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.

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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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