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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0001047469-03-010158.txt : 20030325
<SEC-HEADER>0001047469-03-010158.hdr.sgml : 20030325
<ACCEPTANCE-DATETIME>20030325172453
ACCESSION NUMBER:		0001047469-03-010158
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20030423
FILED AS OF DATE:		20030325
EFFECTIVENESS DATE:		20030325

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ELECTRO SENSORS INC
		CENTRAL INDEX KEY:			0000351789
		STANDARD INDUSTRIAL CLASSIFICATION:	INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823]
		IRS NUMBER:				410943459
		STATE OF INCORPORATION:			MN
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		DEF 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-09587
		FILM NUMBER:		03616386

	BUSINESS ADDRESS:	
		STREET 1:		6111 BLUE CIRCLE DR
		CITY:			MINNETONKA
		STATE:			MN
		ZIP:			55343-9108
		BUSINESS PHONE:		9529300100

	MAIL ADDRESS:	
		STREET 1:		6111 BLUE CIRCLE DR
		CITY:			MINNETONKA
		STATE:			MN
		ZIP:			55343
</SEC-HEADER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>a2106530zdef14a.htm
<DESCRIPTION>DEF 14A
<TEXT>
<HTML>
<HEAD>

</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<BR>
<FONT SIZE=3 ><A HREF="#03STP1274_1">QuickLinks</A></FONT>
<font size=3> -- Click here to rapidly navigate through this document</font>
<P ALIGN="CENTER"><FONT SIZE=2><B>SCHEDULE 14A INFORMATION</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>Proxy
Statement Pursuant to Section 14(a) of<BR>
the Securities Exchange Act of 1934 (Amendment No.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;) </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="79%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Filed by the Registrant <FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
Filed by a Party other than the Registrant <FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
Check the appropriate box:</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2>Preliminary Proxy Statement</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><B>Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2>Definitive Proxy Statement</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2>Definitive Additional Materials</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2>Soliciting Material Pursuant to &sect;240.14a-12<BR></FONT>
</TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

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<TABLE WIDTH="83%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><BR><FONT SIZE=2><B>Electro-Sensors, Inc.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><HR NOSHADE><FONT SIZE=2> (Name of Registrant as Specified In Its Charter)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><HR NOSHADE><FONT SIZE=2> (Name of Person(s) Filing Proxy Statement, if other than the Registrant)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="90%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>Payment of Filing Fee (Check the appropriate box):</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>No fee required</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and&nbsp;0-11</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="90%"><FONT SIZE=2>Title of each class of securities to which transaction applies:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="90%"><FONT SIZE=2>Aggregate number of securities to which transaction applies:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="90%"><FONT SIZE=2>Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(4)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="90%"><FONT SIZE=2>Proposed maximum aggregate value of transaction:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(5)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="90%"><FONT SIZE=2>Total fee paid:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Fee paid previously with preliminary materials.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Check box if any part of the fee is offset as provided by Exchange Act Rule&nbsp;0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="90%"><FONT SIZE=2>Amount Previously Paid:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="90%"><FONT SIZE=2>Form, Schedule or Registration Statement No.:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="90%"><FONT SIZE=2>Filing Party:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(4)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="90%"><FONT SIZE=2>Date Filed:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=1,EFW="2106530",CP="ELECTRO-SENSORS, INC.",DN="1",CHK=374980,FOLIO='blank',FILE='DISK038:[03STP4.03STP1274]BA1274A.;2',USER='JGRONSE',CD='24-MAR-2003;13:10' -->
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<P ALIGN="CENTER"><FONT SIZE=2><B>
<IMG SRC="g34172.jpg" ALT="GRAPHIC" WIDTH="195" HEIGHT="72">
  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ELECTRO-SENSORS,&nbsp;INC. 6111 Blue Circle Drive Minnetonka, Minnesota 55343<BR>
(952)&nbsp;930-0100  </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="120">
<P ALIGN="CENTER"><FONT SIZE=2><B> <A NAME="be1274_notice_of_annual_meeting_of_sh__not02329"> </A>
<A NAME="toc_be1274_1"> </A>
<BR>    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS<BR>  To Be Held On April&nbsp;23, 2003    <BR>  </B></FONT></P>

