PRO-DEX, INC.

SECOND AMENDED AND RESTATED

2004 STOCK OPTION PLAN

This Second Amended and Restated 2004 Stock Option Plan (the “ Plan ”) is adopted in consideration for services rendered and to be rendered to Pro-Dex, Inc. or any Related Company (as defined below).

1.          Definitions . The terms used in this Plan shall, unless otherwise indicated or required by the particular context, have the following meanings:

(a)      Award Shares : The shares of Common Stock underlying an Option or Restricted Stock granted to an Employee.

(b)      Board : The Board of Directors of Pro-Dex, Inc.

(c)      Code : The Internal Revenue Code of 1986, as amended.

(d)      Common Stock : The no par value common stock of Pro-Dex, Inc.

(e)      Company : 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.

(f)        Date of Grant : The date on which an Option is granted under the Plan.

(g)      Disinterested Person : 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 “ Exchange Act ”) 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.

(h)       Employee : An Employee is an employee of the Company or any Related Company.

(i)         Fair Market Value : 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 an established securities market, 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 securities market or quotation service for over-the-counter securities, if the last sale price is not reported for the stock on the service or market on which the stock is quoted.  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, provided that such valuation shall take into account all available information material to the value of the company, including but not limited to the value of the tangible and intangible assets of the company, the present value of its anticipated future cash flows, the market value of the stock or equity interests in other entities engaged in substantially the same business, recent arm’s length transactions involving the sale of such stock, and other relevant factors, and a written record of the method of determining such value shall be maintained.

(j)          Incentive Stock Options (“ISOs”) : “Incentive Stock Options” as that term is defined in Section 422 of the Code.

(k)        Key Employee : 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.

(l)          Non-Incentive Stock Options (“Non-ISOs” ): Options which are not intended to qualify as “Incentive Stock Options” under Section 422 of the Code.

(m)         Option : The rights granted to an Employee to purchase Common Stock pursuant to the terms and conditions of an Option Agreement.

(n)         Option Agreement : The written agreement (and any amendment or supplement thereto) between the Company and an Employee designating the terms and conditions of an Option.

(o)           Option Committee : 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 (“ Option Committee ”) 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)            Option Shares : The shares of Common Stock underlying an Option granted to an Employee.

(q)            Optionee : An Employee who has been granted an Option.

(r)             Related Company : Any corporation that is a “parent corporation” or a “subsidiary corporation” 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.

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(s)             Restricted Stock : Shares of Common Stock granted pursuant to the terms of Section 12 hereof.

(t)            Restricted Stock Agreement : The written agreement (and any amendment or supplement thereto) between the Company and an Employee designating the terms and conditions of Restricted Stock.

(u)             Stock Award : Any Option or Restricted Stock granted under this Plan.

2.          Purpose and Scope .

(a)            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.

(b)            This Plan authorizes the Option Committee to grant Stock Awards 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.

3.          Administration of the Plan .

(a)             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.

(b)             In accordance with and subject to the provisions of the Plan, the Option Committee shall select the Employees to receive Stock Awards and shall determine (i) the number of shares of Common Stock to be subject to each Stock Award, which number shall be fixed as of the date of grant, (ii) the time at which each Stock Award is to be granted, (iii) whether a Stock Award 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 Stock Award as the Option Committee may deem necessary or desirable. The Option Committee shall determine the form of Option Agreement or Restricted Stock Agreement to evidence each Stock Award.

(c)             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.

(d)        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 Stock Award 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:

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(i)     materially modify the eligibility requirements for receiving Stock Awards under the Plan;

(ii)     materially increase the benefits accruing to Employees under the Plan; or

(iii)     increase the number of shares of Common Stock that may be issued under the Plan.

(e)         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.

(f)          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 (“ Rule 16b-3 ”). 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.

4.         Number of Shares . 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 2,000,000 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 Section 9 shall be substituted for the 2,000,000 shares or into which such 2,000,000 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 a Stock Award that for any reason expires or otherwise terminates, may again be made subject to Stock Awards under the Plan.

5.          Eligibility . 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 Stock Awards under the Plan and options or awards granted pursuant to other plans or otherwise.

6.          Option Price . 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 shall not be less than 100 percent of the Fair Market Value of the Option Shares at the time the Option is granted. The purchase price for the Option Shares shall be a fixed, and cannot be a fluctuating, price.

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7.          Duration and Exercise of Options .

(a)         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.  In no event shall the Option Committee have the discretion to extend an Option beyond the earlier of the last date that the Option could have been exercised under the initial term of the Option and the date that is 10 years after the initial date of grant, unless said extension is granted at a time when the exercise price of the Option does not equal or exceed the Fair Market Value of the stock that could be purchased pursuant to the Option.

(b)         Except as otherwise permitted under Section 11 , 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.

(c)          The Option Committee may determine whether any Option shall be exercisable as provided in Subsection (a) of this Section 7 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.

(d)           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.

(e)            Notwithstanding the provisions of Subsection (d) of this Section 7 , 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 dat