EXHIBIT 10-18



 



EXHIBIT 10.18


PRO-DEX, INC.


 DIRECTORS' STOCK OPTION PLAN


 




            This
Directors' Stock Option Plan (the "Plan") adopted by Pro0Dex, Inc. (the
"Company") on May 25, 1994, is amended this 27th day of February
1996.




1.         Definitions.


Unless
otherwise indicated or required by the particular context, the terms used in this Plan shall have the
following meanings:  




Board:    
The Board of Directors of Pro-Dex, Inc.




Code:     
The Internal Revenue Code of 1986, as amended.




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




Company: 
       Pro-Dex, Inc., a corporation incorporated under the laws of California, 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.




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




 Fair
Market Value:   If, at any time an Option is granted under the Plan, the
Company's Common Stock is publicly traded,  Fair Market Value shall be
determined as of the last business day for which the prices or quotes discussed
in this sentence are available prior to the date an Option is granted and shall
mean (a) 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,
(b) the last reported sale price (on that date) of the Common Stock on NASDAQ,
if the stock is not then traded on a national securities exchange; or (c) the
closing bid price (or average of bid prices) last quoted (on that date) by an
established quotation service for over-the-counter securities, if the stock is
not reported on NASDAQ.  However, if the Common Stock is not publicly-traded at
the time an Option is granted under the Plan, Fair Market Value shall be as
determined in good faith by the Board after such consultation with outside
legal, accounting and other experts as the Board may deem advisable.




                        Nonemployee
Director: A person who is a member of the Board of Directors and who is not
an employee of the Company.




                        Option:  
The rights to purchase Common Stock granted pursuant to the terms and
conditions of an Option Agreement (defined below


                        Option
Agreement:     The written agreement (including any amendments or
supplements thereto) between the Company and a Nonemployee Director designating
the terms and conditions of an Option.




                        Option
Shares:  The shares of Common Stock underlying an Option granted to an
Employee.




                        Optionee:    
A Nonemployee Director who has been granted an Option.




                        




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2.          Purpose and Scope.




(a)    The
purpose of this Plan is to advance the interests of the Company and its
shareholders by affording Nonemployee Directors, whose participation and
guidance contribute to the successful operation of the Company, and affording
them an opportunity for investment in the Company and the incentive advantages
inherent in stock ownership in this Company.




(b)  This Plan
authorizes that Options be granted to Nonemployee Directors according to the
formula set forth in Section 3 of this Plan.




3.     
    Operation of the Plan.  




(a)        Grant
of Options:  Amount and Timing.  Options to purchase 20,000 in shares of
Common Stock shall be granted under the Plan to each Nonemployee Director at
the later to occur of (i) the date this Plan is adopted by the Company's
shareholders, or (ii) the date he or she is first elected or appointed a
Nonemployee Director of the Company.  In addition, effective on the second and
third anniversary dates of commencement of service on the Board, options to
purchase an additional 15,000 shares shall automatically be granted to the
Optionee provided that, at that time, he or she is a Nonemployee Director.  All
Options shall be exercisable only as set forth in Sections 3(c) and 6 below and
shall be subject to the other terms and conditions set forth in this Plan or
otherwise established by the Company.




(b)     Option
Purchase Price.  The exercise price for each Option Share shall be the
Fair Market Value of the Company's Common Stock on the Date of Grant.




(c)     Term.  Each Option shall expire ten years after the Date of Grant, except that an
Option will expire, if not exercised, 90 days after the Optionee ceases to be a
director of the Company.




(d)    Amendments.   
This Plan may be changed or modified from time to time provided, however, that,
(A) no such change or modification shall impair any Option previously granted
under the Plan; (B) the provisions relating to the amount, price and timing of
the Options shall not be amended more than once every six months other than to
comport with changes in the Code, the Employee Retirement Income Security Act,
or rules promulgated thereunder; and (C) the approval by the affirmative vote
of the holders of a majority of shares of the Company's securities present, or
represented, and entitled to vote at a meeting duly held in accordance with the
applicable laws of the State of Colorado, shall be required for any amendment
which would do any of the following:




(i)        modify
the eligibility requirements for receiving Options under the Plan;


(ii)        except
as provided in Section 8 relative to capital changes, the number of shares
purchasable pursuant to the granting of any Option hereunder or the exercise
price of each Option;




(iii)        the
maximum term of Options granted;




(iv)        the minimum price at which Options may be granted;




(v)        the dollar amount pursuant to which Options may be granted at any one
time;




(vi)        the
timing of Option Grants; or




(vii)        the
term of the Plan.




