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<SEC-DOCUMENT>0001003297-03-000407.txt : 20031017
<SEC-HEADER>0001003297-03-000407.hdr.sgml : 20031017
<ACCEPTANCE-DATETIME>20031017145445
ACCESSION NUMBER:		0001003297-03-000407
CONFORMED SUBMISSION TYPE:	PRE 14A
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20031211
FILED AS OF DATE:		20031017

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PRO DEX INC
		CENTRAL INDEX KEY:			0000788920
		STANDARD INDUSTRIAL CLASSIFICATION:	WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES [5047]
		IRS NUMBER:				841261240
		STATE OF INCORPORATION:			CO
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		PRE 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-14942
		FILM NUMBER:		03945983

	BUSINESS ADDRESS:	
		STREET 1:		MICRO MOTORS, INC.
		STREET 2:		151 EAST COLUMBINE
		CITY:			SANTA ANA
		STATE:			CA
		ZIP:			92707
		BUSINESS PHONE:		714-241-4411

	MAIL ADDRESS:	
		STREET 1:		MICRO MOTORS INC.
		STREET 2:		151 EAST COLUMBINE
		CITY:			SANTA ANA
		STATE:			CA
		ZIP:			92707
</SEC-HEADER>
<DOCUMENT>
<TYPE>PRE 14A
<SEQUENCE>1
<FILENAME>pdex14a1.htm
<TEXT>
<html>

<head>


<title>Prepared by E-Services - www.edgar2.net</title>



</head>

<body lang=EN-US style='text-justify-trim:punctuation'>

<p align="center">&nbsp;</p>

<p align="center"><b>SCHEDULE
14A INFORMATION</b></p>

<p align="center"><b>Proxy Statement Pursuant to Section
14(a) of the Securities Exchange Act of 1934 </b> </p>

<p>Filed by the Registrant <font face="Wingdings 2">T<br>
</font>Filed by a Party
other than the Registrant <font face="Wingdings">o</font></p>

<p>Check the appropriate box:</p>

<p><font face="Wingdings 2">T</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Preliminary Proxy Statement<br>
<font face="Wingdings">o</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))<br>
<font face="Wingdings">o</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Definitive Proxy Statement<br>
<font face="Wingdings">o</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Definitive Additional Materials<br>
<font face="Wingdings">o</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Soliciting Material Pursuant to &#61479;
240.14a-11(c) or &#61479; 240.14a-12</p>

<p align=center style='margin-top:.25in;text-align:center'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b>PRO-DEX,
INC.&nbsp;</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<br>
</u>(Name of
Registrant as Specified In Its Charter)</p>

<p align="center"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<br>
</u>(Name of Person(s) Filing Proxy Statement if other than the
Registrant)</p>

<p>Payment of Filing Fee (Check the
appropriate box):</p>

<p>&nbsp;<font face="Wingdings 2">T</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No fee required<br>
&nbsp;<font face="Wingdings">o</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.</p>

<p align=left style='margin-left:.75in;text-align:left;
text-indent:-.25in'>1.&nbsp;&nbsp; Title of each class of
securities to which transaction applies:<br>
<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></p>

<p align=left style='margin-left:.75in;text-align:left;
text-indent:-.25in'>2.&nbsp;&nbsp; Aggregate number of securities
to which transaction applies:<br>
<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></p>

<p align=left style='margin-left:.75in;text-align:left;
text-indent:-.25in'>3.&nbsp;&nbsp; Per unit price or other
underlying value of transaction computed pursuant to Exchange Act
Rule&nbsp;0-11 <br>
(set forth the amount on which the filing fee is calculated and state how it
was determined):<br>
<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></p>

<p align=left style='margin-left:.75in;text-align:left;
text-indent:-.25in'>4.&nbsp;&nbsp; Proposed maximum aggregate value
of transaction:<br>
<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></p>

<p align=left style='margin-left:.75in;text-align:left;
text-indent:-.25in'>5.&nbsp;&nbsp; Total fee paid:<br>
<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></p>

<p style='margin-left:.25in;text-indent:-.25in'><font face="Wingdings">o</font>&nbsp;&nbsp;
Fees paid previously with preliminary materials.</p>

<p style='margin-left:.25in;text-indent:-.25in'><font face="Wingdings">o</font>&nbsp;&nbsp; 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.&nbsp; Identify
the previous filing by registration statement number, or the Form or Schedule
and the date of its filing.</p>

<p style='margin-left:0.25in;'>1.&nbsp;&nbsp; Amount
Previously Paid:&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<br>
2.&nbsp;&nbsp; Form,
Schedule or Registration Statement No.:&nbsp; &nbsp; <br>
3.&nbsp;&nbsp; Filing
Party:&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; <br>
4.&nbsp;&nbsp; Date
Filed:&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; </p>

<p style='margin-left:0.25in;'>&nbsp;</p>

<hr color="#000080"><br clear=all
style='page-break-before:always'>


<p align=center style='text-align:center'><b>&nbsp;</b><img src="pdex141.jpg" v:shapes="_x0000_s1026" width="203" height="83"></p>

<p align=center style='text-align:center'>151
E Columbine Avenue<br>
Santa
Ana, California 92707<br>
______________________</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:12.0pt;
margin-left:0in;page-break-after:auto' align="center"><b>NOTICE OF ANNUAL
MEETING OF SHAREHOLDERS<br>
TO BE HELD  DECEMBER 11, 2003</b></p>

<p style='margin-bottom:12.0pt' align="justify">To the
shareholders of Pro-Dex, Inc.:</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:12.0pt;
margin-left:0in' align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Annual Meeting of Shareholders of
Pro-Dex, Inc. (the &quot;Company&quot;) will be held at the DoubleTree Hotel Santa Ana,
201 E. MacArthur Blvd, Santa Ana, California, on  Thursday, December 11, 2003, at 8:00 A.M. Pacific Time, for the following
purposes:</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:12.0pt;
margin-left:1.0in;text-indent:-.5in' align="justify">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; To elect
one person to serve as a Class III director of the Company for a term of three
years. The Class III nominee for election to the Board is named in the attached
Proxy Statement, which is part of this Notice.</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:12.0pt;
margin-left:1.0in;text-indent:-.5in' align="justify">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; To ratify
and approve an amendment to the Company's Articles of Incorporation to increase
the quorum requirement, from one-third to a majority of the votes entitled to
be cast, represented in person or by proxy, at a meeting of the Company's
shareholders.</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:12.0pt;
margin-left:1.0in;text-indent:-.5in' align="justify">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; To ratify
and approve the adoption of the Company's 2004 Stock Option Plan.</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:12.0pt;
margin-left:1.0in;text-indent:-.5in' align="justify">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; To ratify
and approve the adoption of the Company's 2004 Directors' Stock Option Plan.</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:12.0pt;
margin-left:1.0in;text-indent:-.5in' align="justify">5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; To ratify
the appointment of  Moss Adams, LLP as independent public accountants of the Company for
the fiscal year ending June 30, 2004.</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:12.0pt;
margin-left:1.0in;text-indent:-.5in' align="justify">6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; To
transact such other business as may properly come before the Annual Meeting or
any adjournments or postponements thereof.</p>

<p style='margin-bottom:12.0pt;text-indent:.5in' align="justify">Only shareholders of record at the close of business on October

28, 2003, are
entitled to notice of and to vote at the Annual Meeting and at any adjournments
or postponements of the Annual Meeting.</p>

<p style='margin-bottom:12.0pt;text-indent:.5in' align="justify">All shareholders are cordially invited to attend the Annual
Meeting in person. Whether or not you plan to attend the Annual Meeting, please
sign the enclosed proxy and return it in the enclosed addressed envelope. Your
promptness in returning the proxy will assist in the expeditious and orderly
processing of the proxy and will assure that you are represented at the Annual
Meeting. If you return your proxy card, you may nevertheless attend the Annual
Meeting and vote your shares in person.</p>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse'>
 <tr>
  <td width=307 valign=bottom style='width:3.2in;padding:0in 5.4pt 0in 5.4pt'>



  <p>Santa Ana, California<br>
  October 17, 2003</p>

  </td>
  <td width=307 valign=top style='width:3.2in;padding:0in 5.4pt 0in 5.4pt'>
  <p align=left style='margin-bottom:12.0pt;text-align:left'>By
  Order of the Board of Directors,</p>
  <p align=left style='margin-bottom:12.0pt;text-align:left'>PRO-DEX
  INC.</p>

  <p align=left style='margin-bottom:12.0pt;text-align:left'>&nbsp; </p>

  <p align=left style='text-align:left'>/s/ Jeffrey J. Ritchey<u><br>
  </u>Corporate
  Secretary</p>
  </td>
 </tr>
</table>

<p align=center style='text-align:center'><b>&nbsp;</b></p>

<p align=center style='text-align:center'><b>&nbsp;</b></p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p align=center style='text-align:center'><b>&nbsp;&nbsp;</b><img src="pdex141.jpg" v:shapes="_x0000_s1026" width="203" height="83"></p>

<p align=center style='text-align:center'>151
E Columbine Avenue<br>
Santa
Ana, California 92707<br>
<b>______________________</b></p>

<p align=center style='text-align:center'><b>&nbsp;</b></p>

<p align=center style='text-align:center'><b>ANNUAL
MEETING OF SHAREHOLDERS<br>
TO
BE HELD  DECEMBER 11, 2003</b></p>

<p align=center style='text-align:center'><b>______________________

</b></p>

<p align="center"><b>PROXY STATEMENT<br>
________________________</b></p>

<p align="center"><b>SOLICITATION OF PROXIES</b></p>



<p style='margin-top:0in; text-indent:0.5in' align="justify">The accompanying
proxy is solicited by the Board of Directors of Pro-Dex, Inc. (the &quot;Company&quot;)
for use at the Company's Annual Meeting of Shareholders to be held at the
DoubleTree Hotel Santa Ana, 201 E. MacArthur Blvd, Santa Ana, California, on
Thursday, December 11, 2003, at 8:00 A.M. Pacific Time, and at any and all
adjournments thereof. Shareholders are requested to complete, date and sign the
accompanying proxy card and promptly return it in the accompanying envelope or
otherwise mail it to the Company. All shares represented by each properly
executed and unrevoked proxy received in advance of the Annual Meeting, and
that are not revoked, will be voted in the manner specified therein,  and  if no direction is indicated, &quot;for&quot; each of the proposals
described on the proxy card.</p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">Any
shareholder has the power to revoke his or her proxy at any time before it is
voted. A proxy may be revoked by delivering a written notice of revocation to
the Secretary of the Company, by submitting prior to or at the annual meeting a
later dated proxy executed by the person executing the prior proxy, or by
attendance at the Annual Meeting and voting in person by the person executing the
proxy.</p>

<p style="text-indent: 0.5in" align="justify">The Company's Board of Directors does not
presently intend to bring any business before the Annual Meeting other than the
proposals referred to in this proxy statement and specified in the notice of
meeting. So far as is known to the Company's Board of Directors, no other
matters are to be brought before the meeting. As to any business that may
properly come before the meeting, however, it is intended that shares
represented by proxies held by management will be voted in accordance with the
judgment of the persons voting the shares.</p>

<p style="text-indent: 0.5in" align="justify">This proxy statement, the accompanying
proxy card and the Company's Annual Report are being mailed to the Company's
shareholders on or about October  28, 2003. The
cost of soliciting proxies will be borne by the Company. The solicitation will
be made by mail and expenses will include reimbursement paid to brokerage firms
and others for their expenses in forwarding solicitation material regarding the
Annual Meeting to beneficial owners of the Company's Common Stock. Further
solicitation of proxies may be made by telephone or oral communications with
some shareholders. The Company's regular employees, who will not receive
additional compensation for the solicitation, will make such further
solicitations. </p>

<p align="center">1</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p align="center"><b>OUTSTANDING SHARES AND VOTING RIGHTS</b></p>

<p style="text-indent: 0.5in" align="justify">Only holders of record of the 8,776,600
shares of the Company's Common Stock outstanding at the close of business on
October  28, 2003, are entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof.&nbsp; Under Colorado law, the Company's Articles
of Incorporation and the Company's Bylaws, one-third of the shares entitled to
vote, represented in person or by proxy, will constitute a quorum for the
transaction of business at a meeting of shareholders. However,  with respect to Proposal 2,  under Colorado law, a majority of the votes entitled to be
cast, represented in person or by proxy, will constitute a quorum for purposes
of the transaction of business. Shares of
the Company's common stock represented in person or by proxy (regardless of
whether the proxy has authority to vote on all matters), as well as abstentions
and broker non-votes, will be counted for purposes of determining whether a
quorum is present at the meeting.</p>

<p align="justify" style="text-indent: 0.5in">An &quot;abstention&quot; is the voluntary act of
not voting by a shareholder who is present at a meeting and entitled to vote.&nbsp;
&quot;Broker non-votes&quot; are shares of voting stock held in record name by brokers
and nominees concerning which: (i) instructions have not been received from the
beneficial owners or persons entitled to vote; (ii) the broker or nominee does
not have discretionary voting power under applicable rules or the instrument
under which it serves in such capacity; or (iii) the record holder has
indicated on the proxy or has executed a proxy and otherwise notified the
Company that it does not have authority to vote such shares on that matter.</p>

<p align="justify" style="text-indent: 0.5in">All proxies delivered to the Company
will be counted in determining the presence of a quorum, including those
providing for abstention or withholding of authority and those delivered by
brokers voting without beneficial owner instruction and exercising a non-vote
on certain matters.&nbsp; Assuming a quorum is present, for Proposal 1 (the election
of directors) the nominee for director for the Class III position receiving the
highest number of affirmative votes will be elected; votes withheld and votes
against a nominee have no practical effect. In matters other than election of
directors, assuming that a quorum is present, the affirmative votes of a
majority of the shares represented and voting at a meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) is
required for approval; in such matters, abstentions and broker non-votes are
not counted. All other Proposals require the affirmative vote of the holders of
a majority of the Company's shares present in person or represented by proxy
and entitled to vote at the Company's annual meeting; provided, that a majority
of votes entitled to be cast, represented in person or by proxy, will
constitute a quorum for purposes of the transaction of business with respect to
Proposal 2. Each shareholder will be entitled to one vote, in person or by
proxy, for each share of Common Stock held of record on the record date. Votes
cast at the meeting will be tabulated by the person or persons appointed by the
Company to act as inspectors of election for the meeting.</p>

<p align=left style='text-align:left'><b>Recommendation
of the Company's Board of Directors</b></p>

<p style="text-indent: 0.5in" align="justify">The Company's Board of Directors recommends
that the Company's shareholders vote &quot;for&quot; each of the proposals described in
this proxy statement and the accompanying notice of meeting.</p>

<p style="text-indent: 0.5in" align="justify"><b>THE PROPOSALS TO BE VOTED UPON AT
THE MEETING ARE DISCUSSED IN DETAIL IN THIS PROXY STATEMENT. YOU ARE STRONGLY
URGED TO READ AND CONSIDER CAREFULLY THIS PROXY STATEMENT IN ITS ENTIRETY.</b></p>

<p style="text-indent: 0.5in">&nbsp;</p>

<p align="center">2</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p align=center><b>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT</b></p>

<p style="text-indent: 0.5in" align="justify">The following table sets forth certain
information with respect to the beneficial ownership of the Company's Common
Stock as of October 10, 2003 by (i) each person known by the Company to
beneficially own more than 5% of the outstanding shares of Common Stock, (ii)
each of the Company's current directors, (iii) each of the Named Executive
Officers (as hereinafter defined), and (iv) all current directors and Named
Executive Officers of the Company as a group:</p>



<div align="left">



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse' width="753">
 <tr>
  <td valign=bottom style='width:263;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p><b><u>Name of Beneficial Owner</u><sup>(1)</sup></b></p>
  </td>
  <td valign=bottom style='width:227;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center'><b>Number of Shares of Common<br>
  <u>Stock Beneficially
  Owned</u><sup>(2)</sup></b></p>
  </td>
  <td valign=bottom style='width:221;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center'><b>Percent of Common Stock<br>
  <u>Beneficially Owned</u><sup>(3)</sup></b></p>
  </td>
 </tr>
 <tr>
  <td valign=bottom style='width:263;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <sup><b>&nbsp;</b></sup></td>
  <td valign=bottom style='width:227;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  &nbsp;</td>
  <td valign=bottom style='width:221;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  &nbsp;</td>
 </tr>
 <tr>
  <td valign=bottom style='width:263;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p >Ronald G. Coss </p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="227">
  <p >&nbsp;&nbsp;
  &nbsp;2,442,504<sup>(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </sup> </p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="221">
  <p >24.7%&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </p>
  </td>
 </tr>
 <tr>
  <td valign=bottom style='width:263;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p >Kent E. Searl </p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="227">
  <p >781,729<sup>(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </sup>
  </p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="221">
  <p >7.9%&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>
  </td>
 </tr>
 <tr>
  <td valign=bottom style='width:263;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>

  &nbsp;</td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="227">

  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="221">

  </td>
 </tr>
 <tr>
  <td valign=bottom style='width:263;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p >George J. Isaac </p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="227">
  <p >&nbsp;104,900<sup>(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </sup></p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="221">
  <p >&nbsp;1.1%&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>
  </td>
 </tr>
 <tr>
  <td valign=bottom style='width:263;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>

  &nbsp;</td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="227">

  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="221">

  </td>
 </tr>
 <tr>
  <td valign=bottom style='width:263;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p >Michael A. Mesenbrink</p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="227">
  <p >20,000<sup>(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </sup>
  </p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="221">
  <p >&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>
  </td>
 </tr>
 <tr>
  <td valign=bottom style='width:263;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p >Mark P. Murphy</p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="227">
  <p >33,200<sup>(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </sup>
  </p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="221">
  <p >&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>
  </td>
 </tr>
 <tr>
  <td valign=bottom style='width:263;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p >Valerio L. Giannini</p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="227">
  <p >20,000<sup>(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </sup>
  </p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="221">
  <p >&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>
  </td>
 </tr>
 <tr>
  <td valign=bottom style='width:263;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>

  &nbsp;</td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="227">

  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="221">

  </td>
 </tr>
 <tr>
  <td valign=bottom style='width:263;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p >Patrick Johnson </p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="227">
  <p >421,192<sup>(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </sup>
  </p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="221">
  <p >4.3%&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>
  </td>
 </tr>
 <tr>
  <td valign=bottom style='width:263;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p >Gary G. Garleb </p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="227">
  <p >194,145<sup>(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </sup>
  </p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="221">
  <p >2.0%&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>
  </td>
 </tr>
 <tr>
  <td valign=bottom style='width:263;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p >Jeffrey J. Ritchey&nbsp;&nbsp; </p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="227">
  <p >31,500<sup>(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </sup>
  </p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="221">
  <p >&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>
  </td>
 </tr>
 <tr>
  <td valign=bottom style='width:263;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>

  &nbsp;</td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="227">

  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="221">

  </td>
 </tr>
 <tr>
  <td valign=bottom style='width:263;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:left'>All Executive Officers
  and directors as a group (8 persons) </p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="227">
  <p >3,267,441<sup>(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </sup> </p>
  </td>
  <td valign=bottom style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="221">
  <p >33.1%&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:263;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p >&nbsp;&nbsp;&nbsp; </p>
  </td>
  <td valign=top style='width:227;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:left'>&nbsp;&nbsp; </p>
  </td>
  <td valign=top style='width:221;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p >&nbsp;&nbsp;
  </p>
  </td>
 </tr>
</table>

</div>

<p style='margin-left:.5in;text-indent:-.5in'>__________________________</p>

<p style='margin-top:6.0pt;margin-right:0in;margin-bottom:0in;
margin-left:.5in;margin-bottom:.0001pt;text-indent:-.5in'><font size="2">* Less than 1%.</font></p>

<table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="725" id="AutoNumber1">
  <tr>
    <td width="32" valign="top"><font size="2">1.</font></td>
    <td width="726">

<p style='margin-right:0in;' align="justify"><font size="2">Unless otherwise indicated, the address is c/o Pro-Dex,
Inc., 151 E. Columbine Avenue, Santa Ana, California 92707.</font></p>

    </td>
  </tr>
  <tr>
    <td width="32" valign="top">&nbsp;</td>
    <td width="726"><font size="2">&nbsp; </font></td>
  </tr>
  <tr>
    <td width="32" valign="top"><font size="2">2.</font></td>
    <td width="726">

<p style='margin-right:0in;' align="justify"><font size="2">Unless otherwise indicated, to the Company's
knowledge, the persons named in the table have sole voting and sole investment
power with respect to all shares beneficially owned, subject to community
property and similar laws, where applicable.</font></p>

    </td>
  </tr>
  <tr>
    <td width="32" valign="top">&nbsp;</td>
    <td width="726"><font size="2">&nbsp; </font></td>
  </tr>
  <tr>
    <td width="32" valign="top"><font size="2">3.</font></td>
    <td width="726">

<p style='margin-right:0in;' align="justify"><font size="2">Applicable percentage ownership is based on
8,776,600 shares of Common Stock outstanding as of October 10, 2003.&nbsp; Any
securities not outstanding but subject to options exercisable as of October 10,
2003 or exercisable within 60 days after such date are deemed to be outstanding
for the purpose of computing the percentage of outstanding Common Stock
beneficially owned by the person holding such options but are not deemed to be
outstanding for the purpose of computing the percentage of Common Stock
beneficially owned by any other person.</font></p>

    </td>
  </tr>
  <tr>
    <td width="32" valign="top">&nbsp;</td>
    <td width="726"><font size="2">&nbsp; </font></td>
  </tr>
  <tr>
    <td width="32" valign="top"><font size="2">4.</font></td>
    <td width="726">

