8-K

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, 2009

Pro-Dex, Inc.

(Exact name of registrant as specified in its charter)

         Colorado           (State or other jurisdiction of incorporation) 0-14942 (Commission File Number) 84-1261240 (IRS Employer Identification No.)

                  2361 McGaw Avenue Irvine, California,     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):

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

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

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

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

Item 2.03.   Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

On June 30, 2009, Pro-Dex, Inc. (the “Company”) amended its November 17, 2007 Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, N.A. (the “Bank”), effective as of June 22, 2009 to waive the existing covenant violations as of March 31, 2009 and referenced by the Forbearance Agreement dated May 12, 2009.  On July 2, 2009, the Credit agreement was further amended to change two of the existing covenant definitions. 

The amendments provided for;

A)           The Bank to waive the covenant violations that were subject to the Forbearance agreement dated May 12, 2009.

B)           The Line of Credit to be modified to change the allowable indebtedness under the Credit Line Note from time to time at its option any amounts up to $1,000,000.

C)            An introduction of a borrowing base if the outstanding borrowings under the line exceed $500,000. If borrowings under the Credit Line exceed $500,000, the maximum amount of borrowing would be limited to 70% of the eligible accounts receivable plus 40% of the eligible inventory.

D)           The income based covenants to be adjusted to exclude the non-cash charges taken in the quarter ended March 31, 2009 of $1,930,000 for the deferred tax asset allowance and $997,000 for the impairment of the patent asset.

Among other remedies offered to the Bank upon an event of default under the Loan Documents, the Bank may, at its option, cause the entire balance of principal, interest, fees and other charges under the Loan Documents or any other agreement between the Company and the Bank to become immediately due and payable.  Pursuant to the terms of the Loan Documents, the above referenced events of default, as well as all other provisions of the Credit Agreement, shall apply to the Company’s commercial credit accommodations from the Bank, whether now existing or hereafter established.

Copies of the Amendments are attached hereto as Exhibits 10.1 and 10.2, respectively, and are incorporated herein by reference. The foregoing descriptions of each of the Loan Documents are qualified in their entirety by reference to the full text of the respective agreements.

On July 6, 2009, Pro-Dex, Inc. issued a press release announcing the changes to the bank agreement and preliminary financial data for its fiscal fourth quarter ending June 30, 2009.  A copy of the news release is attached to this Form 8-K as exhibit 99.1

Item 9.01.       Financial Statements and Exhibits.

(d) Exhibits:

Number	Description
10.1	Third Amendment to Credit Agreement effective June 22, 2009, dated June 30, 2009, by Pro-Dex, Inc. in favor of Wells Fargo Bank, National Association.
10.2	Fourth Amendment to Credit Agreement effective June 30, 2009, dated July 2, 2009, by Pro-Dex, Inc. in favor of Wells Fargo Bank, National Association.
99.1	Press release dated July 6, 2009 of Pro-Dex Inc.

SIGNATURE

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 6, 2009	Pro-Dex, Inc.
	By: /s/ Jeffrey J. Ritchey
	Jeffrey J. Ritchey, Chief Financial Officer,  Secretary and Vice President

EX-10

EXHIBIT 10.1

THIRD AMENDMENT TO CREDIT AGREEMENT

        THIS AMENDMENT TO CREDIT AGREEMENT (this “Amendment “) is entered into as of June 22, 2009, by and between PRO-DEX, INC., a Colorado corporation (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“BANK”).

RECITALS

WHEREAS, Borrower is currently indebted to Bank pursuant to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of November 1, 2007, as amended from time to time (“Credit Agreement”).

            WHEREAS, Bank and Borrower have previously entered into a forbearance agreement dated May 12, 2009 (the “Forbearance Agreement”) in connection with certain violations of the Credit Agreement defined in the Forbearance Agreement as the “Existing Violations”).

WHEREAS, Bank is now willing to waive the Existing Violations pursuant to the terms and conditions set forth in the Amendment;

            NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Credit Agreement shall be amended as follows:

1.                      Section 1.1. is hereby deleted in its entirety, and the following substituted therefor:

                   “SECTION 1.1                    LINE OF CREDIT.

(a)        Line of Credit.  Subject to the terms and conditions of this Agreement, Bank hereby agrees to make advances to Borrower from time to time up to and including November 1, 2009, not to exceed at any time principal amount of One Million Dollars ($1,000,000)  (“Line of Credit”), the proceeds of which shall be used to finance Borrower’s working capital needs.  Borrower’s obligation to repay advances under the Line of Credit shall be evidenced by a promissory note dated November 1, 2007 (as amended, the “Line of Credit Note”), all terms of which are incorporated herein by reference. 