<P><FONT SIZE=2>To
the Shareholders of Electro-Sensors&nbsp;Inc.: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notice
is hereby given that the Annual Meeting of Shareholders of Electro-Sensors,&nbsp;Inc. will be held at the Radisson South, 7800 Normandale Boulevard, Bloomington, Minnesota, on
Wednesday, April&nbsp;23, 2003, at 2:00 pm, Central Standard Time, for the following purposes: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2>To
set the number of directors at five (5);
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2>To
elect five directors to serve until the next annual meeting of shareholders;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>3.</FONT></DT><DD><FONT SIZE=2>To
approve auditors for the Company for the fiscal year ending December&nbsp;31, 2003; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>4.</FONT></DT><DD><FONT SIZE=2>To
take action upon any other business as may properly come before the meeting or any adjournment thereof. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accompanying
this Notice of Annual Meeting is a Proxy Statement, Form of Proxy and the Company's 10-KSB for the fiscal year ended December&nbsp;31, 2002. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors has fixed the close of business on February&nbsp;24, 2003 as the record date for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting of Shareholders. </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>BY ORDER OF THE BOARD OF DIRECTORS,</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
/s/ Bradley D. Slye</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
Bradley D. Slye<BR>
President</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>Minnetonka,
Minnesota<BR>
Dated: April&nbsp;2, 2003 </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TO
ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON. SHAREHOLDERS WHO ATTEND THE
MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON IF THEY SO DESIRE. </FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=2,EFW="2106530",CP="ELECTRO-SENSORS, INC.",DN="1",CHK=767524,FOLIO='blank',FILE='DISK038:[03STP4.03STP1274]BE1274A.;6',USER='CPULLIA',CD='25-MAR-2003;08:13' -->
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_de1274_1_2"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><B>
<IMG SRC="g34172.jpg" ALT="GRAPHIC" WIDTH="195" HEIGHT="72">
  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ELECTRO-SENSORS,&nbsp;INC. 6111 Blue Circle Drive Minnetonka, Minnesota 55343 (952)&nbsp;930-0100  </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="120">
<P ALIGN="CENTER"><FONT SIZE=2><B> <A NAME="de1274_proxy_statement_for_annual_mee__pro02805"> </A>
<A NAME="toc_de1274_1"> </A>
<BR>    PROXY STATEMENT<BR>  FOR<BR>  ANNUAL MEETING OF SHAREHOLDERS<BR>  To Be Held On April&nbsp;23, 2003    <BR>  </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="120">
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1274_general_information"> </A>
<A NAME="toc_de1274_2"> </A>
<BR></FONT><FONT SIZE=2><B>GENERAL INFORMATION    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Proxy Statement is furnished by the Board of Directors (the "Board of Directors") of Electro-Sensors,&nbsp;Inc., a Minnesota corporation (the "Company"),
to the shareholders of the Company in connection with a solicitation of proxies for use at the Annual Meeting of Shareholders (the "Annual Meeting") to be held at 2:00&nbsp;p.m., Central Standard
Time, on Wednesday, April&nbsp;23, 2003, at the Radisson South, 7800 Normandale Boulevard, Bloomington, Minnesota, and at any and all adjournments thereof. This Proxy Statement and the accompanying
materials are first being mailed to shareholders on or about April&nbsp;2, 2003. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
your shares are registered in the name of a bank or brokerage firm, you may be eligible to vote your shares electronically via the Internet or telephone. A large number of banks and
brokerage firms are
participating in the ADP Investor Communication Services online program. This program provides eligible shareholders who receive a paper copy of the Annual Report and Proxy Statement the opportunity
to vote via the Internet or telephone. If your bank or brokerage firm is participating in ADP's program, your voting form will provide instructions. If your voting form does not refer to Internet or
telephone information, please complete and return the paper proxy card in the postage paid envelope provided. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
proxy delivered pursuant to this solicitation is revocable at the option of the person giving the proxy at any time before it is exercised. A proxy may be revoked, prior to its
exercise, by executing and delivering a later-dated proxy via the Internet, via telephone or by mail, by delivering written notice of the revocation of the proxy to the Company's Secretary prior to
the Annual Meeting, or by attending and voting at the Annual Meeting. Attendance at the Annual Meeting, in and of itself, will not constitute a revocation of a proxy. The shares represented by a proxy
will be voted in accordance with the shareholder's directions if the proxy is duly submitted and not validly revoked prior to the Annual Meeting. If no directions are specified on a duly submitted
proxy, the shares will be voted, in accordance with the recommendations of the Board of Directors, FOR approval of the number of directors to be set at five, FOR the election of the directors
nominated by the Board of Directors, FOR the approval of auditors for the fiscal year ending December&nbsp;31, 2003, and in accordance with the discretion of the persons appointed as proxies on any
other matters properly brought before the Annual Meeting and any all adjournments thereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
expense of preparing, printing, and mailing this Proxy Statement and the proxies solicited hereby will be borne by the Company. The Company will also request brokerage firms, banks,
nominees, custodians, and fiduciaries to forward proxy materials to the beneficial owners of shares of Common Stock as of the record date and will provide reimbursement for the cost of forwarding the
proxy materials in accordance with customary practice. In addition to the use of the Internet and mail, proxies may be solicited by officers, directors, and regular employees of the Company, without
additional remuneration, in person or by telephone, telegraph, or facsimile transmission. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=3,EFW="2106530",CP="ELECTRO-SENSORS, INC.",DN="1",CHK=602301,FOLIO='2',FILE='DISK038:[03STP4.03STP1274]DE1274A.;9',USER='CPULLIA',CD='25-MAR-2003;08:19' -->
<A NAME="page_de1274_1_3"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1274_outstanding_shares___voting_rights"> </A>
<A NAME="toc_de1274_3"> </A>
<BR></FONT><FONT SIZE=2><B>OUTSTANDING SHARES&nbsp;&amp; VOTING RIGHTS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company fixed the close of business on February&nbsp;24, 2003 as the record date for determining shareholders entitled to notice of and to vote at the
Annual Meeting. At February&nbsp;24, 2003, the Company had outstanding 3,162,614 shares of Common Stock, the only outstanding class of capital stock of the Company. Each share of Common Stock
outstanding on the record date entitles the holder thereof to one (1)&nbsp;vote on each matter to be voted upon by shareholders at the Annual Meeting. Holders of Common Stock are not entitled to
cumulative voting rights. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
majority of the shares of Common Stock entitled to vote at the Annual Meeting, present in person or by proxy, constitutes a quorum for the transaction of business. Abstentions are
counted as shares present for purposes of determining the presence or absence of a quorum. Proxies relating to "street name" shares that are voted by brokers on some matters, but not on other matters
as to which authority to vote is withheld from the broker ("broker non-votes") absent voting instructions from the beneficial owner, will be treated as shares present for purposes of
determining the presence or absence of a quorum. The Inspector of Election appointed by the Board of Directors will determine the shares represented at the meeting and the validity of proxies and
ballots, and will count all votes and ballots. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1274_security_ownership_of_certain___sec02525"> </A>
<A NAME="toc_de1274_4"> </A>
<BR></FONT><FONT SIZE=2><B>SECURITY OWNERSHIP OF CERTAIN<BR>  BENEFICIAL OWNERS AND MANAGEMENT    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information, as of February&nbsp;24, 2003, regarding the beneficial ownership of the outstanding shares of Common Stock by
persons known by the Company to beneficially own more than 5% of the outstanding shares of Common Stock, by directors and director nominees, by the executive officers named in the Summary Compensation
Table, and by such directors and executive officers as a group. Amounts for 5% shareholders are reported as of the date such shareholders reported such holdings in filings under the Securities
Exchange Act of 1934 (the "Exchange Act") unless more recent information was provided. </FONT></P>

