8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the

Securities Exchange Act of 1934

Date of Report

(Date of earliest event reported)

June 30, 2011

PRO-DEX, INC.

(Exact name of registrant as specified in its charter)

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

2361 McGaw Avenue

Irvine, Ca. 92614

(Address of principal executive offices, zip code)

(949) 769-3200

(Registrant’s telephone number, including area code)

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

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

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

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

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

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

Adoption of Employee Severance Policy

On June 30, 2011, the Board of Directors of Pro-Dex, Inc. (the “Company”) approved an Employee Severance Policy (the “Policy”). The Policy is designed to provide benefits to certain employees of the Company, including the Company’s named executive officers, in the event of certain terminations of employment from the Company. The Policy is adopted by the Company as of July 1, 2011 and shall remain in full force and effect until amended or rescinded by the Board. The Policy is the Company’s sole policy regarding severance benefits except to the extent (i) a written employment agreement is in effect between the Company and an employee as of June 30, 2011 or (ii) a written change of control agreement exists at any time between the Company and an employee – in which case the change of control agreement shall govern severance payments. In the event an employee is eligible to participate in the Company’s Annual Incentive Plan and/or Long Term Incentive Plan, the employee will also be entitled to receive payments in accordance with the terms of the plans.

An active full-time employee of the Company is eligible to receive benefits under the Policy upon termination of employment if certain conditions set forth in the Policy are met. Severance benefits payable under the Policy are determined on the basis of (i) the number of completed years of active employment with the Company and (ii) the position the employee held with the Company. A covered employee must complete more than six months of active employment with the Company to receive any severance benefits and an employee that completes more than five years will receive the maximum amount of severance benefits he is eligible to receive under the Policy. An employee must also execute a release of claims against the Company to receive any severance benefits under the Policy above the two week minimum payout.

Under the Policy, a covered chief executive officer will receive severance benefits equal to between thirteen and fifty-two weeks of the employee’s base salary. A covered chief financial officer or covered vice president will receive severance benefits equal to between seven and one-half and thirty weeks of the employee’s base salary.

The foregoing description is qualified in its entirety by reference to the Employee Severance Policy, which is attached hereto as Exhibit 10.1, and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit 10.1    Employee Severance Policy, adopted July 1, 2011.

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SIGNATURES

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

Date: July 7, 2011	PRO-DEX, INC (REGISTRANT).
	By:	/s/ Harold A. Hurwitz
		Harold A. Hurwitz
		Chief Financial Officer

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INDEX TO EXHIBITS

Exhibit Number	Description
Exhibit 10.1	Employee Severance Policy, adopted July 1, 2011.

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EX-10.1

Exhibit 10.1

PRO-DEX, INC.

EMPLOYEE SEVERANCE POLICY

I. PURPOSE

This Employee Severance Policy (the “Policy”) is established to be effective as of July 1, 2011 (the “Effective Date”) to provide benefits to certain employees of Pro-Dex, Inc. (the “Company”), upon termination of employment from the Company. The Policy has been adopted by the Board of Directors of the Company and shall remain in force and effect until amended or rescinded by action of the Board of Directors.

II. EXCLUSIVITY OF POLICY

The Policy sets forth the Company’s sole policy regarding severance pay for Eligible Employees. Except to the extent a contrary or inconsistent contractual provision exists in (i) any provision in an unexpired written employment agreement between the Company and an Eligible Employee, which agreement also was in effect as of the Effective Date (an “Existing Agreement”), in which case the provisions of the Existing Agreement will control, or (ii) a written Change of Control Agreement between the Company and certain executive employees, in which case the Change of Control Agreement will govern any terminations covered by it, all other statements, policies and agreements relating to severance pay for an Eligible Employee, whether oral or in writing, and, including without limitation, any statement in any employee handbooks or other policy statements of the Company, shall have no force or effect. Nothing set forth herein shall have any effect on any employee’s at-will employment status.

