Document:

Exhibit 10.3

 

 

 

 

 

 

Exhibit 10.3

Description of Non-Employee Director
Compensation Program

            On
July 14, 2010, the Company’s Board of Directors (“Board”) of Pro-Dex, Inc. (the
“Company”) acting in executive session and upon recommendation of the Company’s
Compensation Committee, approved the Company’s new
compensation plan for non-employee directors of the Board, effective as of July
1, 2010, as described below:

	

•         Annual retainer for each
director                        

			$24,000
	

•         Additional
annual retainer for service as:  

			 
	

o       
Lead Director/Chairman

			$7,000
	

o       
Audit Committee Chair     

			$5,000
	

o       
Compensation   Committee Chair          

			$5,000
	

o        Governance and Nominating Chair         

			$5,000

            

            All
retainers are to be paid in quarterly installments at the end of each calendar
quarter.  In the event that a director attends more than 6 board meetings or
more than 6 meetings of any committee upon which they serve in one fiscal year,
an additional per meeting fee of $1,000 for in person meetings or $500 for
telephone meetings will be paid. If any such “excess” committee meeting is held
on the same date as a board meeting, only the board meeting will be considered
compensable.

            Upon
their initial election or appointment to the Board, each director will receive
an award of 15,000 options.  Upon their re-election to the Board each director
will receive an award of 10,000 options.  All such equity awards will be made
as of the date of such election or appointment and in accordance with the terms
of the Company’s applicable option plan.Exhibit 10.4

 

 

 

 

 

 

Exhibit 10.4

PERSONAL AND CONFIDENTIAL

July 14, 2010

Mark P. Murphy

21295 Clear Haven Dr.

Yorba Linda, CA 92886

Dear Mark:

On behalf of the Board of Directors (the
“Board”) I am pleased to extend this amended 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.  This agreement will be effective as of July 1, 2010.

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 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.

-1-

 

 

 

Bonus/Incentive
Compensation

 

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 or expects to offer 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 First
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 50,000 options to purchase the Company’s
common shares at the average of the high and low prices for the Company’s
shares on the grant date and which will vest ratably over the 36 month period 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.  

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.

 

 

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In addition to the above, in the event you are terminated
involuntarily by the Company without “Cause” or following a “Change in Control,”
or in the event that you resign for “Good Reason” each as defined below,
the Company shall pay you  severance compensation equal to one (1.0) times your
then-current annual base salary (the “Severance Payment”).  The full Severance Payment
will be paid in a single lump-sum payment, subject to applicable withholding, within
seven (7) calendar days of the effective date of the separation agreement
described below. 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 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 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  conviction 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 fifteen percent (15%) 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 sixty (60) mile radius from your current residence in Yorba Linda, 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;

 

 

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(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

(v)      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.”  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.” 

In the case of a change in control of the Company arising
from a sale of all or substantially all of the shares or assets of the Company
or a change in the constitution of the Board of Directors of more than 50% with
the newly elected majority of the members of the Board of Directors not having
been recommended by the previous Board of Directors for election (not including
you in either the denominator or numerator) within one calendar year (a “Change
in Control”), and:  (1) during the six (6) month period immediately following
such Change in Control your employment is involuntarily terminated without
Cause or you are offered an executive position with
the Company or any of its affiliates with a
material diminution in your authority, duties, or responsibilities as they
existed immediately before the Change in Control (including a position in which
the authority, duties, or responsibilities of the supervisor to whom you are
required to report are materially diminished); or (2) in
connection with such Change in Control you are not offered an executive
position with the Company or any of its affiliates with substantially
comparable responsibilities, compensation, benefits and incentives, you shall receive the Severance Payment, subject to the
same terms and conditions described above in the event of termination without
“Cause” or resignation for “Good Reason,” including, but not limited to, the
requirement to execute a mutually acceptable separation agreement including a
general release of claims

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.

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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. Except for the Annual Bonus provision as it relates to FY2010
contained in the letter agreement between the parties dated May 15, 2008, which
shall remain in full force and effect until mutually resolved between the
parties, 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/ Mark Murphy  
		

	

 

			
		 

	

William Healey
	
		Mark Murphy

	

Lead Director on behalf
of

			
		 

	

The Board of Directors

			
		 

	

 

			
		 

	

 

			
		 

	

   /s/ Jeff Ritchey     
	
		 

	

Jeff Ritchey, CFO

			
		 

 

 

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