(b)        Limitation on Borrowings.         Outstanding borrowings under the Line of Credit, to a maximum of the principal amount set for the above, shall not at any time after the occurrence of the Borrowing Base Event (as defined below) exceed the aggregate of seventy percent (70%) of Borrower’s eligible accounts receivable, plus 40% (40%) of the value of  Borrower’s eligible inventory (exclusive of work in process and inventory which is obsolete, unsalable or damaged), with value defined as the lower of cost or market.  All the foregoing shall be determined by Bank upon receipt and review of all collateral reports required hereunder and such other documents and collateral information as Bank may from time to time require. Borrower acknowledges that said borrowing base was established by Bank with the understanding that, among other items, the aggregate of all returns, rebates, discounts, credits and allowances for the immediately preceding three (3) months at all times shall be less than five percent (5%) of the Borrower’s gross sales for said period.  If such dilution of Borrower’s accounts for the immediately preceding three (3) months at any time exceeds five percent (5%) of Borrower’s gross sales for said period, or if there at any time exists any other matters, events, conditions or contingencies, which Bank reasonably believes may affect payment of any portion of Borrower’s accounts, Bank, in its sole discretion, may reduce the foregoing advance rate against eligible accounts receivable to a percentage appropriate to reflect such additional dilution and/or establish additional reserves against Borrower’s eligible accounts receivable.

As used herein, the “Borrowing Base Event” shall be deemed to have occurred when outstanding borrowings under the Line of Credit exceed Five Hundred Thousand Dollars ($500,000.00), and shall be deemed to be continuing at all times thereafter, notwithstanding any subsequent decrease below such amount in the borrowings outstanding under the Line of Credit.

As used herein, “eligible accounts receivable” shall consist solely of trade accounts created in the ordinary course of Borrower’s business, upon which Borrower’s right to receive payment is absolute and not contingent upon the fulfillment of any condition whatsoever, and in which Bank has a perfected security interest of first priority, which shall not include:

(i)         Any account which is more than ninety (90) days past due;

(ii)        that portion of any account for which there exists any right of setoff, defense, or discount (except regular discounts allowed in the ordinary course of business to promote prompt payment) or for which any defense or counterclaim has been asserted;

(iii)       any account which represents an obligation of any state or municipal government or of the United States government or any political subdivision thereof (except accounts which represent obligations of the United States government and for which the assignment provisions of the Federal Assignment of Claims Act, as amended or recodified from time to time, have been complied with to the Bank’s satisfaction);

(iv)       any account which represents an obligation of an account debtor located in a foreign country, except to the extent any such account, in Bank’s determination, is supported by a letter of credit or insured under a policy of foreign credit insurance, in each case in form, substance, and issued by a party acceptable to Bank;

(v)        any account which arises from the sale or lease to or performance of services for, or represents an obligation of, an employee, affiliate, partner, member, parent or subsidiary of Borrower;

(vi)       that portion of any account, which represents interim or progress billings or retention rights on the part of the account debtor;

(vii)      any account which represents an obligation of any account debtor when twenty percent (20%) or more of Borrower’s accounts from such account debtor are not eligible pursuant to (i) above;

(viii)     that portion of any account from an account debtor which represents the amount by which Borrower’s total accounts from said account debtor exceeds twenty-five percent (25%) of Borrower’s total accounts;

(ix)       any account deemed ineligible by Bank when Bank, in its sole discretion, deems the creditworthiness or financial condition of the account debtor, or the industry in which the account debtor is engaged, to be unsatisfactory.

(c)      Borrowing and Repayment.  Borrower may from time to time during the term of the Line of Credit borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions contained herein or in the line of Credit Note; provided however, that the total outstanding borrowings under the Line of Credit shall not at any time exceed the maximum principal amount available thereunder, as set forth above.”

2.         Section 4.3 (c) is hereby redesignated as Section 4.3(d) and the following is hereby added as Section 4.3 (c)”

“(c) Within 15 days after the occurrence of the Borrowing Base Event, a borrowing base certificate for the month ending immediately prior to the Borrowing Base Event, an inventory collateral report for such month, an aged accounts receivable and accounts payable for such month, and a reconciliation of accounts for such month; thereafter, not later than 15 days after and as of the end of the month, a borrowing base certificate, an inventory collateral report, an aged listing of accounts receivable and accounts payable and a reconciliation of accounts, and immediately upon each request from Bank, a list of the names and addresses of all Borrower’s account debtors;”

3.         Section 4.1 is hereby amended by adding at the end thereof, before the period, following the clause: “, and immediately upon demand by Bank, the amount by which the outstanding principal balance of any credit subject hereto at any time exceeds any limitation on borrowings applicable thereto.” 

4.         Bank hereby waives the Existing Violations.  Such waiver by Bank shall not be deemed an agreement by Bank to waive any new violation which may occur, including without limitation any new violation of the provisions which are the subject of the Existing Violation.

