Document:

2009 Employment Commencement Incentive Plan, as amended and restated

 Exhibit 4.2 
 INTUITIVE SURGICAL, INC. 
 2009 EMPLOYMENT COMMENCEMENT INCENTIVE PLAN

 ADOPTED BY THE BOARD OF DIRECTORS OCTOBER 22, 2009 

AMENDMENT AND RESTATEMENT ADOPTED BY THE
BOARD OF DIRECTORS FEBRUARY 3, 2011 

AMENDMENT AND RESTATEMENT ADOPTED BY THE
BOARD OF DIRECTORS JULY 1, 2011 

AMENDMENT AND RESTATEMENT ADOPTED BY THE
BOARD OF DIRECTORS FEBRUARY 2, 2012 
  

	1.	PURPOSES. 

(a) Eligible Recipients. Only Eligible Participants may receive Options under the Plan. 

(b) General Purpose. The purpose of the Plan is to provide a means by which Eligible Participants may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of Options, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company
and its Affiliates. 
  

	2.	DEFINITIONS. 

 (a) “Administrator” means the entity that conducts the general administration of the Plan as provided herein. The term “Administrator” shall refer to the Committee
unless the Board has elected to exercise any of the rights and duties of the Committee under the Plan generally, as provided in Section 3 herein. 
 (b) “Affiliate” means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and
(f), respectively, of the Code. 
 (c) “Board” means the Board of Directors of the Company.

 (d) “Code” means the Internal Revenue Code of 1986, as amended. 

(e) “Committee” means the Compensation Committee of the Board, or another committee or subcommittee of the
Board, appointed as provided in Section 3 herein. 
 (f) “Common Stock” means the common
stock of the Company. 
 (g) “Company” means Intuitive Surgical, Inc., a Delaware corporation.

 (h) “Consultant” means any consultant or adviser if: (a) the consultant or adviser
renders bona fide services to the Company or an Affiliate, (b) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital raising transaction and do not directly or indirectly
promote or maintain a market for the Company’s 

 
securities, and (c) the consultant or adviser is a natural person who has contracted directly with the Company or an Affiliate to render such services. 

(i) “Continuous Service” means that the Participant’s service with the Company or an Affiliate,
whether as an Employee or Consultant, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the
Company or an Affiliate as an Employee or Consultant or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service to the Company or an Affiliate.
For example, a change in status without interruption from an Employee of the Company to a Consultant of an Affiliate will not constitute an interruption of Continuous Service. Unless otherwise determined by the Board or chief executive officer of
the Company, in that party’s sole discretion, any bona fide leave of absence authorized by the Company in accordance with established policies shall not be considered to constitute an interruption or termination of Continuous Service.

 (j) “Director” means a member of the Board of Directors of the Company. 

(k) “Disability” means the permanent and total disability of a person within the meaning of
Section 22(e)(3) of the Code. 
 (l) “Eligible Participant” means any Employee who
has not previously been an Employee or Director of the Company or an Affiliate, or following a bona fide period of non-employment by the Company or an Affiliate, if he or she is granted an Option in connection with his or her commencement of
employment with the Company or an Affiliate and such grant is an inducement material to his or her entering into employment with the Company or an Affiliate. The Board may in its discretion adopt procedures from time to time to ensure that an
Employee is eligible to participate in the Plan prior to the granting of any Options to such Employee under the Plan (including, without limitation, a requirement, if any, that each such Employee certify to the Company prior to the receipt of an
Option under the Plan that he or she has not been previously employed by the Company or an Affiliates, or if previously employed, has had a bona fide period of non-employment, and that the grant of Options under the Plan is an inducement material to
his or her agreement to enter into employment with the Company or an Affiliate). 
 (m)
“Employee” means any person employed by the Company or an Affiliate. Mere service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute
“employment” by the Company or an Affiliate. 
 (n) “Exchange Act” means the Securities
Exchange Act of 1934, as amended. 
 (o) “Fair Market Value” means, as of any date, the value of
the Common Stock determined as follows: 
 (i) If the Common Stock is listed on any (i) established stock exchange (such as
the New York Stock Exchange, the NASDAQ Global Market and the NASDAQ Global Select Market), (ii) national market system or (iii) automated quotation system on which the shares of 