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<TABLE WIDTH="85%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="65%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Common Stock</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="65%" ALIGN="LEFT"><FONT SIZE=1><B>Name and Address<BR>
of Beneficial Owner<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="22%" ALIGN="CENTER"><FONT SIZE=1><B>Number of Shares<BR>
Beneficially Owned(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>Percent<BR>
of Class</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%" VALIGN="TOP"><FONT SIZE=2>Peter R. Peterson<BR>
6111 Blue Circle Drive<BR>
Minnetonka, MN 55343</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>1,294,584</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>(2)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>40.7</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%" VALIGN="TOP"><FONT SIZE=2>Jean C. Slattery<BR>
4378 Mackey Avenue<BR>
Minneapolis, MN 55424</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>172,926</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>5.5</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%" VALIGN="TOP"><FONT SIZE=2>Bradley D. Slye<BR>
6111 Blue Circle Drice<BR>
Minnetonka, MN 55343</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>192,704</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>(4)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>5.9</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%" VALIGN="TOP"><FONT SIZE=2>John S. Strom<BR>
5005 Arden Avenue<BR>
Edina, MN 55424</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>33,500</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>(5)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>1.0</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%" VALIGN="TOP"><FONT SIZE=2>Joseph A. Marino<BR>
13770 Frontier Court<BR>
Burnsville, MN 55337</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>22,500</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>(6)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%" VALIGN="TOP"><FONT SIZE=2>Geoffrey W. Miller<BR>
12735 42<SUP>nd</SUP> Place North<BR>
Plymouth, MN 55442</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>12,000</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>(7)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%" VALIGN="TOP"><FONT SIZE=2>Officers and Directors as a Group</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>1,728,214</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>(8)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>51.9</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>Indicates
ownership of less than one percent (1.0%). </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

<HR NOSHADE>
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<A NAME="page_de1274_1_4"> </A>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Except
as otherwise indicated, each person named or included in the group has the sole power to vote and sole power to direct the disposition of all shares listed as beneficially
owned by him/her.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Includes
4,500 shares held by Mr.&nbsp;Peterson's spouse, 27,852 shares held by the ESOP for the account of Mr.&nbsp;Peterson, and 20,250 shares purchasable upon exercise of
options presently exercisable or exercisable within 60&nbsp;days of February&nbsp;24, 2003.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Includes
41,835 shares held by the estate of James P. Slattery (Jean C. Slattery is the personal representative of such estate).
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>Includes
5,190 shares held by Mr.&nbsp;Slye's spouse, 14,757 shares held by the ESOP for the account of Mr.&nbsp;Slye, and 83,250 shares purchasable upon exercise of options
presently exercisable or exercisable within 60&nbsp;days of February&nbsp;24, 2003.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>Includes
28,500 shares purchasable upon exercise of options presently exercisable or exercisable within 60&nbsp;days of February&nbsp;24, 2003.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD><FONT SIZE=2>Includes
21,750 shares purchasable upon exercise of options presently exercisable or exercisable within 60&nbsp;days of February&nbsp;24, 2003.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(7)</FONT></DT><DD><FONT SIZE=2>Includes
12,000 shares purchasable upon exercise of options presently exercisable or exercisable within 60&nbsp;days of February&nbsp;24, 2003.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(8)</FONT></DT><DD><FONT SIZE=2>Includes
165,750 shares that may be purchased by officers and directors upon exercise of options presently exercisable or exercisable within 60&nbsp;days of February&nbsp;24,
2003, and 42,609 shares allocated to officers' accounts under the ESOP. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
above beneficial ownership information is based on information furnished by the specified persons and is determined in accordance with Rule&nbsp;13d-3 under the
Exchange Act, as required for purposes of this Proxy Statement. Accordingly, it includes shares of Common Stock that are issuable upon the exercise of stock options exercisable within 60&nbsp;days
of February&nbsp;24, 2003. Such information is not necessarily to be construed as an admission of beneficial ownership for other purposes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1274_election_of_directors_proposals_#1_and_#2"> </A>
<A NAME="toc_de1274_5"> </A>
<BR></FONT><FONT SIZE=2><B>ELECTION OF DIRECTORS<BR>  Proposals #1 and #2    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Bylaws of the Company provide that the shareholders at each annual meeting shall determine the number of directors, which shall not be less than one. The
Board of Directors recommends that the number of directors be set at five and that five directors be elected at the Annual Meeting to serve until the next Annual Meeting or until their successors are
duly elected and qualified. Under applicable Minnesota law, approval of the proposal to set the number of directors at five, as well as the election of each nominee, requires the affirmative vote of
the holders of the greater of (1)&nbsp;a majority of the voting power of the shares represented in person or by proxy at the annual meeting with authority to vote on such matter or (2)&nbsp;a
majority of the voting power of the minimum number of shares that would constitute a quorum for the transaction of business at the annual meeting. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
persons named below have been nominated for election by management. All nominees are currently directors of the Company. If, prior to the Annual Meeting, it should become known that
any of the following individuals will be unable to serve as a director after the Annual Meeting by reason of death, incapacity or other unexpected occurrence, the proxies will be voted for such
substitute nominee as is selected by the Board of Directors. The Board of Directors has no reason to believe that any of the following nominees will be unable to serve. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

