as it
deems appropriate. Any such restriction shall be set forth in the respective
Stock Option Agreement and may be referred to on the certificates evidencing
such shares.

6.5. LEGEND. Each certificate representing Option Shares shall
be endorsed with the following legend, which legend shall be removed upon
termination of the stock restrictions set forth in this Article 6.

THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN

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<PAGE>

1998 STOCK OPTION PLAN OF ECO SOIL SYSTEMS, INC. COPIES OF
SUCH STOCK OPTION PLAN MAY BE OBTAINED UPON WRITTEN REQUEST
TO THE SECRETARY OF THE CORPORATION.

6.6. DISPOSITION OF SHARES. Notwithstanding and in addition to
the foregoing, each Optionee shall be required to give the Company prompt notice
of any disposition of shares of Common Stockf acquired by exercise of an
Incentive Stock Option within (i) two (2) years from the date of granting such
Option to such Optionee or (ii) one (1) year after the transfer of such shares
to such Optionee. Certificates evidencing shares acquired by exercise of an
Incentive Stock Option shall refer to such requirement to give prompt notice of
disposition.

ARTICLE VII.

ADMINISTRATION

7.1. COMPENSATION COMMITTEE. Prior to the Company's initial
registration of Common Stock under Section 12 of the Exchange Act, the
Compensation Committee shall consist of the entire Board, provided, however,
that the Board may appoint a Committee of its members to administer this Plan at
any time prior to such registration. Following such registration, the
Compensation Committee (or another committee of the Board assuming the functions
of the Committee under this Plan) shall consist solely of two or more
Independent Directors appointed by and holding office at the pleasure of the
Board, each of whom is both a "non-employee director" as defined by Rule 16(b)-3
and an "outside director" for purposes of Section 162(m) of the Code.
Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.

7.2. DUTIES AND POWERS OF COMMITTEE. It shall be the duty of
the Committee to conduct the general administration of this Plan in accordance
with its provisions. The Committee shall have the power to interpret this Plan
and the agreements pursuant to which Options are granted or awarded, and to
adopt such rules for the administration, interpretation, and application of this
Plan as are consistent therewith and to interpret, amend or revoke any such
rules. Notwithstanding the foregoing, the full Board, acting by a majority of
its members in office, shall conduct the general administration of the Plan with
respect to Options granted to Independent Directors. Any such grant or award
under this Plan need not be the same with respect to each Optionee. Any such
interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under this Plan except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations
or rules issued thereunder, are required to

16
<PAGE>

be determined in the sole discretion of the Committee.

7.3. MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. The Committee
shall act by a majority of its members in attendance at a meeting at which a
quorum is present or by a memorandum or other written instrument signed by all
members of the Committee.

7.4. COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH
ACTIONS. Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of this Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers, or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Optionees, the Company and all other
interested persons. No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to this Plan or Options, and all members of the Committee and the Board
shall be fully protected by the Company in respect of any such action,
determination or interpretation.

ARTICLE VIII.

MISCELLANEOUS PROVISIONS

8.1. NOT TRANSFERABLE. Options under this Plan may not be
sold, pledged, assigned, or transferred in any manner other than by will or the
laws of descent and distribution or pursuant to a QDRO, unless and until such
options have been exercised, or the shares underlying such Options have been
issued, and all restrictions applicable to such shares have lapsed. No Option or
interest or right therein shall be liable for the debts, contracts or
engagements of the Optionee or the Optionee's successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.

During the lifetime of the Optionee, only such Optionee may
exercise an Option (or any portion thereof) granted to such Optionee under the
Plan, unless the Option has been disposed of pursuant to a QDRO. After the death
of the Optionee, any exercisable portion of an Option may, prior to the time
when such portion becomes

17
<PAGE>

unexercisable under the Plan or the applicable Stock Option Agreement or other
agreement, be exercised by the Optionee's personal representative or by any
person empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.

8.2. AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN. Except
as otherwise provided in this Section 8.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board or the Committee. However, without approval of the
Company's shareholders given within twelve months before or after the action by
the Board or the Committee, no action of the Board or the Committee may, except
as provided in Section 8.3, increase the limits imposed in Section 2.1 on the
maximum number of shares which may be issued under this Plan or modify the Award
Limit, and no action of the Board or the Committee may be taken that would
otherwise require shareholder approval as a matter of applicable law, regulation
or rule. No amendment, suspension or termination of this Plan shall, without the
consent of the holder of Options, alter or impair any rights or obligations
under any Options theretofore granted or awarded, unless the award itself
otherwise expressly so provides. No Options may be granted or awarded during any
period of suspension or after termination of this Plan, and in no event may any
Incentive Stock Option be granted under this Plan after the first to occur of
the following events:

(a) The expiration of ten (10) years from the date the Plan is
adopted by the Board; or

(b) The expiration of ten (10) years from the date the Plan is
approved by the Company's shareholders under Section 8.4.

8.3. CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY,
ACQUISITION OR LIQUIDATION OF THE COMPANY AND OTHER CORPORATE EVENTS.

(a) Subject to Section 8.3(d), (A) in the event that the
Committee (or the Board in the case of Options granted to Independent Directors)
determines that any dividend or other distribution (whether in the form of cash,
Common Stock, other securities, or other property), recapitalization,
reclassification, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer, exchange
or other disposition of all or substantially all of the assets of the Company
(including, but not limited to, a Corporate Transaction), or exchange of Common
Stock or other securities of the Company, issuance of warrants or other rights
to purchase Common Stock or other securities of the Company, or other similar
corporate transaction or event, in the Committee's sole discretion (or, in the
case of Options granted to Independent Directors, the Board's sole discretion),
affects the Common Stock such that an adjustment is determined by the Committee
(or the Board in the case of Options granted to Independent Directors) to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to an Option, or (B) in the event of any stock split or reverse stock

<PAGE>

split, then the Committee (or the Board in the case of Options granted to
Independent Directors) shall, in such manner as it may deem equitable, adjust
any or all of

(i) the number and kind of shares of Common Stock (or
other securities or property) with respect to which Options may be granted under
the Plan, (including, but not limited to, adjustments of the limitations in
Section 2.1 on the maximum number and kind of shares which may be issued and
adjustments of the Award Limit),

(ii) the number and kind of shares of Common Stock
(or other securities or property) subject to outstanding Options, and

(iii) the grant or exercise price with respect to any
Option.