  
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Common Stock are listed, quoted or traded, its Fair Market Value shall be the closing sales price for a share of Common Stock as quoted on such exchange or system for such date or, if there is no
closing sales price for a share of Common Stock on the date in question, the closing sales price for a share of Common Stock on the last preceding date for which such quotation exists, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable; 
 (ii) If the Common Stock is not listed on an established securities exchange,
national market system or automated quotation system, but the Common Stock is regularly quoted by a recognized securities dealer, its Fair Market Value shall be the mean of the high bid and low asked prices for such date or, if there are no high bid
and low asked prices for a share of Common Stock on such date, the high bid and low asked prices for a share of Common Stock on the last preceding date for which such information exists, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable; or 
 (iii) If the Common Stock is neither listed on an established securities
exchange, national market system or automated quotation system nor regularly quoted by a recognized securities dealer, its Fair Market Value shall be determined in good faith by the Administrator. 

(p) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the
meaning of Section 422 of the Code and the regulations promulgated thereunder. Incentive Stock Options may not be granted under the Plan. 
 (q) “Independent Director” means a Director of the Company who is not an Employee and who qualifies as “independent” within the meaning of Nasdaq Stock Market Rule
5605(a)(2), if the Company’s securities are traded on the Nasdaq Global Market, or the requirements of any other established stock exchange on which the Company’s securities are traded, as such rules or requirements may be amended from
time to time. 
 (r) “Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option. 
 (s) “Option” means a Nonstatutory Stock Option granted pursuant to the
Plan. 
 (t) “Option Agreement” means a written or electronic agreement between the Company and a
Participant evidencing certain terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan. 
 (u) “Participant” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option. 

(v) “Plan” means this Intuitive Surgical, Inc. 2009 Employment Commencement Incentive Plan. 

(w) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in
effect from time to time. 

  
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 (x) “Securities Act” means the Securities Act of 1933, as
amended. 
  

	3.	ADMINISTRATION. 

 (a) Administration by Committee. The Plan will be administered by a Committee of two or more Independent Directors, and the term “Administrator” will apply to any person or persons to
whom such authority has been delegated. As of the Effective Date, the Plan will be administered by the Compensation Committee of the Board. The Board may at any time re-vest in the Board the administration of the Plan and thereafter for purposes of
the Plan the term “Administrator” as used in this Plan will be deemed to refer to the Board; provided, however, that any action taken by the Board in connection with the administration of the Plan shall not be deemed approved
by the Board unless such action is approved by a majority of the Independent Directors. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the
Board. Vacancies in the Committee may be filled by the Board. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3 promulgated under the Exchange Act, Options under the Plan may be made by the entire Board
(provided, however, that any action taken by the Board in connection with the administration of the Plan shall not be deemed approved by the Board unless such action is approved by a majority of the Independent Directors) or a
Committee meeting the requirements set forth above and such other requirements as may be established from time to time by the Securities and Exchange Commission for Options intended to qualify for exemption under Rule 16b-3 promulgated under
the Exchange Act. 
 (b) Powers of Administrator. The Administrator shall have the power, subject to, and within the
limitations of, the express provisions of the Plan: 
 (i) To determine from time to time which of the persons eligible under
the Plan shall be granted Options; when and how each Option shall be granted; the provisions of each Option granted (which need not be identical), including the time or times when a person shall be permitted to receive Common Stock pursuant to an
Option; and the number of shares of Common Stock with respect to which an Option shall be granted to each such person. 
 (ii)
To adopt procedures from time to time in the Administrator’s discretion to ensure that a person is eligible to participate in the Plan prior to the granting of any Options to such person under the Plan (including, without limitation, a
requirement, if any, that each such person certify to the Company prior to the receipt of an Option under the Plan that he or she has not been previously employed by the Company or an Affiliate, or if previously employed, has had a bona fide period
of non-employment, and that the grant of Options under the Plan is an inducement material to his or her agreement to enter into employment with the Company or an Affiliate). 
 (iii) To construe and interpret the Plan and Options granted under it, and to establish, amend and revoke rules and regulations for its administration. The Administrator, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan or in 

  
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any Option Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective. 