<HR NOSHADE>
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<A NAME="page_de1274_1_5"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the principal occupations (for at least the last five years) and directorships of the nominees: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="78%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="41%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="36%" ALIGN="CENTER"><FONT SIZE=1><B>Principal Occupation and Directorships</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Age</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Director Since</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="41%"><FONT SIZE=2><BR>
Bradley D. Slye</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><BR>
Chairman of the Board and President of the Company since 1997</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
43</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1997</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="41%"><FONT SIZE=2><BR>
Peter R. Peterson</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><BR>
President, P.R. Peterson Company (a venture capital firm); Secretary of the Company since 1973. Director of PPT Vision, Inc.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
69</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1969</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="41%"><FONT SIZE=2><BR>
John S. Strom</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><BR>
Retired; Vice President of Financial Planning &amp; Analysis of Northwest Bancorp (currently Wells Fargo)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
69</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1989</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="41%"><FONT SIZE=2><BR>
Joseph A. Marino</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><BR>
President and CEO of Cardia, Inc. (a medical equipment manufacturer) since 1998.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
51</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1994</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="41%"><FONT SIZE=2><BR>
Geoffrey W. Miller</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><BR>
Controller of Wilcox Paper (a distributor of fine paper to the Printing Industry) since 2002.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
48</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1999</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Committees and Meetings of the Board of Directors  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The present standing committees of the Board of Directors are described below. The Board of Directors does not have a standing nominating committee. </FONT></P>

<P><FONT SIZE=2><B>Board Meetings  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors met four times during the last fiscal year. No incumbent member of the Board of Directors attended fewer than 75% of the total number of
meetings held by the Board of Directors and the committees on which he served (during the periods that he served). </FONT></P>

<P><FONT SIZE=2><B>Audit Committee  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Messrs.&nbsp;Strom, Marino, and Miller currently serve as members of the Audit Committee. This committee met twice during the last fiscal year. The Audit
Committee is responsible for assisting the Board of Directors with respect to its oversight of corporate accounting, reporting practices of the Company, and the quality and integrity of the financial
reports of the Company. The Audit Committee has adopted a charter, which specifies the composition and responsibilities of the committee. For more information concerning the Audit Committee, see the
Report of the Audit Committee on Page 7 and Audit Committee Charter attached as Appendix&nbsp;A to this Proxy Statement. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

<HR NOSHADE>
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<A NAME="page_de1274_1_6"> </A>

<P><FONT SIZE=2><B>Compensation Committee  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Messrs.&nbsp;Strom, Marino and Miller currently serve as members of the Compensation/Stock Option Committee (the "Compensation Committee"). This committee met
twice during the last fiscal year. The Compensation Committee is responsible for making recommendations to the Board of Directors concerning compensation of the Company's employees, officers, and
directors, and is authorized to determine the compensation of the Company's executive officers. The Compensation Committee is authorized to administer the various incentive plans of the Company and
has all powers of the attendant thereto, including the power to grant employee stock options. </FONT></P>

<P><FONT SIZE=2><B>Directors' Compensation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the past, Directors who are not employees of the Company receive $1,500 per meeting for their services on the Board. In addition, under the Company's 1997
Stock Option Plan, each non-employee director is automatically granted 3,000 share options upon each election or re-election as a director by the shareholders. In
January&nbsp;2003, the Compensation Committee elected to discontinue the grant of stock options. The fee remains at $1,500 per meeting. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1274_audit_committee_report"> </A>
<A NAME="toc_de1274_6"> </A>
<BR></FONT><FONT SIZE=2><B>AUDIT COMMITTEE REPORT    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors has adopted and approved a formal written charter for the Audit Committee, a copy of which is appended to this year's Proxy Statement. The
Board of Directors and the Audit Committee believe that the Audit Committee's current member composition satisfies the rule of the National Association of Securities Dealers,&nbsp;Inc. ("NASD") that
governs audit committee composition, Rule&nbsp;4310(c)(26)(B)(i), including the requirement that audit committee members all be "independent directors" as that term is defined by NASD
Rule&nbsp;4200(a)(14). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Audit Committee of the Board of Directors oversees and monitors the participation of the Company's management and independent auditors throughout the financial reporting process. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with its function to oversee and monitor the financial reporting process of the Company, the Audit Committee has done the following: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Reviewed
and discussed the audited financial statements for the fiscal year ended December&nbsp;31, 2002 with the Company's management;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Discussed
with SKB, the Company's independent auditors, those matters required to be discussed by SAS 61 (Codification of Statements on Auditing Standards,
AU &sect;380); and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Received
the written disclosure and the letter from SKB required by Independence Standards Board Standard No.&nbsp;1 (Independence Discussions with Audit
Committees) and has discussed with SKB its independence. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
on the foregoing, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's annual report on
Form&nbsp;10-KSB for the fiscal year ended December&nbsp;31, 2002. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Audit Committee<BR>  </B></FONT><FONT SIZE=2><I>John S. Strom<BR>
Joseph A. Marino<BR>
Geoffrey W. Miller  </I></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