(b) Subject to Sections 8.3(b)(vi) and 8.3(d), in the event of
any Corporate Transaction or other transaction or event described in Section
8.3(a) or any unusual or nonrecurring transactions or events affecting the
Company, any Affiliate of the Company, or the financial statements of the
Company or any Affiliate, or of changes in applicable laws, regulations, or
accounting principles, the Committee (or the Board in the case of Options
granted to Independent Directors) in its discretion is hereby authorized to take
any one (1) or more of the following actions whenever the Committee (or the
Board in the case of Options granted to Independent Directors) determines that
such action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to any option under this Plan, to facilitate such transactions or
events or to give effect to such changes in laws, regulations or principles:

(i) In its sole and absolute discretion, and on such
terms and conditions as it deems appropriate, the Committee (or the Board in the
case of Options granted to Independent Directors) may provide, either by the
terms of the agreement or by action taken prior to the occurrence of such
transaction or event and either automatically or upon the Optionee's request,
for either the purchase of any such Option for an amount of cash equal to the
amount that could have been attained upon the exercise of such Option, or
realization of the Optionee's rights had such Option been currently exercisable
or payable or fully vested or the replacement of such Option with other rights
or property selected by the Committee (or the Board in the case of Options
granted to Independent Directors) in its sole discretion;

(ii) In its sole and absolute discretion, the
Committee (or the Board in the case of Options granted to Independent Directors)
may provide, either by the terms of such Option or by action taken prior to the
occurrence of such transaction or event that it cannot be exercised after such
event;

(iii) In its sole and absolute discretion, and on
such terms and conditions as it deems appropriate, the Committee (or the Board
in the case of Options

<PAGE>
granted to Independent Directors) may provide, either by the terms of such
Option or by action taken prior to the occurrence of such transaction or event,
that for a specified period of time prior to such transaction or event, such
Option shall be exercisable as to all shares covered thereby, notwithstanding
anything to the contrary in (i) Section 4.4 or (ii) the provisions of such
Option;

(iv) In its sole and absolute discretion, and on such
terms and conditions as it deems appropriate, the Committee (or the Board in the
case of Options granted to Independent Directors) may provide, either by the
terms of such Option or by action taken prior to the occurrence of such
transaction or event, that upon such event, such Option be assumed by the
successor or survivor corporation, or a parent or subsidiary thereof, or shall
be substituted for by similar options covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices;

(v) In its sole and absolute discretion, and on such
terms and conditions as it deems appropriate, the Committee (or the Board in the
case of Options granted to Independent Directors) may make adjustments in the
number and type of shares of Common Stock (or other securities or property)
subject to outstanding Options and/or in the terms and conditions of (including
the grant or exercise price), and the criteria included in, outstanding Options
and Options which may be granted in the future; and

(vi) None of the foregoing discretionary actions
taken under this Section 8.3(b) shall be permitted with respect to Options
granted to Independent Directors to the extent that such discretion would be
inconsistent with the applicable exemptive conditions of Rule 16b-3. In the
event of a Corporate Transaction, to the extent that the Board does not have the
ability under Rule 16b-3 to take or to refrain from taking the discretionary
actions set forth in Section 8.3(b)(iii) above, each Option granted to an
Independent Director shall be exercisable as to all shares covered thereby
during the five days immediately preceding the consummation of such Corporate
Transaction and subject to such consummation, notwithstanding anything to the
contrary in Section 4.4 or the vesting schedule of such Options. In the event of
a Corporate Transaction, to the extent that the Board does not have the ability
under Rule 16b-3 to take or to refrain from taking the discretionary actions set
forth in Section 8.3(b)(ii) above, no Option granted to an Independent Director
may be exercised following such Corporate Transaction unless such Option is, in
connection with such Corporate Transaction, either assumed by the successor or
survivor corporation (or parent or subsidiary thereof) or replaced with a
comparable right with respect to shares of the capital stock of the successor or
survivor corporation (or parent or subsidiary thereof).

(c) Subject to Section 8.3(d) and 8.8, the Committee (or the
Board in the case of Options granted to Independent Directors) may, in its
discretion, include such further provisions and limitations in any Option as it
may deem equitable and in the best interests of the Company.

20
<PAGE>

(d) With respect to Incentive Stock Options and Options
intended to qualify as performance-based compensation under Section 162(m), no
adjustment or action described in this Section 8.3 or in any other provision of
the Plan shall be authorized to the extent that such adjustment or action would
cause the Plan to violate Section 422(b)(1) of the Code or would cause such
option to fail to so qualify under Section 162(m), as the case may be, or any
successor provisions thereto. Furthermore, no such adjustment or action shall be
authorized to the extent such adjustment or action would result in short-swing
profits liability under Section 16 or violate the exemptive conditions of Rule
16b-3 unless the Committee (or the Board in the case of Options granted to
Independent Directors) determines that the Option is not to comply with such
exemptive conditions. The number of shares of Common Stock subject to any Option
shall always be rounded to the next whole number.

8.4. APPROVAL OF PLAN BY SHAREHOLDERS. This Plan will be
submitted for the approval of the Company's shareholders within twelve months
after the date of the Board's initial adoption of this Plan. Options may be
granted prior to such shareholder approval, provided that such Options shall not
be exercisable prior to the time when this Plan is approved by the shareholders,
and provided further that if such approval has not been obtained at the end of
said twelve-month period, all Options previously granted under this Plan shall
thereupon be canceled and become null and void.

8.5. TAX WITHHOLDING. The Company shall be entitled to require
payment in cash or deduction from other compensation payable to each Optionee of
any sums required by federal, state or local tax law to be withheld with respect
to the issuance, vesting or exercise of any Option. The Committee (or the Board
in the case of Options granted to Independent Directors) may in its discretion
and in satisfaction of the foregoing requirement allow such Optionee to elect to
have the Company withhold shares of Common Stock otherwise issuable under such
Option (or allow the return of shares of Common Stock) having a Fair Market
Value equal to the sums required to be withheld.

8.6. LOANS. The Committee may, in its discretion, extend one
(1) or more loans to key Employees in connection with the exercise or receipt of
an Option granted under this Plan. The terms and conditions of any such loan
shall be set by the Committee.

8.7. FORFEITURE PROVISIONS. Pursuant to its general authority
to determine the terms and conditions applicable to awards under the Plan, the
Committee (or the Board in the case of Options granted to Independent Directors)
shall have the right (to the extent consistent with the applicable exemptive
conditions of Rule 16b-3 and to the extent permitted under applicable state law)
to provide, in the terms of Options made under the Plan, or to require the
recipient to agree by separate written instrument, that (i) any proceeds, gains
or other economic benefit actually or constructively received by the

21
<PAGE>

recipient upon any receipt or exercise of an Option, or upon the receipt or
resale of any Common Stock underlying such Option, must be paid to the Company,
and (ii) the Option shall terminate and any unexercised portion of such Option
(whether or not vested) shall be forfeited, if (a) a Termination of
Directorship, Termination of Employment or Termination of Consultancy occurs
prior to a specified date, or within a specified time period following receipt
or exercise of the Option, or (b) the recipient at any time, or during a
specified time period, engages in any activity in competition with the Company,
or which is inimical, contrary or harmful to the interests of the Company, as
further defined by the Committee (or the Board, as applicable).