 




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4.          Number of Shares.  


The Board is
authorized to appropriate, issue and sell for the purposes of the Plan, an aggregate maximum of 500,000
shares of Common Stock, including both treasury and newly issued shares, or the
number and kind of shares of stock or other securities which in accordance with
Section 8 shall be substituted for the 500,000 shares or into which such
500,000 shares shall be adjusted.  All or any unsold shares subject to an
Option that for any reason expires or otherwise terminates before it has been
exercised, again may be made subject to other Options granted under the Plan.




5.     
Eligibility.  


Options shall be granted under
the Plan only to Nonemployee Directors provided that any Nonemployee Director
may waive his right to participate in the Plan.  




6.     
Exercise of Options.  




(a)        Each Option granted pursuant to this Plan shall be exercisable in full
commencing six months after the Date of Grant. 


(b)        Except as otherwise provided in Section 9, 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.




(c)        Each Option shall be exercised in whole or in part by delivering to the
office of the Treasurer of the Company written notice of the number of shares
with respect to which the Option is to be exercised and by paying in full the
purchase price for the Option Shares as set forth in Section 7 herein;
provided, that an Option may not be exercised in part unless the purchase price
for the Option Shares purchased is at least $2,000.




(d)        No Option may be exercised, and no Option Shares may be sold,
transferred or otherwise disposed of for a period of at least six months
following the Date of Grant of the Option.




7.     
      Payment for Option Shares.




Upon exercise of any Option, the aggregate exercise price shall be paid
to the Company in cash or by certified or cashier's check.  For any single
purchase by an Optionee of Option Shares at a total purchase price in excess of
$2,000, the Company, in its sole discretion, upon request by the Optionee, may
permit all or part of the purchase price for the Option Shares to be paid by
(a) delivery to the Company for cancellation shares of the Common Stock
previously owned by the Optionee ("Previously Owned Shares") with a Fair Market
Value as of the date of the payment equal to the portion of the purchase price
for the Option Shares that the Optionee does not pay in cash; (b) having shares
withheld from the amount of shares to be received by the Optionee; (c)
delivering an irrevocable subscription agreement obligating the Optionee to
take and pay for the shares to be purchased within one year of the date of such
exercise; or (d) complying with any other payment mechanism as the Company may
approve from time to time.  Notwithstanding the above, an Optionee shall be
permitted to exercise his Option by delivering Previously Owned Shares only if
he has held, and provides appropriate evidence of such, the Previously Owned
Shares for more than six months prior to the date of exercise.  This period
(the "Holding Period") may be extended by the Company acting in its sole
discretion as is necessary, in the opinion of the Company, so that, under
generally accepted accounting principles, no compensation shall be considered
to have been or to be paid to the Optionee as a result of the exercise of the
Option in this manner.  At the time the Option is exercised, the Optionee shall
provide an affidavit, and such other evidence and documents as the Company
shall request, to establish the Optionee's Holding Period.  As indicated above,
an Optionee may deliver shares of Common Stock as part of the purchase price
only if the Company, in its sole discretion agrees, on a case by case basis, to
permit this form of payment.




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            8.         Change
in Stock, Adjustments, Etc.


                        In the
event that each of the outstanding shares of Common Stock (other than shares held
by dissenting shareholders which are not changed or exchanged) should be
changed into, or exchanged for, a different number or kind of shares of stock
or other securities of the Company, or if further changes or exchanges of any
stock or other securities into which the Common Stock shall have been changed,
or for which it shall have been exchanged, shall be made (whether by reason of
merger, consolidation, reorganization, recapitalization, stock dividends,
reclassification, split-up, combination of shares or otherwise) then there
shall be substituted for each share of Common Stock that is subject to the Plan
but not subject to an outstanding Option hereunder, the number and kind of shares
of stock or other securities into which each outstanding shares of Common Stock
(other than shares held by dissenting shareholders which are not changed or
exchanged) shall be so changed or for which each outstanding share of Common
Stock (other than shares held by dissenting shareholders) shall be so changed
or for which each such share shall be exchanged.  Any securities so substituted
shall be subject to similar successive adjustments.




In
the event of any such changes or exchanges, (a) the number, or kind, or
exercise price of the Option Shares or other securities that are then subject
to an Option or Options granted pursuant to the Plan shall be deemed
automatically adjusted in order to prevent dilution or enlargement of rights
and (b) such adjustments shall be effective and binding for all purposes or the
Plan.