<HR NOSHADE>
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<A NAME="page_de1274_1_7"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><I> <A NAME="de1274_executive_compensation"> </A>
<A NAME="toc_de1274_7"> </A>
<BR>    </I></FONT><FONT SIZE=2><B>EXECUTIVE COMPENSATION    <BR>  </B></FONT></P>

<P><FONT SIZE=2><B>Compensation Summary  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes information concerning the compensation awarded or paid to, or earned by, the Company's Chairman and President/Chief Executive
Officer during each of the Company's last three fiscal years. No other executive officers received salary and bonus for fiscal 2002 exceeding $100,000. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1274_summary_compensation_table"> </A>
<A NAME="toc_de1274_8"> </A>
<BR></FONT><FONT SIZE=2><B>Summary Compensation Table    <BR>  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="96%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="30%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Long-Term Compensation</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="30%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Awards</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>Payouts</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="30%" ALIGN="LEFT"><FONT SIZE=1><B>Name and Principal Position<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Year</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Salary<BR>
($)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>Bonus<BR>
($)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Other<BR>
Annual<BR>
Comp<BR>
($)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Restricted<BR>
Stock<BR>
Award(s)<BR>
($)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Securities<BR>
Underlying<BR>
Option<BR>
SARs<BR>
(#)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>Payouts<BR>
LTIP<BR>
($)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>All Other<BR>
Comp<BR>
($)(a)</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="30%"><FONT SIZE=2>Bradley D. Slye<BR>
Chairman<BR>
President/CEO</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2002<BR>
2001<BR>
2000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>176,275<BR>
173,503<BR>
146,280</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>88,000<BR>
75,500<BR>
0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>0<BR>
0<BR>
0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0<BR>
0<BR>
0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0<BR>
75,000<BR>
0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0<BR>
0<BR>
0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,500<BR>
3,412<BR>
4,226</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>Amounts
reflect allocations to individual's account of Company contributions to the ESOP and 401(k) Plan </FONT></DD></DL>

<P><FONT SIZE=2><B>Stock Options  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There were no options to purchase Company Common Stock granted to named executive officers during fiscal 2002. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following tables sets forth information concerning individual exercises of stock options by the named executive officer(s) during fiscal 2002, as well as the number of options
outstanding at the end of fiscal 2002 for the named executive officer(s). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1274_aggregated_options/sar_exercis__agg03543"> </A>
<A NAME="toc_de1274_9"> </A>
<BR></FONT><FONT SIZE=2><B>Aggregated Options/SAR Exercises in Last Fiscal Year And<BR>  Fiscal Year-End Options/SAR Values (a)    <BR>  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="31%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=3><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ROWSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Securities Underlying<BR>
Unexercised Options/SARs(a)<BR>
at Fiscal Year-End (#)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" ROWSPAN=3><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ROWSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Value of<BR>
Unexercised In-the-Money<BR>
Options/SARs<BR>
at Fiscal Year-End ($)</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="31%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=3><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ROWSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Shares<BR>
Acquired<BR>
on Exercise<BR>
(#)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="31%" ROWSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Value<BR>
Realized<BR>
($)</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Exercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Unexercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Exercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Unexercisable</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2>Bradley D. Slye</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>N/A</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>83,250</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>24,750</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>184,563</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>53,813</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>Consists
entirely of stock options. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

<HR NOSHADE>
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<A NAME="page_de1274_1_8"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1274_approval_of_auditors_proposal_#3"> </A>
<A NAME="toc_de1274_10"> </A>
<BR></FONT><FONT SIZE=2><B>APPROVAL OF AUDITORS<BR>  Proposal #3    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's Board of Directors retained Schweitzer Karon&nbsp;&amp; Bremer, LLC as its principal independent accountants for the fiscal year ended
December&nbsp;31, 2002 and has selected Schweitzer Karon&nbsp;&amp; Bremer, LLC to serve as the Company's auditors for the fiscal year ending December&nbsp;31, 2003. The Board of Directors desires
that the selection of such auditors for the current fiscal year be submitted to the shareholders for approval. If the selection is not approved, the Board of Directors will reconsider its decision. </FONT></P>