<p style='margin-right:0in;' align="justify"><font size="2">Mr. Searl owns of record 341,600 shares of
Common Stock, fully vested warrants to acquire 99,000 shares of Common Stock
and 19,900 shares of convertible Preferred Stock (convertible share-for-share
into Common Stock at any time).&nbsp; Mr. Searl is an officer and director of
Professional Sales Associates, Inc. (&quot;PSA&quot;) and may be deemed to beneficially
own PSA's shares which includes 250,000 shares of Common Stock and 58,229
shares of Preferred Stock convertible share-for-share into Common Stock at any
time and fully vested warrants to acquire 13,000 shares of Common Stock owned
of record by PSA.&nbsp; </font> </p>

    </td>
  </tr>
  <tr>
    <td width="32" valign="top">&nbsp;</td>
    <td width="726"><font size="2">&nbsp; </font></td>
  </tr>
  <tr>
    <td width="32" valign="top"><font size="2">5.</font></td>
    <td width="726">

<p style='margin-right:0in;' align="justify"><font size="2">Includes shares of Common Stock subject to stock
warrants and options which were exercisable as of October 10, 2003 or
exercisable within 60 days after October 10, 2003, and are as follows: Mr.
Coss, 195,000 shares, Mr. Isaac, 100,000 shares; Mr. Murphy, 20,000 shares; Mr.
Mesenbrink, 20,000 shares; Mr. Giannini, 20,000 shares; Mr. Johnson, 419,792
shares; Mr. Garleb, 120,755 shares; Mr. Ritchey, 30,000 shares and all
directors and Executive Officers as a group, 925,547 shares. </font> </p>

    </td>
  </tr>
</table>

<p style='margin-top:6.0pt;margin-right:0in;margin-bottom:0in;
margin-left:16.5pt;margin-bottom:.0001pt;text-indent:-16.5pt'>&nbsp;</p>

<p style='margin-top:6.0pt;margin-right:0in;margin-bottom:0in;
margin-left:16.5pt;margin-bottom:.0001pt;text-indent:-16.5pt'>&nbsp;</p>

<p style='margin-top:6.0pt;margin-right:0in;margin-bottom:0in;
margin-left:16.5pt;margin-bottom:.0001pt;text-indent:-16.5pt' align="center">3</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p align=center><b>BENEFICIAL
SHAREHOLDINGS OF DIRECTORS, OFFICERS, AND OWNERS OF MORE&nbsp; <br>
</b><b>THAN
5% OF PREFERRED STOCK </b></p>

<p style='text-indent:33.0pt' align="justify">The following
table sets forth certain information with respect to the beneficial ownership
of the Company's Preferred Stock as of October 10, 2003 by (i) each person
known by the Company to beneficially own more than 5% of the outstanding shares
of Series A Preferred Stock, (ii) each of the Company's current directors and
nominees for director, (iii) each of the Named Executive Officers (as
hereinafter defined), and (iv) all current directors and Named Executive
Officers of the Company as a group:</p>

<div align="left">

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='margin-left:-.1pt;border-collapse:collapse' width="725">
 <tr>
  <td width=220 valign=bottom style='width:165.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p ><b>&nbsp;</b></p>
  <p ><b><u>Name of Beneficial Owner</u><sup>(1)</sup></b></p>
  </td>
  <td valign=bottom style='width:222;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center'><b>Number of Shares of Preferred<br>
  <u>Stock Beneficially
  Owned</u><sup>(2)</sup></b></p>
  </td>
  <td valign=bottom style='width:182;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center'><b>Percent of Preferred Stock<br>
  <u>Beneficially Owned</u><sup>(3)</sup></b></p>
  </td>
 </tr>
 <tr>
  <td width=220 valign=top style='width:165.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p >Kent E. Searl </p>
  </td>
  <td valign=top style='width:222;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="center">
  <p >&nbsp;78,129</p>
  </td>
  <td valign=top style='width:182;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p  align="center">100.0%</p>
  </td>
 </tr>
 <tr>
  <td width=220 valign=top style='width:165.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p >Richard N. Reinhardt </p>
  </td>
  <td valign=top style='width:222;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="center">
  <p >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 58,229
  <sup>(4)</sup></p>
  </td>
  <td valign=top style='width:182;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p  align="center">74.5%</p>
  </td>
 </tr>
 <tr>
  <td width=220 valign=top style='width:165.0pt;padding:0in 5.4pt 0in 5.4pt'>

  &nbsp; </td>
  <td valign=top style='width:222;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="center">

  </td>
  <td valign=top style='width:182;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>

  </td>
 </tr>
 <tr>
  <td width=220 valign=top style='width:165.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p>Professional Sales Associates, Inc. <br>
  1070 Century Drive, Suite 201 <br>
  Louisville, CO 80027 </p>
  </td>
  <td valign=top style='width:222;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="center">
  <p >&nbsp; 58,229</p>
  </td>
  <td valign=top style='width:182;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p  align="center">74.5%</p>
  </td>
 </tr>
 <tr>
  <td width=220 valign=top style='width:165.0pt;padding:0in 5.4pt 0in 5.4pt'>

  &nbsp; </td>
  <td valign=top style='width:222;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="center">

  </td>
  <td valign=top style='width:182;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>

  </td>
 </tr>
 <tr>
  <td width=220 valign=top style='width:165.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p>All Named Executive Officers and directors as a Group (8
  persons) </p>
  </td>
  <td valign=top style='width:222;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="center">
  <p >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0</p>
  </td>
  <td valign=top style='width:182;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p  align="center">0 %</p>
  </td>
 </tr>
</table>

</div>

<p>__________________________</p>

<table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="725" id="AutoNumber2">
  <tr>
    <td width="34" valign="top"><font size="2">1.</font></td>
    <td width="724">

<p style='margin-right:0in;' align="justify"><font size="2">Unless otherwise indicated, the address is c/o
Pro-Dex, Inc., 151 E. Columbine Avenue, Santa Ana, California 92707.</font></p>

    </td>
  </tr>
  <tr>
    <td width="34" valign="top">&nbsp;</td>
    <td width="724"><font size="2">&nbsp; </font></td>
  </tr>
  <tr>
    <td width="34" valign="top"><font size="2">2.</font></td>
    <td width="724">

<p style='margin-right:0in;' align="justify"><font size="2">Unless otherwise indicated, to the Company's
knowledge, following the conversion of the Preferred Stock, the persons named
in the table have sole voting and sole investment power with respect to all
shares beneficially owned, subject to community property and similar laws,
where applicable.</font></p>

    </td>
  </tr>
  <tr>
    <td width="34" valign="top">&nbsp;</td>
    <td width="724"><font size="2">&nbsp; </font></td>
  </tr>
  <tr>
    <td width="34" valign="top"><font size="2">3.</font></td>
    <td width="724">

<p style='margin-top:6.0pt;margin-right:0in;margin-bottom:0in;
margin-left:16.5pt;margin-bottom:.0001pt;text-indent:-16.5pt' align="justify">
<font size="2">Applicable percentage ownership is based on
78,129 shares of Preferred Stock outstanding as of October 10, 2003.</font></p>

    </td>
  </tr>
  <tr>
    <td width="34" valign="top">&nbsp;</td>
    <td width="724"><font size="2">&nbsp; </font></td>
  </tr>
  <tr>
    <td width="34" valign="top"><font size="2">4.</font></td>
    <td width="724">

<p style='margin-right:0in;' align="justify"><font size="2">Includes 58,229 shares owned of record by
Professional Sales Associates, Inc. (&quot;PSA&quot;). Messrs. Searl and Reinhardt are
officers and directors of PSA and may be deemed to beneficially own PSA's
shares. Mr. Searl, individually, owns of record 19,900 shares (25.5% of the
outstanding shares of Preferred Stock). Mr. Reinhardt owns no shares of
Preferred Stock individually. </font> </p>

    </td>
  </tr>
</table>

<p align=center style='margin-top:12.0pt;text-align:center;
page-break-after:avoid'><b>ELECTION OF DIRECTORS</b></p>

<p align=center style='text-align:center'><b>&nbsp;(Proposal No. 1)</b></p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">The
Company's Articles of Incorporation provide for the classification of the
Company's Board of Directors.&nbsp; The Board of Directors, which currently is
composed of five (5) members, is divided into three (3) classes.&nbsp; Generally,
absent earlier resignation of a Class member, one Class stands for re-election
at each annual meeting of shareholders. The Board of Directors currently is
comprised of two Class I directors (George J. Isaac and Michael A. Mesenbrink),
one Class II director (Valerio L. Giannini), and two Class III directors (Mark
P. Murphy and Ronald G. Coss). The term of the Class I directors expires in
2004.&nbsp; The term of the Class II director expires in 2005.&nbsp; The term of the
Class III directors expires in 2003.</p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">The
Board of Directors has authorized and approved the reduction in the authorized
number of Class III directors from two directors to one director. Accordingly,
only one nominee shall stand for election as a Class III director.</p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">&nbsp;</p>

<p style='margin-top:12.0pt;' align="center">4</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p style="text-indent: 0.5in" align="justify">Certain information with respect to the
nominee who will be presented at the Annual Meeting by the Board of Directors
for election as a director is set forth below. Although it is anticipated that
the nominee will be available to serve as a director, should that nominee
become unavailable to serve, the proxies will be voted for such other person as
may be designated by the Company's Board of Directors.</p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">Unless
the authority to vote for directors has been withheld in the proxy, the persons
named in the enclosed proxy intend to vote at the Annual Meeting for the
election of the nominee presented below. In the election of directors, assuming
a quorum is present, the nominee for such Class receiving the highest number of
votes cast at the meeting will be elected director.&nbsp; As a result, proxies voted
to &quot;Withhold Authority&quot; and broker non-votes will have no practical effect upon
the election of directors, although proxies specifying &quot;Withhold Authority&quot;
will be counted for purposes of determining whether a quorum is present, as
will proxies delivered by brokers voting without beneficial owner instruction
and exercising a non-vote on certain matters.</p>



<p style='margin-top:0in' align="center"><b>DIRECTORS</b></p>



<p style='text-indent:.5in'>Set forth
below is certain information with respect to the Company's continuing directors
and director nominees.</p>



<div align="left">



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse' width="740">
 <tr>
  <td valign=top style='width:190;padding:0in'>
  <p><b><u>Name </u></b></p>
  </td>
  <td valign=top style='width:68;padding:0in'>
  <p align=center style='text-align:center'><b><u>Age </u></b></p>
  </td>
  <td valign=top style='width:169;padding:0in'>
  <p><b><u>Position with Company </u></b></p>
  </td>
  <td valign=top style='width:83;padding:0in'>
  <p><b><u>Class </u></b></p>
  </td>
  <td valign=top style='width:155;padding:0in'>
  <p align=center style='text-align:center'><b><u>Class
  Expiration Year</u></b></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:190;padding:0in'>
  <p>Mark P. Murphy</p>
  </td>
  <td valign=top style='width:68;padding:0in'>
  <p align=center style='text-align:center'>44</p>
  </td>
  <td valign=top style='width:169;padding:0in'>
  <p>Director and Nominee <sup>(1)</sup></p>
  </td>
  <td valign=top style='width:83;padding:0in'>
  <p>Class III&nbsp; </p>
  </td>
  <td valign=top style='width:155;padding:0in'>
  <p align=center style='text-align:center'>2003</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:190;padding:0in'>
  <p>George J. Isaac </p>
  </td>
  <td valign=top style='width:68;padding:0in'>
  <p align=center style='text-align:center'>58 </p>
  </td>
  <td valign=top style='width:169;padding:0in'>
  <p>Director</p>
  </td>
  <td valign=top style='width:83;padding:0in'>
  <p>Class I </p>
  </td>
  <td valign=top style='width:155;padding:0in'>
  <p align=center style='text-align:center'>2004</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:190;padding:0in'>
  <p align=left style='text-align:left'>Michael A. Mesenbrink</p>
  </td>
  <td valign=top style='width:68;padding:0in'>

  <p align=center style='text-align:center'>56</p>
  </td>
  <td valign=top style='width:169;padding:0in'>

  <p>Director <sup>(1)</sup></p>
  </td>
  <td valign=top style='width:83;padding:0in'>

  <p>Class I&nbsp;&nbsp; </p>
  </td>
  <td valign=top style='width:155;padding:0in'>

  <p align=center style='text-align:center'>2004</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:190;padding:0in'>
  <p align=left style='text-align:left'>Valerio L. Giannini</p>
  </td>
  <td valign=top style='width:68;padding:0in'>
  <p align=center style='text-align:center'>65</p>
  </td>
  <td valign=top style='width:169;padding:0in'>
  <p>Director <sup>(1)</sup></p>
  </td>
  <td valign=top style='width:83;padding:0in'>
  <p>Class II&nbsp;&nbsp; </p>
  </td>
  <td valign=top style='width:155;padding:0in'>
  <p align=center style='text-align:center'>2005</p>
  </td>
 </tr>
</table>

</div>

<p>__________________________</p>



<p><font size="2">(1)
Member of the Audit and Compensation Committees</font></p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">The
Board of Directors is of the opinion that the ratification of and the election
to the Company's Board of Directors of the Class III Director nominee
identified below who has consented to serve if elected, would be in the
Company's best interests. The name of the Class III Director nominee to be
elected is Mark P. Murphy.</p>

<p style='margin-top:12.0pt;text-indent:.5in'><b>THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE &quot;FOR&quot; ELECTION OF THE NOMINEE NAMED
BELOW AS A CLASS III DIRECTOR.</b></p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">Mark
P. Murphy (44), Class III Director and nominee, is the Chief Operating Officer
and a director of Kyocera Tycom Corporation, a manufacturing company that
develops and sells precision rotary cutting tools to the international printed
circuit board industry.&nbsp; Its  400 employees operate out of North America and China.&nbsp;
Mr. Murphy began with Tycom in 1995 as Executive Vice President and Chief
Financial Officer and was promoted to Chief Operating Officer in January of
2000.&nbsp; Mr. Murphy's career includes 17 years as a senior corporate executive,
having held the top positions in sales, finance, and operations.&nbsp; Mr. Murphy
earned a BA in Business Administration and an MBA in Finance from California
State University at Fullerton.&nbsp; He became a California Certified Public
Accountant in 1983.</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:12.0pt;
margin-left:0in' align="center"><b>CONTINUING DIRECTORS</b></p>

<p style='text-indent:.5in' align="justify">George J.
Isaac (58), Class I Director,<i> </i>served as a consultant
to the Company and its predecessor since 1978, and became a member of the
Company's Board of Directors in July 1995 and was the Company's prior Chief
Financial Officer and
Secretary.&nbsp; Mr. Isaac is a Certified
Public Accountant and was a principal in the certified public accounting firm
of Joseph B. Cohan and Associates, Worcester, Massachusetts.&nbsp; Mr. Isaac is a
director of Professional Sales Associates, Inc. (&quot;PSA&quot;) and Commerce Bank &amp;
Trust.</p>

<p align="center">5</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Michael A.
Mesenbrink(56), Class I Director,
served in 2001 as President, CEO, and a&nbsp;
director of Innovation Sports, an international sports medicine company
and prior to that served as Sr. Vice President of Mobile P.E.T. Systems (OTC.BB:MBPT),
a public company providing services to hospitals for cancer detection. In 1997
he founded a nutriceutical company, Meridian Health
&amp; Nutrition that manufactures and distributes micronutrients and enzyme
products.&nbsp; In 1990 he founded Electrosci, Inc. where he served as Chairman and CEO to
develop industrial water treatment products licensing to other companies.&nbsp; Mr. Mesenbrink has an extensive background in
developing and commercializing proprietary technologies.&nbsp; <b>In 1988 Mr.
Mesenbrink was EVP of Medstone International, a public
company that he helped build to $20 million in revenues with $2.00
per share earnings in less than two years. In 1983 is was co-founder of Medical
Imaging Centers of America (MICA) that he took public and helped build to a
market capitalization of $225 million.</b>&nbsp;
Previously, Mr. Mesenbrink held positions in sales, marketing and
product development in cardiovascular, surgery, and radiology products. Prior
to entering health care, Mr.&nbsp;Mesenbrink was a marine biologist conducting
research in water chemistry and marine biology.&nbsp;
Mr. Mesenbrink received a BA degree in Zoology/Chemistry from
San
  Jose State University
in 1970 and did postgraduate studies at the <b>Menai</b> <b>Bridge Ocean Science Laboratories, </b>
<b>University of Wales</b><b>, </b><b>UK</b><b>.</b></p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">Valerio
L. Giannini (65), Class II Director, is currently and since 1995 has been a
principal of Newcap Partners, a Los Angeles based private investment banking
firm. He previously served as a division president of the Geneva Companies,
then a subsidiary of Chemical Bank.&nbsp; Mr. Giannini joined Geneva from Cumberland
Investment Group; a New York based private investment banking partnership.
Prior to his service with Cumberland Investment Group, he held appointments as
Director of White House Operations, Deputy Special Assistant to the President
for Administration and as Deputy Assistant Secretary of Commerce for
Productivity and Product Technology. Mr. Giannini was also previously with the
Corporate Planning Division of IIT Research Institute (Chicago) and the
Corporate Finance department of Kidder, Peabody &amp; Co. in New York.&nbsp; Mr.
Giannini holds a BSE from Princeton University.&nbsp; He has also served as CEO or
COO of four smaller public companies and two subsidiaries of public companies
in transition. Mr. Giannini currently serves on the Board of Directors of Dudek
&amp; Associates,
a privately held  company.</p>



<p align=center style='text-align:center;page-break-after:avoid'><b>BUSINESS EXPERIENCE OF KEY MANAGEMENT OF SUBSIDIARIES</b></p>



<p style='text-indent:.5in' align="justify">Set forth
below is information concerning certain key management personnel of the Company
and its operating subsidiaries. </p>

<p align="justify" style="text-indent: 0.5in"><i>&nbsp;</i>Patrick L.
Johnson (42), is the Company's<i> </i>Chief Executive Officer and President.&nbsp;
In addition to this position assumed in September 2002, he joined the Company's
Micro Motors subsidiary as Vice President and General Manager in March 2000.&nbsp;
Mr. Johnson has significant experience in dental manufacturing, having served
as General Manager of Analytic Endodontics, Inc. (a division of Sybron Dental)
from 1997 to 2000 and General Manager of Tycom Dental, Inc. from 1996 to 1997,
both dental related product manufacturers.&nbsp;&nbsp; Mr. Johnson received B.A.
degrees in Legal Studies and Philosophy from the University of California in
Santa Cruz and a MBA degree from Pepperdine University.</p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">Gary
G. Garleb (62), is the President of the Company's Oregon Micro Systems, Inc.
(&quot;OMS&quot;) subsidiary.&nbsp; He<i> </i>has served as Vice President and General Manager
of OMS since its acquisition by the Company in July 1995.&nbsp; Prior to that time,
he served as Vice President of Operations and Manufacturing for Micro Motors
from 1974 to 1995.</p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">Jeffrey
J. Ritchey (40), is the Company's<i> </i>Treasurer, Chief
Financial Officer and
Secretary.&nbsp; In addition to this position
assumed in July 2002, he joined the Company's Micro Motors subsidiary as
Controller in August 2001.&nbsp; Mr. Ritchey has significant financial management
experience, having served from 1997 to 2001 as Controller and Finance Director
of Tycom<a name="_DV_C40">  </a>Corp. and from 1990 to 1997 in Corporate and operational
positions at Hughes Electronics and DIRECTV (subsidiaries of General Motors).&nbsp;
Mr. Ritchey received a M.S. degree in Finance from the University of Arizona
and is a Chartered Financial Analyst (&quot;CFA&quot;) charterholder.</p>



<p style='margin-top:12.0pt;' align="center">6</p>



<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>



<p style='margin-top:0in' align="center"><b>CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS</b></p>



<p style='text-indent:.5in' align="justify">Pursuant to
the merger of Micro Motors with the Company's subsidiary in 1995, Ronald G.
Coss entered into a Non-Competition Agreement, pursuant to which he is to be
paid $1 million over five years, with payment commencing on the termination of
his employment agreement with the Company in the sixth year after closing. Due
to the fact that the term of Mr. Coss' employment with the Company had been
extended, the Board of Directors and Mr. Coss agreed that the Company's
performance obligations under the Non-Competition Agreement be extended to
commence on September&nbsp;30,&nbsp;2001. Mr. Coss' employment agreement ended
in June 2002.&nbsp; There was $200,000 of payments made to Mr. Coss pertaining to
the Non-Competition Agreement in the year ending June 30,  2003. There is
a balance of $600,000 to be paid through the year ending June 30 2006.&nbsp; In
addition, the Company received $121,600 pertaining to a note receivable from
Mr. Coss, leaving a balance of $364,800 to be received through the year ending
June 30 2006.</p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">The
Company's shareholders have approved a Director's Stock Option Plan (the
&quot;Directors' Plan&quot;) pursuant to which non-employee directors may be granted
options to purchase shares of the Company's Common Stock. In accordance with
the Directors' Plan's provisions, the Board of Directors previously adopted a
policy to grant each outside director an initial option to purchase 20,000 shares
of Common Stock on the date of his commencement of service as a director and an
option to purchase 15,000 shares annually, exercisable at the closing price on
each anniversary date of such service. The maximum term of each option is ten
years.</p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">During
the fiscal year ended June 30, 2003, three of the Company's current Directors,
Messrs. Murphy, Mesenbrink, and Giannini, were each granted options to purchase
20,000 shares of common stock, exercisable at share prices of $0.42 to $0.53
per share, respectively.&nbsp; The options fully vest after 6 months and expire 90
days from the termination of the directors' service on the Company's Board of
Directors.&nbsp;&nbsp; </p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">During
the fiscal year ended June 30, 2003, 668,500 common stock options previously
provided to current and former Directors expired unused.&nbsp; The expired options
are detailed in the table below:</p>