8.8. LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND
PERFORMANCE-BASED COMPENSATION. Notwithstanding any other provision of this
Plan, this Plan, and any Option granted to any individual who is then subject to
Section 16 of the Exchange Act, shall be subject to any additional limitations
set forth in any applicable exemptive rule under Section 16 of the Exchange Act
(including any amendment to Rule 16b-3 of the Exchange Act) that are
requirements for the application of such exemptive rule. To the extent permitted
by applicable law, the Plan and Options granted or awarded hereunder shall be
deemed amended to the extent necessary to conform to such applicable exemptive
rule. Furthermore, notwithstanding any other provision of this Plan, any Option
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall be subject to any additional limitations set
forth in Section 162(m) of the Code (including any amendment to Section 162(m)
of the Code) or any regulations or rulings issued thereunder that are
requirements for qualification as performance-based compensation as described in
Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the
extent necessary to conform to such requirements.

8.9. EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS. The
adoption of this Plan shall not affect any other compensation or incentive plans
in effect for the Company or any Subsidiary. Nothing in this Plan shall be
construed to limit the right of the Company (i) to establish any other forms of
incentives or compensation for Employees, directors or consultants of the
Company or any Subsidiary or (ii) to grant or assume options or other rights
otherwise than under this Plan in connection with any proper corporate purpose
including but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, partnership,
limited liability company, firm or association.

8.10. COMPLIANCE WITH LAWS. This Plan, the granting and
vesting of Options under this Plan and the issuance and delivery of shares of
Common Stock and the payment of money under this Plan or under Options granted
hereunder are subject to compliance with all applicable federal and state laws,
rules and regulations (including but not limited to state and federal securities
law and federal margin requirements) and to

22
<PAGE>

such approvals by any listing, regulatory or governmental authority as may, in
the opinion of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company as the
Company may deem necessary or desirable to assure compliance with all applicable
legal requirements. To the extent permitted by applicable law, the Plan and
Options granted or awarded hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.

8.11. TITLES. Titles are provided herein for convenience only
and are not to serve as a basis for interpretation or construction of this Plan.

8.12. GOVERNING LAW. This Plan and any agreements hereunder
shall be administered, interpreted and enforced under the internal laws of the
State of Delaware without regard to conflicts of laws thereof.

* * *

<PAGE>

APPENDIX B

THE 1999 EQUITY PARTICIPATION PLAN
OF
ECO SOIL SYSTEMS, INC.

Eco Soil Systems, Inc., a Nebraska corporation (the "Company"),
has adopted The 1999 Equity Participation Plan of Eco Soil Systems, Inc. (the
"Plan"), effective April 19, 1999, for the benefit of its eligible employees.

The purposes of this Plan are as follows:

(1) To provide an additional incentive for key Employees to
further the growth, development and financial success of the Company by
personally benefiting through the ownership of Company stock which recognizes
such growth, development and financial success.

(2) To enable the Company to obtain and retain the services
of key Employees considered essential to the long range success of the Company
by offering them an opportunity to own stock in the Company which will reflect
the growth, development and financial success of the Company.

ARTICLE I.

DEFINITIONS

1.1. GENERAL. Wherever the following terms are used in this
Plan they shall have the meanings specified below, unless the context clearly
indicates otherwise.

1.3. AWARD LIMIT. "Award Limit" shall mean 500,000 shares of
Common Stock, as adjusted pursuant to Section 9.3.

1.4. BOARD. "Board" shall mean the Board of Directors of the
Company.

<PAGE>

1.5. CODE. "Code" shall mean the Internal Revenue Code of
1986, as amended.

1.6. COMMITTEE. "Committee" shall mean the Compensation
Committee of the Board, a sub-committee of the Compensation Committee or another
committee of the Board, appointed as provided in Section 8.1.

1.8. COMPANY. "Company" shall mean Eco Soil Systems, Inc., a
Nebraska corporation.

1.9. CORPORATE TRANSACTION. "Corporate Transaction" shall
mean any of the following shareholder-approved transactions to which the Company
is a party:

1.10. DIRECTOR. "Director" shall mean a member of the Board.

1.11. DISABILITY. "Disability" shall mean, with respect to any
Optionee, (i) the suffering of any mental or physical illness, disability or
incapacity that shall in all material aspects preclude such Optionee from
performing his or her employment duties, or (ii) the absence of such Optionee
from his or her employment duties by reason of any mental or physical illness,
disability or incapacity for a period of six (6) months during any twelve (12)
month period; provided, however, in either case, that such illness,

<PAGE>

disability or incapacity shall be reasonably determined to be of a permanent
nature by the Committee.

1.12. EMPLOYEE. "Employee" shall mean any executive officer of
the Company, which executive officer shall also be an employee (as defined in
accordance with Section 3401(c) of the Code) of the Company, or of any
corporation which is a Subsidiary.

1.13. EXCHANGE ACT. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.

1.14. FAIR MARKET VALUE. "Fair Market Value" of a share of
Common Stock as of a given date shall be (i) the closing price of a share of
Common Stock on the principal exchange on which shares of Common Stock are
then trading, if any (or as reported on any composite index which includes
such principal exchange), on the trading day previous to such date, or if
shares were not traded on the trading day previous to such date, then on the
next preceding date on which a trade occurred; or (ii) if Common Stock is not
traded on an exchange but is quoted on NASDAQ or a successor quotation
system, the mean between the closing representative bid and asked prices for
the Common Stock on the trading day previous to such date as reported by
NASDAQ or such successor quotation system; or (iii) if Common Stock is not
publicly traded on an exchange and not quoted on NASDAQ or a successor
quotation system, the Fair Market Value of a share of Common Stock shall be
established by the Committee acting in good faith, giving predominate weight
to the earnings history, book value and prospects of the Company in light of
market conditions generally.

1.15. INCENTIVE STOCK OPTION. "Incentive Stock Option" shall
mean an option which conforms to the applicable provisions of Section 422 of
the Code and which is designated as an Incentive Stock Option by the
Committee.

1.16. INDEPENDENT DIRECTOR. "Independent Director" shall
mean a member of the Board who is not an Employee of the Company.

1.17. NON-QUALIFIED STOCK OPTION. "Non-Qualified Stock Option"
shall mean an Option which is not designated as an Incentive Stock Option by the
Committee.

1.18. OPTION. "Option" shall mean a stock option granted under
Article III of this Plan. An Option granted under this Plan shall, as
determined by the Committee, be either a Non-Qualified Stock Option or an
Incentive Stock Option.

1.19. OPTION SHARES. "Option Shares" shall mean shares of
Common Stock acquired by Optionees through the exercise of Options under this
Plan.

1.20. OPTIONEE. "Optionee" shall mean an Employee granted an
Option under this Plan.

<PAGE>

1.21. PERSON. "Person" shall mean a corporation, an
association, a partnership, a trust, a limited liability company, an
organization, a business or an individual.

1.22. PLAN. "Plan" shall mean The 1999 Equity Participation
Plan of Eco Soil Systems, Inc.

1.24. RELATED PERSON. "Related Person" shall mean (a) in the
event of a Person's death, such Person's executors, administrators, testamentary
trustees, legatees or beneficiaries or the executors, administrators,
testamentary trustees, legatees or beneficiaries of a Person who has become a
holder of Options or Option Shares in accordance with the terms of this Plan; or
(b) a revocable trust or custodianship the beneficiaries of which may include
only such Person, spouse or lineal descendants by blood or adoption.

