8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the

Securities Exchange Act of 1934

Date of Report

(Date of earliest event reported)

April 20, 2012

PRO-DEX, INC.

(Exact name of registrant as specified in its charter)

COLORADO	0-14942	84-1261240
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

2361 McGaw Avenue

Irvine, Ca. 92614

(Address of principal executive offices, zip code)

(949) 769-3200

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Resignation of Chief Executive Officer, President and Director.

On April 20, 2012, Pro-Dex, Inc. (the “Company”) reported that Mark P. Murphy, the Company’s Chief Executive Officer, President and a member of the Company’s Board of Directors (the “Board”), resigned from all of his positions with the Company, effective April 20, 2012 (the “Separation Date”). On April 20, 2012, the Company and Mr. Murphy entered into a Separation Agreement and General Release of All Claims (“Separation Agreement”) concerning the conclusion of Mr. Murphy’s employment services with the Company. A complete copy of the Separation Agreement is attached to this report as Exhibit 10.1 and the summary set forth below is qualified in its entirety by the full text of the Separation Agreement.

Under the terms of the Separation Agreement, Mr. Murphy will be paid all unpaid base salary, unreimbursed business expenses, less state and federal taxes and other required withholding, for the period through the Separation Date.

Provided that the Separation Agreement has not been revoked by Mr. Murphy prior to the expiration of the seven day revocation period described below, the Company will, among other things, also: (i) pay Mr. Murphy severance compensation in the gross amount of $300,000, in accordance with the terms of the employment letter agreement dated July 14, 2010 by and between Mr. Murphy and the Company; and (ii) provided Mr. Murphy elected coverage under the Company’s group health insurance program prior to the Separation Date and makes a timely election for continued coverage pursuant to COBRA, continue to pay the Company’s portion of the monthly premiums for such continued coverage under the Company’s group health insurance program for a period from the Separation Date through March 31, 2013.

Mr. Murphy has provided the Company and its affiliates with a general release of claims, subject to certain statutory exceptions set forth in the Separation Agreement.

Pursuant to applicable law, Mr. Murphy has a period of seven calendar days to revoke the Separation Agreement by providing the Company with written notice of such revocation. Any revocation of the Separation Agreement, however, shall not affect the finality of the separation of Mr. Murphy’s employment with the Company on the Separation Date.

In connection with Mr. Murphy’s resignation, the Company has entered into an Independent Contractor Agreement to engage Mr. Murphy as an independent contractor through October 23, 2012, for a monthly consulting fee of $5,000. In the event the Company requests, and Mr. Murphy performs, services for the Company in excess of 40 hours during any one-month period during the term of the Independent Contractor Agreement, the Company will pay $200 per hour for each such excess hour of service performed. A complete copy of the Independent Contractor Agreement is attached to this report as Exhibit 10.2 and the summary set forth below is qualified in its entirety by the full text of the Independent Contractor Agreement.

Appointment of Chief Executive Officer and President.

On April 20, 2012, pursuant to appointment by the Board, Michael J. Berthelot began service as the Company’s Chief Executive Officer and President. Prior to his appointment, Mr. Berthelot had been the Chief Executive Officer of Cito Capital Corporation, a strategic consulting firm, since 2003. Mr. Berthelot is the founder and principal of Corporate Governance

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Advisors Inc., a consulting firm that provides corporate governance audits, performance evaluations, and advisory services to public company boards. From 1992 to 2003, Mr. Berthelot served as Chairman and Chief Executive Officer of TransTechnology Corporation, a publicly traded multinational manufacturing firm, and from 2003 until July 2006, he continued to serve as its non-executive Chairman. Mr. Berthelot is a Certified Public Accountant and serves as a director of Fresh Del Monte Produce Inc. and on the boards of a privately held company in the technology industry. He teaches corporate governance at the University of California, San Diego’s Rady School of Management’s MBA program. Mr. Berthelot has been a director of the Company since 2009.

In connection with the appointment, the Company and Mr. Berthelot entered into an at-will employment arrangement (“Employment Arrangement”). The Employment Arrangement is attached to this report as Exhibit 10.3, which exhibit is incorporated herein by this reference. Under the terms of the Employment Arrangement, Mr. Berthelot will report to the Board and his compensation will consist of the following components:

• A base salary at an annualized rate of $300,000.

• Participation in the Company’s Annual Incentive Plan and Long Term Incentive Plan.

• Mr. Berthelot is permitted to participate in any program of stock options or other equity grants which the Company may from time to time provide key employees. Such grants are made under the terms and provisions of the Second Amended and Restated 2004 Stock Option Plan. Subject to the foregoing, the initial grant under this program is 200,000 options to purchase the Company’s common shares at the closing price for the Company’s shares as of the last business day immediately prior to the grant date in which a closing price is available, and such options will vest in their entirety on the third anniversary following the grant date. The options will have a term of ten years from the grant date and to the maximum extent permissible under the relevant Internal Revenue Service regulations, will be made as Incentive Stock Options.

• Health, dental, disability and life insurance, qualified retirement plans, and optional employee benefits of the Company on the same terms as other employees of the Company, except Mr. Berthelot will not participate in the Company-wide employee bonus plan.

Mr. Berthelot also entered into the a Change of Control Agreement with the Company, the standard form of which had been previously approved by the Board for eligible officers. The Change of Control Agreement is attached to this report as Exhibit 10.4, which exhibit is incorporated herein by this reference.

Concurrent with his appointment to Chief Executive Officer and President, Mr. Berthelot resigned from his committee positions on the Company’s Audit, Compensation and Nominating and Governance committees.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit 10.1 Separation Agreement entered into between Pro-Dex, Inc. and Mark P. Murphy, dated April 19, 2012.

Exhibit 10.2 Independent Contractor Agreement entered into between Pro-Dex, Inc. and Mark P. Murphy, effective April 23, 2012.

Exhibit 10.3 Employment Arrangement entered into between Pro-Dex, Inc. and Michael J. Berthelot, dated April 20, 2012.

Exhibit 10.4 Change of Control Agreement entered into between Pro-Dex, Inc. and Michael J. Berthelot, dated April 20, 2012.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: April 20, 2012	PRO-DEX, INC (REGISTRANT).
	By:	/s/ Harold A. Hurwitz
		Harold A. Hurwitz
		Chief Financial Officer

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INDEX TO EXHIBITS

Exhibit Number	Description
Exhibit 10.1	Separation Agreement entered into between Pro-Dex, Inc. and Mark P. Murphy, dated April 19, 2012.
Exhibit 10.2	Independent Contractor Agreement entered into between Pro-Dex, Inc. and Mark P. Murphy, effective April 23, 2012.
Exhibit 10.3	Employment Arrangement entered into between Pro-Dex, Inc. and Michael Berthelot, dated April 20, 2012.
Exhibit 10.4	Change of Control Agreement entered into between Pro-Dex, Inc. and Michael J. Berthelot, dated April 20, 2012.

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EX-10.1

Exhibit 10.1

SEPARATION AGREEMENT AND GENERAL RELEASE OF ALL CLAIMS

This SEPARATION AGREEMENT AND GENERAL RELEASE OF ALL CLAIMS, (“Agreement”) is made and entered into by and between MARK P. MURPHY (“Employee”) and PRO-DEX, Inc., a Colorado corporation (“the Company”).

RECITALS

WHEREAS, Employee has been employed by the Company in the positions of Chief Executive Officer and President and has served as a director on the Company’s Board of Directors.