<div align=center>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse' width="650">
 <tr>
  <td valign=bottom style='width:110;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="center">
  <p align=center style='text-align:center;
  page-break-after:avoid'><b>&nbsp;<u>Name</u></b></p>
  </td>
  <td valign=bottom style='width:84;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="center">


  <p style='margin-top:0in'><u><b>Plan</b></u></p>
  </td>
  <td valign=bottom style='width:129;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="center">

  <p style='margin-top:0in'><b>Number of Options<br>
  <u>Expiring (#)</u></b></p>
  </td>
  <td valign=bottom style='width:122;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="center">
  <p align=center style='text-align:center;
  page-break-after:avoid'><b>Exercise<br>
&nbsp;Price<br>
&nbsp;<u>($/Share)</u></b></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:110;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='line-height:14.0pt;page-break-after:avoid'>Ronald G. Coss</p>
  </td>
  <td valign=top style='width:84;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>Employee</p>
  </td>
  <td valign=top style='width:129;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p align=center style='line-height:14.0pt;
  page-break-after:avoid'>100,000</p>
  </td>
  <td valign=top style='width:122;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>&nbsp;$1.25</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:110;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='line-height:14.0pt;page-break-after:avoid'>Frank H. Zagar</p>
  </td>
  <td valign=top style='width:84;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>Employee</p>
  </td>
  <td valign=top style='width:129;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>300,000</p>
  </td>
  <td valign=top style='width:122;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>&nbsp;$0.81</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:110;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='line-height:14.0pt;page-break-after:avoid'>Frank H. Zagar</p>
  </td>
  <td valign=top style='width:84;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>Director</p>
  </td>
  <td valign=top style='width:129;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>20,000</p>
  </td>
  <td valign=top style='width:122;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>&nbsp;$0.99</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:110;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='line-height:14.0pt;page-break-after:avoid'>Frank.Brown</p>
  </td>
  <td valign=top style='width:84;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='margin-right:.1pt;text-align:center;
  line-height:14.0pt;page-break-after:avoid'>Director</p>
  </td>
  <td valign=top style='width:129;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>53,000</p>
  </td>
  <td valign=top style='width:122;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>$0.81 - $2.06</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:110;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='line-height:14.0pt;page-break-after:avoid'>Robert Hovee</p>
  </td>
  <td valign=top style='width:84;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='margin-right:.1pt;text-align:center;
  line-height:14.0pt;page-break-after:avoid'>Director</p>
  </td>
  <td valign=top style='width:129;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>195,500</p>
  </td>
  <td valign=top style='width:122;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>$0.81 - $2.90</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:110;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=right style='text-align:right;line-height:14.0pt'>Total</p>
  </td>
  <td valign=top style='width:84;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td valign=top style='width:129;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>668,500</p>
  </td>
  <td valign=top style='width:122;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>$0.81 - $2.90</p>
  </td>
 </tr>
</table>

</div>

<p style="text-indent: 0.5in" align="justify">Mr. Hovee, a prior director of the
Company, entered into a consulting agreement with the Company in October 2002.&nbsp;
The agreement has a three year term to provide services on an as needed basis.&nbsp;
As compensation for the agreement, Mr. Hovee received 65,000 warrants with a
three year term at an exercise price of $0.54.&nbsp; Mr. Hovee exercised these
options in full in July 2003.</p>

<p style="text-indent: 0.5in" align="justify">&nbsp;</p>

<p align="center">7</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p style='margin-bottom:12.0pt' align="center"><b>LEGAL
PROCEEDINGS</b></p>

<p style='margin-bottom:12.0pt;text-indent:.5in' align="justify">The Company is a party to various legal proceedings
incidental to its business, none of which are considered by the Company to be
material.</p>

<p align="center"><b>BOARD OF DIRECTORS MEETINGS AND
RELATED MATTERS</b></p>

<p align="justify" style="text-indent: 0.5in">During the fiscal year ended June 30, 2003,
the Board of Directors held nine meetings and there were six actions by
unanimous written consent.&nbsp; No director attended less than 75% of the aggregate
of all meetings of the Board of Directors and all meetings of committees of the
Board of Directors upon which he served.</p>

<p align="justify" style="text-indent: 0.5in">The Board of Directors has an Audit
Committee that consists of three Board members, Michael A. Mesenbrink, Mark P.
Murphy and Valerio L. Giannini.&nbsp; The Audit Committee is comprised entirely of
non-employee, independent directors operating under a written charter adopted
by the Board of Directors.&nbsp; The duties of the Audit Committee include meeting
with the independent public accountants of the Company to review the scope of
the annual audit and to review the quarterly and annual financial statements of
the Company before the statements are released to the Company's shareholders.
The Audit Committee also evaluates the independent public accountants'
performance and determines
whether the independent public accounting firm should be retained by the
Company for the ensuing fiscal year. The Audit Committee pre-approves all
services provided by the independent public accountants. In addition, the Audit
Committee reviews the Company's internal accounting and financial controls and
reporting systems practices. The Audit Committee held three meetings during the
fiscal year ended June 30, 2003.&nbsp;&nbsp; </p>



<p style='text-indent:.5in' align="justify">The Board of
Directors has a Compensation Committee that consists of three Board members,
Michael A. Mesenbrink, Mark P. Murphy and Valerio L. Giannini.&nbsp; The
Compensation Committee is responsible for (i) ensuring that senior management
will be accountable to the Board through the effective application of
compensation policies and (ii) monitoring the effectiveness of both senior
management and the Board (including committees thereof).&nbsp; The Compensation
Committee establishes compensation policies applicable to the Company's
executive officers.&nbsp; The Compensation Committee held no meetings during the
fiscal year ended June 30, 2003.</p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">The
Board of Directors serves as the Company's Nominating Committee.&nbsp; In such
capacity it is responsible for identifying, recommending and nominating
candidates to the Board of Directors. The Board will consider candidate
nominees for election as director who are recommended by shareholders.
Recommendations should be sent to the Secretary of the Company and should
include the candidate's name and qualifications and a statement from the
candidate that he or she consents to being named in the Proxy Statement and
will serve as a director if elected.&nbsp; In order for any candidate to be
considered by the Board and, if nominated, to be included in the Proxy
Statement, such recommendation must be received by the Secretary on or before
the date of record preceding the annual meeting at which directors will be
elected by the shareholders.</p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">Directors
of the Company who are not also employees received a
fee of $3,000 per quarter plus $1,000 per board meeting, plus $750 per each day
of committee meetings attended, together with reasonable expenses of attendance
at committee meetings.&nbsp; The Secretary received a
fee of $3,000 per quarter plus $1,500 per board meeting plus $750 per each day
of committee meetings attended.&nbsp; The Chairman of the Board received a
fee of $4,000 per quarter plus $1,500 per Board meeting, plus $1,000 per each
day of committee meetings attended, plus reimbursement for medical insurance up
to $500 per month.&nbsp; Directors of the Company, if any, who are also employees of
the Company were not compensated for their services as directors or
committee members.</p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">&nbsp;</p>

<p style='margin-top:12.0pt;text-indent:.5in' align="center">8</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p align="center"><b>COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION</b></p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">No
other director or executive officer of the Company serves as an officer,
director or member of a compensation committee of any other entity for which an
executive officer or director thereof is also a member of the Company's Board
of Directors.</p>

<p align="center"><b>&nbsp;INDEMNIFICATION
OF DIRECTORS AND OFFICERS</b></p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">The
Company's Articles of Incorporation, as amended, and indemnification agreements
entered into between the Company and its directors and officers require the
Company to indemnify these officers and directors to the fullest extent
permitted by applicable law against liabilities incurred in connection with
their duties as the Company's officers and directors. These indemnification
rights may extend to liabilities under the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934, as amended. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to the
Company's directors, officers and controlling persons, we have been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act,
and is, therefore, unenforceable.</p>

<p align="center"><b>COMPENSATION OF EXECUTIVE OFFICERS
AND MANAGEMENT</b></p>

<p align="justify" style="text-indent: 0.5in">The following table sets forth certain
compensation information for the three fiscal years ended June 30, 2002, 2001
and 2000, respectively, by the Chief Executive Officer and the other highest
paid executive officers of the Company (up to four) serving as such at the end
of the 2003 fiscal year whose aggregate total annual salary and bonus for such
year exceeded $100,000 (the &quot;Named Executive Officers&quot;).</p>

<p style='margin-top:0in' align="center"><b><u>SUMMARY
COMPENSATION TABLE</u></b></p>

<div align="left">

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse' width="745">
 <tr>
  <td valign=bottom style='width:190;padding:0in; '>

  </td>
  <td valign=bottom style='width:84;padding:0in'>

  </td>
  <td colspan=3 valign=bottom style='width:239;padding:0in'>
  <p align=center style='text-align:center;page-break-after:
  avoid'><b><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Annual
  Compensation&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </font>
  </u></b></p>
  </td>
  <td valign=bottom style='width:96;padding:0in; '>
  <p align=center style='text-align:center;page-break-after:
  avoid'><b><font size="2">Long Term <br>
  </font>
  <u><font size="2">Compensation </font> </u> </b></p>
  </td>
 </tr>
 <tr>
  <td valign=bottom style='width:190;padding:0in; '>
  <p align=center style='text-align:center;page-break-after:
  avoid'><b><font size="2">&nbsp;</font></b></p>
  <p align=center style='text-align:center;page-break-after:
  avoid'><b><font size="2">Name and <br>
  </font>
  <u><font size="2">Principal Position </font> </u> </b></p>
  </td>
  <td valign=bottom style='width:84;padding:0in'>
  <p align=center style='text-align:center;page-break-after:
  avoid'><b><font size="2">&nbsp;</font></b></p>
  <p align=center style='text-align:center;page-break-after:
  avoid'><b><font size="2">Fiscal <br>
  </font>
  <u><font size="2">Year </font> </u> </b></p>
  </td>
  <td valign=bottom style='width:74;padding:0in'>
  <p align=center style='text-align:center;page-break-after:
  avoid'><b><u><font size="2">Salary </font> </u></b></p>
  </td>
  <td valign=bottom style='width:73;padding:0in'>
  <p align=center style='text-align:center;page-break-after:
  avoid'><b><u><font size="2">Bonus </font> </u></b><sup>
  <font size="2">(1)</font></sup></p>
  </td>
  <td valign=bottom style='padding:0in' align="center">
  <p align=center style='text-align:center;page-break-after:
  avoid'><b><font size="2">&nbsp;All Other <br>
  <u>Compensation</u></font></b><font size="2"><sup>(2)</sup> </font></p>
  </td>
  <td valign=bottom style='width:96;padding:0in; '>
  <p align=center style='text-align:center;page-break-after:
  avoid'><b><font size="2">Securities <br>
  Underlying <br>
  </font>
  <u><font size="2">Stock Options </font> </u> </b></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:190;padding:0in; '>

  &nbsp;</td>
  <td valign=top style='width:84;padding:0in'>

  &nbsp;</td>
  <td valign=top style='width:74;padding:0in'>

  </td>
  <td valign=top style='width:73;padding:0in'>

  </td>
  <td valign=top style='width:92;padding:0in'>

  </td>
  <td valign=top style='width:96;padding:0in; '>

  </td>
 </tr>
 <tr>
  <td valign=top style='width:190;padding:0in; '>
  <p style='page-break-after:avoid'><font size="2">Patrick Johnson <sup>(3)</sup> <br>
  CEO Pro-Dex Inc. and
  President,&nbsp; Micro Motors, Inc. </font> </p>
  </td>
  <td valign=top style='width:84;padding:0in' align="center">
  <p style='page-break-after:avoid'><font size="2">2003<br>
  2002 <br>
  2001</font></p>
  </td>
  <td valign=top style='width:74;padding:0in'>
  <p align=center style='text-align:center;page-break-after:
  avoid'><font size="2">$160,795<br>
  $155,357<br>
  $144,000</font></p>
  </td>
  <td valign=top style='width:73;padding:0in'>
  <p align=center style='text-align:center;page-break-after:
  avoid'><font size="2">$26,375<br>
  $15,000<br>
  $15,000</font></p>
  </td>
  <td valign=top style='width:92;padding:0in'>
  <p align=center style='text-align:center;page-break-after:
  avoid'><font size="2">$22,854<br>
  $17,214<br>
  $10,227</font></p>
  </td>
  <td valign=top style='width:96;padding:0in; '>
  <p align=center style='text-align:center;page-break-after:
  avoid'><font size="2">300,000<br>
  187,500 <br>
  - </font> </p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:190;padding:0in; '>

  </td>
  <td valign=top style='width:84;padding:0in' align="center">

  </td>
  <td valign=top style='width:74;padding:0in'>

  </td>
  <td valign=top style='width:73;padding:0in'>

  </td>
  <td valign=top style='width:92;padding:0in'>

  </td>
  <td valign=top style='width:96;padding:0in; '>

  </td>
 </tr>
 <tr>
  <td valign=top style='width:190;padding:0in; '>
  <p style='page-break-after:avoid'><font size="2">Jeffrey J. Ritchey <sup>(4)<br>
  </sup>Treasurer and CFO Pro-Dex Inc. and Controller,&nbsp; Micro Motors, Inc.</font></p>
  </td>
  <td valign=top style='width:84;padding:0in' align="center">
  <p style='page-break-after:avoid'><font size="2">2003<br>
  2002 <br>
  2001</font></p>
  </td>
  <td valign=top style='width:74;padding:0in'>
  <p align=center style='text-align:center;page-break-after:
  avoid'><font size="2">$103,138<br>
  $78,923<br>
  - </font> </p>
  </td>
  <td valign=top style='width:73;padding:0in'>
  <p align=center style='text-align:center;page-break-after:
  avoid'><font size="2">$5,968<br>
  -<br>
  -</font></p>
  </td>
  <td valign=top style='width:92;padding:0in'>
  <p style='margin-top:0in' align="center"><font size="2">$8,842<br>
  $4,909<br>
  - </font> </p>
  </td>
  <td valign=top style='width:96;padding:0in; '>
  <p style='margin-top:0in' align="center"><font size="2">60,000<br>
  40,000<br>
  - </font> </p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:190;padding:0in; '>

  </td>
  <td valign=top style='width:84;padding:0in' align="center">

  </td>
  <td valign=top style='width:74;padding:0in'>

  </td>
  <td valign=top style='width:73;padding:0in'>

  </td>
  <td valign=top style='width:92;padding:0in'>

  </td>
  <td valign=top style='width:96;padding:0in; '>

  </td>
 </tr>
 <tr>
  <td valign=top style='width:190;padding:0in; '>
  <p style='page-break-after:avoid'><font size="2">Gary G. Garleb <br>
  &nbsp;&nbsp;&nbsp; President, Oregon <br>
  &nbsp;&nbsp;&nbsp;&nbsp;
  Micro Systems, Inc. </font> </p>
  </td>
  <td valign=top style='width:84;padding:0in' align="center">
  <p style='page-break-after:avoid'><font size="2">2003<br>
  2002 <br>
  2001</font></p>
  </td>
  <td valign=top style='width:74;padding:0in'>
  <p align=center style='text-align:center;page-break-after:
  avoid'><font size="2">$135,028<br>
  $132,497<br>
  $146,697</font></p>
  </td>
  <td valign=top style='width:73;padding:0in'>
  <p align=center style='text-align:center;page-break-after:
  avoid'><font size="2">-<br>
  $34,450<br>
  $34,450</font></p>
  </td>
  <td valign=top style='width:92;padding:0in'>
  <p align=center style='text-align:center;page-break-after:
  avoid'><font size="2">$16,111<br>
  $16,706 <br>
  $16,535 </font> </p>
  </td>
  <td valign=top style='width:96;padding:0in; '>
  <p align=center style='text-align:center;page-break-after:
  avoid'><font size="2">- <br>
  89,000<br>
  - </font> </p>
  </td>
 </tr>
</table>

</div>

<p style='margin-left:35.0pt;text-indent:-7.0pt'>__________________________</p>



<p style='margin-left:71.5pt;text-indent:-44.0pt' align="justify">
<font size="2">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Represents amounts earned in prior
year and paid in year reported.</font></p>



<p style='margin-left:71.5pt;text-indent:-44.0pt' align="justify">
<font size="2">(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Consists of:
(iii) for Mr. Johnson, $9,000 in automotive reimbursement in 2003 and 2002, and
$9,516, $8,214, and $10,227 of health insurance and related payments for the
years 2003, 2002 and 2001, respectively, (iv) for Mr. Garleb, health insurance
and related payments and matching contributions made by the Company under the
Company's 401(k) plan of $1,655 in 2003 and $2,166 for 2001 and $1,750 for
2000, and, (v) for Mr. Ritchey, health insurance and related payments and
matching contributions made by the Company under the Company's 401(k) plan of
$1,333 in 2003.</font></p>



<p style='margin-left:71.5pt;text-indent:-44.0pt'>&nbsp;</p>



<p align="center">9</p>



<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>



<p style='margin-top:0in;margin-right:.5pt;margin-left:71.5pt;text-indent:-44.0pt' align="justify">
<font size="2">(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mr. Johnson commenced employment with the
Company April&nbsp;2000 and was named President and Chief Executive Officer as
of September 2002.</font></p>



<p style='margin-top:0in;margin-right:.5pt;margin-bottom:0in;
margin-left:71.5pt;margin-bottom:.0001pt;text-indent:-44.0pt' align="justify">
<font size="2">(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mr. Ritchey commenced employment with the
Company in August&nbsp;2001, and was named Treasurer and Chief Financial
Officer as of July 2002.</font></p>

<p align="center"><b>OPTION GRANTS IN LAST FISCAL YEAR</b></p>

<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The following table provides
information with respect to option grants in fiscal year 2003 to the Named
Executive Officers.</p>



<div align="left">



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='margin-left:5.4pt;border-collapse:collapse' width="725">
 <tr>
  <td width=129 valign=bottom style='width:96.5pt;padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center;
  page-break-after:avoid'><b>&nbsp;<u>Name</u></b></p>
  </td>
  <td width=95 valign=bottom style='width:71.5pt;padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center;
  page-break-after:avoid'><b>Number of<br>
  Securities<br>
  Underlying<br>
  Options <br>
  Granted (#)</b></p>
  </td>
  <td valign=bottom style='width:129;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;
  page-break-after:avoid'><b>Percent of Total<br>
  Options Granted to<br>
  Employees and<br>
  Directors in<br>
&nbsp;<u>Fiscal Year (%)</u><sup>(1)</sup></b></p>
  </td>
  <td valign=bottom style='width:76;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;
  page-break-after:avoid'><b>&nbsp;Exercise<br>
  or Base<br>
  Price<br>
  <u>($/Share)</u></b></p>
  </td>
  <td width=88 valign=bottom style='width:66.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center;
  page-break-after:avoid'><b>&nbsp;Expiration<br>
  <u>Date</u></b></p>
  </td>
 </tr>
 <tr>
  <td width=129 valign=top style='width:96.5pt;padding:0in 5.4pt 0in 5.4pt'>
  <p style='line-height:14.0pt;page-break-after:avoid'>Patrick Johnson</p>
  </td>
  <td width=95 valign=top style='width:71.5pt;padding:0in 5.4pt 0in 5.4pt' align="center">
  <p style='line-height:14.0pt;
  page-break-after:avoid'>200,000</p>
  </td>
  <td valign=top style='width:129;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>43.5%</p>
  </td>
  <td valign=top style='width:76;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>$0.35</p>
  </td>
  <td width=88 valign=top style='width:66.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>9/05/12</p>
  </td>
 </tr>
 <tr>
  <td width=129 valign=top style='width:96.5pt;padding:0in 5.4pt 0in 5.4pt'>
  <p style='line-height:14.0pt;page-break-after:avoid'>Patrick Johnson</p>
  </td>
  <td width=95 valign=top style='width:71.5pt;padding:0in 5.4pt 0in 5.4pt' align="center">
  <p style='line-height:14.0pt;
  page-break-after:avoid'>100,000</p>
  </td>
  <td valign=top style='width:129;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>21.7%</p>
  </td>
  <td valign=top style='width:76;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>$1.42</p>
  </td>
  <td width=88 valign=top style='width:66.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>9/05/12</p>
  </td>
 </tr>
 <tr>
  <td width=129 valign=top style='width:96.5pt;padding:0in 5.4pt 0in 5.4pt'>
  <p style='line-height:14.0pt;page-break-after:avoid'>Jeffrey J. Ritchey</p>
  </td>
  <td width=95 valign=top style='width:71.5pt;padding:0in 5.4pt 0in 5.4pt' align="center">
  <p style='line-height:14.0pt;
  page-break-after:avoid'>60,000</p>
  </td>
  <td valign=top style='width:129;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>13.0%</p>
  </td>
  <td valign=top style='width:76;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>$0.42</p>
  </td>
  <td width=88 valign=top style='width:66.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'>9/26/12</p>
  </td>
 </tr>
</table>

</div>

<p style='margin-top:0in;margin-right:0in;margin-bottom:0in;
margin-left:1.0in;margin-bottom:.0001pt;text-indent:-44.5pt'>__________________________</p>

<p style='margin-top:12.0pt;margin-right:83.0pt;margin-bottom:0in;
margin-left:71.5pt;margin-bottom:.0001pt;text-indent:-44.0pt'><font size="2">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Based on options to purchase 460,000
shares of Common Stock granted to employees and directors during the fiscal
year ended June 30, 2003.</font></p>

<p><b>AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES</b></p>

<p style="text-indent: 0.5in" align="justify">The following table provides information
on option exercises in fiscal 2003 by the Named Executive Officers and
unexercised options held by each of them at the close of such fiscal year.&nbsp; No
options were exercised during such period and there were unexercised in the
money options on the last trading day of the fiscal year.</p>