1.25. RULE 16B-3. "Rule 16b-3" shall mean that certain Rule
16b-3 under the Exchange Act, as such Rule may be amended from time to time.

1.26. SECURITIES ACT. "Securities Act" shall mean the
Securities Act of 1933, as amended.

1.27. SUBSIDIARY. "Subsidiary" shall mean any corporation in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one (1) of the other corporations in such chain.

1.28. TERMINATION OF EMPLOYMENT. "Termination of Employment"
shall mean the time when the employee-employer relationship between an Optionee
and the Company or any Subsidiary is terminated for any reason, with or without
cause, including, but not by way of limitation, a termination by resignation,
discharge, death, Disability or retirement; but excluding (i) terminations where
there is a simultaneous reemployment or continuing employment of an Optionee by
the Company or any Subsidiary, (ii) at the discretion of the Committee,
terminations which result in a temporary severance of the employee-employer
relationship, and (iii) at the discretion of the Committee, terminations which
are followed by the simultaneous establishment of a consulting relationship by
the Company or a Subsidiary with the former employee. The Committee, in its
absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a

<PAGE>

discharge for good cause, and all questions of whether particular leaves of
absence constitute Terminations of Employment; provided, however, that,
unless otherwise determined by the Committee in its discretion, a leave of
absence, change in status from an employee to an independent contractor or
other change in the employee-employer relationship shall constitute a
Termination of Employment if, and to the extent that, such leave of absence,
change in status or other change interrupts employment for the purposes of
Section 422(a)(2) of the Code and the then applicable regulations and revenue
rulings under said Section. Notwithstanding any other provision of this Plan,
the Company or any Subsidiary has an absolute and unrestricted right to
terminate an Employee's employment at any time for any reason whatsoever,
with or without cause, except to the extent expressly provided otherwise in
writing.

1.29. TERMINATION FOR CAUSE. "Termination for Cause" shall
mean the time when the employee-employer relationship between an Optionee and
the Company or any Subsidiary is terminated for cause, as termination for cause
is defined in the Optionee's employment agreement; provided however, that if
termination for cause is not therein defined, it shall have such meaning, in
conformance with applicable law, as the Committee shall determine is
appropriate.

ARTICLE II.

SHARES SUBJECT TO PLAN

2.1. SHARES SUBJECT TO PLAN.

(a) The shares of stock subject to Options granted under
Article III or subject to purchase under Article VII shall be Common Stock. The
aggregate number of such shares which may be issued upon exercise of Options
under the Plan or upon the purchase of Common Stock under Article VII shall be
1,600,000. The shares of Common Stock of the Company issuable upon exercise of
Options or purchase under Article VII may be either previously authorized but
unissued shares or treasury shares.

(b) The maximum number of shares which may be subject to
Options granted under the Plan to any individual or which may be purchased by
any individual under Article VII in any fiscal year of the Company shall not
exceed the Award Limit. To the extent required by Section 162(m) of the
Code, shares subject to Options which are canceled continue to be counted
against the Award Limit and if, after grant of an Option, the price of shares
subject to such Option is reduced, the transaction is treated as a
cancellation of the Option and a grant of a new Option and both the Option
deemed to be canceled and the Option deemed to be granted are counted against
the Award Limit.

<PAGE>

prior to its expiration, cancellation or exercise may again be available for
the granting of Options hereunder, subject to the limitations of Section 2.1.
Furthermore, any shares subject to Options which are adjusted pursuant to
Section 9.3 and become exercisable with respect to shares of stock of another
corporation shall be considered canceled and may again be available for the
granting of Options hereunder, subject to the limitations of Section 2.1.
Shares of Common Stock which are delivered by the Optionee or withheld by the
Company upon the exercise of any Option under this Plan, in payment of the
exercise price thereof, may again be available for the granting of Options
hereunder, subject to the limitations of Section 2.1. Notwithstanding the
provisions of this Section 2.2, no shares of Common Stock may again be
available for the granting of Options if such action would cause an Incentive
Stock Option to fail to qualify as an incentive stock option under Section
422 of the Code.

ARTICLE III.

GRANTING OF OPTIONS

3.1. ELIGIBILITY. Any Employee selected by the Committee
pursuant to Section 3.2(a)(i) shall be eligible to be granted an Option.

3.3. GRANTING OF OPTIONS.

(a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of this Plan:

(i) Determine which Employees are key Employees and
select from among the key Employees (including Employees who have
previously received Options under this Plan) such of them as in its
opinion should be granted Options;

(ii) Subject to the Award Limit, determine the number
of shares to be subject to such Options granted to the selected key
Employees;

(iii) Determine whether such Options are to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of
the Code; and

<PAGE>

(iv) Determine the terms and conditions of such
Options, consistent with this Plan; provided, however, that the terms
and conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to satisfy the applicable provisions of Section 162(m) of the
Code.

(b) Upon the selection of a key Employee to be granted an
Option, the Committee shall instruct the Secretary of the Company to issue the
Option and may impose such conditions on the grant of the Option as it deems
appropriate. Without limiting the generality of the preceding sentence, the
Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition on the grant of an Option to an Employee that such
Employee surrender for cancellation some or all of the unexercised Options or
other rights which have been previously granted to such Employee under this Plan
or otherwise. An Option, the grant of which is conditioned upon such surrender,
may have an option price lower (or higher) than the exercise price of such
surrendered Option or other award, may cover the same (or a lesser or greater)
number of shares as such surrendered Option or other award, may contain such
other terms as the Committee deems appropriate, and shall be exercisable in
accordance with its terms, without regard to the number of shares, price,
exercise period or any other term or condition of such surrendered Option or
other award.

(c) Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such option from treatment as an
"incentive stock option" under Section 422 of the Code.

ARTICLE IV.

TERMS OF OPTIONS

4.1. OPTION AGREEMENT. Each Option shall be evidenced by a
written Stock Option Agreement, which shall be executed by the Optionee and an
authorized officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan. Stock
Option Agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain such
terms and conditions as may be necessary to satisfy the applicable provisions of
Section 162(m) of the Code. Stock Option Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.

4.2. OPTION PRICE. The price per share of the shares subject
to each Option shall be set by the Committee; provided, however, that:

<PAGE>

(a) Unless otherwise permitted by applicable securities
laws, such price shall be not less than eighty-five percent (85%) of the Fair
Market Value of the stock at the time the option is granted, except that the
price shall be one hundred and ten percent (110%) of the Fair Market Value of
the stock in the case of any person possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or its
Subsidiary;

(b) In the case of Incentive Stock Option and Options
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code, such price shall not be less than one hundred percent
(100%) of the Fair Market Value of a share of Common Stock on the date the
Option is granted; and

(c) In the case of Incentive Stock Options granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Subsidiary such price shall not be less than one
hundred and ten percent (110%) of the Fair Market Value of a share of Common
Stock on the date the Option is granted.