WHEREAS, Employee and the Company are parties to that certain July 14, 2010 letter agreement signed by Employee and by William L. Healey and Jeff Ritchey on behalf of the Company, the provisions of which letter agreement the parties intend to supersede through their entry into this Agreement; and

WHEREAS, Employee’s employment with the Company will separate on April 20, 2012 (the “Separation Date”), and the Company and Employee mutually desire to settle fully and finally all obligations to Employee that the Company may have of any nature whatsoever, as well as any asserted or unasserted claims that Employee may have arising out of his employment with the Company or the separation of that employment.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual covenants and agreements and the terms and conditions set forth herein and other valuable consideration, the parties agree as follows:

1. Compensation Through Separation Date. On the Separation Date, Employee will be paid all unpaid base salary, unpaid bonuses earned, unreimbursed business expenses, together with any accrued but unused vacation pay, less state and federal taxes and other required withholding, for the period from the last regular pay day through the Separation Date, including (a) seventeen thousand four hundred forty dollars and eighty-eight cents ($17,440.88), less state and federal taxes and other required withholding, as settlement of all amounts due to Employee under the Company’s Long Term Incentive Plan; and (b) twelve thousand eighty-two dollars and nineteen cents ($12,082.19), less state and federal taxes and other required withholding, as settlement of all amounts due to Employee under the Company’s Annual Incentive Plan. Employee acknowledges and agrees that upon the receipt of the foregoing payment, the Company will have paid to him all salary, bonuses, benefits, accrued vacation pay, or other consideration owed to him at any time and for any reason through the Separation Date. Employee further represents and agrees that (i) no further sums are or were due and owing Employee either by the Company or by any individual or entity related to the Company in any way, except as provided for in this Agreement and (ii) except as stated in clauses (a) and (b) above, no amounts are owed to him in connection with the Company’s Annual Incentive Plan or Long Term Incentive Plan.

2. Effective Date. The Effective Date of this Agreement shall be the eighth day after Employee’s dated execution of this Agreement, provided that Employee has not revoked this Agreement pursuant to Paragraph 13.

3. Special Additional Compensation. In consideration of this Agreement, and provided that none of the provisions of Paragraph 4 has been violated, and that the revocation period referenced in Paragraph 13 shall have expired without this Agreement having been revoked, the Company also will do the following:

A. Pay to Employee, within seven (7) calendar days after the Effective Date, in one lump sum payment, a gross amount equal to Three Hundred Thousand Dollars ($300,000), less applicable legal deductions and withholdings (the “Separation Agreement Payment”).

B. As additional consideration for the promises and obligations contained herein, and provided Employee elected coverage under the Company’s group health insurance program prior to the Separation Date and makes a timely election for continued coverage pursuant to COBRA, the Company further agrees to pay the monthly premiums for such continued coverage under the Company’s group health insurance program for a period from the Separation Date through March 31, 2013 (provided Employee remains eligible for COBRA continuation coverage). Thereafter, if applicable, continuation coverage pursuant to COBRA will be available to Employee at Employee’s sole expense, and Employee will be responsible for the full COBRA premium for any remaining months of the COBRA coverage period made available pursuant to applicable law.

C. Pay to Employee, within seven (7) calendar days after the Effective Date, the value of Employee’s vested “in the money” stock options (“Option Value”) as of the Separation Date. The Option Value shall be computed as the difference between the closing price of the Company’s common stock on the second day immediately preceding the Separation Date (“Market Price”) and the exercise price (“Exercise Price”) in each vested and unexercised option held by the Employee as of the Separation Date where the Exercise Price is lower than the Market Price, multiplied by the number of shares of each vested and unexercised option.

D. Reimburse Employee for costs incurred for actual outplacement consulting services used in connection with finding future employment, up to a maximum of ten thousand dollars ($10,000), which reimbursement will be made by the Company within ten (10) days following its receipt from Employee of written evidence of such costs.

E. Allow Employee to use the Vistage CEO roundtable membership which the Company has already paid for through November 2012 (annual dues).

4. Return of Company Property. Employee understands that, except as otherwise provided by this Paragraph 4, as of the Separation Date he was required to return to the Company, and Employee represents that he has returned to the Company, all tangible property and information belonging to the Company that is within his possession or subject to his control, including but not limited to any equipment, supplies, business cards, credit cards, and office

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machines, and also including any electronic or tangible documents or files relating to the Company, except for (i) such personnel and compensation records provided to Employee during the course of his employment, and (ii) the following tangible items which were assigned for Employee’s use prior to the Separation Date, and which the Company has agreed Employee may retain thereafter: cell phone, cell phone number, laptop computer (after all Company data has been removed from such laptop computer as determined by the Company) and the docking station, back-up device, and charger associated with the laptop computer.

5. Health Insurance Benefits. Employee is entitled to continue his health insurance benefits at his own expense (except as otherwise provided in Paragraph 3) and for such period as may be permitted by law.

6. Complete Release of Claims by Employee.

A. In consideration for this Agreement, and to the maximum extent permitted by law, Employee, for himself, and his heirs, assigns, executors, administrators, agents and successors (collectively, “Employee’s Affiliates”) hereby fully releases, covenants not to sue and forever discharges the Company and each of its predecessors, successors, assigns, employees, officers, directors, shareholders, agents, attorneys, subsidiaries, parent companies, divisions or affiliated corporations or organizations, expressly including, but not limited to, PRO-DEX, Inc., whether previously or hereafter affiliated in any manner (collectively, “Released Parties”), from any and all claims, demands, actions, causes of action, charges of discrimination, obligations, damages, attorneys’ fees, costs, expenses, and liabilities of any nature whatsoever, whether or not now known, suspected or claimed (the “Claims”), that Employee or Employee’s Affiliates ever had, now have, or may claim to have as of the date of this Agreement against the Released Parties (whether directly or indirectly), or any of them, by reason of any act or omission concerning any matter, cause or thing occurring on or before the Effective Date of this Agreement. This release includes, without limiting the generality of the foregoing, the waiver of any claims related to or arising out of Employee’s employment with the Company or the separation of that employment. In giving this release, Employee waives and releases any and all rights to employment or re-employment with the Company.

B. Without limiting the generality of the foregoing, Employee understands and agrees that the release provisions of this Paragraph 6 apply to any Claims that Employee or the Employee’s Affiliates now have, or may ever have had, against the Company or any of the other Released Parties occurring on or before the Effective Date of this Agreement that arise out of or are in any manner related to Employee’s employment with the Company or with any of the other Released Parties, as well as the separation of that employment, including without limitation any Claims arising out of or related to violation of any federal or state employment discrimination laws, including the California Fair Employment and Housing Act; the California Family Rights Act; the Family and Medical Leave Act; Title VII of the Civil Rights Act of 1964; the federal Age Discrimination in Employment Act, as amended; the Americans With Disabilities Act; the National Labor Relations Act; the Equal Pay Act; the Employee Retirement Income Security Act of 1974; as well as all Claims arising out of or related to violations of the provisions of the California Labor Code; the California Government Code; the California

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Business & Professions Code, including Business & Professions Code Section 17200, et seq.; state and federal wage and hour laws, including the federal Fair Labor Standards Act; breach of contract; fraud; misrepresentation; common counts; unfair competition; unfair business practices; negligence; defamation; infliction of emotional distress; invasion of privacy; assault; battery; false imprisonment; wrongful termination; and any other state or federal law, rule, or regulation.

