EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "
Agreement ") is made this 22nd day of November 2005, between
Pro-Dex, Inc., a Colorado corporation (" Pro-Dex " or the "
Company "), and Patrick Johnson, (" Employee ")
(collectively the " Parties ") with reference to the
following facts:
A. Pro-Dex, Inc. designs,
develops and manufactures medical, dental and motion control
devices. The Company's principal offices are located at 151 E.
Columbine Ave., Santa Ana, CA, 92707.
B. The Company
desires to employ Employee as the Chief Executive Officer ("
CEO ") and President of the Company and Employee desires to
accept such employment subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of
the facts recited above, the covenants contained in this Agreement,
and other valuable consideration, the parties agree as follows:
1. EMPLOYMENT .
The Company hereby employs the
Employee, and the Employee accepts such employment, in the capacity
of CEO and President of the Company in accordance with the terms of
this Agreement, the bylaws of the Company and applicable law.
2. SERVICES AND
DUTIES .
Employee shall perform all services,
acts or other things necessary or advisable, and as may be
determined and assigned to Employee from time to time by the Board
of Directors, to manage the business of the Company and have
general supervision, direction and control over the business and
affairs of the Company and its employees, subject to the control
and direction of the Board of Directors.
3. STANDARD OF
PERFORMANCE .
Employee agrees that at all times
during the Employment Term (defined herein) he will diligently,
competently, and to the best of his ability and experience, perform
all of the services and duties that are required as the CEO and
President of the Company.
4. EXCLUSIVE
EMPLOYMENT .
Employee shall not, while employed by
the Company, render services of any kind to others for
compensation, or engage in any other business activity without the
prior written consent of the Board of Directors of the Company (in
the event Employee is a member of the Board of Directors at such
time, he shall not participate in the vote concerning such
consent). During the Employment Term, Employee shall not, directly
or indirectly, whether as a partner, employee, creditor,
shareholder, or otherwise, promote, participate, or engage in any
activity or business competitive with the Company's
business. However, nothing in this Agreement shall be
deemed to prevent or limit the right of the Employee to invest any
of his funds in the capital stock or other securities of any entity
whose stock or securities are publicly owned or are regularly
traded on any public exchange, so long as (i) such entity does not
engage in a business that is in competition with the Company's
business as of the date of such investment; (ii) the investment
does not exceed 2% of the outstanding voting equity interests of
such entity; and (iii) the management of that investment does not
materially interfere with the performance of his duties
hereunder.
5. LOCATION OF
EMPLOYMENT .
Employee's performance under this
Agreement shall be rendered at 151 E. Columbine Ave., Santa Ana,
CA, 92707, or at such other place that (i) the Board of Directors
of the Company reasonably requires or (ii) that the interests,
needs, business and opportunities of the Company require or make
advisable.
6. TERM OF
EMPLOYMENT .
6.1 Unless terminated earlier pursuant
to this Section 6 or Sections 11, 12, or 13 of
this Agreement, Employee shall be employed for a term commencing as
of 1 October, 2005 and ending on 30 September 2008 (the "
Employment Term "). Thereafter, the Employment Term shall
continue on an "at-will" basis until terminated at the option of
either party upon one hundred twenty (120) days prior written
notice to the other party. This Agreement may be
terminated at any time by written agreement of the parties, or as
provided in Sections 11, 12, or 13.
6.2 If Employee is terminated by the
Company other than pursuant to this Section 6 or
Sections 11, 12, or 13 of this Agreement, Employee shall be
entitled to continued payment of compensation due under
Section 7.1 for the remainder of the Employment Term,
and to the bonus described in Exhibit A for a fiscal year ending
prior to such termination.
6.3 If Employee resigns from his
employment hereunder other than for Good Reason, (as defined in
Section 6.6 ), the Employee shall be entitled to payment of
his base salary accrued through and including the date of such
termination or resignation, but shall not be entitled to any other
compensation or benefits under this Agreement (including without
limitation any Bonus or options provided for in Section 7 )
not due as of such date nor with respect to the year of such
termination or resignation or any subsequent year.
6.4 If, prior to the expiration of the
Term, the Employee resigns from his employment hereunder for Good
Reason (as defined in Section 6.6 ), Employee shall be
entitled to continued payment of base compensation due under
Section 7 for the remainder of the Employment Term
(such remainder of the Employment Term being referred to herein as
the " Remainder Period ") but shall not be entitled to any
other compensation or benefits under this Agreement (including
without limitation any Bonus provided for in Section 7.2 )
with respect to the year of such termination or resignation or any
subsequent year. Anything in this Agreement to
the contrary notwithstanding, if the Employee provides services for
pay (including as an independent consultant or independent
contractor) to anyone other than the Company or any of its
affiliates or subsidiaries during the Remainder Period, the amount
of base compensation paid to the Employee during the Remainder
Period shall be reduced by [75%] of the amounts of salary, bonus
and other cash compensation earned by the Employee during such
period, including any amounts the payment of which is deferred at
the election, or with the agreement, of the Employee until after
expiration of such Remainder Period, as a result of his performing
such services during such period (it being understood that bonus
compensation earned for services rendered during the Remainder
Period but paid after expiration of the Remainder Period shall be
considered compensation that will reduce the amount of Remainder
Period base compensation paid to the Employee as provided
herein). The Employee agrees to notify the Company promptly
in writing of any arrangement during the Remainder Period in which
he performs services for pay, to cooperate fully with the Company
in determining the amount of any such reduction to the Remainder
Period base compensation provided in this Section 6.4 , and
to repay the Company any Remainder Period base compensation
previously paid to the Employee and owing to the Company if
required by the terms of the previous sentence.