<div align=left>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse' width="740">
 <tr>
  <td valign=bottom style='width:119;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;
  page-break-after:avoid'><b><font size="2">&nbsp;</font><u><font size="2">Name</font></u></b></p>
  </td>
  <td valign=bottom style='width:90;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='margin-top:0in' align="center"><b><font size="2">Shares<br>
  Acquired on<br>
&nbsp;</font><u><font size="2">Exercise</font></u></b></p>
  </td>
  <td valign=bottom style='width:70;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;
  page-break-after:avoid'><b><font size="2">&nbsp;Value<br>
  </font> <u><font size="2">Realized</font></u></b></p>
  </td>
  <td colspan=2 valign=bottom style='width:202;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;
  page-break-after:avoid'><b><font size="2">Number of
  Securities<br>
  Underlying Unexercised </font> <u><font size="2"><br>
  Options at June 30, 2003 (#)</font></u></b></p>
  </td>
  <td colspan=2 valign=bottom style='width:187;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;
  page-break-after:avoid'><b><font size="2">Value of
  Unexercised <br>
  In-The-Money Options at<br>
&nbsp;</font><u><font size="2">June 30, 2003 ($)</font></u></b></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:119;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;
  page-break-after:avoid'><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td valign=top style='width:90;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td valign=top style='width:70;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;
  page-break-after:avoid'><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td valign=top style='width:88;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;
  page-break-after:avoid'><b><u><font size="2">Exercisable</font></u></b></p>
  </td>
  <td valign=top style='width:100;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;
  page-break-after:avoid'><b><u><font size="2">Unexercisable</font></u></b></p>
  </td>
  <td valign=top style='width:78;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;
  page-break-after:avoid'><b><u><font size="2">Exercisable</font></u></b></p>
  </td>
  <td valign=top style='width:95;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;
  page-break-after:avoid'><b><u><font size="2">Unexercisable</font></u></b></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:119;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='line-height:14.0pt;page-break-after:avoid'><font size="2">Patrick Johnson</font></p>
  </td>
  <td valign=top style='width:90;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">0</font></p>
  </td>
  <td valign=top style='width:70;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">$0</font></p>
  </td>
  <td valign=top style='width:88;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">419,792</font></p>
  </td>
  <td valign=top style='width:100;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">192,708</font></p>
  </td>
  <td valign=top style='width:78;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">$218,448</font></p>
  </td>
  <td valign=top style='width:95;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">$43,177</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:119;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='line-height:14.0pt;page-break-after:avoid'><font size="2">Jeffrey J. Ritchey</font></p>
  </td>
  <td valign=top style='width:90;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">0</font></p>
  </td>
  <td valign=top style='width:70;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">$0</font></p>
  </td>
  <td valign=top style='width:88;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">10,000</font></p>
  </td>
  <td valign=top style='width:100;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">90,000</font></p>
  </td>
  <td valign=top style='width:78;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">$3,350</font></p>
  </td>
  <td valign=top style='width:95;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">$62,850</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:119;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='line-height:14.0pt'><font size="2">Gary
  G. Garleb</font></p>
  </td>
  <td valign=top style='width:90;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">0</font></p>
  </td>
  <td valign=top style='width:70;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">$0</font></p>
  </td>
  <td valign=top style='width:88;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">120,755</font></p>
  </td>
  <td valign=top style='width:100;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">66,750</font></p>
  </td>
  <td valign=top style='width:78;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">$10,903</font></p>
  </td>
  <td valign=top style='width:95;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;line-height:14.0pt;
  page-break-after:avoid'><font size="2">$32,707</font></p>
  </td>
 </tr>
</table>

</div>

<p align="center"><b>LONG-TERM INCENTIVE PLAN AWARDS</b></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In fiscal 2003, no awards were given to
the Named Executive Officers under long-term incentive plans.</p>

<p>&nbsp;</p>

<p align="center">10</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p align="center"><b>REPRICING OF OPTIONS AND SARS</b></p>

<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No adjustments to or repricing of stock
options previously awarded to the Named Executive Officers occurred in fiscal
2003.</p>

<p align="center"><b>EQUITY COMPENSATION PLAN INFORMATION</b></p>



<p style='text-indent:.5in;page-break-after:avoid' align="justify">The following table sets forth information about the
Company's common stock that may be issued upon the exercise of options under
all of the Company's equity compensation plans as of June 30, 2003.</p>



<div align="left">



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='margin-left:5.4pt;border-collapse:collapse' width="725">
 <tr>
  <td valign=bottom style='width:144;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='page-break-after:avoid'><b>&nbsp;<u>Plan Category</u></b></p>
  </td>
  <td valign=bottom style='width:177;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;page-break-after:
  avoid'><b>Number of Securities <br>
  to be Issued Upon<br>
&nbsp;Exercise of Outstanding
  Options, <u><br>
  Warrants, and Rights</u></b></p>
  </td>
  <td valign=bottom style='width:156;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center'><b>&nbsp;Weighted Average<br>
&nbsp;Exercise Price of<br>
&nbsp;Outstanding Options,<br>
  <u>Warrants, and Rights</u> </b></p>
  </td>
  <td valign=bottom style='width:153;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center'><b>&nbsp;Number of
  Securities<br>
  Remaining Available<br>
  <u>for Future Issuance</u></b></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:144;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='page-break-after:avoid'><b>&nbsp;</b></p>
  </td>
  <td valign=top style='width:177;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;page-break-after:
  avoid'>(a)</p>
  </td>
  <td valign=top style='width:156;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center'>(b)</p>
  </td>
  <td valign=top style='width:153;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center'>(c)</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:144;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:left;page-break-after:avoid'>Equity
  Compensation Plans Approved by Security Holders</p>
  </td>
  <td valign=top style='width:177;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td valign=top style='width:156;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td valign=top style='width:153;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>

  </td>
 </tr>
 <tr>
  <td valign=top style='width:144;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='page-break-after:avoid'>&nbsp;&nbsp;&nbsp; &#9679;&nbsp; Employee Plan</p>
  </td>
  <td valign=top style='width:177;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;page-break-after:
  avoid'>1,183,405</p>
  </td>
  <td valign=top style='width:156;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center'>$1.17</p>
  </td>
  <td valign=top style='width:153;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center'>316,595</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:144;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='page-break-after:avoid'>&nbsp;&nbsp;&nbsp; &#9679;&nbsp; Director Plan</p>
  </td>
  <td valign=top style='width:177;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center;page-break-after:
  avoid'>180,000</p>
  </td>
  <td valign=top style='width:156;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center'>$0.68</p>
  </td>
  <td valign=top style='width:153;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center'>320,000</p>
  </td>
 </tr>
 <tr>
  <td valign=bottom style='width:144;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=left style='text-align:left;page-break-after:avoid'>Equity
  Compensation Plans Not Approved by Security Holders</p>
  </td>
  <td valign=bottom style='width:177;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>


  <p style='margin-top:0in' align="center">402,000</p>
  </td>
  <td valign=bottom style='width:156;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>


  <p align=center style='text-align:center'>$1.45</p>
  </td>
  <td valign=bottom style='width:153;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>


  <p align=center style='text-align:center'>--</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:144;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>

  &nbsp;</td>
  <td valign=top style='width:177;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td valign=top style='width:156;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td valign=top style='width:153;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>

  </td>
 </tr>
 <tr>
  <td valign=top style='width:144;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='page-break-after:avoid'>Total</p>
  </td>
  <td valign=top style='width:177;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center'>1,765,405</p>
  </td>
  <td valign=top style='width:156;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center'>$1.18</p>
  </td>
  <td valign=top style='width:153;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p align=center style='text-align:center'>636,595</p>
  </td>
 </tr>
</table>

</div>

<p align="center"><b>EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL
ARRANGEMENTS</b></p>

<p align="justify" style="text-indent: 0.5in">Mr. Johnson has an Employment
Agreement (&quot;Employment Agreement&quot;) with the Company dated April 3, 2000 (as
amended September 6, 2002), that details the terms of his employment as the
Company's President and Chief Executive Officer.&nbsp; The term of the Employment
Agreement was originally from April 3, 2000 until June 30, 2003 and has been
extended until June 30, 2005, subject to customary termination provisions for
breach and &quot;cause&quot; events.&nbsp; Thereafter, Mr. Johnson's employment shall continue
on an at-will basis until terminated at the option of either party upon sixty
(60) days prior written notice.&nbsp; His base rate of pay, commencing&nbsp; September 1,
2002, is $175,000 per annum and, in connection with the execution of the
amendment of his Employment Agreement he was granted 300,000 stock options,
200,000 of which are exercisable immediately at $0.35 per share and 100,000 are
exercisable commencing September 6, 2004 at $1.42 per share.&nbsp; In addition, Mr.
Johnson receives vacation, car allowance, medical, disability and dental
benefits and is eligible to receive additional performance-based compensation.&nbsp; If Mr. Johnson is terminated without &quot;cause&quot; during the
term of his employment, he shall be entitled to compensation under its terms
for the remainder of the employment term.&nbsp; The Employment Agreement may be
terminated by either party, upon sixty (60) days notice, if a Change of Control
shall have occurred, and Mr. Johnson shall be entitled to (i) his salary and
(ii) to the extent permitted by the Company's insurance policies, insurance
benefits for a period of one year from the date of termination.&nbsp; In the event
such insurance coverage is not available, then Mr. Johnson shall be provided
reimbursement for the acquisition of a policy or policies providing
substantially similar coverage for such one year period.&nbsp; In addition, upon a
Change in Control, the unvested portion of Mr. Johnson's stock options shall
immediately vest.&nbsp; &quot;Change in Control&quot; is defined to mean either one of the following:&nbsp;
(i) when any &quot;person,&quot; as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than a shareholder of the Company on the date of the
Agreement), the Company, a subsidiary or a Company Employee Benefit Plan,
(including any trustee of such Plan acting as trustee) becomes, after the date
of the Agreement, the &quot;beneficial owner&quot; (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 35% or more of the combined voting power of the Company's then
outstanding&nbsp; securities; or&nbsp; (ii)&nbsp; the occurrence of a transaction requiring
shareholder approval, and involving the sale of all or substantially all of the
assets of the Company or the merger of the Company with or into another corporation.</p>

<p align="justify" style="text-indent: 0.5in">&nbsp;</p>

<p align="center">11</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p style="text-indent: 0.5in" align="justify">For options and warrants other than those
discussed above, the Board of Directors, as the administrator of the Company's
1994 Employee Stock Option Plan and Director Stock Option Plan, has the
discretion to accelerate any outstanding options held by the employees and
directors in the event of an acquisition of the Company by a merger or asset
sale in which the outstanding options under each such plan are not to be
assumed by the successor corporation or substituted with options to purchase
shares of such corporation.</p>

<p align=center style='text-align:center;text-indent:0in;page-break-after:
avoid'><b>REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION</b></p>

<p style="text-indent: 0.5in" align="justify">The Company applies a consistent
philosophy to compensation for all employees, including senior management. This
philosophy is based on the premise that the achievements of the Company result
from the coordinated efforts of all individuals working toward common
objectives. The Company strives to achieve those objectives through teamwork
that is focused on meeting the expectations of customers and shareholders.</p>

<p style='page-break-after:avoid'><b>Compensation
Philosophy</b> </p>

<p style="text-indent: 0.5in" align="justify">The goals of the compensation program are
to align compensation with business objectives and performance, and to enable
the Company to attract, retain and reward executive officers that contribute to
the long-term success of the Company. The Company's compensation program for
executive officers is based on the same four principles applicable to
compensation decisions for all employees of the Company:</p>

<ul>
  <li>
  <p align="justify">The Company pays competitively. The Company is committed to
providing a pay program that helps attract and retain highly qualified people
in the industry. To ensure that pay is competitive, the Company regularly
compares its pay practices with those of other leading companies of similar
size and sets its pay parameters based on this review.<br>
&nbsp;</li>
  <li>

<p style='margin-right:0in;' align="justify">The Company pays for relative sustained performance. Executive
officers are rewarded based upon corporate performance, business unit
performance and individual performance. Corporate performance and business unit
performance are evaluated by the Board of Directors by reviewing the extent to
which strategic and business plan goals are met, including such factors as
revenues, operating profit and cash flow. </p>

  </li>
  <li>

<p style='margin-right:0in;'>The Company strives for fairness in the administration of pay and
to achieve a balance of the compensation paid to a particular individual with
the compensation paid to other executives both inside the Company and at
comparable companies.</p>

  </li>
  <li>The Company believes that employees should understand the
performance evaluation and pay administration process. The process of assessing
performance is as follows:</li>
</ul>

<p>&nbsp;</p>

<p align="center">12</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:
0in;margin-left:1.0in;margin-bottom:.0001pt;text-indent:-17.0pt' align="justify">1.&nbsp;&nbsp; At the beginning of the performance cycle, the Chief
Executive Officer or other evaluating manager sets objectives and key goals.</p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:
0in;margin-left:19.0pt;margin-bottom:.0001pt;text-indent:.5in' align="justify">2.&nbsp;&nbsp; The evaluating manager gives the employee ongoing
feedback on performance.</p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:
0in;margin-left:1.0in;margin-bottom:.0001pt;text-indent:-17.0pt' align="justify">3.&nbsp;&nbsp; At the end of the performance cycle, the manager
objectively and subjectively evaluates the accomplishment of objectives/key
goals.</p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:
0in;margin-left:19.0pt;margin-bottom:.0001pt;text-indent:.5in' align="justify">4.&nbsp;&nbsp; The manager compares the results to the results of
peers within the Company.</p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:
0in;margin-left:19.0pt;margin-bottom:.0001pt;text-indent:.5in' align="justify">5.&nbsp;&nbsp; The evaluating manager communicates the comparative results
to the employee.</p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:
0in;margin-left:1.0in;margin-bottom:.0001pt;text-indent:-17.0pt' align="justify">6.&nbsp;&nbsp; The comparative result affects decisions on salary
and, if applicable, bonus and, if applicable, stock options.</p>

<p style='margin-top:12.0pt;page-break-after:avoid' align="justify"><b>Compensation Vehicles</b></p>

<p style="text-indent: 0.5in" align="justify">The Company has historically used a
compensation program that consists of cash and equity based compensation. The
vehicles are:</p>

<p style="margin-left: 0.5in" align="justify"><u>Salary</u>. The Company sets base
salary for its employees by reviewing the base salary for competitive positions
in the market in order to attract, retain, and motivate highly talented
individuals at all levels in the organization. </p>

<p style="margin-left: 0.5in" align="justify"><u>Bonus</u>.&nbsp; The Company utilizes
incentive compensation plans for selected employees to reward achievement of
key objectives and goals.</p>

<p style='page-break-after:avoid; margin-left:0.5in' align="justify"><u>Employee
Stock Option Program</u>. The purpose of this program is to provide additional
incentives to selected employees to work to maximize shareholder value.&nbsp; The
Board of Directors makes all stock option grants.&nbsp; Stock options generally are
granted with an exercise price equal to the fair market value of the underlying
Common Stock on the date of grant and vest in equal annual installments over a
four-year period. </p>

<p align="center"><b>BOARD OF DIRECTORS COMPENSATION
COMMITTEE</b></p>

<p align=center style='text-align:center;text-indent:0in'>Valerio L. Giannini&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Michael A.
Mesenbrink&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mark P. Murphy</p>

<p align=center style='text-align:center;text-indent:0in;page-break-after:
avoid'><b>AUDIT COMMITTEE REPORT</b></p>

<p align="justify" style="text-indent: 0.5in">The Audit Committee reports to and acts on
behalf of the Board of Directors in providing oversight to the financial
management, independent auditors, and financial reporting procedures of the
Company.&nbsp; The Company's management is responsible for preparing the Company's
financial statements and the independent auditors are responsible for auditing
those statements.&nbsp; In this context, the Audit Committee has reviewed and
discussed the audited financial statements contained in the 2003 Annual Report
on Form 10-KSB with management and the independent auditors.</p>

<p align="justify" style="text-indent: 0.5in">The Audit Committee has discussed with the
independent auditors the matters required to be discussed by the Statement on
Auditing Standards No. 61 (&quot;Communication with Audit Committees&quot;), as amended.&nbsp;
The Audit Committee has received the written disclosures and the letter from
the independent auditors required by Independence Standards Board Standard No.
1 (Independence Discussions with Audit Committees), as amended, and has
discussed with the independent auditors their independence.&nbsp; In concluding that
the auditors are independent, the Committee considered, among other factors,
whether the non-audit services provided by McGladrey &amp; Pullen, LLP were
compatible with maintaining their independence.&nbsp; </p>

<p align="center">13</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p style="text-indent: 0.5in" align="justify">In reliance on the reviews and discussions
referred to above, the Audit Committee recommended to the Board of Directors
that the audited financial statements be included in the Company's Annual
Report on Form 10-KSB for the year ended June 30, 2003, for filing with the
Securities and Exchange Commission.&nbsp; </p>

<p style='page-break-after:avoid; text-indent:0.5in' align="justify">The Audit
Committee has retained Moss Adams, LLP to serve as the Company's independent
auditors for the year ending June 30, 2004.</p>

<p align=center style='text-align:center;text-indent:0in;page-break-after:
avoid'><b>AUDIT COMMITTEE</b></p>

<p align=center style='text-align:center;text-indent:0in'>Valerio L. Giannini &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Michael A.
Mesenbrink&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mark P. Murphy</p>

<p align="center"><b>DIRECTORS' COMPENSATION</b></p>

<p style="text-indent: 0.5in" align="justify">Directors of the Company who are not also
employees received a fee of $3,000 per quarter plus $1,000 per board meeting,
plus $750 per each day of committee meetings attended, together with reasonable
expenses of attendance at committee meetings.&nbsp; The Secretary received a
fee of $3,000 per quarter plus $1,500 per board meeting plus $750 per each day
of committee meetings attended.&nbsp; The Chairman of the Board received a
fee of $4,000 per quarter plus $1,500 per Board meeting, plus $1,000 per each
day of committee meetings attended, plus reimbursement for medical insurance up
to $500 per month.&nbsp; Directors of the Company, if any, who are also employees of
the Company were not compensated for their services as directors or
committee members.&nbsp; The Directors fees paid in the fiscal year ended June 30,
2003 are as follows:</p>

<div align="left">

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='margin-left:5.4pt;border-collapse:collapse' width="572">
 <tr>
  <td valign=bottom style='width:290;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p ><b>&nbsp;</b></p>
  <p ><b><u>Director</u></b></p>
  </td>
  <td valign=bottom style='width:254;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' colspan="2">
  <p align=center style='text-align:center'><b>Director's Fees received in the <u>
  <br>
  Fiscal Year
  Ending June 30, 2003</u></b></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:290;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p>Ronald G. Coss </p>
  </td>
  <td valign=top style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="127">
  <p >$20,250</p>
  </td>
  <td valign=top style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="127">
  &nbsp;</td>
 </tr>
 <tr>
  <td valign=top style='width:290;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p>George Isaac </p>
  </td>
  <td valign=top style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="127">
  <p >$17,250</p>
  </td>
  <td valign=top style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="127">
  &nbsp;</td>
 </tr>
 <tr>
  <td valign=top style='width:290;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p>Frank Zagar </p>
  </td>
  <td valign=top style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="127">
  <p >$4,500</p>
  </td>
  <td valign=top style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="127">
  &nbsp;</td>
 </tr>
 <tr>
  <td valign=top style='width:290;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p>Mark P. Murphy </p>
  </td>
  <td valign=top style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="127">
  <p >$15,000</p>
  </td>
  <td valign=top style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="127">
  &nbsp;</td>
 </tr>
 <tr>
  <td valign=top style='width:290;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p>Michael Mesenbrink </p>
  </td>
  <td valign=top style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="127">
  <p >$13,750</p>
  </td>
  <td valign=top style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="127">
  &nbsp;</td>
 </tr>
 <tr>
  <td valign=top style='width:290;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p>Valerio Giannini </p>
  </td>
  <td valign=top style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="127">
  <p >&nbsp;$13,000</p>
  </td>
  <td valign=top style='padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right" width="127">
  &nbsp;</td>
 </tr>
</table>

</div>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">The
Company's shareholders have approved the Director's Plan pursuant to which
non-employee directors may be granted options to purchase shares of the
Company's Common Stock. In accordance with the Directors' Plan's provisions,
the Board of Directors previously adopted a policy to grant each outside
director an initial option to purchase 20,000 shares of Common Stock on the
date of his commencement of service as a director and an option to purchase
15,000 shares annually, exercisable at the closing price on each anniversary
date of such service. The maximum term of each option is ten years.</p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">During
the fiscal year ended June 30, 2003, three of the Company's current Directors,
Messrs. Murphy, Mesenbrink, and Giannini, were each granted options to purchase
20,000 shares of common stock, exercisable at share prices of $0.42 to $0.53
per share, respectively.&nbsp; The options fully vest after 6 months and expire 90
days from the termination of the directors' service on the Company's Board of
Directors. In addition to
the director's fees disclosed above, Mark P. Murphy received $2,000 in
consulting fees from the Company during the fiscal year ended June 30, 2003.</p>

<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mr. Hovee, a prior director of the
Company, entered into a consulting agreement with the Company in October 2002.&nbsp;
The agreement has a three year term to provide services on an as needed basis.&nbsp;
As compensation for the agreement, Mr. Hovee received 65,000 warrants with a
three year term at an exercise price of $0.54.&nbsp; Mr. Hovee exercised these
options in full in July 2003.</p>

<p align="center">14</p>

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</p>

<p align="center"><b>SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE</b></p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">Under
Section 16(a) of the Securities Exchange Act of 1934, as amended, the directors
and officers of the Company and any person who owns more than ten percent of
the Company's Common Stock are required to report their initial ownership of
the Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission (&quot;SEC&quot;) and the NASDAQ Small Cap Market.
Officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish the Company with copies of all forms they file in
accordance with Section 16(a).&nbsp; Based solely on its review of the copies of such
forms received by it, or written representations from certain reporting persons
that no Forms 5 were required for those persons, the Company believes that,
during the fiscal year ended June 30, 2003, its officers, directors and greater
than 10% shareholders complied with all filing requirements applicable to such
persons.</p>