4.3. OPTION TERM. The term of an Option shall be set by the
Committee in its discretion; provided, however, that:

(a) No Option may have a term that extends beyond the
expiration of ten (10) years from the date the Option was granted;

(b) In the case of Incentive Stock Options, the term shall
not be more than ten (10) years from the date the Incentive Stock Option is
granted, or five (5) years from such date if the Incentive Stock Option is
granted to an individual then owning (within the meaning of Section 424(d) of
the Code) more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any Subsidiary;

(c) Except as limited by requirements of Section 422 of the
Code and regulations and rulings thereunder applicable to Incentive Stock
Options, the Committee (or the Board in the case of Options granted to
Independent Directors). The Committee may extend the term of any outstanding
Option in connection with any Termination of Employment of the Optionee, or
amend any other term or condition of such Option relating to such a termination;
and

(d) Unless otherwise permitted by applicable securities laws,
in the event of an Optionee's Termination of Employment for any reason except
death, Disability or Termination for Cause, the Optionee shall have such period
of time as may be set by the Committee in the Optionee's written Stock Option
Agreement to exercise the Option, and in the event of an Optionee's Termination
of Employment due to the Optionee's death or Disability, the Optionee shall have
at least six (6) months from the date of such Termination of Employment to
exercise the Option. Notwithstanding the

<PAGE>

forgoing, if an Optionee's Termination of Employment also qualifies as a
Termination for Cause, the Company, in its discretion, may terminate the
Optionee's right to exercise his or her Options on the date of such
termination or such other time as the Committee, in its discretion, shall
deem appropriate.

4.4. OPTION VESTING.

(a) The period during which the right to exercise an Option
in whole or in part vests in the Optionee shall be set by the Committee and the
Committee may determine that an Option may not be exercised in whole or in part
for a specified period after it is granted; provided, however, that, subject to
Section 4.4(b), (i) unless otherwise permitted by applicable securities laws,
each Option shall become exercisable no later than seven (7) years after such
Option is granted and such Option shall become exercisable with respect to at
least twenty percent (20%) of the shares of Common Stock subject to such Option,
as determined by the Committee in its sole discretion, on each anniversary of
the date of the grant of such Option; (ii) unless the Committee otherwise
provides in the terms of the Stock Option Agreement or this Plan otherwise so
dictates, no Option shall be exercisable by any Optionee who is then subject to
Section 16 of the Exchange Act within the period ending six months and one day
after the date the Option is granted; and (iii) each outstanding Option shall
automatically become fully exercisable for all of the shares of Common Stock at
the time subject to such Option if during the term of such Option any of the
following occur: (A) the transfer of more than fifty percent (50%) of Common
Stock to a Person who is not an Affiliate of the Company; (B) a merger or
consolidation in which the Company is not the surviving entity, except for a
transaction the principal purpose of which is to change the State in which the
Company is incorporated, to form a holding company or to effect a similar
reorganization as to form whereupon this Plan and all Options are assumed by the
successor entity; or (C) the sale, transfer, exchange or other disposition of
all or substantially all of the assets of the Company, in complete liquidation
or dissolution of the Company in a transaction not covered by the exceptions to
clause (B) above; provided, further, that Options may become fully exercisable,
subject to reasonable conditions such as continued employment, at any time or
during any period established by the Committee.

(b) No portion of an Option which is unexercisable at
Termination of Employment shall thereafter become exercisable, except as may be
otherwise provided by the Committee either in the Stock Option Agreement or by
action of the Committee following the grant of the Option.

(c) To the extent that the aggregate Fair Market Value of
stock with respect to which "incentive stock options" (within the meaning of
Section 422 of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by an Optionee during any calendar year (under
the Plan and all other incentive stock option plans of the Company and any
Subsidiary) exceeds $100,000, such Options shall be treated as Non-Qualified
Options to the extent required by Section 422 of the Code. The rule set forth
in the preceding sentence shall be applied by taking Options into

<PAGE>

account in the order in which they were granted. For purposes of this
Section 4.4(c), the Fair Market Value of stock shall be determined as of the
time the Option with respect to such stock is granted.

4.5. CONSIDERATION. In consideration of the granting of an
Option, the Optionee shall agree, in the written Stock Option Agreement, to
remain in the employ of the Company or any Subsidiary for a period of at least
one (1) year (or such shorter period as may be fixed in the Stock Option
Agreement or by action of the Committee following grant of the Option) after the
Option is granted. Nothing in this Plan or in any Stock Option Agreement
hereunder shall confer upon any Optionee any right to continue in the employ of
the Company or any Subsidiary or shall interfere with or restrict in any way the
rights of the Company or any Subsidiary, which are hereby expressly reserved, to
discharge any Optionee at any time for any reason whatsoever, with or without
good cause.

4.6. FINANCIAL STATEMENTS. To the extent required by
applicable securities laws, each Optionee shall receive financial statements of
the Company at least annually.

ARTICLE V.

EXERCISE OF OPTIONS

5.1. PARTIAL EXERCISE. An exercisable Option may be exercised
in whole or in part. However, an Option shall not be exercisable with respect
to fractional shares and the Committee may require that, by the terms of the
Option, a partial exercise be with respect to a minimum number of shares.

5.2. MANNER OF EXERCISE. All or a portion of an exercisable
Option shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company or such Secretary's office:

(a) A written notice complying with the applicable rules
established by the Committee stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion;

(b) Such representations and documents as the Committee, in
its absolute discretion, deems necessary or advisable to effect compliance with
all applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its absolute discretion,
also take whatever additional actions it deems appropriate to effect such
compliance including, without limitation,

<PAGE>

placing legends on share certificates and issuing stop-transfer notices to
agents and registrars;

(c) In the event that the Option shall be exercised pursuant
to Section 9.1 by any person or persons other than the Optionee, appropriate
proof of the right of such person or persons to exercise the Option; and

(d) Full cash payment to the Secretary of the Company for the
shares and for payment of any applicable withholding or other applicable
employment taxes with respect to which the Option, or portion thereof, is
exercised. However, the Committee, may in its discretion (i) allow a delay in
payment up to thirty (30) days from the date the Option, or portion thereof, is
exercised; (ii) allow payment, in whole or in part, through the delivery of
shares of Common Stock which have been owned by the Optionee for at least six
months, duly endorsed for transfer to the Company with a Fair Market Value on
the date of delivery equal to the aggregate exercise price of the Option or
exercised portion thereof; (iii) allow payment, in whole or in part, through the
surrender of shares of Common Stock then issuable upon exercise of the Option
having a Fair Market Value on the date of Option exercise equal to the aggregate
exercise price of the Option or exercised portion thereof; (iv) allow payment,
in whole or in part, through the delivery of property of any kind which
constitutes good and valuable consideration; (v) allow payment, in whole or in
part, through the delivery of a full recourse, limited recourse or non-recourse
(as determined by the Committee) promissory note bearing interest (at no less
than such rate as shall then preclude the imputation of interest under the Code)
and payable upon such terms as may be prescribed by the Committee or the Board;
(vi) allow payment, in whole or in part, through the delivery of a notice that
the Optionee has placed a market sell order with a broker with respect to shares
of Common Stock then issuable upon exercise of the Option, and that the broker
has been directed to pay a sufficient portion of the net proceeds of the sale to
the Company in satisfaction of the Option exercise price and applicable
withholding or other employment taxes; or (vii) allow payment through any
combination of the consideration provided in the foregoing subparagraphs (ii),
(iii), (iv), (v) and (vi). In the case of a promissory note, the Committee may
also prescribe the form of such note and the security to be given for such note.
The Option may not be exercised, however, by delivery of a promissory note or by
a loan from the Company when or where such loan or other extension of credit is
prohibited by law.