C. Employee acknowledges and represents that he did not suffer any work-related injuries while working for the Company. Employee acknowledges and represents that he has no intention of filing any claim for workers’ compensation benefits of any type against the Company, and that he will not file or attempt to file any claims for workers’ compensation benefits of any type against the Company. Employee acknowledges that the Company has relied upon these representations, and that the Company would not have entered into this Agreement but for these representations. As a result, Employee agrees, covenants, and represents that the Company may, but is not obligated to, submit this Agreement to the Workers’ Compensation Appeals Board for approval as a compromise and release as to any workers’ compensation claim that Employee files at any time against the Company.

7. Older Workers Benefit Protection Act. This Agreement is subject to the terms of the Older Workers Benefit Protection Act of 1990 (the “OWBPA”). The OWBPA provides that an individual cannot waive a right or claim under the Age Discrimination in Employment Act (“ADEA”) unless the waiver is knowing and voluntary. Pursuant to the terms of the OWBPA, Employee acknowledges and agrees that he has executed this Agreement voluntarily, and with full knowledge of its consequences. In addition, Employee hereby acknowledges and agrees that: (a) this Agreement has been written in a manner that is calculated to be understood, and is understood, by Employee; (b) the release provisions of this Agreement apply to rights and claims that Employee may have under the ADEA, including the right to file a lawsuit against the Released Parties for age discrimination; (c) the release provisions of this Agreement do not apply to any rights or claims that Employee may have under the ADEA that arise after the date Employee executes this Agreement; and (d) the Company does not have a preexisting duty to pay the special additional compensation identified in this Agreement (except to the extent otherwise provided in the July 14, 2010 letter agreement).

8. General Nature of Release; Claims Not Released. The Release set forth above in Paragraph 6 of this Agreement is a general release of all claims, demands, causes of action, obligations, damages, and liabilities of any nature whatsoever that are described in the Release and is intended to encompass all known and unknown, foreseen and unforeseen claims that Employee may have against the Released Parties, or any of them, except for (a) any claims that may arise from the terms of this Agreement, (b) any claims which may not be released as a matter of law, (c) any claims under the Indemnification Agreement (as defined below), (d) any claims for indemnification and/or reimbursement of expenses by the Company with respect to which Employee may be eligible by reason of Employee’s indemnification rights under any applicable statute or provision of the Company’s charter documents, or (e) any rights that Employee may have under the Option Grants (as defined below). It is further understood by the Parties that nothing in this Agreement shall affect any rights Employee may have under any Pension Plan and/or Savings Plan (i.e., 401(k) plan) provided by the Company as of the

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Separation Date, such items to be governed exclusively by the terms of the applicable plan documents. Employee covenants and agrees never to commence, aid in any way, prosecute or cause to be commenced or prosecuted any action or other proceeding based upon any claims, demands, causes of action, obligations, damages or liabilities which are the subject of this Agreement; provided however, that Employee does not relinquish any protected rights to file a charge, testify, assist or participate in any manner in an investigation, hearing or proceeding conducted by the Equal Employment Opportunity Commission, the Office of Federal Contract Compliance or any similar state human rights agency. However, Employee may not recover additional compensation or damages as a result of any such action.

9. Release of Section 1542 Rights. Employee expressly waives and relinquishes all rights and benefits he may have under Section 1542 of the California Civil Code. Section 1542 is intended to protect against an inadvertent release of unknown or unsuspected claims that would be material to this Agreement. This Paragraph 9 provides that Employee also is releasing any such unknown or unsuspected claims. Section 1542 reads as follows:

“Section 1542. [General Release; extent.] A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”

10. Non-Admission of Liability. Employee and the Company acknowledge and agree that this Agreement is a settlement agreement and shall not in any way be construed as an admission by any of the Released Parties of any wrongful act against, or any liability to, Employee or any other person.

11. Protection of Trade Secrets. Employee agrees to keep in strict confidence at all times, and that he will not at any time, either directly or indirectly, make known, reveal, make available or use, any Trade Secrets as defined herein, which Employee obtained during or by virtue of his employment with the Company. The parties agree that “Trade Secrets” as used herein means all confidential information which (i) has been the subject of reasonable efforts by the Company to maintain as secret and confidential, (ii) pertains in any manner to the business of the Company, including proprietary information entrusted to the Company in confidence by its customers or suppliers (except to the extent such information is generally known or made available to the public or to the Company’s competitors through lawful means), and (iii) has independent economic value by virtue of not being generally known to other persons who could obtain economic value from its disclosure or use. Employee acknowledges that all Trade Secrets, as well as all other confidential information or data of the Company, are and remain the exclusive property of the Company (or, in the case of proprietary information belonging to a customer or supplier who has entrusted it to the Company, the exclusive property of that person or entity). Employee and the Company further agree that the following information constitutes a non-exclusive listing of Trade Secrets coming within the terms of this Agreement: the customer contacts and business requirements of the Company’s current customers with respect to the Company’s products; the supplier contacts and business requirements of the Company’s suppliers with respect to the Company’s products; the specific nature and amount of business conducted by the Company with its customers and suppliers; the product specifications required

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by the Company’s customers or required by the Company of its suppliers; customer and supplier pricing information and discount schedules with respect to the Company’s products or supplies; and the Company’s business plans and strategies for acquiring new products, customers, or manufacturing sources or otherwise expanding or improving its product offerings to customers. Employee further agrees that he shall not directly or indirectly solicit business from or with respect to any customers or suppliers of the Company through the use of any Trade Secrets. To the maximum extent permitted by law, Employee further covenants and agrees to observe and comply with all other agreements previously made with the Company with respect to the protection of the Company’s intellectual property and confidential information, and that all such agreements shall survive the parties’ entry into this Agreement to their maximum lawful extent except as specifically superseded by this Agreement.

12. Twenty-One Day Consideration Period. This Agreement is being given to Employee on April 17, 2012. Employee acknowledges that he is entitled to take up to twenty-one (21) calendar days to consider whether to accept this Agreement, and that if he signs this Agreement before expiration of the 21-day period, he has done so voluntarily. Employee agrees that any modifications, material or otherwise, made to this Agreement do not restart or affect in any manner the original twenty-one (21) calendar day consideration period.

13. Seven Day Revocation Period. After signing this Agreement, Employee shall have a period of seven (7) calendar days to revoke the Agreement by providing the Company with written notice of his revocation. To be effective, such revocation must be in writing, must specifically revoke this Agreement, and must be received by the Company prior to the eighth calendar day following Employee’s execution of this Agreement. This Agreement shall become effective, enforceable, and irrevocable on the eighth calendar day following Employee’s execution of this Agreement. Any revocation of this Agreement, however, shall not affect the finality of the separation of Employee’s employment with the Company on the Separation Date.

14. Acknowledgment of Being Advised to Consult Legal Counsel. This Agreement is an important legal document. Employee acknowledges that the Company has advised him in writing to consult with an attorney of his choice prior to signing this Agreement, and that he has had the opportunity to consult with an attorney to the extent he so desires.

15. Confidentiality. As a material inducement to the Company to enter into this Agreement, Employee promises and agrees to maintain confidentiality regarding this Agreement to the extent permitted by applicable law, except to the extent the Company publicly discloses its terms in accordance with public company disclosure requirements. Therefore, except to the extent of any public disclosure by the Company, Employee promises and covenants not to disclose, publicize, or cause to be publicized any of the terms and conditions of this Agreement except to his immediate family, and to his attorney or accountant to the extent reasonably necessary to obtain professional advice with respect to the parties’ rights and obligations as stated herein, to the extent necessary to enforce this Agreement, or otherwise as permitted by law. Employee further promises and covenants to use his best efforts to prevent any further disclosure of this Agreement by any such persons to whom he does make disclosure.