<P><FONT SIZE=2><B>Independent Auditors' Fees  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The firm of Schweitzer Karon&nbsp;&amp; Bremer, LLC ("SKB") served as the Company's independent auditors for the fiscal year ended December&nbsp;31, 2002. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Audit Fees:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The SKB aggregate fees billed and to be billed for the annual audit of the financial statements included in the
Company's Forms 10-KSB for the year end December&nbsp;31, 2002 are $37,900. The fees for services related to the reviews of the Company's quarterly forms 10QSB filed during year end
December&nbsp;31, 2002 were $11,500. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial Information Systems Design and Implementation Fees:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;There were no fees billed by SKB for financial information
systems design and implementation for the 2002 fiscal year. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All Other Fees:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The aggregate fees for all other services rendered to the Company during fiscal 2002, including
non-audit related services, were $33,500. Non-audit related services generally include fees for pension and statutory audits, business acquisitions, accounting consultations,
tax consultations and preparation, and SEC registration statements. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Audit Committee has concluded that the services provided by SKB to the Company that were not related to its audit of the Company's financial statements were at all times compatible
with maintaining that firm's independence. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Representatives
of Schweitzer Karon&nbsp;&amp; Bremer, LLC are expected to be present at the Annual Meeting. They will be given an opportunity to make a statement regarding financial and
accounting matters of the Company, if they so desire, and will be available to respond to appropriate questions from the Company's shareholders. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1274_section_16(a)_beneficia__de102039"> </A>
<A NAME="toc_de1274_11"> </A>
<BR></FONT><FONT SIZE=2><B>SECTION 16(a) BENEFICIAL OWNERSHIP<BR>  REPORTING COMPLIANCE    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to Section&nbsp;16(a) of the Exchange Act, the Company's directors, its executive officers, and any persons who beneficially own more than 10% of the
Company's Common Stock are required to report their initial ownership of Common Stock and subsequent changes in that ownership to the Securities and Exchange Commission. Specific due dates for those
reports have been established, and the Company is required to disclose in this Proxy Statement any failure to file by those due dates during fiscal 2002. Based upon a review of such reports furnished
to the Company, or written representations that no reports were required, the Company believes that all of those filing requirements were satisfied with respect to fiscal 2002. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1274_other_matters"> </A>
<A NAME="toc_de1274_12"> </A>
<BR></FONT><FONT SIZE=2><B>OTHER MATTERS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors knows of no other matters to be brought before the Annual Meeting. However, if any other matters are properly brought before the Annual
Meeting, it is the intention of the persons named in the accompanying proxy to vote in accordance with their judgment on such matters. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

<HR NOSHADE>
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<A NAME="page_de1274_1_9"> </A>
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1274_shareholder_proposals"> </A>
<A NAME="toc_de1274_13"> </A>
<BR></FONT><FONT SIZE=2><B>SHAREHOLDER PROPOSALS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholder proposals for the 2004 Annual Meeting of Shareholders of the Company must be received no later than December&nbsp;4, 2003 at the Company's principal
executive offices, 6111 Blue Circle Drive, Minnetonka, Minnesota 55343, directed to the attention of the Secretary, in order to be considered for inclusion in next year's annual meeting proxy material
under the SEC's proxy rules. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Also,
if a shareholder proposal intended to be presented at the next annual meeting but not included in the Company's proxy statement and proxy is received by the Company after
February&nbsp;16, 2004, then management named in the Company's proxy form for the next annual meeting will have discretionary authority to vote shares represented by such proxies on the shareholder
proposal, if presented at the meeting, without including information about the proposal in the Company's proxy material. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1274_form_10-ksb"> </A>
<A NAME="toc_de1274_14"> </A>
<BR></FONT><FONT SIZE=2><B>FORM 10-KSB    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A copy of the Company's Annual Report to the Securities and Exchange Commission on Form&nbsp;10-KSB for the fiscal year ended December&nbsp;31,
2002 has been provided with this Proxy Statement. The Company will furnish to any shareholder, upon written request, any exhibit described in the list accompanying the Form&nbsp;10-KSB
upon the payment, in advance, of reasonable fees related to the Company's furnishing such exhibits(s). Any such request should include a representation that the shareholder was the beneficial owner of
shares of Electro-Sensors Common Stock on February&nbsp;24, 2003, the record date for the 2003 Annual Meeting, and should be directed to Mr.&nbsp;Bradley Slye, Chief Executive Officer, at the
Company's principal address. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>The foregoing Notice of Annual Meeting and Proxy Statement are sent by order of the Board of Directors.</B></FONT></P>

<P><FONT SIZE=2>BRADLEY
D. SLYE<BR>
President<BR>
April&nbsp;2, 2003 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

<HR NOSHADE>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_dg1274_1_10"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1274_charter_for_the_audit_committe__cha03140"> </A>
<A NAME="toc_dg1274_1"> </A>
<BR></FONT><FONT SIZE=2><B>CHARTER FOR THE AUDIT COMMITTEE<BR>  OF THE BOARD OF DIRECTORS<BR>  OF ELECTRO-SENSORS,&nbsp;INC.    <BR>  </B></FONT></P>

<P><FONT SIZE=2><B>I.&nbsp;&nbsp;&nbsp;&nbsp;PURPOSE  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The primary function of the Audit Committee of Electro-Sensors,&nbsp;Inc. (the "Company") is to provide oversight responsibilities by reviewing: the financial
reports and other financial information provided by the Company to any governmental body or the public and the Company's systems of internal controls regarding finance, accounting, legal compliance
and ethics that management and the Board of Directors (the "Board") have established. The Committee's primary duties and responsibilities are to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Serve
as an independent and objective party to monitor the Company's financial reporting process and internal control system.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Coordinate
and evaluate the audit efforts of the Company's independent auditors.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Communicate
directly with the independent auditors, the financial and senior management and the Board regarding the matters related to the Committee's
responsibilities and duties. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in Section&nbsp;III of this Charter. </FONT></P>