(iv) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests
of the Company, which are not in conflict with the provisions of the Plan. 
 (c) Majority Rule; Unanimous Written
Consent. The Committee shall act by a majority of its members in attendance at a meeting at which a quorum is present or by a memorandum or other written instrument signed by all members of the Committee. 

(d) Compensation; Professional Assistance; Good Faith Actions. Members of the Committee shall receive such compensation, if any,
for their services as members as may be determined by the Board. All expenses and liabilities which members of the Committee incur in connection with the administration of the Plan shall be borne by the Company. The Committee may, with the approval
of the Board, employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee, the Company and the Company’s officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All actions taken and all interpretations and determinations made by the Committee or the Board in good faith shall be final and binding upon all Participants, the Company and all other interested persons. No members of the Committee or
Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or Options, and all members of the Committee and the Board shall be fully protected by the Company in respect of any such
action, determination or interpretation. 
  

	4.	SHARES SUBJECT TO THE PLAN. 

(a) Share Reserve. The shares of stock subject to Options shall be Common Stock, subject to adjustment as provided in
Section 10. Subject to adjustment as provided in Section 10, the aggregate number of such shares which may be issued with respect to Options granted under the Plan shall not exceed 630,000. 

(b) Reversion of Shares to the Share Reserve. If any Option shall for any reason expire or otherwise terminate, in whole or in
part, without having been exercised in full, the shares of Common Stock not acquired under such Option shall revert to and again become available for issuance under the Plan. 
 (c) Source of Shares. The shares of Common Stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise. 

 

	5.	ELIGIBILITY. 

 Options may be granted only to Eligible Participants. All Options granted under the Plan shall be Nonstatutory Stock Options. 

  
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	6.	OPTION PROVISIONS. 

 The Administrator may grant Options, the terms of which Options shall be set forth in an appropriate Option Agreement. Each Option shall be in such form and shall contain such terms and conditions as the
Administrator shall deem appropriate. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following
provisions: 
 (a) Option Exercise Price and Option Term. The exercise price of each Option shall be not less than the
Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. The term of an Option granted to an Eligible Participant shall be set by the Administrator in its discretion, but in no event shall the term of an Option
exceed ten years from the date the Option is granted. 
 (b) Consideration. The purchase price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either: (i) in cash at the time the Option is exercised, or (ii) at the discretion of the Administrator (A) by delivery to the
Company of other Common Stock, (B) according to a deferred payment or other similar arrangement with the Participant or (C) in any other form of legal consideration that may be acceptable to the Administrator. Unless otherwise specifically
provided in the Option, the purchase price of Common Stock acquired pursuant to an Option that is paid by delivery to the Company of other Common Stock acquired, directly or indirectly from the Company, shall be paid only by shares of the Common
Stock of the Company that have been held for more than the period of time required to avoid a charge to earnings for financial accounting purposes. At any time that the Company is incorporated in Delaware, payment of the Common Stock’s
“par value,” as defined in the Delaware General Corporation Law, shall not be made by deferred payment. 
 (c)
Deferred Payment. In the case of any deferred payment arrangement, interest shall be compounded at least annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as interest, under any applicable provisions
of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement. 
 (d)
Transferability of Options. An Option shall be transferable to the extent provided in the Option Agreement. If the Option does not provide for transferability, then the Option shall not be transferable except by will or by the laws of descent
and distribution and shall be exercisable during the lifetime of the Participant only by the Participant. Notwithstanding the foregoing, the Participant may, by delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Participant, shall thereafter be entitled to exercise the Option. 