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16. Ambiguities. Employee and the Company agree that the general rule that ambiguities shall be construed against the drafting party shall not apply to any interpretation of this Agreement.

17. Interpretation. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be valid and effective under applicable law. If any provision of this Agreement shall be unlawful, void or for any reason unenforceable, it shall be deemed separable from, and shall in no way affect the validity or enforceability of, the remaining provisions of this Agreement, and the rights and obligations of the parties shall be enforced to the fullest extent possible. All captions are for convenience of reference only and shall be disregarded in interpreting this Agreement.

18. Entire Agreement. Employee acknowledges that he is not relying, and has not relied, on any representation or statement by the Company with regard to the subject matter or terms of this Agreement, except to the extent set forth fully in this Agreement. This Agreement constitutes the entire agreement between Employee and the Company with respect to the subject matter of this Agreement, and supersedes any and all other agreements, understandings or discussions between Employee and the Company with respect to the subject matter of this Agreement (specifically including the July 14, 2010 letter agreement between Employee and the Company), other than (a) the Confidentiality, Unfair Competition, Non-Recruiting, and Assignment of Inventions Agreement signed by Employee on September 15, 2010, (b) the Indemnification Agreement between the parties, dated October 24, 2008 (the “Indemnification Agreement”), and (c) any rights Employee may have in connection with his option grants under the Company’s First or Second Amended and Restated 2004 Stock Option Plan (the “Option Grants”), each of which agreements or rights shall survive the execution of this Agreement and the separation of Employee’s employment.

19. Risk of New or Different Facts. Employee acknowledges that he may discover new information different from or inconsistent with facts he presently believes to be true, and expressly agrees to assume the risk of such new or different information.

20. Acknowledgment by Company of No Known Claims Against Employee. The Company represents and acknowledges that it knows of no claims it has against Employee, and hereby confirms that the Company has no present intention of pursuing any claim or claims against Employee.

21. Modification. This Agreement cannot be modified or terminated, except by a writing signed by the party against whom enforcement of the modification or termination is sought.

22. Voluntary Agreement. This Agreement in all respects has been voluntarily and knowingly executed by the parties hereto. Employee specifically represents that he has carefully read and fully understands all of the provisions of this Agreement, and that he is voluntarily entering into this Agreement.

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23. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

24. Governing Law. The validity and effect of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California, without giving effect to conflicts of laws principles.

IN WITNESS WHEREOF, the parties hereto have executed this Separation Agreement and General Release of All Claims, and have initialed each page hereof, on the dates set forth below.

Dated: April 19, 2012	/s/ Mark P. Murphy
	Mark P. Murphy Employee
	PRO-DEX, INC.
Dated: April 19, 2012	/s/ William L. Healey
	By: William L. Healey
	Its: Chairman of Board of Directors
Dated: April 19, 2012	/s/ Harold A. Hurwitz
	By: Harold A. Hurwitz Its: Chief Financial Officer

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EX-10.2

Exhibit 10.2

INDEPENDENT CONTRACTOR AGREEMENT

This INDEPENDENT CONTRACTOR AGREEMENT (“Agreement”) is made and entered into as of April 23, 2012, by and between Pro-Dex, Inc. (the “Company”), with its principal place of business located at 2361 McGaw Ave., Irvine, California 92614, and Mark Murphy (“Independent Contractor”), an individual with his principal place of business located at 21295 Clear Haven Drive, Yorba Linda, CA 92886.

RECITALS

WHEREAS, Independent Contractor served as the Company’s Chief Executive Officer and President through April 20, 2012 and therefore possesses knowledge and experience of value to the Company; and

WHEREAS, the Company desires to engage the services of Independent Contractor on a non-exclusive, short-term basis to assist with transitioning a new executive in these positions.

AGREEMENT

NOW, THEREFORE, for and in consideration of the premises and the mutual promises, covenants and agreements hereinafter set forth, Company and Independent Contractor agree as follows:

1. Engagement. The Company hereby engages the services of Independent Contractor, and Independent Contractor agrees to provide, the services described further herein.

2. Term and Termination.

2.1 Term. The term of this Agreement shall be from April 23, 2012 through October 23, 2012 (the “Term”), unless earlier terminated as provided herein, or unless extended by mutual agreement expressed in writing signed by both parties prior to the expiration of the Term.

2.2 Termination. Notwithstanding anything in this Agreement to the contrary:

2.2.1 The Term may be terminated by either party at any time without advance notice, upon a material breach by the other party of any of its or his obligations hereunder; and

2.2.2 The Term may be terminated without cause by either party upon three (3) days written notice to the other.

3. Fees and Expenses; Services.

3.1 Fees. During the Term, the Company shall pay Independent Contractor as follows:

3.1.1 For services performed during the Term, the Company will pay Independent Contractor at the rate of Five Thousand Dollars ($5,000) per month (prorated for any partial month resulting from the termination of the Term prior to its expiration or otherwise), payable on the twenty-third day of each month, with the first payment being made on May 23, 2012 and the last payment being made on October 23, 2012, for a total consulting fee of Thirty Thousand Dollars ($30,000). Independent Contractor will be responsible to provide up to forty (40) hours of consulting time per month for this flat fee, but the Company’s failure to require this number of hours shall not relieve it of its obligation to pay this minimum fee. Unused hours during any month will not be carried forward to any subsequent month.

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3.1.2 In the event Company requests, and Independent Contractor performs services for Company during the Term, in excess of the forty (40) hours in any one month, the Company will pay $200 per hour for each such excess hour of service performed. Such payment will be made within two (2) weeks of the submission of the report of hours incurred as described in Section 4.1.

3.2 Supplies and Equipment. Except to the extent that the Company may determine it to be more convenient for Independent Contractor to use equipment and supplies already owned by the Company at site(s) where Independent Contractor is performing services, Independent Contractor shall be responsible for furnishing, at his expense, all equipment and supplies necessary for the provision of his or his services hereunder.

4. Additional Requirements for Services to Be Performed.

4.1 Reporting. Independent Contractor shall regularly report, but no less than weekly during the Term, on the progress of completion of tasks, and the hours incurred in performing such tasks, to Michael Berthelot, or any other Company representative designated by him.

4.2 Best Efforts. Independent Contractor agrees to use his best efforts in providing services under the terms of this Agreement.

4.3 No Subcontracting. Independent Contractor is being engaged to perform personal services within his asserted areas of professional expertise, and shall not delegate or subcontract any portion of the services to be performed hereunder.

5. Independent Contractor Relationship.

5.1 No Employment Relationship. The Company and Independent Contractor each expressly agree and understand that they are creating an independent contractor relationship, and that Independent Contractor shall not be considered an employee of the Company for any purpose. Independent Contractor is not entitled to receive or participate in any medical, retirement, vacation, paid or unpaid leave, or other benefits provided by the Company to its employees. Independent Contractor is exclusively responsible for all Social Security, self-employment, and income taxes, disability insurance, workers’ compensation insurance, any other statutory benefits otherwise required to be provided to employees, and all fees and licenses, if any, required for the performance of the services hereunder. Immediately upon entering into this Agreement, Independent Contractor agrees to provide the Company with a completed and signed Form W-9, Request for Taxpayer Identification Number and Certification. Company will report all income to Independent Contractor on IRS Form 1099. Independent Contractor understands and agrees that he is solely responsible for all income and/or other tax obligations, if any, including but not limited to all reporting and payment obligations, if any, which may arise as a consequence of any payment under this Agreement. Independent Contractor agrees to indemnify the Company for any claims or obligations asserted to the contrary by Independent Contractor.