<P><FONT SIZE=2><B>II.&nbsp;&nbsp;&nbsp;&nbsp;MEMBERSHIP  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Committee shall be comprised of three or more directors elected by the Board, each of whom shall be independent. In addition, no member of the Audit Committee
shall receive any compensation whatsoever from the Company other than compensation paid to such member as a director of the Company and member of one or more committee of the Board. Committee members
shall serve until the next annual organizational meeting of the Board, or until their successors are duly elected and qualified. The Chair of the Committee shall be elected by the Board. In the
absence of the election of a Chair by the Board, the members of the Committee shall elect a Chair by majority vote of the Committee membership. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
Committee members shall have a working familiarity with basic finance and accounting practices and shall be able to read and understand financial statements at the time of their
appointment to the Committee. Committee members may enhance their familiarity with finance and accounting by participating in educational programs conducted by the Company or an outside consultant. At
least one member of the Committee shall be a "financial expert", as such term is defined in applicable regulations of the Securities and Exchange Commission and The Nasdaq Stock Market,&nbsp;Inc. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

<HR NOSHADE>
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<A NAME="page_dg1274_1_11"> </A>

<P><FONT SIZE=2><B>III.&nbsp;&nbsp;&nbsp;&nbsp;RESPONSIBILITIES AND DUTIES  </B></FONT></P>

<UL>

<P><FONT SIZE=2><B> Independent Auditors  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Appoint,
compensate and oversee the Company's independent auditors. The Company's independent auditors shall report directly to the Committee. On an annual
basis, the Committee should review and discuss with the auditors all significant relationships the auditors have with the Company to determine the auditors' independence.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Review
the performance of the independent auditors and discharge the independent auditors when circumstances warrant.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Prior
to approval by the Board, pre-approve all audit services and non-audit services to be performed by the Company's independent
auditors. Neither the Committee nor the Board shall approve, and the Company's independent auditors shall not provide to the Company, the following non-audit services if such services are
to be provided contemporaneously while serving as independent auditors of the Company: bookkeeping services; financial IS design and implementation services; appraisal or valuation services; fairness
opinions; contribution-in-kind reports; actuarial services; internal audit outsourcing services; management functions or HR; broker/dealer, investment adviser or investment
banking services; and legal services and expert services unrelated to the audit. </FONT></DD></DL>
</UL>
<UL>

<P><FONT SIZE=2><B> Financial Reporting Processes  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Instruct
the independent auditors, the Chief Executive Officer and Chief Financial Officer that the Committee expects to be advised if there are areas of
Company operation that, consistent with the Committee's purpose, require its special attention.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Periodically
consult with the independent auditors out of the presence of management regarding the adequacy of internal controls.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Consider
the independent auditors' judgments about the quality and appropriateness of the Company's accounting principles as applied and estimates used in
its financial reporting.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Periodically
consult with the independent auditors out of the presence of management regarding the accuracy and completeness of the Company's financial
statements. </FONT></DD></DL>

<P><FONT SIZE=2><B> Documents/Reports Review  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Review
with financial management and the independent auditors any earnings releases and all Forms 10-QSB or 10-KSB prior to its
release or filing. The Chair of the Committee may represent the entire Committee for purposes of this review.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Review
and update this Charter periodically, at least annually, as conditions dictate. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

<HR NOSHADE>
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<A NAME="page_dg1274_1_12"> </A>
<UL>
<UL>
</UL>
</UL>
<UL>

<P><FONT SIZE=2><B> Audit Committee Report  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Prepare
an annual Audit Committee Report to be presented to the Board. The Committee will prepare the Audit Committee Report with the understanding that its
representations will in used by the Board and the Company to comply with Item 306 of Regulation&nbsp;S-B and Item 7(d)(3) of Schedule&nbsp;14A as those regulations affect the Company. </FONT></DD></DL>
</UL>
<UL>

<P><FONT SIZE=2><B> Related-Party Transactions  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Review
and approve all related-party transactions to which the Company may be a party prior to their implementation to assess whether such transactions meet
applicable legal requirements. </FONT></DD></DL>

<P><FONT SIZE=2><B> Ethical and Legal Compliance  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Review
periodically the Company's Code of Ethical Conduct for Senior Financial Officers and management's enforcement of the Code as it relates to the
Company's financial reporting process and internal control system.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Establish
and maintain procedures for efficiently responding to complaints received by the Company regarding accounting, internal accounting controls and
auditing. At a minimum, these procedures shall allow employees to submit concerns regarding questionable accounting and auditing matters on a confidential, anonymous basis. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>IV.&nbsp;&nbsp;&nbsp;&nbsp;AUTHORITY  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee shall have the sole authority to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Appoint,
discharge and authorize compensation of the Company's independent auditors; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>At
the expense of the Company, to retain such consultants and advisors as it deems reasonably necessary or appropriate to assist it with its functions. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Audit Committee shall also have the authority as it deems necessary or appropriate to the functions of the Audit Committee, to request from the Chief Executive Officer, the Chief
Financial Officer and such other members of Company management as the Committee shall deem appropriate advice and information, orally or in writing, concerning the Company's business operations and
financial condition relevant to the functions of the Committee. </FONT></P>

<P><FONT SIZE=2><B>V.&nbsp;&nbsp;&nbsp;&nbsp;MEETINGS AND MINUTES  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Committee shall meet at least two times annually, or more frequently as circumstances dictate. The Audit Committee will maintain written minutes of its
meeting. Such minutes will be provided to the Board, and filed with the minutes of the meetings of the Board. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