III. ELIGIBILITY

(1) To be eligible for the benefits set forth herein, an employee must be an active full-time employee who, at the time of employment separation, satisfies all of the following requirements, and is not otherwise excluded by any other provision of this Section III:

(a) Employee is not covered by a collective bargaining agreement (unless it expressly provides for coverage under the Policy);

(b) Employee does not receive payment under the Company’s Change of Control Policy, if any, in effect at such time; and

(c) Employee is (i) permanently laid off, (ii) voluntarily terminates employment on account of a qualifying (A) change in work location or (B) if the Employee is a party and subject to the Company’s Change of Control Policy, any of the matters set forth in Sections 1.4(b)(i),(ii) and (iii) therein, or (iii) is involuntarily terminated under the Company’s at-will employment policy, including terminations for inadequate or unsatisfactory performance other than Disqualifying Conduct as defined herein.

(1) An employee will be considered “laid off” if his or her services as an employee of the Company are terminated because of a reduction in the work force for economic reasons such as lack of work, elimination of the employee’s job classification or changes in the Company’s organization. A lay off will be deemed “permanent” only if, at the time of termination of employment, the Company does not expect to rehire the employee, as determined by the Company in its sole discretion.

(2) A qualifying change in work location is an employer-required permanent change in the employee’s primary work location, but only if the change both (i) increases the employee’s commuting distance, and (ii) requires a one-way commute of more than 30 miles, determined based on the employee’s place of residence when the change in work location was announced. An employee will not be deemed to have terminated employment on account of a qualifying change in work location if the employee voluntarily resigns before the effective date of the change in location.

(3) A termination for Disqualifying Conduct is one in which the Company separates the employment relationship due to an employee’s serious misconduct, as determined by the Company in its sole discretion. Such serious misconduct includes the following types of behavior and other comparable misconduct: illegal conduct or a credible allegation thereof that (i) relates to job duties or job performance or (ii) reasonably could result in material injury or damage to the Company (including its reputation); gross misconduct such as dishonesty, fighting, misappropriation or misuse of Company assets; repeated violation of Company work rules or rules of conduct; and willful or grossly negligent violation of Company work rules or rules of conduct in situations that reasonably could result in material injury or damage to the Company. A termination for inadequate or unsatisfactory performance (not accompanied by serious misconduct as described above) does not constitute a termination for Disqualifying Conduct.

(2) An employee will not be eligible for benefits under the Policy if, within 30 days following termination of employment with the Company, the employee commences employment with any successor, acquirer or affiliate of the Company in a position which is comparable to or better than the position the employee held with the Company prior to termination of employment. Similarly, an employee whose employment is deemed terminated by the Company as the result of an acquisition of the Company but who has been offered substantially comparable employment with a successor, acquirer or affiliate of the Company will not be eligible for benefits under this Policy. Whether an employer is a successor, acquirer or affiliate of the Company and whether a position is comparable to or better than another position shall be determined by the Company in its sole discretion.

(3) Benefits under the Policy are payable only under the conditions set forth in this Section III. Any termination for Disqualifying Conduct is expressly excluded from benefits hereunder. Benefits are not payable under the Policy if an employee separates from the Company voluntarily for any reason, including retirement, but not including voluntarily

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resignation of employment on account of a qualifying (A) change in work location or (B) if the Employee is a party and subject to the Company’s Change of Control Policy, any of the matters set forth in Sections 1.4(b)(i),(ii) and (iii) therein. Benefits also are not payable under the Policy on account of a separation of employment that occurs (i) due to death, (ii) due to an employee’s failure to return to work at the expiration of an approved or legally-mandated leave of absence, or (iii) after an employee has begun receiving disability benefits under the Company’s long term disability insurance coverage or disability benefits pursuant to a workers’ compensation claim.

(4) An employee who meets all of the requirements of this Section III and does not come within one of the exclusions from benefits is referred to throughout this Policy as an “Eligible Employee.”

IV. BENEFITS

Each Eligible Employee shall receive severance benefits under the Policy determined on the basis of: (i) the number of complete years of active employment of the Eligible Employee by the Company or an affiliate of the Company, measured from the Eligible Employee’s most recent hire date after subtracting any breaks in service, other than statutorily-mandated temporary leaves of absence, and (ii) the position held by the Eligible Employee on his or her last day of active work; subject, however, to (iii) the Eligible Employee’s execution (and, if applicable, non-revocation) of a release of claims against the Company in form and content satisfactory to the Company and its legal counsel. In the event Employee and the Company have entered into an Indemnification Agreement with each other, Employee shall not be required to release any rights afforded to Employee under such Indemnification Agreement, or any provisions concerning indemnification under the Company’s Bylaws or Articles of Incorporation, and the Company shall continue to indemnify Employee under any such Agreement and/or provisions which may be applicable to Employee.