5.2 Nonexclusivity of Services Other Than to Competitors. This Agreement shall not restrict Independent Contractor from performing services for other clients or businesses; provided, however, that during the Term of this Agreement, Independent Contractor shall not apply, bid, or contract for; or undertake any employment, independent contractor work, or consulting work with, any competitor of Company. The determination of which businesses constitute “competitors” of Company shall be solely within the exclusive discretion of the Company.

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6. Conflicts of Interest and Ethical Conduct.

6.1 Performance of Services for Competitors. Independent Contractor will notify the Company immediately if, during the Term, he engages, or proposes to engage, in the performance of services for any competitor of Company, or any vendor to or customer of the Company. If Independent Contractor performs services, whether as an employee or an independent contractor, for a competitor of Company during the Term of this Agreement, Company may terminate this Agreement immediately and without further obligation. Additionally, to avoid the appearance or existence of a conflict of interest, during the Term, Independent Contractor must fully disclose in advance to Company the terms of any proposed or actual services for a vendor or customer of Company, and Company shall have the right in its sole discretion to disapprove the transaction on conflict of interest grounds, or alternatively to terminate this Agreement immediately and without further obligation to Independent Contractor.

6.2 Compliance with Applicable Laws. Independent Contractor, in his performance under this Agreement, shall comply with all applicable federal, state, and local laws and regulations.

6.3 Solicitation of Company Personnel. Independent Contractor agrees to refrain from any solicitation or recruitment (directly or indirectly) of any of Company’s employees during the term of this Agreement and for a period after the expiration or termination of this Agreement equal in duration to the duration of this Agreement. General solicitation, not directed at Company’s employees, will not constitute a violation of this Section.

6.4 Conditions Imposed by Company’s Customers or Vendors. Company’s customers or vendors may from time to time impose restrictions or conditions, including conditions of confidentiality, on Company and personnel working with the Company. Independent Contractor agrees that such terms and conditions, of which he has been notified in writing, form an integral part of this Agreement, and Independent Contractor covenants and agrees to accept and comply with such additional terms and conditions.

7. Confidentiality and Non-Disclosure.

7.1 Confidential Information Defined. As used herein, the term “Confidential Information” shall mean and include, without limitation, any and all trade secrets, secret processes, marketing data, marketing plans, marketing strategies, customer names and addresses, prospective customer lists, data concerning Company’s products and methods, computer software, files and documents, and any other information of a similar nature disclosed to Independent Contractor or otherwise made known to him as a consequence of or through his relationship with the Company.

7.2 Confidential Information Belongs to Company. All notes, data reference materials, memoranda, documentation and records in any way incorporating or reflecting any of the Confidential Information shall belong exclusively to Company, and Independent Contractor agrees to return the originals and all copies of such materials in his possession, custody or control to the Company upon request or upon termination or expiration of the Term of this Agreement.

7.3 Confidentiality Obligation. Independent Contractor agrees during the Term of this Agreement and thereafter to hold in confidence and not to directly or indirectly reveal, report, publish, disclose or transfer any of the Confidential Information to any other person or entity, or utilize any of the Confidential Information for any purpose, except in the course of services performed under this Agreement.

7.4 Injunctive Relief in Event of Breach. Because of the unique nature of the Confidential Information, the undersigned understands and agrees that Company will suffer irreparable harm in the event that Independent Contractor fails to comply with any of his obligations under this Section 7, and that monetary damages will be inadequate to compensate Company for such breach. Accordingly, Independent Contractor agrees that Company will, in addition to any other remedies available to it at law or in equity, be entitled to injunctive relief to enforce the terms of this Section 7.

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8. Representations and Warranties. Independent Contractor hereby represents and warrants that, as of the date hereof and continuing throughout the term of this Agreement, he is not and will not be in any way restricted or prohibited, contractually or otherwise, from entering into this Agreement or performing the services contemplated hereunder.

9. Miscellaneous.

9.1 Entire Agreement. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and supersedes and replaces any oral or written agreements heretofore entered into between the parties. This Agreement cannot be modified, or any performance or condition waived, in whole or in part, except by a writing signed by the party against whom enforcement of the modification or waiver is sought. The waiver of any breach of any term or condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition.

9.2 Interpretation, Severability and Reformation. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be valid and effective under applicable law. If any provision of this Agreement shall be unlawful, void or for any reason unenforceable, it shall be deemed separable from, and shall in no way affect the validity or enforceability of, the remaining provisions of this Agreement, and the rights and obligations of the parties shall be enforced to the fullest extent possible.

9.3 Survival. To the extent consistent with this Agreement, all representations, warranties and post-termination obligations contained in this Agreement shall survive the expiration of the Term, or the termination, of this Agreement.

9.4 Binding Effect. This Agreement shall be binding upon and inure to the benefit of Company and to any of its successors. This Agreement is not assignable by Independent Contractor, but shall be binding upon and, to the extent provided for in this Agreement, inure to the benefit of Independent Contractor’s heirs, executors, administrators and legal representatives.

9.5 Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

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9.6 Governing Law. The validity and effect of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California without reference to conflicts of laws principles.

IN WITNESS WHEREOF, the parties hereto have executed this Independent Contractor Agreement as of the date first above written.

COMPANY:	By:	/s/ Harold A. Hurwitz
		Harold A. Hurwitz
		Chief Financial Officer
	By:	/s/ William L. Healey
		William L. Healey
		Chairman of the Board
INDEPENDENT CONTRACTOR:		/s/ Mark Murphy
		Mark Murphy

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EX-10.3

Exhibit 10.3

PERSONAL AND CONFIDENTIAL

April 20, 2012

Michael J. Berthelot

P O Box 7277

Rancho Santa Fe, CA 92067

Dear Mike:

On behalf of the Board of Directors (the “Board”) I am pleased to extend this employment letter agreement concerning your employment as Chief Executive Officer of Pro-Dex Inc. (the “Company”) as an “at-will” employee, serving at the pleasure of the Board and in accordance with the Company’s Bylaws and applicable law. As Chief Executive Officer, you will perform the duties assigned to you from time to time by the Board. You may also be required to serve as the Chief Executive Officer and/or a director or other officer of subsidiaries or other related entities of the Company with no additional compensation. You will be based out of our Irvine, California office.

Salary

Your bi-weekly salary will be $11,538 which equals $300,000 on an annualized basis, subject to increases from time to time at the discretion of the Board, and subject to reductions that do not constitute a “material reduction in your salary” as defined below.

Benefits

You will be eligible to participate in benefits including health, dental, disability and life insurance, qualified retirement plans, and optional employee benefits which, by Board approval, are or become available to all Company employees, except you will not participate in the Company-wide employee quarterly bonus/non-qualified profit sharing plan. You will receive the greater of (i) Paid Time Off equal to four weeks per year or (ii) Paid Time Off in accordance with the plan established for senior executives of the Company.

You will receive reimbursement for ordinary and necessary business expenses incurred in the ordinary course of business, consistent with the Company’s policies applicable to all employees (including, without limitation, the requirement to provide appropriate supporting documentation) and subject to review by the Company’s finance department and Audit Committee.