<p align=center style='margin-top:12.0pt;text-align:center;
page-break-after:avoid'><b>RATIFICATION AND APPROVAL OF
AMENDMENT TO<br>
ARTICLES OF INCORPORATION TO INCREASE QUORUM REQUIREMENT</b></p>

<p align=center style='margin-top:12.0pt;text-align:center;
page-break-after:avoid'><b>(Proposal No. 2)</b></p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">Effective
as of October 16, 2003, the Company's Board of Directors approved an
amendment to Article 6 of the Company's Articles of Incorporation to increase
the quorum required to conduct a meeting of the shareholders from one-third to
a majority of the votes entitled to be cast, represented in person or by proxy,
at a meeting of the shareholders.</p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">We
refer to this amendment as the quorum increase. The full text of the amendment
is attached to this proxy statement as <i>Appendix A</i>. The Company's Board
of Directors believes that the quorum increase is in the best interests of
Pro-Dex and its shareholders because the quorum increase more closely conforms
the Articles of Incorporation to customary governance guidelines for public
companies and disables a minority shareholder or small group of shareholders
from controlling Pro-Dex. The Company's Board of Directors believes that
control over matters to be voted on by shareholders at a meeting of the
shareholders should be exerted only at meetings of the shareholders where a
majority of the votes entitled to be cast are represented in person or by
proxy. In addition, the Company's Board of Directors believes that the quorum
increase is critical in light of the high concentration of voting power held by
only a few shareholders. However, the Company's Board of Directors believes that
the quorum increase may make it more difficult to conduct shareholder meetings
and to obtain shareholder approval of matters to be acted upon by the
shareholders.</p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">The
Company's Board of Directors believes that it is in the best interests of the Company
and the Company's shareholders to amend the Company's Articles of Incorporation
to provide for the increase in the quorum required at a meeting of the
shareholders from one-third to a majority of the votes entitled to be cast,
represented in person or by proxy. Although the Company's Board of Directors
does not intend the increase in the quorum requirements at meetings of the
shareholders to entrench present management, the increase may have the result
of impeding hostile takeover attempts. However, no hostile takeover attempts
are, to management's knowledge, currently threatened.</p>

<p style='margin-top:12.0pt;text-indent:.5in'>&nbsp;</p>

<p style='margin-top:12.0pt;' align="center">15</p>

<hr color="#000080">
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</p>

<p align=left style='text-align:left'><b>Required
Vote of Shareholders and Board Recommendation</b></p>

<p style='page-break-after:avoid' align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
affirmative vote of a majority of the shares of the Company's common stock
present in person or represented by proxy at the meeting and entitled to vote
on this proposal will constitute shareholder ratification and approval of the
proposed amendment to the Company's Articles of Incorporation; provided, that
at least a majority of the Company's outstanding shares of common stock
entitled to vote on this proposal are present in person or represented by proxy
at the meeting. As noted above, the Board of Directors has approved the amendment
to the Company's Articles of Incorporation. </p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify"><b>THE
COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE &quot;FOR&quot; APPROVAL OF THE PROPOSED
AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION. </b></p>

<p align=center style='margin-top:12.0pt;text-align:center;
page-break-after:avoid'><b>RATIFICATION AND APPROVAL OF
2004 STOCK OPTION PLAN</b></p>

<p align=center style='margin-top:12.0pt;text-align:center;
page-break-after:avoid'><b>(Proposal No. 3)</b></p>

<p align=left style='margin-top:12.0pt;text-align:left;
page-break-after:avoid'><b>General</b></p>

<p style="text-indent: 0.5in" align="justify">As described above under the
heading &quot;Equity Compensation Plan Information,&quot; as of June&nbsp;30, 2003, the Company had two
stock option plans. Effective as of October 16, 2003, the
Company's Board of Directors approved the Company's 2004 Stock Option Plan (the
&quot;2004 Stock Option Plan&quot;), subject to shareholder ratification and approval
of the 2004 Stock Option Plan.</p>

<p style="text-indent: 0.5in" align="justify">The 2004 Stock Option Plan is designed to enable the Company to offer an incentive-based compensation
system to the Company's key employees and officers. The 2004 Stock Option
Plan provides for the grant of incentive stock options, or ISOs, and
nonqualified stock options, or NQOs.</p>

<p align=left style='text-align:left;page-break-after:avoid'><b>Shares Subject to the 2004 Stock Option
Plan</b></p>

<p style="text-indent: 0.5in" align="justify">To date, no options to purchase shares of
common stock have been issued under the 2004 Stock Option
Plan, and 1,500,000 shares are available for issuance under the 2004 Stock Option Plan. Any shares of common stock that are subject to an
award but are not used because the terms and conditions of the award are not
met, or any shares that are used by participants to pay all or part of the
purchase price of any option, may again be used for awards under the 2004 Stock Option Plan.</p>

<p style="text-indent: 0.5in" align="justify">As soon as practicable following
shareholder approval of this proposal, the Company intends
to register on Form S-8 under the Securities Act of 1933 the issuance of the
Company's securities under the 2004 Stock Option
Plan. A copy of the 2004 Stock Option Plan is attached as <i>Appendix B</i> to this proxy
statement and is described below.</p>

<p align=left style='text-align:left;page-break-after:avoid'><b>Administration</b></p>

<p align="justify" style="text-indent: 0.5in">The 2004 Stock Option
Plan is to be administered by the Company's Board of Directors or an
appropriate committee of the Company's Board of Directors. It is the intent of
the 2004 Stock Option Plan that it be administered in a manner such that option grants
and exercises would be &quot;exempt&quot; under Rule 16b-3 of the Securities Exchange Act
of 1934 (the &quot;Exchange Act&quot;).</p>

<p align="justify" style="text-indent: 0.5in">The Company's Board of Directors or an
appropriate committee is empowered to select those eligible persons to whom
options shall be granted under the 2004 Stock Option
Plan, to determine the time or times at which each option shall be granted,
whether options will be ISOs or NQOs, and the number of shares to be subject to
each option, and to fix the time and manner in which each such option may be
exercised, including the exercise price and option period, and other terms and
conditions of such options, all subject to the terms and conditions of the 2004 Stock Option Plan. The Company's Board of Directors or an appropriate
committee has sole discretion to interpret and administer the 2004 Stock Option Plan, and its decisions regarding the 2004 Stock Option Plan are final.</p>

<p align="justify" style="text-indent: 0.5in">&nbsp;</p>

<p align="center">16</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p align="justify" style="text-indent: 0.5in">The 2004 Stock Option
Plan may be wholly or partially amended or otherwise modified, suspended or
terminated at any time and from time to time by the Company's Board of
Directors. Neither the Company's Board of Directors nor any committee may
materially impair any outstanding options without the express consent of the
optionee or increase the number of shares subject to the 2004 Stock Option
Plan, materially increase the benefits to optionees under the 2004 Stock Option Plan, materially modify the requirements as to eligibility
to participate in the 2004 Stock Option Plan or alter the method of determining the option
exercise price without shareholder approval. No option may be granted under the
2004 Stock Option Plan after October 16, 2013.</p>

<p align=left style='text-align:left;page-break-after:avoid'><b>Option Terms</b></p>

<p style="text-indent: 0.5in" align="justify">ISOs granted under the 2004 Stock Option Plan must have an exercise price of not less than 100% of
the fair market value of the common stock on the date the ISO is granted and
must be exercised, if at all, within ten years from the date of grant. In the
case of an ISO granted to an optionee who owns more than 10% of the total
voting securities of the Company on the date of grant, the exercise price may
not be less than 110% of fair market value on the date of grant, and the option
period may not exceed five years. NQOs granted under the 2004 Stock Option
Plan must have an exercise price of not less than 85% of the fair market value
of the common stock on the date the NQO is granted.</p>

<p style="text-indent: 0.5in" align="justify">Options may be exercised during a period
of time fixed by the Company's Board of Directors or an appropriate committee,
except that no option may be exercised more than ten years after the date of
grant. In the discretion of the Company's Board of Directors or an appropriate
committee, payment of the purchase price for the shares of stock acquired
through the exercise of an option may be made in the manner and for the type of
consideration determined by the Company's Board of Directors or an appropriate
committee, which may include cash, one or more promissory notes, shares of the
Company's common stock, consideration received under a cashless exercise
program implemented in connection with the 2004 Employee Option Plan, or any
combination of the foregoing.</p>

<p style='text-indent:0in'><b>Federal Income Tax Consequences</b></p>

<p align="justify" style="text-indent: 0.5in">Holders of NQOs do not realize income as a
result of a grant of the option, but normally realize compensation income upon
exercise of an NQO to the extent that the fair market value of the shares of
common stock on the date of exercise of the NQO exceeds the exercise price paid.
The Company will be required to withhold taxes on ordinary income realized by an optionee upon the exercise of a NQO. In the case of an optionee subject to the
&quot;short-swing&quot; profit recapture provisions of Section 16(b) of the Exchange Act,
the optionee realizes income only upon the lapse of the six-month period under
Section 16(b), unless the optionee elects to recognize income immediately upon
exercise of his or her option.</p>

<p align="justify" style="text-indent: 0.5in">Holders of ISOs will not be considered to
have received taxable income upon either the grant or the exercise of the
option. Upon the sale or other taxable disposition of the shares, long-term
capital gain will normally be recognized on the full amount of the difference
between the amount realized and the option exercise price paid if no
disposition of the shares has taken place within either two years from the date
of grant of the option or one year from the date of exercise. If the shares are
sold or otherwise disposed of before the end of the one-year or two-year
periods, the holder of the ISO must include the gain realized as ordinary
income to the extent of the lesser of the fair market value of the option stock
minus the option price, or the amount realized minus the option price. Any gain
in excess of these amounts, presumably, will be treated as capital gain. We
will be entitled to a tax deduction in regard to an ISO only to the extent the
optionee has ordinary income upon the sale or other disposition of the option
shares.</p>

<p align="justify" style="text-indent: 0.5in">&nbsp;</p>

<p align="center">17</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p style="text-indent: 0.5in" align="justify">Upon the exercise of an ISO, the amount by
which the fair market value of the purchased shares at the time of exercise
exceeds the option price will be an &quot;item of tax preference&quot; for purposes of
computing the optionee's alternative minimum tax for the year of exercise. If
the shares so acquired are disposed of prior to the expiration of the one-year
and two-year periods described above, there should be no &quot;item of tax
preference&quot; arising from the option exercise.</p>

<p style="text-indent: 0.5in" align="justify">The tax
discussion set forth above is included for general information only and is
based upon present law. Each holder of options under the 2004 Stock Option Plan
should consult his or her own tax advisor as to the specific tax consequences
of the transaction to him or her, including application and effect of federal,
state, local and other tax laws and the possible effects of changes in federal
or other laws.</p>

<p><b>New Plan Benefits</b></p>

<p style="text-indent: 0.5in" align="justify">Because awards under the 2004 Stock Option Plan are discretionary, no future awards under the 2004 Stock Option Plan are determinable at this time.</p>

<p style='text-indent:0in'><b>Possible Anti-Takeover Effects</b></p>

<p style="text-indent: 0.5in" align="justify">Although not intended as an anti-takeover
measure by the Board of Directors, one of the possible effects of the 2004 Stock Option Plan could be to place additional shares, and to increase
the percentage of the total number of shares outstanding, in the hands of the
Company's directors and officers. These persons may be viewed as part of, or
friendly to, incumbent management and may, therefore, under certain
circumstances be expected to make investment and voting decisions in response
to a hostile takeover attempt that may serve to discourage or render more
difficult the accomplishment of the attempt.</p>

<p style="text-indent: 0.5in" align="justify">In addition, options may, in the
discretion of the Board of Directors or an appropriate committee, contain a
provision providing for the acceleration of the exercisability of outstanding,
but unexercisable, installments upon the first public announcement of a tender
offer, merger, consolidation, sale of all or substantially all of the assets of
the Company, or other attempted changes in the control of the Company. In the
opinion of the Company's Board of Directors, such an acceleration provision
merely ensures that optionees under the 2004 Stock Option
Plan will be able to exercise their options as intended by the Company's Board
of Directors and shareholders prior to any such extraordinary corporate
transaction that might serve to limit or restrict that right. The Company's
Board of Directors is, however, presently unaware of any threat of hostile
takeover involving the Company.</p>

<p style="text-indent: 0.5in" align="justify">&nbsp;</p>

<p align="center">18</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p align=left style='text-align:left;text-indent:0in;page-break-after:
avoid'><b>Required Vote and Board Recommendation</b></p>

<p style='page-break-after:avoid; text-indent:0.5in' align="justify">The
affirmative vote of a majority of the shares of the Company's common stock
present in person or represented by proxy at the meeting and entitled to vote
on this proposal will constitute shareholder ratification and approval of the
2004 Stock Option Plan; provided, that at least a majority of the Company's
outstanding shares of common stock entitled to vote on this proposal are
present in person or represented by proxy at the meeting. As noted above, the
Board of Directors has approved the 2004 Stock Option
Plan.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE &quot;FOR&quot; THE RATIFICATION AND APPROVAL OF THE 2004 STOCK OPTION
PLAN.</b></p>

<p align=center style='margin-top:12.0pt;text-align:center;
page-break-after:avoid'><b>RATIFICATION AND APPROVAL OF
2004 DIRECTORS' STOCK OPTION PLAN</b></p>

<p align=center style='margin-top:12.0pt;text-align:center;
page-break-after:avoid'><b>(Proposal No. 4)</b></p>

<p align=left style='margin-top:12.0pt;text-align:left;
page-break-after:avoid'><b>General</b></p>

<p style="text-indent: 0.5in" align="justify">As described above under the
heading &quot;Equity Compensation Plan Information,&quot; as of June&nbsp;30, 2003, the Company had two
stock option plans. Effective as of October 16, 2003, the
Company's Board of Directors approved the Company's 2004 Directors' Stock
Option Plan (the &quot;2004 Directors' Stock Option Plan&quot;),
subject to shareholder ratification and approval of the 2004 Directors' Stock Option Plan.</p>

<p style="text-indent: 0.5in" align="justify">The 2004 Directors' Stock Option
Plan is designed to enable the Company to offer an incentive-based compensation
system to the Company's non-employee directors. The 2004 Directors' Stock Option Plan provides for the grant of nonqualified stock options,
or NQOs.</p>

<p align=left style='text-align:left;page-break-after:avoid'><b>Shares Subject to the 2004 Directors' Stock Option Plan</b></p>

<p style="text-indent: 0.5in" align="justify">To date, no options to purchase shares of
common stock have been issued under the 2004 Directors' Stock Option Plan,
and 500,000 shares are available for issuance under the 2004 Directors' Stock Option Plan. Any shares of common stock that are subject to an
award but are not used because the terms and conditions of the award are not
met, or any shares that are used by participants to pay all or part of the
purchase price of any option, may again be used for awards under the 2004
Directors' Stock Option Plan.</p>

<p style="text-indent: 0.5in" align="justify">As soon as practicable following
shareholder approval of this proposal, we intend to register on Form S-8 under
the Securities Act of 1933 the issuance of the Company's securities under the
2004 Directors' Stock
Option Plan. A copy of the 2004
Directors' Stock Option Plan is attached as <i>Appendix C</i> to this proxy
statement and is described below.</p>

<p align=left style='text-align:left;page-break-after:avoid'><b>Administration</b></p>

<p align="justify" style="text-indent: 0.5in">The 2004 Directors' Stock Option
Plan is to be administered by the Company's Board of Directors or an
appropriate committee of the Company's Board of Directors. It is the intent of
the 2004 Directors' Stock
Option Plan that it be administered in a
manner such that option grants and exercises would be &quot;exempt&quot; under Rule 16b-3
of the Securities Exchange Act of 1934 (the &quot;Exchange Act&quot;).</p>

<p align="justify" style="text-indent: 0.5in">The Company's Board of Directors or an
appropriate committee is empowered to select those eligible persons to whom
options shall be granted under the 2004 Directors' Stock Option Plan,
to determine the time or times at which each option shall be granted, and the
number of shares to be subject to each option, and to fix the time and manner
in which each such option may be exercised, including the exercise price and
option period, and other terms and conditions of such options, all subject to
the terms and conditions of the 2004 Directors' Stock Option Plan.
The Company's Board of Directors or an appropriate committee has sole
discretion to interpret and administer the 2004 Directors' Stock Option Plan,
and its decisions regarding the 2004 Directors' Stock Option Plan
are final.</p>

<p align="justify" style="text-indent: 0.5in">&nbsp;</p>

<p align="center">19</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p align="justify" style="text-indent: 0.5in">The 2004 Directors' Stock Option Plan
may be wholly or partially amended or otherwise modified, suspended or
terminated at any time and from time to time by the Company's Board of
Directors. Neither the Company's Board of Directors nor any committee may
materially impair any outstanding options without the express consent of the
optionee or increase the number of shares subject to the 2004 Directors' Stock Option Plan, materially increase the benefits to optionees under
the 2004 Directors' Stock
Option Plan, materially modify the
requirements as to eligibility to participate in the 2004 Directors' Stock Option Plan or alter the method of determining the option exercise
price without shareholder approval. No option may be granted under the 2004
Directors' Stock Option Plan after October 16, 2013.</p>

<p align=left style='text-align:left;page-break-after:avoid'><b>Option Terms</b></p>

<p style="text-indent: 0.5in" align="justify">NQOs granted under the 2004 Directors' Stock Option Plan must have an exercise price of not less than the fair
market value of the common stock on the date the NQO is granted and must be
exercised, if at all, within ten years from the date of grant.</p>

<p style="text-indent: 0.5in" align="justify">Options may be exercised during a period
of time fixed by the Company's Board of Directors or an appropriate committee,
except that no option may be exercised more than ten years after the date of
grant. In the discretion of the Company's Board of Directors or an appropriate
committee, payment of the purchase price for the shares of stock acquired
through the exercise of an option may be made in the manner and for the type of
consideration determined by the Company's Board of Directors or an appropriate
committee, which may include cash, one or more promissory notes, shares of the
Company common stock, consideration received under a cashless exercise program
implemented in connection with the 2004 Directors Plan, or any combination of
the foregoing.</p>

<p style='text-indent:0in'><b>Federal Income Tax Consequences</b></p>

<p style="text-indent: 0.5in" align="justify">Holders of NQOs do not realize income as a
result of a grant of the option, but normally realize compensation income upon
exercise of an NQO to the extent that the fair market value of the shares of
common stock on the date of exercise of the NQO exceeds the exercise price paid.
The Company will be required to withhold taxes on ordinary income realized by an optionee upon the exercise of a NQO. In the case of an optionee subject to the
&quot;short-swing&quot; profit recapture provisions of Section 16(b) of the Exchange Act,
the optionee realizes income only upon the lapse of the six-month period under
Section 16(b), unless the optionee elects to recognize income immediately upon
exercise of his or her option.</p>

<p style="text-indent: 0.5in" align="justify">The tax
discussion set forth above is included for general information only and is
based upon present law. Each holder of options under the 2004 Directors' Stock
Option Plan should consult his or her own tax advisor as to the specific tax
consequences of the transaction to him or her, including application and effect
of federal, state, local and other tax laws and the possible effects of changes
in federal or other laws.</p>

<p><b>New Plan Benefits</b></p>

<p style="text-indent: 0.5in" align="justify">Because awards under the 2004 Directors' Stock Option Plan are discretionary, except as follows, no future awards
under the 2004 Directors' Stock
Option Plan are determinable at this
time. Options to purchase 20,000 shares of Common Stock are to be
granted under the 2004 Directors' Stock Option Plan
to each non-employee director at the later to occur of (i) the date the 2004
Directors' Stock Option Plan is adopted by the Company's shareholders, or (ii) the
date he or she is first elected or appointed as a non-employee director of the
Company. In addition, effective on the anniversary
dates of commencement of service on the Board of Directors, options to purchase
an additional 15,000 shares shall automatically be granted to the non-employee
director provided that, at that time, he or she is a non-employee director.</p>

<p style="text-indent: 0.5in" align="justify">&nbsp;</p>

<p style="text-indent: 0.5in" align="center">20</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p style='text-indent:0in'><b>Possible Anti-Takeover Effects</b></p>

<p style="text-indent: 0.5in" align="justify">Although not intended as an anti-takeover
measure by the Board of Directors, one of the possible effects of the 2004
Directors' Stock Option Plan could be to place additional shares, and to increase
the percentage of the total number of shares outstanding, in the hands of the
Company's directors and officers. These persons may be viewed as part of, or
friendly to, incumbent management and may, therefore, under certain
circumstances be expected to make investment and voting decisions in response
to a hostile takeover attempt that may serve to discourage or render more
difficult the accomplishment of the attempt.</p>

<p style="text-indent: 0.5in" align="justify">In addition, options may, in the
discretion of the Board of Directors or an appropriate committee, contain a
provision providing for the acceleration of the exercisability of outstanding,
but unexercisable, installments upon the first public announcement of a tender
offer, merger, consolidation, sale of all or substantially all of the assets of
the Company, or other attempted changes in the control of the Company. In the
opinion of the Company's Board of Directors, such an acceleration provision
merely ensures that optionees under the 2004 Directors' Stock Option
Plan will be able to exercise their options as intended by the Company's Board
of Directors and shareholders prior to any such extraordinary corporate
transaction that might serve to limit or restrict that right. The Company's
Board of Directors is, however, presently unaware of any threat of hostile
takeover involving the Company.</p>

<p align=left style='text-align:left;text-indent:0in;page-break-after:
avoid'><b>Required Vote and Board Recommendation</b></p>