(e) Vesting Generally. The total number of shares of Common Stock subject to an Option may, but need not, vest and therefore
become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the
Administrator may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this subsection 6(e) are subject to any Option provisions 

  
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governing the minimum number of shares of Common Stock as to which an Option may be exercised. 
 (f) Limitations on Exercise of Options Granted. Unless otherwise provided by the Administrator in the Option Agreement, no Option granted to an Eligible Participant may be exercised to any extent
by anyone after the first to occur of the following events: 
 (i) The expiration of 18 months from the date of the
Participant’s death; 
 (ii) The expiration of 12 months from the date of the Participant’s termination of
Continuous Service by reason of his or her Disability; 
 (iii) The expiration of three months from the date of the
Participant’s termination of Continuous Service for any reason other than such Participant’s termination by the Company or an Affiliate for “Cause” (as defined in the Participant’s employment or consulting agreement with the
Company in effect on the grant date of the Option, or, if the Participant does not have an employment or consulting agreement with the Company or the Participant’s employment or consulting agreement does not include a definition of
“Cause”, as defined in the Option Agreement), death or Disability, unless the Participant dies within said three-month period; 
 (iv) The Participant’s termination by the Company or an Affiliate for “Cause” (as defined in the Participant’s employment or consulting agreement with the Company in effect on the
grant date of the Option, or, if the Participant does not have an employment or consulting agreement with the Company or the Participant’s employment or consulting agreement does not include a definition of “Cause”, as defined in the
Option Agreement); 
 (v) The expiration of the term of the Option, as set forth in the Option Agreement; or 

(vi) Ten years from the date the Option was granted. 
 (g) Conditions to Issuance of Stock Certificates. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any Option
or portion thereof prior to fulfillment of all of the following conditions: 
 (i) The admission of such shares to listing on
all stock exchanges on which such class of stock is then listed; 
 (ii) The completion of any registration or other
qualification of such shares under any state or federal law, or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body which the Administrator shall, in its absolute discretion, deem
necessary or advisable; 

  
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 (iii) The obtaining of any approval or other clearance from any state or federal
governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable; 
 (iv)
The lapse of such reasonable period of time following the exercise of the Option as the Administrator may establish from time to time for reasons of administrative convenience; and 

(v) The receipt by the Company of full payment for such shares, including payment of any applicable withholding tax, which in the
discretion of the Administrator may be in the form of consideration used by the Participant to pay for such shares under Section 6(b), subject to Section 9(e). 
 (h) Extension of Termination Date. A Participant’s Option Agreement may also provide that if the exercise of the Option following the termination of the Participant’s Continuous Service
(other than upon the Participant’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate
on the earlier of: 
 (i) the expiration of the term of the Option set forth in subsection (a); 

(ii) ten years from the date the Option was granted; or 
 (iii) the expiration of a period of three months after the termination of the Participant’s Continuous Service during which the exercise of the Option would not be in violation of such
registration requirements. 
 (i) Additional Limitations on Exercise of Options. Participants may be required to comply
with any timing or other restrictions with respect to the settlement or exercise of an Option, including a window-period limitation, as may be imposed in the discretion of the Administrator. 

 

	7.	COVENANTS OF THE COMPANY. 

(a) Availability of Shares. During the terms of the Options, the Company shall keep available at all times the number of shares of
Common Stock required to satisfy such Options. 
 (b) Securities Law Compliance. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Options and to issue and sell shares of Common Stock upon exercise or vesting of the Options; provided, however, that this
undertaking shall not require the Company to register under the Securities Act the Plan, any Option or any Common Stock issued or issuable pursuant to any such Option. If, after reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall 

  
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be relieved from any liability for failure to issue and sell Common Stock upon exercise or vesting of such Options unless and until such authority is obtained. 

 

	8.	USE OF PROCEEDS FROM STOCK 

Proceeds from the sale of Common Stock pursuant to Options shall constitute general funds of the Company. 