Bonus/Incentive Compensation

Commencing with the fiscal year beginning July 1, 2012 you will be eligible to participate in all Company created and Board approved incentive compensation plans open to participation for

senior executives of the Company, subject to the terms and provisions of the applicable plan documents covering any such plans. The terms of such plans may be changed from time to time at the discretion of the Board. Currently, the Company offers an Annual Incentive Plan and a Long Term Incentive Plan. Copies of the related plan documents have been attached hereto as Exhibits A and Exhibit B respectively.

Equity Grants

You will be permitted to participate in any program of stock option or other equity grants which the Company may from time to time provide key employees. Such grants are made under the terms and provisions of the Second Amended and Restated 2004 Stock Option Plan in varying amounts to individual participants based upon their perceived impact upon the long term success of the Company and are made at the sole and absolute discretion of the Board, generally at the first Board meeting following the filing of the Company’s Form 10-K for the previous fiscal year. Subject to the foregoing, your initial grant under this program will be 200,000 options to purchase the Company’s common shares at the closing price for the Company’s shares as of the last business day immediately prior to the grant date in which a closing price is available and such options will vest in their entirety on the third anniversary of the grant date. The options will have a term of ten years from the grant date and to the maximum extent permissible under the relevant Internal Revenue Service regulations, will be made as Incentive Stock Options. The initial grant of options will occur on the sixth trading day following the release of the Company’s financial results for the quarter ended March 31, 2012.

Term

This letter agreement will terminate on the third anniversary of its execution (which shall be deemed to be the date first set forth on the top of this document) but may be extended by a written agreement executed by the parties and approved by the Board of Directors. Your employment is at-will, and the term of this letter agreement does not establish a specified term of employment with the Company. Upon the termination of this letter agreement during your employment, without an express written extension executed by the parties and approved by the Board of Directors, your at-will employment with the Company will continue until terminated by the Company or by you, but shall no longer be controlled by the terms and provisions of this letter agreement, and any obligations of the Company pursuant to this letter agreement, following its termination, shall be without force or effect.

Termination/Severance

In the event that your employment with the Company terminates for any reason, the Company shall pay you your (i) salary up through the date of termination (including any accrued but unused Paid Time Off remaining as of the termination date), plus; (ii) any Annual Incentive Plan or Long Term Incentive Plan awards (or prorated portion thereof) actually earned based on existing Board-established criteria and the terms of such bonus plans, but not yet paid as of the termination date, each of which shall be paid less applicable withholding for taxes as required by law. You shall also receive reimbursement for any ordinary and necessary business expenses outstanding as of the date of termination.

In addition to the above, in the event you are terminated involuntarily by the Company without “Cause” or in the event that you resign for “Good Reason” each as defined below, the Company shall pay you severance compensation (the “Severance Payment”) in accordance with the Company’s general severance policy in effect at that time (the “Severance Policy”). The full Severance Payment will be paid in accordance with the terms and conditions set forth in the Severance Policy. You hereby acknowledge that such Severance Payment will be the total and sole remedy for any claims by you, known or unknown, arising from your employment with the Company or the termination thereof, and you will be required to execute a written separation agreement with the Company, substantially in the form required by the Severance Policy, if applicable, otherwise, in the form and content of those agreements entered into by other employees leaving the Company, containing a general release of claims against the Company in form and content acceptable to both you and the Company and our respective counsel. However, the separation agreement will not alter your rights under the Indemnification Agreement between you and the Company, indemnification provisions of the Company’s Articles of Incorporation and/or Bylaws (if any), or the Company’s insurance for Officers and Directors.

As used herein, the term “Cause” shall mean termination by the Company due to:

(i) your inability or failure to adequately perform your duties with the Company;

(ii) your failure to substantially follow and comply with the specific and lawful directives of the Board;

(iii) The Board’s determination of your commission of an act of fraud or dishonesty; your indictment or plea of no contest in any state or federal jurisdiction for any felony, or any misdemeanor crime involving dishonesty, moral turpitude, or which has, or is reasonably likely to have, an adverse effect on the Company’s image; gross misconduct; or your material violation of any material written policy, guideline, code, handbook or similar document governing the conduct of directors, officers or employees of the Company or its related entities; however, if it is later determined that you did not violate the Company’s policies or commit such acts as listed in this paragraph, your termination will deemed to have occurred for without “Cause”; or

(iv) a material breach by you of the terms of this letter agreement.

As used herein, the term resignation for “Good Reason” shall mean your resignation due to:

(i) a material reduction in your salary as set forth herein or failure of the Company to pay any amount owing to you hereunder when due. For purposes of this letter the term “material reduction in your salary” shall mean an involuntary reduction of greater than twenty percent (20%) total from your maximum base salary for a consecutive period of more than six (6) months but shall not include an “across the board” reduction of salary or benefits made applicable to substantially all Company employees;

(ii) the Company’s requiring you to be based full time in any office or location outside of a one hundred (100) mile radius from your current residence in Rancho Santa Fe, California;

(iii) a material diminution in the scope of your authority, duties, and responsibilities, including the assignment of duties inconsistent with the position of a Chief Executive officer of a publicly traded company;

(iv) this Agreement is not renewed or a new employment agreement is not entered into within ninety (90) days prior to of the expiration of this Agreement or any renewal thereof;

or

(iii) a material breach by the Company of the terms of this letter agreement.

In case of a claim of “Cause” for termination, the Board shall promptly notify you in writing and in reasonable detail of the existence of such Cause, and if the basis of such claim is reasonably susceptible of cure and in fact is fully cured within thirty (30) days of your receipt of such notice, it shall no longer be grounds for termination with “Cause” for resignation. In case of your claim of resignation for “Good Reason,” your resignation must occur within a limited period of time not to exceed two (2) years following the initial event giving rise to the Good Reason, and you must notify the Company in writing and in reasonable detail of the event or condition constituting “Good Reason” within thirty (30) days of the initial existence of such event or condition, specifying that you intend to terminate your employment for such Good Reason and specifying the facts and circumstances constituting Good Reason. If the Company remedies the specified condition within thirty (30) days after receipt of such notice, it shall no longer be grounds for your resignation for “Good Reason.”

The Board has approved a Change of Control Agreement for you to enter into with the Company, the form of which is attached to this letter as Exhibit C. Upon a change of control (as defined in the Change of Control Agreement) and certain other conditions being met, you will receive certain payments in accordance with the terms and provisions of the Change of Control Agreement.

Indemnification

The Company will continue its commitment to indemnify you in accordance with the Company’s standard Indemnification Agreement for its officers and directors (which you have previously executed in your capacity as an officer and/or director of the Company) and any such provisions concerning indemnification under its Articles of Incorporation or Bylaws.

At Will Employment; Other

By entering into this letter agreement, you confirm your understanding that your employment will be on an “at-will” basis meaning that either you or the Company may terminate the employment relationship at any time for any reason with or without notice or Cause, and that neither you nor the Company has entered into any other agreement regarding the duration of

your employment. this letter agreement represents the full and exclusive understanding between us of the matters set forth herein and supersedes fully any prior agreement between you and the Company. There is no other agreement, written or oral, which governs the matters described herein. Any amendment to this letter agreement must be in writing, and must be executed by you and by an authorized representative of the Company’s Board.

Please sign both copies of this letter to indicate your acceptance of this offer and retain one copy for your records and return the second copy to us.