<p style='margin-top:12.0pt;text-indent:.5in;page-break-after:
avoid' align="justify">The affirmative vote of a majority of the shares
of the Company's common stock present in person or represented by proxy at the
meeting and entitled to vote on this proposal will constitute shareholder
ratification and approval of the 2004 Directors' Stock Option Plan;
provided, that at least a majority of the Company's outstanding shares of
common stock entitled to vote on this proposal are present in person or
represented by proxy at the meeting. As noted above, the Board of Directors has
approved the 2004 Directors' Stock
Option Plan. Shareholders should be
aware, however, that the Board of Directors may be viewed as having a conflict
of interest in approving, and recommending that shareholders approve, the 2004
Directors' Stock Option Plan.</p>

<p align=left style='margin-top:12.0pt;text-align:left;
text-indent:.5in'><b>THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE &quot;FOR&quot; THE RATIFICATION AND APPROVAL OF THE 2004 DIRECTORS'
STOCK OPTION PLAN.</b></p>

<p align=center style='margin-top:12.0pt;text-align:center;
page-break-after:avoid'><b>RATIFICATION OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS</b></p>

<p align=center style='margin-top:12.0pt;text-align:center;
page-break-after:avoid'><b>(Proposal No. 5)</b></p>

<p style='margin-top:12.0pt;text-indent:.5in' align="justify">The Audit Committee
of the Company has appointed the firm of Moss Adams, LLP as the Company's independent certified public accountants for the fiscal year ending
June 30, 2004, and is asking the shareholders to ratify this appointment by the
holders of a majority of the shares represented either in person or proxy at
the Annual Meeting.&nbsp; In the event that the shareholders do not ratify the
selection of Moss Adams, LLP as the Company's independent public accountants, the
Board of Directors will consider the selection of another independent public
accounting firm. McGladrey
&amp; Pullen, LLP audited the Company's financial statements for the year ended
June 30, 2003 that were included in the Company's most recent annual report on
Form 10-KSB.</p>



<p style='margin-top:12.0pt;text-indent:.5in' align="justify">&nbsp;</p>



<p style='margin-top:12.0pt;' align="center">21</p>



<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>



<p style='text-indent:.5in' align="justify">Representatives
of Moss Adams, LLP are expected to be present at the annual meeting, and
will have the opportunity to make a statement if such representative desires to
do so, and will be available to respond to appropriate questions. </p>

<p align=center style='text-align:center;text-indent:0in;page-break-after:
avoid'><b>ACCOUNTING FEES</b></p>

<p style='page-break-after:avoid'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Aggregate
fees billed to the Company by McGladrey &amp; Pullen, LLP during the year ended
June 30, 2003 are as follows:</p>

<div align="left">
  <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="657" id="AutoNumber3">
    <tr>
      <td width="554">

<p style='margin-left:44.0pt;text-indent:0in;page-break-after:avoid'>Audit
fees........................................................................................ </p>

      </td>
      <td width="136" align="right">$ 136,000</td>
    </tr>
    <tr>
      <td width="554">

<p style='margin-left:44.0pt;text-indent:0in;page-break-after:avoid'>Tax
Services.................................................................................... </p>

      </td>
      <td width="136" align="right">$&nbsp;&nbsp; 30,000</td>
    </tr>
    <tr>
      <td width="554">

<p style='margin-left:44.0pt;text-indent:0in;page-break-after:avoid'>
Audit-related fees, audit of pension plan and various other matters....... </p>

      </td>
      <td width="136" align="right">$&nbsp;&nbsp; 30,000</td>
    </tr>
  </table>
</div>

<p style='margin-left:35.0pt;text-indent:-7.0pt;page-break-after:
avoid'>__________________________</p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:
0in;margin-left:35.0pt;margin-bottom:.0001pt;text-indent:1.0pt;page-break-after:
avoid' align="justify">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Includes fees for the audit of the
Company's annual financial statements for the year ended June 30, 2003, and the
reviews of the condensed financial statements included in the Company's
quarterly reports on Forms 10-QSB for the year ended June 30, 2003.</p>

<p style='margin-left:33.0pt;text-indent:0in' align="justify">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Audit Committee has considered whether the provision of these services is
compatible with maintaining the principal accountant's independence.</p>

<p style='text-indent:33.0pt'>No fees have been billed to the Company by Moss
Adams, LLP as of the date of filing of this Proxy Statement.</p>

<p align=center style='text-align:center;text-indent:0in'><b>CHANGES IN THE COMPANY'S
CERTIFYING ACCOUNTANT</b></p>

<p align="justify" style="text-indent: 0.5in">On October
16, 2003, the Company dismissed McGladrey &amp; Pullen, LLP (&quot;McGladrey&quot;) as
its independent accountant. The reports of McGladrey on the Company's financial
statements for the past two fiscal years contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. The Company's decision to change
accountants was approved by its Audit Committee.</p>

<p align="justify" style="text-indent: 0.5in">In
connection with its audits for the two most recent fiscal years and through
October 16, 2003, there have been no disagreements with McGladrey on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of McGladrey would have caused them to make reference thereto in
their report on the financial statements for such years. During the two most
recent fiscal years and through October 16, 2003, there have been no reportable
events (as defined in Regulation S-K Item 304(a)(1)(v)).</p>

<p align="justify" style="text-indent: 0.5in">The
Company's Audit Committee approved the engagement of Moss Adams, LLP (&quot;Moss
Adams&quot;) as its new independent accountant, for the fiscal year ending June 30,
2004 to replace McGladrey. During the two most recent fiscal years and through
October 16, 2003, the Company has not consulted with Moss Adams regarding
either (i)&nbsp;the application of accounting principles to a specified
transaction, either completed or proposed; or the type of audit opinion that
might be rendered on the Company's financial statements; or (ii)&nbsp;any
matter that was either the subject of a disagreement, as that term is defined
in Item&nbsp;304(a)(1)(iv) of Regulation&nbsp;S-K and the related instructions
to Item&nbsp;304 of Regulation&nbsp;S-K, or a reportable event, as that term is
defined in Item&nbsp;304(a)(1)(v) of Regulation&nbsp;S-K. The Company has
authorized McGladrey to respond fully to any inquiries from Moss Adams relating
to its engagement as the Company's independent accountant.</p>

<p align="justify" style="text-indent: 0.5in">&nbsp;</p>

<p align="center">22</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p align=left style='text-align:left;text-indent:0in;page-break-after:
avoid'><b>Required Vote and Board Recommendation</b></p>

<p style='page-break-after:avoid' align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
affirmative vote of a majority of the shares of the Company's common stock
present in person or represented by proxy at the meeting and entitled to vote
on this proposal will constitute shareholder ratification of the appointment.
If shareholder approval of this proposal is not obtained, the Company's Audit
Committee may reconsider the Company's
appointment of Moss Adams, LLP
as the Company's independent auditors.</p>

<p style='text-indent:.5in' align="justify"><b>THE BOARD
OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE &quot;FOR&quot; THE RATIFICATION OF
THE APPOINTMENT OF MOSS ADAMS, LLP TO SERVE AS THE COMPANY'S INDEPENDENT AUDITORS FOR
THE FISCAL YEAR ENDING JUNE&nbsp;30,&nbsp;2004.</b></p>

<p style='text-indent:.5in' align="justify">&nbsp;</p>

<p style='text-indent:.5in' align="justify">&nbsp;</p>

<p style='text-indent:.5in' align="justify">&nbsp;</p>

<p align="center">23</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>

<p align="center"><b>ANNUAL REPORT</b></p>

<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Company's Annual Report containing
audited financial statements for the fiscal years ended June 30, 2003
accompanies this Proxy Statement.&nbsp; Such report is not incorporated herein and
is not deemed to be a part of this proxy solicitation material.</p>

<p align="center"><b>PROPOSALS OF SHAREHOLDERS</b></p>

<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pursuant to Rule 14a-8 of the Securities
and Exchange Commission, proposals by shareholders which are intended for
inclusion in the Company's proxy statement and proxy and to be presented at the
Company's next Annual Meeting must be received by the Company by June 30, 2004, in
order to be considered for inclusion in the Company's proxy materials. Such
proposals should be addressed to the Company's Secretary and may be included in
next year's proxy materials if they comply with certain rules and regulations
of the Securities and Exchange Commission governing shareholder proposals. The
Shareholder Notice must also comply with certain other requirements set forth
in the Company's Bylaws, a copy of which may be obtained by written request
delivered to the Company's Secretary.</p>

<p align="center"><b>OTHER MATTERS</b></p>

<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Board of Directors knows of no other
matters which will be acted upon at the Annual Meeting. If any other matters
are presented properly for action at the Annual Meeting or at any adjournment
thereof, it is intended that the proxy will be voted with respect thereto in
accordance with the best judgment and in the discretion of the proxy holder.</p>

<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>THE COMPANY'S SHAREHOLDERS ARE URGED TO
COMPLETE, SIGN AND RETURN PROMPTLY THE ACCOMPANYING PROXY CARD IN THE ENCLOSED
ENVELOPE.</b></p>

<p align=left style='margin-top:12.0pt;margin-right:0in;
margin-bottom:0in;margin-left:3.0in;margin-bottom:.0001pt;text-align:left;
text-indent:-3.0in'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; By
Order of the Board of Directors,<br>
<br>
PRO-DEX, INC.<br>
<br>
<br>
/s/ Jeffrey J. Ritchey<br>
Corporate Secretary</p>

<p align=left style='text-align:left'>Santa
Ana, California<br>
October 17, 2003</p>



<p style='margin-top:12.0pt' align="justify">SHAREHOLDERS
MAY OBTAIN FREE OF CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB
FOR THE FISCAL YEAR ENDED June 30, 2003, (WITHOUT EXHIBITS) AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BY WRITING TO:&nbsp; INVESTOR RELATIONS, PRO-DEX,
INC., 151 E. COLUMBINE AVE, SANTA ANA, CALIFORNIA 92707 OR CALL (714) 241-4411.</p>



<p style='margin-top:12.0pt' align="justify">&nbsp;</p>



<p style='margin-top:12.0pt' align="justify">&nbsp;</p>



<p style='margin-top:12.0pt' align="center">24</p>

<b><hr color="#000080"><br clear=all
style='page-break-before:always'>
</b>

<p align=center style='text-align:center'><b>THIS
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS<br>
ANNUAL
MEETING OF SHAREHOLDERS <br>
TO
BE HELD DECEMBER 11, 2003 </b></p>



<p align="justify">The undersigned hereby appoints
Michael A. Mesenbrink and Patrick L. Johnson, and each of them, individually,
the attorney, agent and proxy of the undersigned, each with the power to
appoint his substitute, to represent and vote, as designated below, all shares
of common stock of Pro-Dex, Inc. held of record by the undersigned on
October&nbsp;28,&nbsp;2003, at the annual meeting of shareholders to be
held at the DoubleTree Hotel Santa Ana, 201 E. MacArthur Blvd, Santa Ana,
California 92707 on December 11, 2003, at 8:00&nbsp;a.m., local time, and at any and all
adjournments thereof.</p>



<p style='margin-left:.5in;text-indent:-.5in'>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; To elect one Class III director as follows:</p>



<div align="left">



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse' width="754">
 <tr>
  <td valign=top style='width:372;padding:0in; '>
  <p><b>FOR </b> <br>
  approval of the
  election of the Class III nominee listed below. </p>
  </td>
  <td valign=top style='width:280;padding:0in; '>
  <p>&nbsp;&nbsp;&nbsp;&nbsp; <b>WITHHOLD AUTHORITY </b> <br>
  to vote for the Class
  III nominee listed below. </p>
  </td>
 </tr>
</table>



</div>



<p style='margin-left:35.0pt;text-indent:-18.5pt'>Mark P. Murphy</p>



<p style='margin-bottom:12.0pt' align="justify">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; To
ratify and approve an amendment to the Company's Articles of Incorporation to increase
the quorum requirement, from one-third to a majority of the votes entitled to
be cast, represented in person or by proxy, at a meeting of the Company's
shareholders (circle one).</p>

<p align=center style='margin-bottom:12.0pt;text-align:center'><b>FOR &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AGAINST&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
ABSTAIN</b></p>

<p style='margin-bottom:12.0pt'>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; To
ratify and approve the adoption of the Company's 2004 Stock Option Plan (circle
one).</p>

<p align=center style='margin-bottom:12.0pt;text-align:center'><b>FOR &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AGAINST&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
ABSTAIN</b></p>

<p style='margin-bottom:12.0pt' align="justify">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; To
ratify and approve the adoption of the Company's 2004 Directors' Stock Option
Plan (circle one).</p>

<p align=center style='margin-bottom:12.0pt;text-align:center'><b>FOR &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AGAINST&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
ABSTAIN</b></p>

<p align="justify">5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; To ratify the
appointment of Moss Adams, LLP as the Company's independent auditors for the fiscal
year ending June 30, 2004 (circle one). </p>



<p align=center style='text-align:center'><b>FOR
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AGAINST&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
ABSTAIN</b></p>



<p align="justify">6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In their discretion, the
proxies are authorized to vote upon such other business as may properly come
before the meeting or any adjournment thereof. </p>



<p style='text-indent:38.5pt' align="justify">This proxy
when properly executed will be voted in the manner directed herein by the
undersigned shareholder. If no direction is made, this proxy will be voted
&quot;FOR&quot; all Proposals. </p>



<p><b>&nbsp;</b></p>



<p align="center">25</p>

<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>



<p align="justify">



<b>PLEASE
MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. </b>
</p>
</p>



<table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="725" id="AutoNumber4">
  <tr>
    <td width="427">&nbsp;</td>
    <td width="331">Dated:____________, 2003 <br>
    Name:_________________ <br>
    Common Shares:_________ </td>
  </tr>
  <tr>
    <td width="427">&nbsp;</td>
    <td width="331">_______________________ </td>
  </tr>
  <tr>
    <td width="427">&nbsp;</td>
    <td width="331">Signature </td>
  </tr>
  <tr>
    <td width="427">&nbsp;</td>
    <td width="331">_______________________ </td>
  </tr>
  <tr>
    <td width="427">&nbsp;</td>
    <td width="331">Signature (if jointly held) <br>
&nbsp;</td>
  </tr>
  <tr>
    <td width="427">&nbsp;</td>
    <td width="331">
    <p align="justify">Please sign exactly as name appears in the records of Pro-Dex,
    Inc. When shares are held by joint tenants, both should sign. When signing
    as attorney, as executor, administrator, trustee or guardian, please give
    full title as such. If a corporation, please sign in full corporate name by
    President or other authorized officer. If a partnership, please sign in
    partnership name by authorized person. </td>
  </tr>
</table>







<p align=center style='text-align:center'>&nbsp;</p>







<p align=center style='text-align:center'>26</p>

<hr color="#000080"><br clear=all
style='page-break-before:always'>


<p align=center style='text-align:center'><i>Appendix A</i></p>



<p align=center style='margin-top:0in;text-align:center'><b>ARTICLES OF AMENDMENT<br>
TO THE<br>
ARTICLES OF INCORPORATION<br>
OF<br>
PRO-DEX, INC.</b></p>

<p align=center style='margin-top:0in;text-align:center'><b>&nbsp;</b></p>

<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pursuant to the provisions of the Colorado
Business Corporation Act, the undersigned corporation adopts the following
Articles of Amendment to its Articles of Incorporation:</p>

<p style='margin-left:.5in;text-indent:0in'>FIRST:&nbsp;
The name of the corporation is Pro-Dex, Inc.</p>

<p align="justify" style="text-indent: 0.5in">SECOND:&nbsp; The following amendment to the
Articles of Incorporation of Pro-Dex, Inc. was adopted on December&nbsp;11,&nbsp;2003,
as prescribed by the Colorado Business Corporation Act, by a vote of the
shareholders of the corporation. The number of shares voted for the amendment
was sufficient for approval. The first sentence of Article 6 of the Articles of
Incorporation of Pro-Dex, Inc. is replaced with the following:</p>

<p style='margin-top:12.0pt;margin-right:1.0in;margin-bottom:0in;
margin-left:71.5pt;margin-bottom:.0001pt;text-indent:.5pt' align="justify"><u>ARTICLE
6</u>:&nbsp;&nbsp;&nbsp;&nbsp; A majority of the votes entitled to be cast on the matter by a
voting group, represented in person or by proxy, shall constitute a quorum of
that voting group for action on that matter at a meeting of shareholders.</p>

<p style="text-indent: 0.5in">THIRD:&nbsp; There is no exchange,
reclassification or cancellation of issued shares provided for in this
amendment.</p>

<p style="text-indent: 0.5in">FOURTH:&nbsp; Such amendment does not effect
any change in the amount of stated capital.</p>



<table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="725" id="AutoNumber5">
  <tr>
    <td width="324" valign="top">Date: December 11, 2003</td>
    <td width="434" valign="top"> <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <br>
    </u>_____________, President</td>
  </tr>
  <tr>
    <td width="324" valign="top">&nbsp;</td>
    <td width="434" valign="top">&nbsp; </td>
  </tr>
  <tr>
    <td width="324" valign="top">&nbsp;</td>
    <td width="434" valign="top">&nbsp; </td>
  </tr>
  <tr>
    <td width="324">&nbsp;</td>
    <td width="434">

<p align=left style='margin-top:0in;margin-right:0in;
text-align:left'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></p>

    </td>
  </tr>
  <tr>
    <td width="324">&nbsp;</td>
    <td width="434">

<p align=left style='margin-right:0in;
text-align:left'>_____________, Secretary</p>





    </td>
  </tr>
</table>
<p align="left" style="margin-right: 0in">&nbsp;</p>
<p align="left" style="margin-right: 0in">&nbsp;</p>





<hr color="#000080"><br clear=all
style='page-break-before:always'>


<p align="center"><i>Appendix B</i></p>


<p align="center">&nbsp;</p>


<p align="center"><b>PRO-DEX, INC.</b></p>
<p align="center"><b>2004 STOCK OPTION PLAN</b></p>
<p align="justify" style="text-indent: 0.5in">This 2004 Stock Option Plan (the &quot;<u>Plan</u>&quot;)
is adopted in consideration for services rendered and to be rendered to Pro-Dex,
Inc. and related companies.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Definitions</u>. The terms used in this Plan shall, unless otherwise
indicated or required by the particular context, have the following meanings:</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Board</u>: The Board of Directors of Pro-Dex, Inc.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Code</u>: The Internal Revenue Code of 1986, as amended.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Common Stock</u>: The no par value common stock of Pro-Dex, Inc.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Company</u>: Pro-Dex, Inc., a corporation incorporated under the laws of
Colorado, and any successors in interest by merger, operation of law, assignment
or purchase of all or substantially all of the property, assets or business of
the Company.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Date of Grant</u>: The date on which an Option (see below) is granted under
the Plan.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Disinterested Person</u>: A director who has not been granted or awarded
equity securities pursuant to any plan of the Company or of any Related Company
of the Company during one year prior to that director's service as an
administrator of the Plan, except as otherwise provided in Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the &quot;<u>Exchange
Act</u>&quot;) with respect to (i) participation in formula plans or ongoing
securities acquisitions plans, and (ii) an election to receive securities for an
annual retainer fee.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Employee</u>: An Employee is an employee of the Company or any Related
Company.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Fair Market Value</u>: The Fair Market Value of the Option Shares. Such Fair
Market Value as of any date shall be determined by the Option Committee as of
the last business day for which the prices or quotes discussed in this sentence
are available prior to the date an Option is granted and shall mean (i) the
average (on that date) of the high and low prices of the Common Stock on the
principal national securities exchange by which the Common Stock is traded, if
the stock is then traded on a national securities exchange; or, (ii) the last
reported sale price (on that date) of the Common Stock on NASDAQ, if the stock
is not then traded on a national securities exchange; or (iii) the closing bid
price (or average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the stock is not reported
on NASDAQ. However, if the Common Stock is not publicly-traded at the time an
Option is granted under the Plan, Fair Market Value shall be deemed to be the
fair value of the stock as determined in good faith by the Board or the Option
Committee, and a written record of the method of determining such value shall be
maintained.</p>





<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>
<p style="margin-left:0in; text-indent:1in" align="justify">&nbsp;</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Incentive
Stock Options (&quot;ISOs&quot;)</u>: &quot;Incentive Stock Options&quot; as that term is defined in
Section 422 of the Code.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Key Employee</u>: A person designated by the Option Committee who either is
employed by the Company or a Related Company (see below) and upon whose
judgment, initiative and efforts the Company or a Related Company is largely
dependent for the successful conduct of its business; provided, however, that
Key Employees shall not include those members of the Board who are not employees
of the Company or a Related Company.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(k)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Non-Incentive Stock Options (&quot;Non-ISOs&quot;</u>): Options which are not intended
to qualify as &quot;Incentive Stock Options&quot; under Section 422 of the Code.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(l)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Option</u>:
The rights granted to an Employee to purchase Common Stock pursuant to the terms
and conditions of an Option Agreement (see below).</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(m)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Option Agreement</u>: The written agreement (and any amendment or supplement
thereto) between the Company and an Employee designating the terms and
conditions of an Option.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(n)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Option Committee</u>: With respect to grants of Options to Employees who are
not also Officers and/or Directors of the Company, the Plan shall be
administered by an Option Committee (&quot;<u>Option Committee</u>&quot;) composed of the
Board or at least two members of the Board. With respect to grants of Options to
Employees who are also Officers or Directors, the Plan shall be administered by
a committee, selected by the Board, consisting of two or more persons, each of
whom is a Disinterested Person. Such committee may also be deemed an Option
Committee.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(o)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Option Shares</u>: The shares of Common Stock underlying an Option granted to
an Employee.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(p)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Optionee:</u>&nbsp; An Employee who has been granted an Option.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(q)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Related Company</u>: Any corporation that is a &quot;parent corporation&quot; or a
&quot;subsidiary corporation&quot; with respect to the Company, as those terms are defined
in Section 425 of the Code. The determination of whether a corporation is a
Related Company shall be made without regard to whether the corporation or the
relationship between the corporation and the Company now exists or comes into
existence hereinafter.</p>
<p style="margin-left:0in;page-break-after:avoid; text-indent:0.5in" align="justify">
2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Purpose and Scope</u>.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
purpose of this Plan is to advance the interests of the Company and its
shareholders by affording Employees an opportunity for investment in the Company
and the incentive advantages inherent in stock ownership in this Company.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Plan authorizes the Option Committee to grant Options to purchase shares of
Common Stock to Employees selected by the Option Committee while considering
criteria such as employment position or other relationship with the Company,
duties and responsibilities, ability, productivity, length of service or
association, morale, interest in the Company, recommendations by supervisors,
and other matters.</p>
<p style="margin-left:0in" align="center">2</p>