5.3. CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:

(a) The admission of such shares to listing on all stock
exchanges, if any, on which such class of stock is then listed;

<PAGE>

(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee or the Board may establish from time to
time for reasons of administrative convenience; and

(e) The receipt by the Company of full payment for such
shares, including payment of any applicable withholding tax, which in the
discretion of the Committee or the Board may be in the form of consideration
used by the Employee to pay for such shares under Section 5.2(d).

ARTICLE VI.

RIGHTS AND RESTRICTIONS WITH RESPECT TO OPTION SHARES

6.1. OWNERSHIP AND TRANSFER RESTRICTIONS. The Committee, in
its absolute discretion, may impose restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as it
deems appropriate; provided, however, that Option Shares may be transferred at
any time to a Related Person, provided that the Related Person agrees in writing
to be bound by the terms of this Plan. Any such restriction shall be set forth
in the respective Stock Option Agreement and may be referred to on the
certificates evidencing such shares.

6.2. DISPOSITION OF SHARES. Notwithstanding and in addition
to the foregoing, each Optionee shall be required to give the Company prompt
notice of any disposition of shares of Common Stock acquired by exercise of an
Incentive Stock Option within (i) two (2) years from the date of granting such
Option to such Optionee or (ii) one (1) year after the transfer of such shares
to such Optionee. Certificates evidencing shares acquired by exercise of an
Incentive Stock Option shall refer to such requirement to give prompt notice of
disposition.

<PAGE>

ARTICLE VII.

STOCK PURCHASES

7.1. ELIGIBILITY TO PURCHASE COMMON STOCK. The Committee may
grant to any Employee the right to purchase Common Stock under this Plan from
time to time, in such amounts and subject to such terms and conditions as the
Committee may determine, and, at the discretion of the Committee, such
determinations may include determining categories of employees and the number of
shares to be made available to employees in each such category; PROVIDED,
HOWEVER, that the total number of shares granted in an action taken by category
must be readily determinable. The Committee shall determine the purchase price
for such Common Stock; PROVIDED, HOWEVER, that the purchase price for Common
Stock purchased under this Article VII shall be no less than the Fair Market
Value of such Common Stock as of the date of purchase

7.2. TERMINATION OF EMPLOYMENT. An Employee whom the
Committee has granted the right to purchase Common Stock under this Article VII
may only purchase such Common Stock while he or she is an Employee.

7.3. FORM OF PAYMENT. An eligible Employee may purchase
Common Stock pursuant to this Article VII only upon delivery of all of the
following to the Secretary of the Company or his office:

(a) Written notice complying with the applicable rules
established by the Committee stating the number of shares of Common Stock
acquired by exercise of an Incentive Stock Option within (i) two (2) years from
the date of granting such Option to such Optionee or (ii) one (1) year after the
transfer of such shares to such Optionee. Certificates evidencing shares
acquired by exercise of an Incentive Stock Option shall refer to such
requirement to give prompt notice of disposition;

(c) Full cash payment to the Secretary of the Company for the
shares being purchased and for payment of any applicable withholding or other
applicable employment taxes. However, the Committee may in its discretion allow
payment, in whole or in part, through the delivery of a full recourse, limited
recourse or non-recourse promissory note bearing interest (at no less than such
rate as shall then preclude the imputation of interest under the Code) and
payable upon such terms as

<PAGE>

may be prescribed by the Committee or the Board. The Administrator may
prescribe the form of such promissory note and the security to be given for
such note. Notwithstanding the foregoing, however, Common Stock may not be
purchased under this Article VII by delivery of a promissory note or by a
loan from the Company when or where such loan or other extension of credit is
prohibited by law.

7.4. CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of Common Stock purchased under this Article VII prior
to fulfillment of all of the following conditions:

(a) The admission of such shares to listing on all stock
exchanges, if any, on which such class of stock is then listed;

(d) The receipt by the Company of full payment for such
shares, including payment of any applicable withholding tax, which in the
discretion of the Committee or the Board may be in the form of consideration
used by the Employee to pay for such shares under Section 7.3(c).

7.5. RIGHTS AS STOCKHOLDERS/ DIVIDEND EQUIVALENTS. An
Employee who is granted the right to purchase Common Stock under this Article
VII shall not be, nor have any of the rights or privileges of, stockholders of
the Company in respect of any shares purchasable pursuant to such right unless
and until certificates representing such shares have been issued by the Company
to such Employee.

7.6. STOCKHOLDER APPROVAL REQUIREMENTS. All rights to
purchase Common Stock pursuant to this Article VII are subject to stockholder
approval of the Plan. If such stockholder approval is not obtained within
twelve months after the date of the Board's initial adoption of the Plan,
then all Common Stock purchased by any Employee pursuant to this Article VII
shall be returned to the Company, all consideration paid to the Company shall
be returned to the Employee and all such purchases shall be canceled and be
null and void AB INITIO.

7.7. SECTION 83(b) ELECTION. If an Employee makes an election
under Section 83(b) of the Code, or any successor section thereto, to be taxed
with respect to the Common Stock purchased pursuant to this Article VII as of
the date of transfer of such Common Stock rather than as of the date or dates
upon which such Employee

<PAGE>

would otherwise be taxable under Section 83(a) of the Code, he or she shall
deliver a copy of such election to the Company immediately after filing such
election with the Internal Revenue Service.

ARTICLE VIII.

ADMINISTRATION

8.1. COMPENSATION COMMITTEE. Prior to the Company's initial
registration of Common Stock under Section 12 of the Exchange Act, the
Compensation Committee shall consist of the entire Board, provided, however,
that the Board may appoint a Committee of its members to administer this Plan at
any time prior to such registration. Following such registration, the
Compensation Committee (or another committee of the Board or sub-committee of
the Compensation Committee assuming the functions of the Committee under this
Plan) shall consist solely of two or more Independent Directors appointed by and
holding office at the pleasure of the Board, each of whom is both a
"non-employee director" as defined by Rule 16(b)-3 and an "outside director" for
purposes of Section 162(m) of the Code. Appointment of Committee members shall
be effective upon acceptance of appointment. Committee members may resign at
any time by delivering written notice to the Board. Vacancies in the Committee
may be filled by the Board.