Pro-Dex, Inc.
/s/ William Healey	/s/ Michael J. Berthelot
William Healey	Michael J. Berthelot
Chairman on behalf of
The Board of Directors
/s/ Harold A. Hurwitz
Harold A. Hurwitz, CFO

EX-10.4

Exhibit 10.4

PRO-DEX, INC.

CHANGE OF CONTROL AGREEMENT

THIS CHANGE OF CONTROL AGREEMENT (the “Agreement”) is made and entered into effective as of April 20, 2012 (the “Effective Date”), by and between Michael J. Berthelot, an individual (the “Employee”) and Pro-Dex, Inc., a Colorado corporation (the “Company”).

R E C I T A L S

A. It is expected that the Company may from time to time consider the possibility of a Change of Control (as defined below) of the Company. The Board of Directors of the Company has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication and objectivity of the Employee, notwithstanding the possibility, threat or occurrence of a Change of Control of the Company.

B. The Board believes that it is in the best interests of the Company and its shareholders to provide the Employee with an incentive to continue his/her employment and to motivate the Employee to maximize the value of the Company upon a Change of Control in the form of certain benefits upon the Employee’s termination of employment following a Change of Control.

A G R E E M E N T

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and in consideration of the continuing employment of Employee by the Company, the parties agree as follows:

1. Definitions.

1.1 Cause. “Cause” shall mean:

(a) Employee has been convicted of a felony involving theft or moral turpitude; or

(b) Employee has engaged in conduct that constitutes willful gross neglect or willful gross misconduct with respect to employment duties resulting in demonstrable material economic harm to Company; provided, however, that for the purposes of determining whether conduct constitutes willful gross neglect or willful gross misconduct, no act or omission on Employee’s part shall be considered “willful” unless it is done, or omitted to be done, by Employee in bad faith and without any reasonable belief that Employee’s action or omission was in the best interests of the Company. Notwithstanding the foregoing, Company may not terminate Employee’s employment for Cause under this sub-section (b) unless (i) a determination that Cause exists and is not reasonably curable within thirty (30) days is made and approved by a majority of the Company’s Board of Directors, (ii) Employee is given at least thirty (30) days written notice of the Board of Directors meeting called to make such determination, and (iii) Employee and his/her legal counsel are given the opportunity to address such meeting.

1.2 Change of Control. “Change of Control” shall mean the occurrence of any of the following events:

(a) Any “person” or “group” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities;

(b) A change in the composition of the Board of Directors of the Company occurring within a one-year period, resulting in the change of sixty percent or more of the directors serving on the Board from the beginning of the one-year period to the end of the one-year period;

(c) There is a merger or consolidation of the Company in which the Company does not survive as an independent public company; or

(d) The acquisition of all or substantially all the Company’s assets in a transaction or series of related transactions with a third-party purchaser.

1.3 Death; Disability.

(a) This Agreement shall terminate automatically upon Employee’s death.

(b) If Company determines in good faith that the Disability of Employee has occurred (pursuant to the definition of “Disability” set forth below), it may give to Employee written notice of its intention to terminate Employee’s employment. In such event, Employee’s employment with Company shall terminate effective on the thirtieth (30^th) day after receipt by Employee of such notice given (i) at any time after a period of one hundred twenty (120) consecutive days of Disability or a period of one hundred eighty (180) days of Disability within any twelve (12) consecutive months, and (ii), in either case, while such Disability is continuing; provided that, within the thirty (30) days after such receipt, Employee shall not have returned to full-time performance of Employee’s duties. Until such 30^th day after receipt of such notice delivered in accordance with this Section 1.3(b), Employee shall be entitled to all compensation and benefits for which he is eligible hereunder.

(c) For purposes of this Agreement, “Disability” means Employee’s inability substantially to perform his duties with reasonable accommodation, as evidenced by a certificate signed either by a physician mutually acceptable to Company and Employee or, if Company and Employee cannot agree upon a physician, by a physician selected by agreement of a physician designated by Company and a physician designated by Employee; provided, however, that if such physicians cannot agree upon a third physician within thirty (30) days, such third physician shall be designated by the Chief Medical Officer of St. Joseph Hospital, Orange California; or, in the event the Chief Medical Officer declines to make such designation, Company or Employee may file a petition with the Presiding Judge of the Orange County Superior Court for the designation of such third physician.

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1.4 Involuntary Termination. “Involuntary Termination” shall mean:

(a) any involuntary separation of Employee’s employment other than for Death, Disability, or Cause;

(b) Employee’s resignation as a result of any of the following reasons; provided that Employee provides written notice to the Company of the reason within 60 days of its occurrence and such reason is not remedied by the Company within 30 days after such notice.

(i) the continued assignment to Employee of any duties or the continued significant reduction of Employee’s duties, either of which is substantially inconsistent with the level of Employee’s position with the Company, for a period of thirty (30) days after notice thereof from Employee to the Chief Executive Officer of the Company setting forth in reasonable detail the respect in which Employee believes such assignments or duties are substantially inconsistent with the level of Employee’s position;

(ii) a material reduction in Employee’s salary, other than any such reduction which is part of, and generally consistent with, a general reduction of salaries of employees in the same or similar position;

(iii) a material reduction by the Company in the kind or level of employee benefits (other than salary and bonus) to which Employee is entitled immediately prior to such reduction with the result that Employee’s overall benefits package (other than salary and bonus) is substantially reduced (other than any reduction applicable to employees in the same or similar position); or

(iv) the relocation of Employee’s principal place for the rendering of the services to be provided by him hereunder to a location which both increases the Employee’s commuting distance and makes the Employee’s one-way commute more than one hundred (100) miles, determined based upon the Employee’s place of residence when the change in work location was announced.

1.5 Termination Date. “Termination Date” shall mean (a) if the Employee’s employment is terminated by the Company for Disability, thirty (30) days after notice of termination is given to the Employee (provided that the Employee shall not have returned to the performance of the Employee’s duties on a full-time basis during such thirty (30) day period), (b) if the Employee’s employment is terminated by the Company for any other reason, the date on which a notice of termination is given, or (c) if the Agreement is terminated by the Employee, the date on which the Employee delivers the notice of termination to the Company.

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2. Change of Control Payment.

If the Employee’s employment with the Company terminates at any time within twelve (12) months after a Change of Control, then, subject to Section 3, the Employee shall be entitled to receive benefits as follows:

2.1 Involuntary Termination. If the Employee’s employment terminates as a result of Involuntary Termination:

(a) Within ten (10) business days following the satisfaction of the requirements of Section 3.3, the Company shall pay the Employee a lump sum amount equal to thirty (30) weeks base compensation of the Employee at the time of such termination (without giving effect to any reduction in base compensation that resulted in such Involuntary Termination). Base compensation shall not include overtime, bonuses, commissions, premium pay, employee benefits and expense reimbursement or other similar pay. It shall include base pay not received because of elections under Internal Revenue Code Section 125 and 401(k). In addition, the Employee shall be entitled to receive bonus or compensation award payments, if any, in accordance with the terms of the Company’s Annual Incentive Plan and Long Term Incentive Plan.

(b) The Employee shall receive one hundred percent (100%) Company-paid health, dental and life insurance coverage as provided to such Employee immediately prior to the Employee’s termination (the “Company Paid Coverage”). If such coverage included the Employee’s dependents immediately prior to the Employee’s termination, such dependent shall also be covered at the Company’s expense. Company Paid Coverage shall continue for twelve (12) months following termination or until the Employee becomes covered under another employer’s group health, dental or life insurance plan. In addition, the Company shall pay the Employee all of the Employee’s accrued and unused vacation through the Termination Date promptly upon termination and within the period of time mandated by law.