9.         Nontransferability
of Option.


Except
as herein provided, no Option granted under the Plan shall be transferable by
the Optionee, either voluntarily or involuntarily, except by will, by the laws
of descent and distribution, or pursuant to a qualified domestic relations
order as defined in the Code or the Employee Retirement Income Security Act or
rules promulgated thereunder; and no Option shall be subject to execution,
attachment or similar process.  Any attempt to transfer an Option except as
otherwise herein provided shall void the Option.  Notwithstanding anything
herein to the contrary, an Option may be transferred to an immediate family
member or a family trust if such transfer is then permitted by the rules
adopted under Section 16(b) of the Securities Exchange Act of 1934, as amended.




10.       
Rights as a Shareholder.


No person shall
have any rights as a shareholder with respect to any shares covered by an
Option until that person becomes the holder of record of such shares and,
except as provided in Section 8, no adjustments shall be made for dividends or
other distributions or other rights as to which there is an earlier record
date.




11.       
Securities Laws Requirements.


No Option
Shares shall be issued unless and until, in the opinion of the Company, any
applicable registration requirements of the Securities Act of 1933, as amended
("Securities Act"), any applicable listing requirements of any securities
exchange on which stock of the same class is then listed, and any other
requirement of law or of any regulatory bodies having jurisdiction over such
issuance and delivery, have been fully complied with.  Each Option Agreement
and each Option Share certificate may be imprinted with legends reflecting
federal and state securities laws restrictions and conditions, and the Company
may comply therewith and issue "stop transfer" instructions to its transfer
agent and registrar in good faith without liability.




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12.      
Disposition of Shares.


To the extent
reasonably requested by the Company, each Optionee, as a condition of
exercise, shall represent, warrant and agree, in a form of written certificate
approved by the Company, as follows:  (a) that all Option Shares are being
acquired solely for his/her own account and not on behalf of any other person
or entity; (b) that no Option Shares will be sold or otherwise distributed in
violation of the Securities Act or any other applicable federal or state
securities laws; (c) that he/she will report all sales of Option Shares to the
Company in writing on a form prescribed by the Company; and (d) that if he/she
is subject to the reporting requirements under Section 16(a) of the Exchange
Act (i) he will not violate Section 16(b) of the Exchange Act, (ii) he will
furnish the Company with a copy of each Form 4 and Form 5 filed by him, and
(iii) he will timely file all reports required under the federal securities
laws.




13.             
Effective Date of Plan; Termination Date of Plan.  


The
Plan shall be effective on the date of  the Plan has been approved by the Board
of Directors and the shareholders of the Company and shall terminate at
midnight on a date which is ten years after the effective date, except as to
Options previously granted and outstanding under the Plan at that time. No Options
shall be granted after the date on which the Plan terminates.  The Plan may be
abandoned or terminated at any earlier time by the affirmative vote of the
holders of a majority of the shares of Common Stock present, or represented,
and entitled to vote at a meeting duly held in accordance with the applicable
laws of the State of California, except with respect to any Options then
outstanding under the Plan.




14.             
Withholding Taxes. 


The
Option Agreement shall provide that the Company may take such steps as it may
deem necessary or appropriate for the withholding of any taxes which the
Company is required by any law or regulation or any governmental authority,
whether federal, state or local, domestic or foreign, to withhold in connection
with any Option including, but riot limited to, the withholding of all or any
portion of any payment or the withholding of issuance of Option Shares upon the
exercise of any Option.




15.             
Other Provisions.




The following
provisions are also in effect under the Plan:




(a)     The
use of a masculine gender in the Plan shall also include within its meaning the
feminine, and the singular may include the plural, and the plural may include
the singular, unless the context clearly indicates to the contrary. 




(b)       Any expenses of administering the plan shall be borne by the
Company.




(c)       This
Plan shall be construed to be in addition to any and all other  compensation
plans or programs.  The adoption of the Plan by the shareholders of the Company
shall not be construed as creating any limitations on the power or authority of
the Board to adopt such other additional incentive or other compensation
arrangements as the Board may deem necessary or desirable. 




(d)    The
validity, construction, interpretation, administration and effect of the Plan and
of its rules and regulations, and the rights of any and all persons having or
claiming to have an interest therein or thereunder shall be governed by and
determined exclusively and solely in accordance with the laws of the State of
Colorado. 






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