8.2. DUTIES AND POWERS OF COMMITTEE. It shall be the duty of
the Committee to conduct the general administration of this Plan in accordance
with its provisions. The Committee shall have the power to interpret this Plan
and the agreements pursuant to which Options are granted or awarded, and to
adopt such rules for the administration, interpretation, and application of this
Plan as are consistent therewith and to interpret, amend or revoke any such
rules. Any such grant or award under this Plan need not be the same with
respect to each Optionee. Any such interpretations and rules with respect to
Incentive Stock Options shall be consistent with the provisions of Section 422
of the Code. In its absolute discretion, the Board may at any time and from
time to time exercise any and all rights and duties of the Committee under this
Plan except with respect to matters which under Rule 16b-3 or Section 162(m) of
the Code, or any regulations or rules issued thereunder, are required to be
determined in the sole discretion of the Committee.

8.3. MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. The Committee
shall act by a majority of its members in attendance at a meeting at which a
quorum is present or by a memorandum or other written instrument signed by all
members of the Committee.

8.4. COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH
ACTIONS. Members of the Committee shall receive such compensation for their
services as

<PAGE>

members as may be determined by the Board. All expenses and liabilities
which members of the Committee incur in connection with the administration of
this Plan shall be borne by the Company. The Committee may, with the
approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers, or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Optionees, the Company and all
other interested persons. No members of the Committee or Board shall be
personally liable for any action, determination or interpretation made in
good faith with respect to this Plan or Options, and all members of the
Committee and the Board shall be fully protected by the Company in respect of
any such action, determination or interpretation.

ARTICLE IX.

MISCELLANEOUS PROVISIONS

9.1. NOT TRANSFERABLE. Options under this Plan may not be
sold, pledged, assigned, or transferred in any manner other than by will or the
laws of descent and distribution, unless and until such Options have been
exercised, or the shares underlying such Options have been issued, and all
restrictions applicable to such shares have lapsed. No Option or interest or
right therein shall be liable for the debts, contracts or engagements of the
Optionee or the Optionee's successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.

During the lifetime of the Optionee, only such Optionee may
exercise an Option (or any portion thereof) granted to such Optionee under the
Plan. After the death of the Optionee, any exercisable portion of an Option
may, prior to the time when such portion becomes unexercisable under the Plan or
the applicable Stock Option Agreement or other agreement, be exercised by the
Optionee's personal representative or by any person empowered to do so under the
deceased Optionee's will or under the then applicable laws of descent and
distribution.

9.2. AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN.
Except as otherwise provided in this Section 9.2, this Plan may be wholly or
partially amended or otherwise modified, suspended or terminated at any time or
from time to time by the Board or the Committee. However, without approval of
the Company's shareholders given within twelve months before or after the action
by the Board or the Committee, no action of the Board or the Committee may,
except as provided in Section 9.3, increase the

<PAGE>

limits imposed in Section 2.1 on the maximum number of shares which may be
issued under this Plan or modify the Award Limit, and no action of the Board
or the Committee may be taken that would otherwise require shareholder
approval as a matter of applicable law, regulation or rule. No amendment,
suspension or termination of this Plan shall, without the consent of the
holder of Options, alter or impair any rights or obligations under any
Options theretofore granted or awarded, unless the award itself otherwise
expressly so provides. No Options may be granted or awarded during any
period of suspension or after termination of this Plan, and in no event may
any Incentive Stock Option be granted under this Plan after the first to
occur of the following events:

(a) The expiration of ten (10) years from the date the Plan
is adopted by the Board; or

(b) The expiration of ten (10) years from the date the Plan
is approved by the Company's shareholders under Section 9.4.

9.3. CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY,
ACQUISITION OR LIQUIDATION OF THE COMPANY AND OTHER CORPORATE EVENTS.

(a) Subject to Section 9.3(d), (A) in the event that the
Committee determines that any dividend or other distribution (whether in the
form of cash, Common Stock, other securities, or other property),
recapitalization, reclassification, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale,
transfer, exchange or other disposition of all or substantially all of the
assets of the Company (including, but not limited to, a Corporate Transaction),
or exchange of Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase Common Stock or other securities of the
Company, or other similar corporate transaction or event, in the Committee's
sole discretion, affects the Common Stock such that an adjustment is determined
by the Committee to be appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the
Plan or with respect to an Option, or (B) in the event of any stock split or
reverse stock split, then the Committee shall, in such manner as it may deem
equitable, adjust any or all of

(i) the number and kind of shares of Common Stock (or
other securities or property) which may be purchased pursuant to Article VII or
with respect to which Options may be granted under the Plan, (including, but not
limited to, adjustments of the limitations in Section 2.1 on the maximum number
and kind of shares which may be issued and adjustments of the Award Limit),

(ii) the number and kind of shares of Common Stock (or
other securities or property) which may be purchased pursuant to Article VII or
which are subject to outstanding Options, and

<PAGE>

(iii) the grant or exercise price with respect to any
Option or the purchase price for Common Stock which is purchasable pursuant to
Article VII.

(b) Subject to Section 9.3(d), in the event of any Corporate
Transaction or other transaction or event described in Section 9.3(a) or any
unusual or nonrecurring transactions or events affecting the Company, any
Affiliate of the Company, or the financial statements of the Company or any
Affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Committee in its discretion is hereby authorized to take any one
(1) or more of the following actions whenever the Committee determines that such
action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to any option under this Plan, to facilitate such transactions or
events or to give effect to such changes in laws, regulations or principles:

(i) In its sole and absolute discretion, and on such
terms and conditions as it deems appropriate, the Committee may provide, either
by the terms of the agreement or by action taken prior to the occurrence of such
transaction or event and either automatically or upon the Optionee's request,
for either the purchase of any such Option for an amount of cash equal to the
amount that could have been attained upon the exercise of such Option, or
realization of the Optionee's rights had such Option been currently exercisable
or payable or fully vested or the replacement of such Option with other rights
or property selected by the Committee in its sole discretion;

(ii) In its sole and absolute discretion, the Committee
may provide, either by the terms of such Option or by action taken prior to the
occurrence of such transaction or event that it cannot be exercised after such
event;

(iii) In its sole and absolute discretion, and on such
terms and conditions as it deems appropriate, the Committee may provide, either
by the terms of such Option or by action taken prior to the occurrence of such
transaction or event, that for a specified period of time prior to such
transaction or event, such Option shall be exercisable as to all shares covered
thereby, notwithstanding anything to the contrary in (i) Section 4.4 or (ii) the
provisions of such Option;

(iv) In its sole and absolute discretion, and on such
terms and conditions as it deems appropriate, the Committee may provide, either
by the terms of such Option or by action taken prior to the occurrence of such
transaction or event, that upon such event, such Option be assumed by the
successor or survivor corporation, or a parent or subsidiary thereof, or shall
be substituted for by similar options covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices;

(v) In its sole and absolute discretion, and on such
terms and conditions as it deems appropriate, the Committee may make adjustments
in the number

<PAGE>

and type of shares of Common Stock (or other securities or property) subject
to outstanding Options and/or in the terms and conditions of (including the
grant or exercise price), and the criteria included in, outstanding Options
and Options which may be granted in the future; and

(c) Subject to Sections 8.3(d) and 8.8, the Committee may, in
its discretion, include such further provisions and limitations in any Option as
it may deem equitable and in the best interests of the Company.