 

	9.	MISCELLANEOUS.  

 (a) Acceleration of Exercisability and Vesting. The Administrator shall have the power to accelerate the time at which an Option may first vest and/or be exercised in accordance with the Plan,
notwithstanding the provisions in the Option stating the time at which it may first be exercised or the time during which it will vest. 
 (b) Stockholder Rights. No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Option unless and
until such Participant has satisfied all requirements for exercise of the Option pursuant to its terms. 
 (c) No Employment
or Other Service Rights. Nothing in the Plan or any instrument executed or Option granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the
Option was granted or shall affect the right of the Company or an Affiliate to terminate: (i) the employment of an Employee with or without notice and with or without cause; or (ii) the service of a Consultant pursuant to the terms of such
Consultant’s agreement with the Company or an Affiliate. 
 (d) Investment Assurances. The Company may require a
Participant, as a condition of exercising or acquiring Common Stock under any Option: (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to
employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the
merits and risks of exercising the Option; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Option for the Participant’s own account and not with any
present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if: (A) the issuance of the shares of Common Stock upon the
exercise or acquisition of Common Stock under the Option has been registered under a then currently effective registration statement under the Securities Act; or (B) as to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock. 

  
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 (e) Withholding Obligations. To the extent provided by the terms of an Option
Agreement, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under an Option by any of the following means (in addition to the Company’s right to withhold
from any compensation paid to the Participant by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise
issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Option, provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law;
or (iii) delivering to the Company owned and unencumbered shares of Common Stock. 
  

	10.	ADJUSTMENTS UPON CHANGES IN STOCK. 

(a) Capitalization Adjustments. If any change is made in the Common Stock subject to the Plan, or subject to any Option, without
the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan will be appropriately adjusted in the class(es) and maximum number of securities subject to the Plan pursuant to
subsection 4(a) and the outstanding Options will be appropriately adjusted in the class(es) and number of securities and price per share of Common Stock subject to such outstanding Options. The Administrator shall make such adjustments, and its
determination shall be final, binding and conclusive. The conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company. 

(b) Dissolution or Liquidation. In the event of a dissolution or liquidation of the Company, then all outstanding Options shall
terminate immediately prior to such event. 
 (c) Asset Sale, Merger, Consolidation or Reverse Merger. In the event of:
(i) a sale, lease or other disposition of all or substantially all of the assets of the Company, (ii) a merger or consolidation in which the Company is not the surviving corporation, or (iii) a reverse merger in which the Company is
the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise (collectively, a “change in
control”), then any surviving corporation or acquiring corporation shall assume any Options outstanding under the Plan or shall substitute similar stock awards (including an award to acquire the same consideration paid to the stockholders in
the change in control for those outstanding under the Plan). In the event any surviving corporation or acquiring corporation refuses to assume such Options or to substitute similar stock awards for those outstanding under the Plan, then with respect
to Options held by Participants whose Continuous Service has not terminated, the vesting of such Options (and, if applicable, the time during which such Options may be exercised) shall be accelerated in full, and the Options shall terminate if not
exercised (if applicable) at or prior to the change in control. With respect to any other Options outstanding 

  
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under the Plan, such Options shall terminate if not exercised (if applicable) prior to the change in control. 
  

	11.	AMENDMENT OF THE PLAN AND OPTIONS. 

(a) Amendment of Plan. Except as otherwise provided in this Section 11(a), the Plan may be wholly or partially amended or
otherwise modified at any time or from time to time by the Board. No amendment, suspension or termination of the Plan shall, without the consent of the Participant, alter or impair any rights or obligations under any Option theretofore granted or
awarded, unless the Option itself otherwise expressly so provides. 
 (b) Contemplated Amendments. It is expressly
contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide Eligible Participants with the maximum benefits provided or to be provided under the provisions of the Code. 