(1) Schedule A, attached hereto, sets forth the total number of weeks of separation plus severance pay to be received by the Eligible Employee based on the criteria specified in sub-section (1) above. Each Eligible Employee shall receive a two weeks’ of Base Pay as a separation payment in accordance with sub-section (1), subject to required withholding, to be paid unconditionally to the Eligible Employee on his or her last day of employment, provided such Eligible Employee meets all of the requirements of sub-section (1) (“Separation Pay”). After deducting this two weeks from the amount shown in Schedule A for the applicable Eligible Employee, the remaining number of weeks (“Severance Weeks”) shall be multiplied by the Eligible Employee’s base salary or regular rate of pay on his or her last day of active work to determine the amount of severance pay the Eligible Employee is entitled to. Such base salary or rate of pay (“Base Pay) shall not include overtime, bonuses, commissions, premium pay, employee benefits and expense reimbursement or other similar pay. It shall include base pay not received because of elections under Internal Revenue Code Sections 125 and 401(k). In addition, in the event, the Employee is subject to the Company’s Annual Incentive Plan and/or Long Term Incentive Plan (not the Company’s general bonus plan), the Employee shall be entitled to receive bonus or compensation award payment, if any, in accordance with the terms of such Annual Incentive Plan and Long Term Incentive Plan, as the case may be. Severance pay meeting all of the requirements of this Section IV is referred to throughout this Policy as the

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“Severance” owed to the Eligible Employee, provided such Eligible Employee meets all of the requirements of both sub-sections (1) and (2).

V. METHOD OF PAYMENT AND REPAYMENT

(1) The Severance will be paid in a lump sum (subject to required withholding) within five business days after the effective date (including the expiration of any applicable revocation periods) of the release of claims by an Eligible Employee.

(2) An employee who has received the Severance and is recalled to work may, as a condition of reinstatement, be required to repay a portion of the Severance received by the Eligible Employee. If the number of weeks paid for Severance exceeds the number of weeks the Eligible Employee was actually laid off, the Eligible Employee must repay the excess Severance within 30 days of re-employment in order to be eligible for severance benefits in the event of a future layoff or other qualifying termination of employment.

VI. RELEASE OF ALL CLAIMS

In order to receive the Severance, an Eligible Employee in Category 1-5 set forth on Schedule A attached hereto must sign a release (“Release”) of all claims the Eligible Employee had, has or may have against the Company, in form and content satisfactory to the Company and its legal counsel and within the time period required by the Company for such signature. If a revocation period is applicable to the Release, the revocation period must expire without revocation having occurred before the Severance shall become payable. Eligible Employees who choose not to sign the Release (or, if applicable, sign the Release but revoke it) shall receive only the two weeks of unconditional Separation Pay. In the event Employee and the Company are have entered into an Indemnification Agreement with each other, Employee shall not be required to release any rights afforded to Employee under such Indemnification Agreement or any provisions concerning indemnification under the Company’s Bylaws or Articles of Incorporation and the Company shall continue to indemnify Employee under such Indemnification Agreement and provisions.

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Schedule A

Separation Plus Severance Table

(Note: These amounts include the two weeks of Separation Pay. The Severance Weeks equal the amounts in the Schedule A minus two.

Years of Service				Employee Category
More than	but less than or equal to			1	2	3	4	5
				All Other	Managers	Directors	VPs	CEO
				Number of Weeks of Severance Pay
0.5	1	25	%	2.0	3.3	4.5	7.5	13.0
1	2	40	%	3.2	5.2	7.2	12.0	20.8
2	3	55	%	4.4	7.2	9.9	16.5	28.6
3	4	70	%	5.6	9.1	12.6	21.0	36.4
4	5	85	%	6.8	11.1	15.3	25.5	44.2
5		100	%	8.0	13.0	18.0	30.0	52.0