<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>
<p style="margin-left:0in;page-break-after:avoid; text-indent:0.5in" align="justify">
3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Administration of the Plan</u>.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Plan shall be administered by the Option Committee. The Option Committee shall
have the authority granted to it under this Section and under each other Section
of the Plan.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with and subject to the provisions of the Plan, the Option
Committee shall select the Optionees, shall determine (i) the number of shares
of Common Stock to be subject to each Option, (ii) the time at which each Option
is to be granted, (iii) whether an Option shall be granted in exchange for the
cancellation and termination of a previously granted option or options under the
Plan or otherwise, (iv) the purchase price for the Option Shares, (v) the option
period, and (vi) the manner in which the Option becomes exercisable. In
addition, the Option Committee shall fix such other terms of each Option as the
Option Committee may deem necessary or desirable. The Option Committee shall
determine the form of Option Agreement to evidence each Option.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Option Committee from time to time may adopt such rules and regulations for
carrying out the purposes of the Plan as it may deem proper and in the best
interests of the Company. The Option Committee shall keep minutes of its
meetings and those minutes shall be distributed to every member of the Board.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board may from time to time make such changes in and additions to the Plan as it
may deem proper and in the best interest of the Company; provided, however, that
no such change or addition shall impair any Option previously granted under the
Plan, and that the approval by the affirmative vote of the holders of a majority
of the Company's securities entitled to vote and represented at a meeting duly
held in accordance with the applicable laws of the State of California, shall be
required for any amendment which would:</p>
<p style="margin-left:2.0in;text-indent:-.5in" align="justify">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
materially modify the eligibility requirements for receiving Options under the
Plan;</p>
<p style="margin-left:2.0in;text-indent:-.5in" align="justify">(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
materially increase the benefits accruing to Employees under the Plan; or</p>
<p style="margin-left:2.0in;text-indent:-.5in" align="justify">(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
increase the number of shares of Common Stock that may be issued under the Plan.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
actions taken and all interpretations and determinations made by the Option
Committee in good faith (including determinations of Fair Market Value) shall be
final and binding upon all Employees, the Company and all other interested
persons. No member of the Option Committee shall be personally liable for any
action, determination or interpretation made in good faith with respect to the
Plan, and all members of the Option Committee shall, in addition to rights they
may have as Directors of the Company be fully protected by the Company with
respect to any such action, determination or interpretation.</p>
<p style="margin-left:0in" align="center">3</p>





<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is
the further intent of the Plan that it conform in all respects with the
requirements of Rule 16b-3 of the Securities and Exchange Commission under the
Exchange Act (&quot;<u>Rule 16b-3</u>&quot;). To the extent that any aspect of the Plan or
its administration is at any time viewed as inconsistent with the requirements
of Rule 16b-3 or, in connection with ISOs, the Code, that aspect shall be deemed
to be modified, deleted, or otherwise changed as necessary to ensure continued
compliance with the Rule 16b-3 requirements.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Number of Shares</u>. The Board is authorized to appropriate, issue and sell
for the purposes of the Plan, and the Option Committee is authorized to grant
Options with respect to, a total number, not in excess of 1,500,000 shares of
Common Stock, either treasury or authorized but unissued, or the number and kind
of shares of stock or other securities which in accordance with <u>Section 9</u>
shall be substituted for the 1,500,000 shares or into which such 1,500,000
shares shall be adjusted. Such number of shares shall include any options
granted under any other stock option plan of the Company that may from time to
time become subject to and governed by the terms and conditions of this Plan.
All or any unsold shares subject to an Option that for any reason expires or
otherwise terminates, may again be made subject to Options under the Plan.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Eligibility</u>. Options which are intended to qualify as ISOs will be
granted only to Key Employees. Key Employees and other Employees may hold more
than one Option under the Plan and may hold Options under the Plan and options
granted pursuant to other plans or otherwise.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Option Price</u>. The Option Committee shall determine the purchase price for
the Options Shares, provided that the purchase price to be paid by Optionees for
the Option Shares which are intended to qualify as ISOs shall not be less than
100 percent of the Fair Market Value of the Option Shares at the time the ISO is
granted. The price per share to be paid by the Optionee at the time an NQO is
exercised shall not be less than 85% of the Fair Market Value on the date as of
which the NQO is granted, as determined by the Option Committee. The purchase
price for the Option Shares shall be a fixed, and cannot be a fluctuating,
price.</p>
<p style="margin-left:0in;page-break-after:avoid; text-indent:0.5in" align="justify">
7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Duration and Exercise of Options</u>.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Option granted under the Plan shall be exercisable on such date or dates and
during such period and for such number of shares as shall be determined pursuant
to the provisions of the instrument evidencing such Option. The Option Committee
shall have the right to accelerate the date of exercise of any Option, provided
that the Option Committee shall not accelerate the exercise of any ISO granted
if such acceleration would violate the annual vesting limitation contained in
Section 422(d)(1) of the Code.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Except as otherwise permitted under <u>Section 11</u>, during the lifetime of
the Optionee, the Option shall be exercisable only by the Optionee; provided,
that in the event of the legal disability of an Optionee, the guardian or
personal representative of the Optionee may exercise the Option. However, if the
Option is an ISO it may be exercised by the guardian or personal representative
of the Optionee only if such guardian or personal representative obtains a
ruling from the Internal Revenue Service or an opinion of counsel to the effect
that neither the grant nor the exercise of such power is violative of Section
422(b)(5) of the Code. Any opinion of counsel must be both from counsel and in a
form acceptable to the Option Committee.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">&nbsp;</p>
<p style="margin-left:0in" align="center">4</p>





<hr color="#000080">
<p><br clear=all
style='page-break-before:always'>


</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Option Committee may determine whether any Option shall be exercisable as
provided in Subsection (a) of this <u>Section 7</u> or whether the Options shall
be exercisable in installments only; if the Option Committee determines the
latter, it shall determine the number of installments and the percentage of the
Option exercisable at each installment date. All such installments shall be
cumulative.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the
Optionee ceases to be employed by either the Company or a Related Company
because of the death or permanent and total disability (as defined in Section
22(e) (3) of the Code) of the Optionee, any Option held by the Optionee at the
time his employment ceases may be exercised within 90 days after the date his
employment ceased, but only to the extent that the Option was exercisable
according to its terms on the date the Optionee's employment ceased. After such
90-day period, any unexercised portion of an Option shall expire.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">
(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding the provisions of Subsection (d) of this <u>
Section 7</u>, if an Optionee's employment by the Company or a Related Company
ceases for any reason other than the Optionee's death or permanent and total
disability, any unexercised portion of any Option held by the Optionee at the
time his employment ceases may be exercised within 30 days after the date his
employment ceased, but only to the extent that the Option was exercisable
according to its terms on the date the Optionee's employment ceased. After such
date, any unexercised portion of an Option shall expire.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Option shall be exercised in whole or part by delivering to the office of the
Treasurer of the Company written notice of the number of shares with respect to
which the Option is to be exercised and by paying in full the purchase price for
the Option Shares purchased as set forth in <u>Section 8</u>; provided, that an
Option may not be exercised in part unless the purchase price for the Option
Shares purchased is at least $2,000.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the
extent required to qualify for the exemption provided by Rule 16b-3 under the
Exchange Act, and any successor provision, at least six months must elapse from
the date of acquisition of an Option by any person who is subject to the
reporting requirements of Section 16(a) of the Exchange Act to the date of
exercise of such Option or disposition of the Option Shares.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Payment for Option Shares</u>. If the purchase price of the Option Shares
purchased by any Optionee at one time exceeds $2,000, the Option Committee may
permit all or part of the purchase price for the Option Shares to be paid by the
Optionee by (a) delivering to the Company shares of the Company's common Stock
previously owned by the Optionee with a Fair Market Value as of the date of
payment equal to the portion of the purchase price for the Option Shares that
the Optionee does not pay in cash, (b) having shares withheld from the amount of
shares to be received by the Optionee, (c) delivering an irrevocable
subscription agreement obligating the Optionee to take and pay for the shares to
be purchased within one year of the date of such exercise, or (d) complying with
any other payment mechanisms as the Option Committee may approve from time to
time. As a condition to the exercise of any Option granted under this Plan, the
Optionee shall make such arrangements as the Option Committee may require for
the satisfaction of any federal, state or withholding tax obligations which may
arise in connection with such exercise. The issuance, transfer or delivery of
certificates of shares of Common Stock pursuant to the exercise or Options may
be delayed, at the discretion of the Option Committee, until the Option
Committee is satisfied that the applicable requirements of federal and state
securities laws and the withholding provisions of the Code have been met. Until
such person has been issued a certificate or certificates for the Option Shares
so purchased, he or she shall possess no rights of a recordholder with respect
to any of such shares.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">&nbsp;</p>
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<p style="margin-left:0in;page-break-after:avoid; text-indent:0.5in" align="justify">
9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Change in Stock, Adjustments, Inc.</u></p>
<p style="margin-left:0in; text-indent:1in" align="justify">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the
event that each of the outstanding shares of Common Stock (other than shares
held by dissenting shareholders which are not changed or exchanged) should be
changed into, or exchanged for, a different number or kind of shares of stock or
other securities of the Company, or, if further changes or exchanges of any
stock or other securities into which the Common Stock shall have been changed,
or for which it shall have been exchanged, shall be made (whether by reason of
merger, consolidation reorganization, recapitalization, stock dividends,
reclassification, split-up, combination or shares or otherwise(, then there
shall be substituted for each share of Common Stock that is subject to the Plan
but not subject to an outstanding Option thereunder, the number and kind of
shares of stock or other securities into which each outstanding share of Common
Stock (other than shares held by dissenting shareholders which are not changed
or exchanged) shall be so changed or for which each outstanding share of Common
Stock (other than shares held by dissenting shareholders) shall be exchanged.
Any securities so substituted shall be subject to similar successive
adjustments.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the
event of any such changes or exchanges, the Option Committee shall determine
whether, in order to prevent dilution or enlargement of rights, an adjustment
should be made in the number, or kind, or Option price of the shares or other
securities then subject to an Option or Options granted pursuant to the Plan and
the Option Committee shall make any such adjustment, and such adjustments shall
be made and shall be effective and binding for all purposes of the Plan.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">10.&nbsp;&nbsp;&nbsp;
<u>Relationship to Employment</u>. Nothing contained in the Plan, or in any
Option granted pursuant to the Plan, shall confer upon any Optionee any right
with respect to continuance of employment by the Company, or interfere in any
way with the right of the Company to terminate the Optionee's employment at any
time.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">11.&nbsp;&nbsp;&nbsp;
<u>Nontransferability of Option</u>. No Option granted under the Plan shall be
transferable by the Optionee, either voluntarily or involuntarily, except by
will or the laws of descent and distribution, pursuant to a qualified domestic
relations order as defined in the Code, or pursuant to the Employee Retirement
Income Security Act or rules promulgated thereunder; except that (a) Optionees
who are not subject to Section 16(b) of the Exchange Act may upon written notice
transfer an Option (i) to an Optionee's spouse, parents, siblings, or lineal
descendants, or (ii) to a trust for the benefit of the Optionee or any of the
Optionee's spouse, parents, siblings, or lineal descendants, or (iii) to any
corporation or partnership controlled by the Optionee; and (b) Optionees who are
subject to Section 16(b) of the Exchange Act may transfer Options to immediate
family members and family trusts. No Option shall be subject to execution,
attachment or similar process. Except as specifically provided herein, any
attempt to transfer the Option shall void the Option.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">&nbsp;</p>
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</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">12.&nbsp;&nbsp; <u>
Rights as a Shareholder</u>. No person shall have any rights as a shareholder
with respect to any shares covered by an Option until that person shall become
the holder of record of such shares and, except as provided in <u>Section 9</u>,
no adjustments shall be made for dividends or other distributions or other
rights as to which there is an earlier record date.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">13.&nbsp;&nbsp;&nbsp;
<u>Securities Laws Requirements</u>. No Option Shares shall be issued unless and
until, in the opinion of the Company, any applicable registration requirements
of the Securities Act of 1933, as amended (&quot;<u>Securities Act</u>&quot;), any
applicable listing requirements of any securities exchange on which stock of the
same class is then listed, and any other requirements of law or of any
regulatory bodies having jurisdiction over such issuance and delivery, have been
fully complied with. Each Option and each Option Share certificate may be
imprinted with legends reflecting federal and state securities laws,
restrictions and conditions, and the Company may comply therewith and issue
&quot;stop transfer&quot; instructions to its transfer agent and registrar in good faith
without liability.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">14.&nbsp;&nbsp; <u>
Disposition of Shares</u>. Each Optionee, as a condition of exercise, shall
represent, warrant and agree, in a form of written certificate approved by the
Company, as follows: (a) that all Option Shares are being acquired solely for
his own account and not on behalf of any other person or entity; (b) that no
Option Shares will be sold or otherwise distributed in violation of the
Securities Act, or any other applicable federal or state securities laws; (c)
that if he is subject to reporting requirements under Section 16(a) of the
Exchange Act, he will (i) not violate Section 16(b) of the Exchange Act, (ii)
furnish the Company with a copy of each Form 4 and Form 5 filed by him, and
(iii) timely file all reports required under the federal securities laws; and
(d)&nbsp;that he will report all sales of Option Shares to the Company in writing on
a form prescribed by the Company.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">15.&nbsp;&nbsp; <u>
Effective Date of Plan; Termination Date of Plan</u>. The Plan shall be
effective on the date of the approval of the Plan by the affirmative vote of the
holders of a majority of the Company's securities entitled to vote and
represented at a meeting duly held in accordance with applicable law. The Plan
was adopted, subject to shareholder approval, by the Board as of October 16,
2003. The Plan shall terminate on October 16, 2013, except as to Options
previously granted and outstanding under the Plan at that time. No Options shall
be granted after the date on which the Plan terminates. In no event may the
Option period exceed ten years from the date on which the Option is granted. The
Plan may be abandoned or terminated at any earlier time by the Board, except
with respect to any Options then outstanding under the Plan.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">16.&nbsp;&nbsp; <u>
Limitation on Amount of Option</u>. The aggregate Fair Market Value (determined
at the time any ISO is granted) of the Common Stock with respect to which an
Optionee's ISOs, together with incentive stock options granted under any other
plan of the Company and any parent, are exercisable for the first time by such
Optionee during any calendar year shall not exceed $100,000. If an Optionee
holds ISOs that become first exercisable (including as a result of acceleration
of exercisability under the Plan) in any one year for shares having a Fair
Market Value at the date of grant in excess of $100,000, then the most recently
granted of the ISOs, to the extent that they are exercisable for shares having
an aggregate Fair Market Value in excess of the limit, shall be deemed to be
NQOs.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">&nbsp;</p>
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</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">17.&nbsp;&nbsp; <u>
Ten Percent Shareholder Rule</u>. With respect to ISOs, no Option may be granted
to a Key Employee who, at the time the Option is granted, owns stock possessing
more than 10 percent of the total combined voting power of all classes of stock
of the Company or of any &quot;parent corporation&quot; or &quot;subsidiary corporation&quot; as
those terms are defined in Section 425 of the Code, unless at the time the
Option is granted the purchase price for the Option shares is at least 110
percent of the Fair Market Value of the Option Shares at the time the ISO is
granted and such Option by its terms is not exercisable after the expiration of
five years from the Date of Grant. For purposes of the preceding sentence, stock
ownership shall be determined as provided in Section 425 of the Code.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">18.&nbsp;&nbsp;&nbsp;&nbsp;
<u>Withholding Taxes</u>. The Company, or any Related Company, may take such
steps as it may deem necessary or appropriate for the withholding of any taxes
which the Company, or any Related Company, is required by any law or regulation
or any governmental authority, whether federal, state or local, domestic or
foreign, to withhold in connection with any Option including, but riot limited
to, the withholding of all or any portion of any payment or the withholding of
issuance of Option Shares to be issued upon the exercise of any Option.</p>
<p style="margin-left:0in;page-break-after:avoid; text-indent:0.5in" align="justify">
19.&nbsp;&nbsp;&nbsp;&nbsp; <u>Change in Control, Stock Dividends,
Reorganization and Other Extraordinary Actions</u>.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If (i)
the company shall at any time be involved in a transaction described n Section
424(a) of the Code (or any successor provision) or any &quot;corporate transaction&quot;
described in the regulations thereunder; (ii) the Company shall declare
dividends payable in, or shall subdivide or combine, its Common Stock or (iii)
any other event with substantially the same effect shall occur, the Option
Committee shall, with respect to each outstanding Option, proportionately adjust
the number of Option Shares and/or the exercise price per share so as to
preserve the rights of the Optionee substantially proportionate to the rights of
the Optionee prior to such event, and to the extent that such action shall
include an increase or decrease in the number of Option Shares subject to
outstanding Options, the number of shares available under this Plan shall
automatically be increased or decreased, as this case may be, proportionately,
without further action on the part of the Option Committee, the Company or the
Company's shareholders.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the
Company is liquidated or dissolved, the Option Committee may allow the holders
of any outstanding Options to exercise all or any part of the unvested portion
of the Options held by them; provided, however, that such Options must be
exercised prior to the effective date of such liquidation or dissolution. If the
Option Holders do not exercise their Options prior to such effective date, each
outstanding Option shall terminate as of the effective date of the liquidation
or dissolution.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The grant of an Option shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure, to merge, consolidate or dissolve, to
liquidate or to sell or transfer all or part of its business or assets.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event of a Change in Control (as defined below) of the Company, the
Option Committee may, in its discretion, accelerate all outstanding Options so
that they immediately become fully vested and immediately exercisable for the
duration of the Option Term. For purposes of this Subsection (d), &quot;<u>Change in
Control</u>&quot; shall mean either one of the following: (i) when any &quot;person,&quot; as
such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than a
shareholder of the Company on the date of this Plan), the Company, a subsidiary
or a Company Employee Benefit Plan, (including any trustee of such Plan acting
as trustee) becomes, after the date of this Plan, the &quot;beneficial owner&quot; (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 35% or more of the combined voting power
of the Company's then outstanding securities; or (ii) the occurrence of a
transaction requiring shareholder approval, arid involving the sale of all or
substantially all of the assets of the Company or the merger of the Company with
or into another corporation.</p>
<p style="margin-left:0in" align="center">8</p>





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</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If at
any time the Company declares an Extraordinary Dividend, as defined below, all
Options shall accelerate and thereupon become fully vested and immediately
exercisable for the duration of the Option Term. For purposes of this Subsection
(e), &quot;<u>Extraordinary Dividend</u>&quot; shall mean a cash dividend payable to
holders of record of the Common Stock in an amount in excess of 10% of the then
Fair Market Value of the Company's Common Stock.</p>
<p style="margin-left:0in;page-break-after:avoid; text-indent:0.5in" align="justify">
20.&nbsp;&nbsp;&nbsp;&nbsp; <u>Other Provisions</u>.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The use
of a masculine gender in the Plan shall also include within its meaning the
feminine, and the singular may include the plural, and the plural may include
the singular, unless the context clearly indicates to the contrary.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
expenses of administering the Plan shall be borne by the Company.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Plan shall be construed to be in addition to any and all other compensation
plans or programs. Neither the adoption of the Plan by the Board nor the
submission of the Plan to the shareholders of the Company shall be construed as
creating any limitations on the power of authority of the Board to adopt such
other additional incentive or other compensation arrangements as the Board may
deem necessary or desirable.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
corporate laws of the State of Colorado shall govern all issues concerning the
relative rights of the Company and its shareholders under the Plan. All other
questions and obligations under the Plan shall be construed and enforced in
accordance with the internal laws of the State of California, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of California or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of California.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">
(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding anything to the contrary contained in this Plan,
the following provisions, in compliance with the California Corporate Securities
Law of 1968 and the rules and regulations promulgated thereunder, shall apply to
the Plan and all Options granted under the Plan:</p>
<p style="margin-left:0in; text-indent:1.5in" align="justify">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each Option shall be exercisable in whole or in consecutive installments,
cumulative or otherwise, during its term as determined in the discretion of the
Option Committee. Each Option granted to an Optionee shall provide for the right
to exercise at the rate of at least 20% per year over five years from the date
the Option is granted, subject to reasonable conditions such as continued
employment; however, in the case of an Option granted to officers, directors,
managers or consultants of the Company, the Option may become fully exercisable,
subject to reasonable conditions such as continued employment, at any time or
during any period established by the Company.</p>
<p style="margin-left:0in; text-indent:1.5in" align="justify">&nbsp;</p>
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<p style="margin-left:0in; text-indent:1.5in" align="justify">(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(A) if the Optionee's employment with the Company terminates for any reason
(other than involuntary dismissal for &quot;cause&quot; or voluntary resignation in
violation of any agreement to remain in the employ of the Company), he or she
may, at any time before the expiration of thirty days after termination or
before expiration of the Option, whichever first occurs, exercise the Option (to
the extent that the Option was exercisable by him or her on the date of the
termination of his or her employment); (B) if the Optionee's employment
terminates due to disability (as defined in Section 22(e)(3) of the Code and
subject to such proof of disability as the Option Committee may require), the
Option may be exercised by the Optionee (or by his guardian(s), or conservator(s),
or other legal representative(s)) before the expiration of six months after
termination or before expiration of the Option, whichever first occurs (to the
extent that the Option was exercisable by him or her on the date of the
termination of his or her employment); and (C) in the event of the death of the
Optionee, an Option exercisable by him or her at the date of his or her death
shall be exercisable by his or her legal representative(s), legatee(s), or
heir(s), or by his or her beneficiary or beneficiaries so designated by him or
her, as the case may be, within six months after his or her death or before the
expiration of the Option, whichever first occurs (to the extent that the Option
was exercisable by him or her on the date of his or her death).</p>
<p style="margin-left:0in; text-indent:1.5in" align="justify">(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Optionees under the Plan who do not otherwise have access to financial
statements of the Company will receive the Company's financial statements at
least annually.</p>
<p style="margin-left:0in; text-indent:1.5in" align="justify">(iv)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Except as permitted by rule 701 of the Securities Act, Options granted under the
Plan are nontransferable other than by will, by the laws of descent and
distribution, by instrument to an inter vivos or testamentary trust in which the
Options are to be passed to beneficiaries upon the death of the trustor (settlor),
or by gift to immediate family. The term &quot;immediate family&quot; means any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or
sister-in-law, and also includes adoptive relationships.</p>