(c) No Impairment of Rights. Rights under any Option granted before amendment of the Plan shall not be impaired by any amendment
of the Plan unless: (i) the Company requests the consent of the Participant; and (ii) the Participant consents in writing. 
 (d) Amendment of Options. The Board at any time, and from time to time, may amend the terms of any one or more Options; provided, however, that the rights under any Option shall not be
impaired by any such amendment unless: (i) the Company requests the consent of the Participant; and (ii) the Participant consents in writing. Notwithstanding the foregoing, the Board shall not, without the approval of the stockholders of
the Company, authorize the amendment of any outstanding Option to reduce its exercise price. Furthermore, no Option shall be canceled and replaced with grants having a lower exercise price without the further approval of stockholders of the Company.

  

	12.	TERMINATION OR SUSPENSION OF THE PLAN. 

(a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate on the
day before the tenth (10th) anniversary of the date the Plan is adopted by the Board. No Option may be granted under the Plan while the Plan is suspended or after it is terminated. 

(b) No Impairment of Rights. Suspension or termination of the Plan shall not impair rights and obligations under any Option
granted while the Plan is in effect except with the written consent of the Participant. 
  

	13.	EFFECTIVE DATE OF PLAN 

The Plan shall become effective upon its adoption by the Board. 

  
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	14.	CHOICE OF LAW/INTERPRETATION. 

The law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without
regard to such state’s conflict of laws rules. 
  

	15.	STOCKHOLDER APPROVAL NOT REQUIRED. 

It is expressly intended that approval of the Company’s stockholders not be required as a condition of the effectiveness of the Plan,
and the Plan’s provisions shall be interpreted in a manner consistent with such intent for all purposes. Specifically, Rule 5635(c) promulgated by The Nasdaq Stock Market generally requires stockholder approval for stock option plans or other
equity compensation arrangements adopted by companies whose securities are listed on the Nasdaq Global Market pursuant to which stock awards or stock may be acquired by officers, directors, employees or consultants of such companies. Nasdaq Stock
Market Rule 5635(c)(4) provides an exception to this requirement for issuances of securities to a person not previously an employee or director of the issuer, or following a bona fide period of non-employment, as an inducement material to the
individual’s entering into employment with the issuer, provided such issuances are approved by either the issuer’s independent compensation committee or a majority of the issuer’s independent directors. Notwithstanding anything to the
contrary herein, Options under the Plan may only be made to Employees who have not previously been an Employee or member of the Board of the Company or an Employee or director of an Affiliate, or following a bona fide period of non-employment by the
Company or an Affiliate, as an inducement material to the Employee’s entering into employment with the Company or an Affiliate. Options under the Plan will be approved as set forth herein by: (i) the Committee, provided it is comprised
solely of two or more Independent Directors, or (ii) a majority of the Company’s Independent Directors. Accordingly, pursuant to Nasdaq Stock Market Rule 5635(c)(4), the issuance of Options and the shares of Common Stock issuable upon
exercise or vesting of such Options pursuant to this Plan are not subject to the approval of the Company’s stockholders. 
  

	16.	SECTION 409A. 

 To the extent that the Administrator determines that any Option granted under the Plan is subject to Section 409A of the Code, the Option Agreement evidencing such Option shall incorporate the terms
and conditions required by Section 409A of the Code. To the extent applicable, the Plan and Option Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive
guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the adoption of the Plan. Notwithstanding any provision of the Plan to the contrary, in the event that following the adoption of
the Plan the Administrator determines that any Option may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the adoption of the Plan), the
Administrator may adopt such amendments to the Plan and the applicable Option Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator
determines are necessary or appropriate to: (a) exempt the Option from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Option; or (b) comply with the requirements of
Section 409A of the Code and related Department of Treasury guidance. 

  
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	17.	UNFUNDED STATUS OF AWARDS. 

The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a
Participant pursuant to an Option, nothing contained in the Plan or any Option Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Affiliate. 

 

	18.	PARTICIPANTS IN FOREIGN COUNTRIES.  

The Board shall have the authority to adopt such modifications, procedures and subplans as may be necessary or desirable to comply with
provisions of the laws of foreign countries in which the Company or any Affiliate may operate to assure the viability of Options granted under the Plan in such countries and to meet the objectives of the Plan. 

  
 13Separation Agreement

 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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