2.2 Voluntary Resignation; Termination for Cause. If the Employee’s employment terminated by reason of the Employee’s voluntary resignation (other than for those reasons set forth in Section 1.4(b)) or if the Employee is terminated for Cause, the Employee shall not be entitled to receive a Change of Control payment or other benefits except for those (if any) as may be established under the Company’s then-existing benefits plans and policies at the time of such termination. If Employee receives a Change of Control payment hereunder, such Employee shall not be eligible to receive a severance payment under the Company’s Severance Policy, if any, in existence at such time. Employee’s refusal to accept continued employment following a Change of Control or with a successor company under the terms of Section 6.1, below, on terms that do not otherwise constitute an Involuntary Termination, shall constitute a voluntary resignation.

2.3 Disability; Death. If the Company terminates the Employee’s employment as a result of the Employee’s Disability, or such Employee’s employment is terminated due to the death of the Employee, then the Employee shall not be entitled to receive benefits except for those (if any) as may then be established (and applicable) under the Company’s then existing severance and benefits plans and policies at the time of such Disability or death.

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3. Limitation on Payments and Benefits; Condition to Payment.

3.1 Limitation. To the extent that any of the payments and benefits provided for in this Agreement constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code (the “Code”) and, but for this Section 3, would be subject to the excise tax imposed by Section 4999 of the Code, the aggregate amount of such payments and benefits shall be reduced such that the present value thereof (as determined under the Code and applicable regulations) is equal to 2.99 times Employee’s “base amount” (as defined in the Code).

3.2 Company Notice. Within thirty (30) days the Termination Date of an Involuntary Termination, the Company shall notify Employee in writing if it believes that any reduction in the payments and benefits that would otherwise be paid or provided to the Employee under the terms of this Agreement is required to comply with the provisions of Section 3.1 hereof. If the Company determines that any such reduction is required, it will provide Employee with copies of the information used and calculations made by the Company to determine the amount of such reduction.

3.3 Payment Conditioned Upon Receipt of Release. In order to receive any Change of Control payment, the Employee must sign a release (“Release”) of all claims the Employee had, has or may have against the Company, in form and content satisfactory to the Company and its legal counsel and within the time period required by the Company. If a revocation period is applicable to the Release, the revocation period must expire without revocation having occurred before the Change of Control payment hereunder shall become payable. Employee shall not be required to release any rights afforded to Employee under an executed Indemnification Agreement or any provisions concerning indemnification under the Company’s Bylaws or Articles of Incorporation and the Company shall continue to indemnify Employee under such Agreement and provisions.

4. At-Will Employment. The Company and the Employee acknowledge that the Employee’s employment is and shall continue to be at-will, as defined under applicable law. If the Employee’s employment terminates for any reason, the Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, or as may otherwise be available in accordance with the Company’s established employee plans and practices or other agreements with the Company at the time of termination.

5. Termination. This Agreement shall terminate upon the earlier of (i) the date that all obligations of the parties hereunder have been satisfied or (ii) three years after the Effective Date; provided however, that if a Change of Control occurs prior to the third anniversary of the Effective Date of this Agreement, the term shall automatically be extended to terminate one year from the date of the Change of Control. Notwithstanding the foregoing, this Agreement may be extended for an additional period or periods by mutual written agreement of the Company and the Employee.

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6. Successors.

6.1 Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession.

6.2 Employee’s Successors. The terms of this Agreement and all rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

7. Notice.

7.1 General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Employee, mailed notices shall be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.

7.2 Notice of Termination. Any termination or resignation of the Employee shall be communicated by a notice to the other party hereto given in accordance with Section 7 of this Agreement. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the Termination Date (which shall be not more than thirty (30) days after the giving of such notice). The failure by the Employee to include in the notice any fact or circumstances which contributes to a showing of Involuntary Termination shall not waive any right of the Employee hereunder or preclude the Employee from asserting such fact or circumstance in enforcing his rights hereunder.

8. Arbitration; Venue. If the parties fail to resolve the matter themselves within fifteen days after written notice that a dispute exists, the exclusive remedy for the resolution of any dispute arising under or relating to this agreement, whether based on contract, tort, statute, or other legal or equitable theory, will be submission of the dispute final and binding arbitration in the County of Orange, State of California, before a single arbitrator who shall be a retired California Superior Court Judge, a retired California Appellate Court or Supreme Court Justice, or a retired Federal Court Judge or Justice. If the parties are unable to agree to an arbitrator, the arbitration shall be submitted to JAMS, Inc., dba JAMS – The Resolution Experts, pursuant to its then-current Employment Arbitration Rules and Procedures (“Rules”), with the exception of any optional rules not expressly provided for herein or agreed to by Employee and Company. If the parties are unable to agree on a retired judge from the JAMS employment law panel, the arbitrator shall be selected from JAMS’ employment law panel pursuant to JAMS’ procedures. The parties waive their rights to a jury trial. This agreement to arbitrate claims is governed by

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and enforceable under the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (“FAA”). If for any reason the FAA is held not to apply to this agreement to arbitrate or any portion of it, the agreement to arbitrate shall, to that extent, be governed by and enforceable under the California Arbitration Act, California Code of Civil Procedure §§ 1280 et seq. The party initiating the arbitration shall be responsible for paying the initial filing fee, except that Company will pay any portion of the filing fee in excess of the then-current cost of filing a Complaint in the state or federal court having jurisdiction of the claim(s) asserted in the arbitration. The Company shall be responsible for paying all other costs and expenses of the arbitration, including the fees of the arbitrator. Each party shall bear its, his or her own attorneys’ fees, expert fees, and other expenses associated with the preparation for and presentation of that party’s case in the arbitration, except that following issuance of the arbitration award, the arbitrator shall have authority to award costs (including arbitration fees) and attorneys’ fees to the prevailing party to the same extent as would be permissible in a civil action in the state or federal court having jurisdiction of the claim(s) asserted in the arbitration.

9. Miscellaneous Provisions.

9.1 Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized office of the Company (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

9.2 Choice of Law. Except with respect to the agreement to arbitrate claims as set forth in Section 8 above, which agreement is governed by the Federal Arbitration Act, this Agreement shall be governed by, and construed in accordance with, the laws of the State of California without regard to principles of conflicts of law.

9.3 Severability. The invalidity or enforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.

9.4 Employment Taxes. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes.

9.5 Assignment by Company. The Company may assign its rights under this Agreement to an affiliate, and an affiliate may assign its rights under this Agreement to another affiliate of the Company or to the Company; provided, however, that no assignment shall be made if the net worth of the assignee is less than the net worth of the Company at the time of assignment. In the case of any such assignment, the term “Company” when used in a section of this Agreement shall mean the corporation that actually employs the Employee.

9.6 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

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9.7 Conflicts. In the event of any conflict or inconsistency between any provision in this Agreement and any provision in any unexpired written employment agreement between the Company and Employee, which agreement also was in effect as of the Effective Date of this Agreement (an “Existing Agreement”), the provisions of the Existing Agreement will control.

IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the day and year first above written.

COMPANY:	PRO-DEX, INC.
	By:	/s/ Harold A. Hurwitz
	Name:	Harold A. Hurwitz
	Title:	Chief Financial Officer and Secretary
EMPLOYEE:		/s/ Michael J. Berthelot
	Print:	Michael J. Berthelot
	Address:	PO Box 7277
		Rancho Santa Fe, CA 92067

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