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6.5 This Agreement will terminate
immediately upon Employee's death in which case the Employee's
estate shall be entitled to payment of his base salary accrued
through and including the date of death, but shall not be entitled
to any other compensation or benefits under this Agreement
(including without limitation any Bonus provided for in Section
7.2 ) with respect to the year of death or any subsequent
year.
6.6 For
purposes of this Agreement, " Good Reason " shall mean:
(a) a material reduction in, or the assignment to
the Employee of duties which would be inconsistent with, the
Employee's positions or responsibilities as described herein;
or
(b) a reduction in the Employee's Salary as then
in effect or the repeated failure of the Company to pay any amount
owing to the Employee hereunder when due.
Unless the
Employee provides written notification of an event described in
causes (a) or (b) of the preceding sentence within 45 days after
the Employee knows or has reason to know of the occurrence of any
such event, the Employee shall be deemed to have consented thereto
and such event shall no longer constitute Good Reason for purposes
of this Agreement. If the Employee provides such written
notice of the Company, the Company shall have 20 business days from
the date of receipt of such notice to effect a cure of the event
described therein and, upon cure thereof by the Company, such event
shall no longer constitute Good Reason for purposes of this
Agreement.
7. COMPENSATION
.
7.1 Company shall
pay Employee a base monthly salary of eighteen thousand four
hundred fifty nine dollars and 48 cents ($18,459.48), which monthly
base salary shall increase (but not decrease) as of 1 July (the "
Adjustment Date ") of each subsequent employment year
(commencing 1 July 2006) during the Employment Term by the
percentage increase, if any, in the " Current Index " over
the " Base Index ."
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The adjustments described above shall
be calculated on the basis of the United States Department of
Labor, Bureau of Labor Statistics, "Consumer Price Index For All
Urban Consumers, Los Angeles-Anaheim-Riverside Area" (the "
Index "). The Index for April preceding the immediately
prior employment year shall be considered the "Base Index," and the
April preceding the employment year for which the adjustment shall
become effective shall be the "Current Index." Salary shall be
payable in accordance with the Company's usual payroll method for
corporate executives.
7.2
Additional Compensation . Employee shall be entitled
to a Bonus in accordance with Exhibit A attached hereto
and incorporated by this reference, but shall not be eligible to
participate in any other profit sharing or bonus plan of the
Company, except as provided herein.
7.3
Options : Simultaneous with the payment of the Bonus
described in Exhibit A and subject to the same conditions as to
eligibility for payment, Employee shall receive options to purchase
twelve thousand (12,000) shares of common stock of the Company for
each of the three years covered by this Agreement at the market
value of the Company's stock at the date of issuance and in
accordance with other terms the Company's Employee Stock Option
Plan.
8.
BENEFITS .
8.1 Pension
Plan Participation . Employee shall be entitled to
participate, on the same basis as all other eligible employees, in
any pension benefit plan adopted by the Company, subject to the
terms, conditions and overall administration of any such plan.
8.2
Paid Time Off . Employee shall be entitled to Paid
Time Off in accordance with policies delineated in the Company's
Employee Handbook.
8.3
Insurance . Employee shall be entitled to the
following insurance benefits:
Participation for Employee in the
Company's group medical and dental insurance plan:
(a) participation for Employee in an executive
medical reimbursement plan if later adopted by the Company and
under the terms and conditions of any Plan if so adopted;
(b) such life insurance as is associated with the
group medical policy described above; and
(c) participation in the Company's group
disability plan, as well as the supplemental disability coverage as
shall be made available to Company executives if, and when,
adopted.
9. BUSINESS EXPENSES
.
Employee will be required to incur
travel, entertainment and other business expenses on behalf of the
Company in the performance of Employee's duties hereunder. Employee
shall submit expense reports and supporting documentation for all
such expenses and be reimbursed for all reasonable and necessary
expenses paid by him. Use of a personal automobile shall be
reimbursed on a mileage basis. The Company shall make available a
corporate credit card to pay business expenses that Employee shall
reasonably incur in the performance of Employee's duties under this
Employment Agreement. Employee shall reimburse Employer for any
business expenses disallowed for deduction under the Internal
Revenue Code of 1986, as amended, unless approved in writing by the
Board of Directors of the Company (in the event Employee is a
member of the Board of Directors at such time, he shall not
participate in the vote concerning such approval).
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