(d) With respect to Incentive Stock Options and Options
intended to qualify as performance-based compensation under Section 162(m), no
adjustment or action described in this Section 9.3 or in any other provision of
the Plan shall be authorized to the extent that such adjustment or action would
cause the Plan to violate Section 422(b)(1) of the Code or would cause such
Option to fail to so qualify under Section 162(m), as the case may be, or any
successor provisions thereto. Furthermore, no such adjustment or action shall
be authorized to the extent such adjustment or action would result in
short-swing profits liability under Section 16 or violate the exemptive
conditions of Rule 16b-3 unless the Committee determines that the Option is not
to comply with such exemptive conditions. The number of shares of Common Stock
subject to any Option shall always be rounded to the next whole number.

(e) Notwithstanding the foregoing, in the event that the
Company becomes a party to a transaction that is intended to qualify for
"pooling of interests" accounting treatment and, but for one or more of the
provisions of this Plan or any Stock Option Agreement would so qualify, then
this Plan and any Stock Option Agreement shall be interpreted so as to preserve
such accounting treatment, and to the extent that any provision of the Plan or
any Stock Option Agreement would disqualify the transaction from pooling of
interests accounting treatment (including, if applicable, an entire Stock Option
Agreement), then such provision shall be null and void. All determinations to be
made in connection with the preceding sentence shall be made by the independent
accounting firm or firms whose opinion(s) with respect to "pooling of interests"
treatment is required as a condition to the Company's consummation of such
transaction, and/or the Securities Exchange Commission or another regulatory
body which exercises appropriate authority.

9.4. APPROVAL OF PLAN BY SHAREHOLDERS. This Plan will be
submitted for the approval of the Company's shareholders within twelve months
after the date of the Board's initial adoption of this Plan. Options may be
granted prior to such shareholder approval, provided that such Options shall not
be exercisable prior to the time when this Plan is approved by the shareholders,
and provided further that if such approval has not been obtained at the end of
said twelve-month period, all Options previously granted under this Plan shall
thereupon be canceled and become null and void. Rights to purchase Common Stock
pursuant to Article VII may be granted or awarded prior to such shareholder
approval, provided that all rights to purchase Common Stock granted

<PAGE>

pursuant to Article VII shall be subject to cancellation as provided in
Section 7.6.

9.5. TAX WITHHOLDING. The Company shall be entitled to
require payment in cash or deduction from other compensation payable to each
Optionee or Employee who purchases Common Stock under Article VII of any sums
required by federal, state or local tax law to be withheld with respect to the
issuance, vesting or exercise of any Option or purchase of Common Stock under
Article VII. The Committee may in its discretion and in satisfaction of the
foregoing requirement allow such Optionee or Employee who purchases Common Stock
under Article VII to elect to have the Company withhold shares of Common Stock
otherwise issuable (or allow the return of shares of Common Stock) having a Fair
Market Value equal to the sums required to be withheld.

9.6. LOANS. The Committee may, in its discretion, extend one
(1) or more loans to key Employees in connection with the exercise or receipt of
an Option granted under this Plan. The terms and conditions of any such loan
shall be set by the Committee.

9.7. FORFEITURE PROVISIONS. Pursuant to its general authority
to determine the terms and conditions applicable to awards under the Plan, the
Committee shall have the right (to the extent consistent with the applicable
exemptive conditions of Rule 16b-3 and to the extent permitted under applicable
state law) to provide, in the terms of Options made under the Plan, or to
require the recipient to agree by separate written instrument, that (i) any
proceeds, gains or other economic benefit actually or constructively received by
the recipient upon any receipt or exercise of an Option, or upon the receipt or
resale of any Common Stock underlying such Option, must be paid to the Company,
and (ii) the Option shall terminate and any unexercised portion of such Option
(whether or not vested) shall be forfeited, if (a) a Termination of Employment
occurs prior to a specified date, or within a specified time period following
receipt or exercise of the Option, or (b) the recipient at any time, or during a
specified time period, engages in any activity in competition with the Company,
or which is inimical, contrary or harmful to the interests of the Company, as
further defined by the Committee.

9.8. LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND
PERFORMANCE-BASED COMPENSATION. Notwithstanding any other provision of this
Plan, this Plan, and any Option granted to any individual who is then subject to
Section 16 of the Exchange Act, shall be subject to any additional limitations
set forth in any applicable exemptive rule under Section 16 of the Exchange Act
(including any amendment to Rule 16b-3 of the Exchange Act) that are
requirements for the application of such exemptive rule. To the extent
permitted by applicable law, the Plan and Options granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such applicable
exemptive rule. Furthermore, notwithstanding any other provision of this Plan,
any Option intended to qualify as performance-based compensation as described in
Section

<PAGE>

162(m)(4)(C) of the Code shall be subject to any additional limitations set
forth in Section 162(m) of the Code (including any amendment to Section
162(m) of the Code) or any regulations or rulings issued thereunder that are
requirements for qualification as performance-based compensation as described
in Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to
the extent necessary to conform to such requirements.

9.9. EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS. The
adoption of this Plan shall not affect any other compensation or incentive plans
in effect for the Company or any Subsidiary. Nothing in this Plan shall be
construed to limit the right of the Company (i) to establish any other forms of
incentives or compensation for Employees of the Company or any Subsidiary or
(ii) to grant or assume options or other rights otherwise than under this Plan
in connection with any proper corporate purpose including but not by way of
limitation, the grant or assumption of options in connection with the
acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, limited liability
company, firm or association.

9.10. COMPLIANCE WITH LAWS. This Plan, the granting and
vesting of Options under this Plan and the issuance and delivery of shares of
Common Stock and the payment of money under this Plan or under Options granted
hereunder are subject to compliance with all applicable federal and state laws,
rules and regulations (including but not limited to state and federal securities
law and federal margin requirements) and to such approvals by any listing,
regulatory or governmental authority as may, in the opinion of counsel for the
Company, be necessary or advisable in connection therewith. Any securities
delivered under this Plan shall be subject to such restrictions, and the person
acquiring such securities shall, if requested by the Company, provide such
assurances and representations to the Company as the Company may deem necessary
or desirable to assure compliance with all applicable legal requirements. To
the extent permitted by applicable law, the Plan and Options granted or awarded
hereunder shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.

9.11. TITLES. Titles are provided herein for convenience only
and are not to serve as a basis for interpretation or construction of this Plan.

9.12. GOVERNING LAW. This Plan and any agreements hereunder
shall be administered, interpreted and enforced under the internal laws of the
State of California without regard to conflicts of laws thereof.

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