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<BR>
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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="16%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="38%"><FONT SIZE=2><B>GREATBANC TRUST COMPANY</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="16%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2><B>C/O AMERICAN STOCK TRANSFER &amp;<BR>
TRUST COMPANY<BR>
59 MAIDEN LANE<BR>
NEW YORK, NEW Y0RK 10038</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2><B>ELECTRO-SENSORS, INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.<BR>
PROXY FOR ANNUAL MEETING<BR>
April 23, 2003  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby appoints BRADLEY D. SLYE and PETER R. PETERSON, and each of them, with full power of substitution, his or her Proxies to represent and
vote, as designated below, all shares of the Common Stock of Electro-Sensors, Inc. registered in the name of the undersigned at the 2003 Annual Meeting of Shareholders of the Company to be held at the
Radisson South, 7800 Normandale Boulevard, Bloomington, Minnesota, at 2:00 p.m. local time, on April 23, 2003, and at any adjournment thereof. The undersigned hereby revokes all proxies previously
granted with respect to such meeting. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>(Continued and to be signed on the reverse side)  </B></FONT></P>

<P ALIGN="RIGHT"><FONT SIZE=2>14475 </FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=14,EFW="2106530",CP="ELECTRO-SENSORS, INC.",DN="1",CHK=438187,FOLIO='blank',FILE='DISK038:[03STP4.03STP1274]MA1274A.;23',USER='LSMITH',CD='24-MAR-2003;17:19' -->
<P ALIGN="CENTER"><FONT SIZE=1><B>ANNUAL MEETING OF SHAREHOLDERS OF  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ELECTRO-SENSORS, INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=1><B>April 17, 2003  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>Please
date, sign and mail<BR>
your proxy card in the<BR>
envelope provided as soon<BR>
as possible. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>V&nbsp;Please detach and mail in the envelope provided.&nbsp;V  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=1><B>THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH PROPOSAL.<BR>
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE <FONT FACE="WINGDINGS">&#253;</FONT>  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1>FOR</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1>AGAINST</FONT></TD>
<TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1>ABSTAIN</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>1.</FONT></TD>
<TD COLSPAN=3><FONT SIZE=1>Set number of directors at five</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>2.</FONT></TD>
<TD COLSPAN=3><FONT SIZE=1>Elect five directors:</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=1>NOMINEES</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="21%"><FONT SIZE=1>FOR ALL NOMINEES</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>B. Slye</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>P. Peterson</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="21%"><FONT SIZE=1>WITHHOLD AUTHORITY<BR>
FOR ALL NOMINEES</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1><FONT FACE="WINGDINGS">&#111;</FONT><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>G. Miller<BR>
J. Marino</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>J. Strom</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="21%"><FONT SIZE=1>FOR ALL EXCEPT<BR>
(See instructions below)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=4><FONT SIZE=1><B><I>INSTRUCTION: </I></B></FONT><FONT SIZE=1><B>To withold authority to vote for any individual nominee(s), mark "FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to withhold, as shown
here:</B></FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>3.</FONT></TD>
<TD COLSPAN=4><FONT SIZE=1>Approve appointment of Schweitzer Karon &amp; Bremer, LLC as independent auditors for the current fiscal year.</FONT></TD>
<TD WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>4.</FONT></TD>
<TD COLSPAN=4><FONT SIZE=1>Other Matters. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.</FONT></TD>
<TD WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=1><BR>
To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD COLSPAN=4><BR><FONT SIZE=1><B>THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN FOR A PARTICULAR PROPOSAL, WILL BE VOTED FOR SUCH PROPOSAL.</B></FONT><FONT SIZE=1><BR>
<BR></FONT> <FONT SIZE=1><B>DETACH AND RETURN USING THE ENVELOPE PROVIDED</B></FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="16%"><FONT SIZE=1><BR>
Signature of Shareholder</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=1><BR>
&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
<TD WIDTH="5%"><FONT SIZE=1><BR>
Date:</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%"><FONT SIZE=1><BR>
Signature of Shareholder</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=1><BR>
&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
<TD WIDTH="5%"><FONT SIZE=1><BR>
Date:</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>Note:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="92%"><FONT SIZE=1>This proxy must be signed exactly as the name appears hereon. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such.
If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE>
<!-- ZEQ.=2,SEQ=15,EFW="2106530",CP="ELECTRO-SENSORS, INC.",DN="1",CHK=610683,FOLIO='blank',FILE='DISK038:[03STP4.03STP1274]MA1274A.;23',USER='LSMITH',CD='24-MAR-2003;17:19' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<BR>
<P><br><A NAME="03STP1274_1">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_be1274_1">NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To Be Held On April 23, 2003</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_de1274_1">PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS To Be Held On April 23, 2003</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1274_2">GENERAL INFORMATION</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1274_3">OUTSTANDING SHARES &amp; VOTING RIGHTS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1274_4">SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1274_5">ELECTION OF DIRECTORS Proposals #1 and #2</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1274_6">AUDIT COMMITTEE REPORT</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1274_7">EXECUTIVE COMPENSATION</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1274_8">Summary Compensation Table</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1274_9">Aggregated Options/SAR Exercises in Last Fiscal Year And Fiscal Year-End Options/SAR Values (a)</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1274_10">APPROVAL OF AUDITORS Proposal #3</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1274_11">SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1274_12">OTHER MATTERS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1274_13">SHAREHOLDER PROPOSALS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1274_14">FORM 10-KSB</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dg1274_1">CHARTER FOR THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF ELECTRO-SENSORS, INC.</A></FONT><BR>

<!-- SEQ=,FILE='QUICKLINK',USER=KLIND,SEQ=,EFW="2106530",CP="ELECTRO-SENSORS, INC.",DN="1" -->
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`
end

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