<p align="center">&nbsp;</p>


<p align="center">10</p>


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<p>&nbsp;</p>
<p align="center"><i>Appendix C</i></p>
<p align="center">&nbsp;</p>
<p align="center"><b>PRO-DEX, INC.</b></p>
<p align="center"><b>2004 DIRECTORS' STOCK OPTION PLAN</b></p>
<p align="justify" style="text-indent: 0.5in">This 2004 Directors' Stock Option
Plan (the &quot;<u>Plan</u>&quot;) is adopted in consideration for services rendered and
to be rendered to Pro-Dex, Inc. and related companies.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Definitions</u>.
Unless otherwise indicated or required by the particular context, the terms used
in this Plan shall have the following meanings:</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;
<u>Board</u>: The Board of Directors of Pro-Dex, Inc.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;
<u>Code</u>: The Internal Revenue Code of 1986, as amended.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;<u>Common
Stock</u>: The no par value common stock of Pro-Dex, Inc.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Company</u>: Pro-Dex, Inc., a corporation incorporated under the laws of
Colorado, and any successors in interest by merger, operation of law, assignment
or purchase of all or substantially all of the property, assets or business of
the Company.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Date of Grant</u>: The date on which an Option (see below) is granted under
the Plan.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Fair Market Value</u>: If, at any time an Option is granted under the Plan,
the Company's Common Stock is publicly traded, Fair Market Value shall be
determined as of the last business day for which the prices or quotes discussed
in this sentence are available prior to the date an Option is granted and shall
mean (i) the average (on that date) of the high and low prices of the Common
Stock on the principal national securities exchange by which the Common Stock is
traded, if the stock is then traded on a national securities exchange; or, (ii)
the last reported sale price (on that date) of the Common Stock on NASDAQ, if
the stock is not then traded on a national securities exchange; or (iii) the
closing bid price (or average of bid prices) last quoted (on that date) by an
established quotation service for over-the-counter securities, if the stock is
not reported on NASDAQ. However, if the Common Stock is not publicly-traded at
the time an Option is granted under the Plan, Fair Market Value shall be as
determined in good faith by the Board after such consultation with outside
legal, accounting and other experts as the Board may deem advisable.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Nonemployee Director</u>: A person who is a member of the Board of Directors
and who is not an employee of the Company.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Option</u>: The rights to purchase Common Stock granted pursuant to the terms
and conditions of an Option Agreement (defined below).</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Option
Agreement</u>:&nbsp; The written agreement (including any amendments or
supplements thereto) between the Company and a Nonemployee Director designating
the terms and conditions of an Option.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">&nbsp;</p>
<p style="margin-left:0in; text-indent:1in" align="justify">&nbsp;</p>
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</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Option Shares</u>: The shares of Common Stock underlying an Option granted to
a Nonemployee Director.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(k)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Optionee:</u>&nbsp; A Nonemployee Director who has been granted an Option.</p>
<p style="margin-left:0in;page-break-after:avoid; text-indent:0.5in" align="justify">
2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Purpose and Scope</u>.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
purpose of this Plan is to advance the interests of the Company and its
shareholders by affording Nonemployee Directors, whose participation and
guidance contribute to the successful operation of the Company, and affording
them an opportunity for investment in the Company and the incentive advantages
inherent in stock ownership in this Company.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Plan authorizes that Options be granted to Nonemployee Directors according to
the formula set forth in <u>Section 3</u> of this Plan.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;It is the further intent of the Plan that it conform in all respects with the
requirements of Rule 16b-3 of the Securities and Exchange Commission under the
Exchange Act (&quot;<u>Rule 16b-3</u>&quot;). To the extent that any aspect of the Plan or
its administration is at any time viewed as inconsistent with the requirements
of Rule 16b-3 or, in connection with ISOs, the Code, that aspect shall be deemed
to be modified, deleted, or otherwise changed as necessary to ensure continued
compliance with the Rule 16b-3 requirements.</p>
<p style="margin-left:0in;page-break-after:avoid; text-indent:0.5in" align="justify">
3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Operation of the Plan</u>. </p>
<p style="margin-left:0in; text-indent:1in" align="justify">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Grant of Options; Amount and Timing</u>. Options to purchase 20,000 shares of
Common Stock shall be granted under the Plan to each Nonemployee Director at the
later to occur of (i) the date this Plan is adopted by the Company's
shareholders, or (ii) the date he or she is first elected or appointed a
Nonemployee Director of the Company. In addition, effective on the anniversary dates of commencement of service on the Board, options to
purchase an additional 15,000 shares shall automatically be granted to the Optionee provided that, at that time, he or she is a Nonemployee Director. All
Options shall be exercisable only as set forth in <u>Sections 3(c) and 6</u>
below and shall be subject to the other terms and conditions set forth in this
Plan or otherwise established by the Company.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Option Purchase Price</u>. The exercise price for each Option Share shall be
the Fair Market Value of the Company's Common Stock on the Date of Grant.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Term</u>. Each Option shall expire ten years after the Date of Grant, except
that an Option will expire, if not exercised, 90 days after the Optionee ceases
to be a director of the Company.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Amendments</u>. This Plan may be changed or modified from time to time
provided, however, that, (i) no such change or modification shall impair any
Option previously granted under the Plan; (ii) the provisions relating to the
amount, price and timing of the Options shall not be amended more than once
every six months other than to comport with changes in the Code, the Employee
Retirement Income Security Act, or rules promulgated thereunder, or other
applicable law; and (iii) the approval by the affirmative vote of the holders of
a majority of shares of the Company's securities present, or represented, and
entitled to vote at a meeting duly held in accordance with the applicable laws
of the State of Colorado, shall be required for any amendment which would do any
of the following:</p>
<p style="margin-left:0in; text-indent:1in" align="justify">&nbsp;</p>
<p style="margin-left:0in" align="center">2</p>
<hr color="#000080">
<p><br clear="all" style="page-break-after:always">
</p>
<p style="margin-left:2.0in;text-indent:-.5in" align="justify">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;materially
modify the eligibility requirements for receiving Options under the Plan;</p>
<p style="margin-left:2.0in;text-indent:-.5in" align="justify">(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;except as provided in <u>Section 8</u> relative to capital changes, increase the number of shares purchasable
pursuant to the granting of any Option hereunder or the exercise
price of each Option;</p>
<p style="margin-left:2.0in;text-indent:-.5in" align="justify">(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
increase the maximum term of Options granted;</p>
<p style="margin-left:2.0in;text-indent:-.5in" align="justify">(iv)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;decrease the minimum price at which Options may be granted;</p>
<p style="margin-left:2.0in;text-indent:-.5in" align="justify">
(v)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;change the dollar amount pursuant to which Options may be
granted at any one time;</p>
<p style="margin-left:2.0in;text-indent:-.5in" align="justify">(vi)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;change the timing of Option Grants; or</p>
<p style="margin-left:2.0in;text-indent:-.5in" align="justify">(vii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;increase the term of the Plan.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Number of Shares</u>. The Board is authorized to appropriate, issue and sell
for the purposes of the Plan, an aggregate maximum of 500,000 shares of Common
Stock, including both treasury and newly issued shares, or the number and kind
of shares of stock or other securities which in accordance with <u>Section 8</u>
shall be substituted for the 500,000 shares or into which such 500,000 shares
shall be adjusted. Such number of shares shall include any options granted under
any other stock option plan of the Company that may from time to time become
subject to and governed by the terms and conditions of this Plan. All or any
unsold shares subject to an Option that for any reason expires or otherwise
terminates before it has been exercised, again may be made subject to other
Options granted under the Plan.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">5.&nbsp;&nbsp;&nbsp;&nbsp;
<u>Eligibility</u>. Options shall be granted under the Plan only to Nonemployee
Directors provided that any Nonemployee Director may waive his right to
participate in the Plan. </p>
<p style="margin-left:0in;page-break-after:avoid; text-indent:0.5in" align="justify">
6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Exercise of Options</u>. </p>
<p style="margin-left:0in; text-indent:1in" align="justify">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Option granted pursuant to this Plan shall be exercisable in full commencing six
months after the Date of Grant.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as otherwise provided in <u>Section 9</u>, during the lifetime of the Optionee,
the Option shall be exercisable only by the Optionee; provided that, in the
event of the legal disability of an Optionee, the guardian or personal
representative of the Optionee may exercise the Option.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each Option shall be exercised in whole or in part by delivering to the office
of the Treasurer of the Company written notice of the number of shares with
respect to which the Option is to be exercised and by paying in full the
purchase price for the Option Shares as set forth in <u>Section 7</u> herein;
provided, that an Option may not be exercised in part unless the purchase price
for the Option Shares purchased is at least $2,000.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">&nbsp;</p>
<p style="margin-left:0in" align="center">3</p>
<hr color="#000080">
<p><br clear="all" style="page-break-after:always">
</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
Option may be exercised, and no Option Shares may be sold, transferred or
otherwise disposed of for a period of at least six months following the Date of
Grant of the Option.</p>
<p style="margin-left:0in;page-break-after:avoid; text-indent:0.5in" align="justify">
7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Payment for Option Shares</u>. Upon
exercise of any Option, the aggregate exercise price shall be paid to the
Company in cash or by certified or cashier's check. For any single purchase by
an Optionee of Option Shares at a total purchase price in excess of $2,000, the
Company, in its sole discretion, upon request by the Optionee, may permit all or
part of the purchase price for the Option Shares to be paid by (a) delivery to
the Company for cancellation shares of the Common Stock previously owned by the
Optionee (&quot;<u>Previously Owned Shares</u>&quot;) with a Fair Market Value as of the
date of the payment equal to the portion of the purchase price for the Option
Shares that the Optionee does not pay in cash; (b) having shares withheld from
the amount of shares to be received by the Optionee; (c) delivering an
irrevocable subscription agreement obligating the Optionee to take and pay for
the shares to be purchased within one year of the date of such exercise; or (d)
complying with any other payment mechanism as the Company may approve from time
to time. Notwithstanding the above, an Optionee shall be permitted to exercise
his Option by delivering Previously Owned Shares only if he has held, and
provides appropriate evidence of such, the Previously Owned Shares for more than
six months prior to the date of exercise. This period (the &quot;<u>Holding Period</u>&quot;)
may be extended by the Company acting in its sole discretion as is necessary, in
the opinion of the Company, so that, under generally accepted accounting
principles, no compensation shall be considered to have been or to be paid to
the Optionee as a result of the exercise of the Option in this manner. At the
time the Option is exercised, the Optionee shall provide an affidavit, and such
other evidence and documents as the Company shall request, to establish the
Optionee's Holding Period. As indicated above, an Optionee may deliver shares of
Common Stock as part of the purchase price only if the Company, in its sole
discretion agrees, on a case by case basis, to permit this form of payment.</p>
<p style="margin-left:0in;page-break-after:avoid; text-indent:0.5in" align="justify">
8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Change in Stock, Adjustments,
Etc</u>.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the
event that each of the outstanding shares of Common Stock (other than shares
held by dissenting shareholders which are not changed or exchanged) should be
changed into, or exchanged for, a different number or kind of shares of stock or
other securities of the Company, or if further changes or exchanges of any stock
or other securities into which the Common Stock shall have been changed, or for
which it shall have been exchanged, shall be made (whether by reason of merger,
consolidation, reorganization, recapitalization, stock dividends,
reclassification, split-up, combination of shares or otherwise) then there shall
be substituted for each share of Common Stock that is subject to the Plan but
not subject to an outstanding Option hereunder, the number and kind of shares of
stock or other securities into which each outstanding shares of Common Stock
(other than shares held by dissenting shareholders which are not changed or
exchanged) shall be so changed or for which each outstanding share of Common
Stock (other than shares held by dissenting shareholders) shall be so changed or
for which each such share shall be exchanged. Any securities so substituted
shall be subject to similar successive adjustments.</p>
<p style="margin-left:0in" align="center">4</p>
<hr color="#000080">
<p><br clear="all" style="page-break-after:always">
</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the
event of any such changes or exchanges, (i) the number, or kind, or exercise
price of the Option Shares or other securities that are then subject to an
Option or Options granted pursuant to the Plan shall be deemed automatically
adjusted in order to prevent dilution or enlargement of rights and (ii) such
adjustments shall be effective and binding for all purposes or the Plan.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Nontransferability
of Option</u>. Except as herein provided, no Option granted under the Plan shall
be transferable by the Optionee, either voluntarily or involuntarily, except by
will, by the laws of descent and distribution, or pursuant to a qualified
domestic relations order as defined in the Code or the Employee Retirement
Income Security Act or rules promulgated thereunder; and no Option shall be
subject to execution, attachment or similar process. Any attempt to transfer an
Option except as otherwise herein provided shall void the Option.
Notwithstanding anything herein to the contrary, an Option may be transferred to
an immediate family member or a family trust if such transfer is then permitted
by the rules adopted under Section 16(b) of the Securities Exchange Act of 1934,
as amended.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">10.&nbsp;&nbsp;&nbsp;
<u>Rights as a Shareholder</u>. No person shall have any rights as a shareholder
with respect to any shares covered by an Option until that person becomes the
holder of record of such shares and, except as provided in <u>Section 8</u>, no
adjustments shall be made for dividends or other distributions or other rights
as to which there is an earlier record date.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">11.&nbsp;&nbsp;&nbsp;
<u>Securities Laws Requirements</u>. No Option Shares shall be issued unless and
until, in the opinion of the Company, any applicable registration requirements
of the Securities Act of 1933, as amended (&quot;<u>Securities Act</u>&quot;), any
applicable listing requirements of any securities exchange on which stock of the
same class is then listed, and any other requirement of law or of any regulatory
bodies having jurisdiction over such issuance and delivery, have been fully
complied with. Each Option Agreement and each Option Share certificate may be
imprinted with legends reflecting federal and state securities laws restrictions
and conditions, and the Company may comply therewith and issue &quot;stop transfer&quot;
instructions to its transfer agent and registrar in good faith without
liability.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">12.&nbsp;&nbsp;&nbsp;
<u>Disposition of Shares</u>. To the extent reasonably requested by the Company,
each Optionee, as a condition of exercise, shall represent, warrant and agree,
in a form of written certificate approved by the Company, as follows: (a) that
all Option Shares are being acquired solely for his/her own account and not on
behalf of any other person or entity; (b) that no Option Shares will be sold or
otherwise distributed in violation of the Securities Act or any other applicable
federal or state securities laws; (c) that he/she will report all sales of
Option Shares to the Company in writing on a form prescribed by the Company; and
(d) that if he/she is subject to the reporting requirements under Section 16(a)
of the Exchange Act (i) he will not violate Section 16(b) of the Exchange Act,
(ii) he will furnish the Company with a copy of each Form 4 and Form 5 filed by
him, and (iii) he will timely file all reports required under the federal
securities laws.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">13.&nbsp;&nbsp; <u>
Effective Date of Plan; Termination Date of Plan</u>. The Plan shall be
effective on the date the Plan has been approved by the Board of Directors and
the shareholders of the Company. The Plan was adopted, subject to shareholder
approval, by the Board as of October 16, 2003. The Plan shall terminate on
October 16, 2013, except as to Options previously granted and outstanding under
the Plan at that time. No Options shall be granted after the date on which the
Plan terminates. In no event may the Option period exceed ten years from the
date on which the Option is granted. The Plan may be abandoned or terminated at
any earlier time by the affirmative vote of the holders of a majority of the
shares of Common Stock present, or represented, and entitled to vote at a
meeting duly held in accordance with the applicable laws of the State of
Colorado, except with respect to any Options then outstanding under the Plan.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">&nbsp;</p>
<p style="margin-left:0in" align="center">5</p>
<hr color="#000080">
<p><br clear="all" style="page-break-after:always">
</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">14.&nbsp;&nbsp;&nbsp;<u>Withholding
Taxes</u>. The Option Agreement shall provide that the Company may take such
steps as it may deem necessary or appropriate for the withholding of any taxes
which the Company is required by any law or regulation or any governmental
authority, whether federal, state or local, domestic or foreign, to withhold in
connection with any Option including, but riot limited to, the withholding of
all or any portion of any payment or the withholding of issuance of Option
Shares upon the exercise of any Option.</p>
<p style="margin-left:0in; text-indent:0.5in" align="justify">15.&nbsp;&nbsp;&nbsp;
<u>Other Provisions</u>. The following provisions are also in effect under the
Plan:</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
use of a masculine gender in the Plan shall also include within its meaning the
feminine, and the singular may include the plural, and the plural may include
the singular, unless the context clearly indicates to the contrary. </p>
<p style="margin-left:0in; text-indent:1in" align="justify">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
expenses of administering the plan shall be borne by the Company.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Plan shall be construed to be in addition to any and all other compensation
plans or programs. The adoption of the Plan by the shareholders of the Company
shall not be construed as creating any limitations on the power or authority of
the Board to adopt such other additional incentive or other compensation
arrangements as the Board may deem necessary or desirable. </p>
<p style="margin-left:0in; text-indent:1in" align="justify">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
corporate laws of the State of Colorado shall govern all issues concerning the
relative rights of the Company and its shareholders under the Plan. All other
questions and obligations under the Plan shall be construed and enforced in
accordance with the internal laws of the State of California, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of California or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of California.</p>
<p style="margin-left:0in; text-indent:1in" align="justify">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notwithstanding anything to the contrary contained in this Plan, the following
provisions, in compliance with the California Corporate Securities Law of 1968
and the rules and regulations promulgated thereunder, shall apply to the Plan
and all Options granted under the Plan:</p>
<p style="margin-left:0in; text-indent:1.5in" align="justify">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each Option shall be exercisable in whole or in consecutive installments,
cumulative or otherwise, during its term as determined in the discretion of the
Board. Each Option granted to an Optionee shall provide for the right to
exercise at the rate of at least 20% per year over five years from the date the
Option is granted, subject to reasonable conditions such as continued employment
or service; however, in the case of an Option granted to officers, directors,
managers or consultants of the Company, the Option may become fully exercisable,
subject to reasonable conditions such as continued employment or service, at any
time or during any period established by the Company.</p>
<p style="margin-left:0in; text-indent:1.5in" align="justify">&nbsp;</p>
<p style="margin-left:0in" align="center">6</p>
<hr color="#000080">
<p><br clear="all" style="page-break-after:always">
</p>
<p style="margin-left:0in; text-indent:1.5in" align="justify">(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(A) if the Optionee's service with the Company terminates for any reason (other
than involuntary dismissal for &quot;cause&quot; or voluntary resignation in violation of
any agreement to remain in the employ of the Company), he or she may, at any
time before the expiration of thirty days after termination or before expiration
of the Option, whichever first occurs, exercise the Option (to the extent that
the Option was exercisable by him or her on the date of the termination of his
or her service); (B) if the Optionee's service terminates due to disability (as
defined in Section 22(e)(3) of the Code and subject to such proof of disability
as the Option Committee may require), the Option may be exercised by the
Optionee (or by his guardian(s), or conservator(s), or other legal
representative(s)) before the expiration of six months after termination or
before expiration of the Option, whichever first occurs (to the extent that the
Option was exercisable by him or her on the date of the termination of his or
her service); and (C) in the event of the death of the Optionee, an Option
exercisable by him or her at the date of his or her death shall be exercisable
by his or her legal representative(s), legatee(s), or heir(s), or by his or her
beneficiary or beneficiaries so designated by him or her, as the case may be,
within six months after his or her death or before the expiration of the Option,
whichever first occurs (to the extent that the Option was exercisable by him or
her on the date of his or her death).</p>
<p style="margin-left:0in; text-indent:1.5in" align="justify">
(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Optionees under the Plan who do not otherwise have access to
financial statements of the Company will receive the Company's financial
statements at least annually.</p>
<p style="margin-left:0in; text-indent:1.5in" align="justify">(iv)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Except as permitted by rule 701 of the Securities Act, Options granted under the
Plan are nontransferable other than by will, by the laws of descent and
distribution, by instrument to an inter vivos or testamentary trust in which the
Options are to be passed to beneficiaries upon the death of the trustor (settlor),
or by gift to immediate family. The term &quot;immediate family&quot; means any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or
sister-in-law, and also includes adoptive relationships.</p>
<p style="text-indent: 1.5in; margin-left: 0in" align="justify">&nbsp;</p>
<p style="text-indent: 1.5in; margin-left: 0in" align="justify">&nbsp;</p>
<p style="margin-left: 0in" align="center">7</p>

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`
end

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