5.         Except as specifically provided herein, all terms and conditions of the Credit Agreement remain in full force and effect, without waiver or modification.  All terms defined in the Credit Agreement shall have the same meaning when used in this Amendment. This Amendment and the Credit Agreement shall be read together, as one document.

6.        Borrower hereby remakes all representations and warranties contained in the Credit Agreement and reaffirms all covenants set forth therein. Borrower further certifies that as of the date of this Amendment there exists no Event of Default as defined in the Credit Agreement, nor any condition, act or event which with the giving of notice or the passage of time or both would constitute any such Event of Default.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first written above.

	WELLS FARGO BANK,
PRO-DEX, INC.	NATIONAL ASSOCATION
By:   /s/   Jeffrey Ritchey	By:       /s/ Manishi G. Parikh
Jeffrey Ritchey	Manishi G. Parikh
Chief Financial Officer,	Vice President
Treasurer, Secretary
By:     /s/   Mark P. Murphy
Mark P. Murphy
Chief Executive Officer

EX-10

EXHIBIT 10.2

FOURTH AMENDMENT TO CREDIT AGREEMENT

        THIS AMENDMENT TO CREDIT AGREEMENT (this “Amendment “) is entered into as of June 30, 2009, by and between PRO-DEX, INC., a Colorado corporation (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“BANK”).

RECITALS

WHEREAS, Borrower is currently indebted to Bank pursuant to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of November 1, 2007, as amended from time to time (“Credit Agreement”).

            WHEREAS, Bank and Borrower have agreed to certain changes in the terms and conditions set forth in the Credit Agreement and have agreed to amend the Credit Agreement to reflect said changes.

            NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Credit Agreement shall be amended as follows:

1.         Sections 4.9 (c) and (e) are hereby deleted in its entirety, and the following substituted therefor:

                   “(c)        Net Income after taxes not less than $1.00 on an annual basis, determined as of each fiscal year end, provided, however, that Borrower may incur a net loss for either the fiscal year ending 2009 or the fiscal year ending 2010 of up to $2,957,000.00 resulting from the write-off of the Borrower’s “Intraflow” product during such year (“Intraflow Write-off”) and the amount of the deferred tax asset allowance taken in the fiscal quarter ending March 31, 2009.

                   (e)          Fixed Charge Coverage Ratio not less than 1.25 to 1.0 as of each fiscal quarter end, determined on a rolling 4 quarter basis, with “Fixed Charge Coverage Ratio” defined as the aggregate of net profit after taxes (excluding any Intraflow Write-off during any period permitted herein and the mount of the deferred tax asset allowance taken in the quarter ending March 31, 2009) plus depreciation expense, cash capital contributions and increases in subordinated debt minus dividends, distributions and decreases in subordinated debt, divided by the aggregate of all principal payments made on CPLTD and all capitalized lease payments.”

2.         Except as specifically provided herein, all terms and conditions of the Credit Agreement remain in full force and effect, without waiver or modification.  All terms defined in the Credit Agreement shall have the same meaning when used in this Amendment. This Amendment and the Credit Agreement shall be read together, as one document.

3.         Borrower hereby remakes all representations and warranties contained in the Credit Agreement and reaffirms all covenants set forth therein. Borrower further certifies that as of the date of this Amendment there exists no Event of Default as defined in the Credit Agreement, nor any condition, act or event which with the giving of notice or the passage of time or both would constitute any such Event of Default.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first written above.

	WELLS FARGO BANK,
PRO-DEX, INC.	NATIONAL ASSOCATION
By:   /s/   Mark P. Murphy	By:       /s/ Manishi G. Parikh
Mark P .Murphy	Manishi G. Parikh
Chief Executive Officer	Vice President
By:   /s/   Jeffrey Ritchey
Jeffrey Ritchey
Chief Financial Officer, Treasurer, Secretary

EX-99

                             

                                                            Contact:           Jeff Ritchey, Chief Financial Officer

                                                                                    (949) 769-3200

                                                                                                                                                &n bsp;          

For Immediate Release                                                                      

PRO-DEX, INC. ANNOUNCES AMENDMENTS TO BANK AGREEMENT

Company reports favorable resolution of its existing Wells Fargo credit facility

IRVINE, CA, July 6, 2009 - PRO-DEX, INC. (NASDAQ: PDEX) today announced that it has resolved its previously described covenant violations resulting from its fiscal Q3 operating results.

As reported in May with its Q3 earnings release, the loss reported by the Company in the quarter ended March 31, 2009 resulted in violations of certain covenants related to the line of credit issued by Wells Fargo Bank, who issued a forbearance letter concerning the violations while it conducted a review.  The bank has completed its review, and has amended the loan agreement, waiving the covenant violations. 

The amount of available credit will remain at the $1 million limit established in May.  The amount available on the credit line will remain unrestricted for the first $500,000 of borrowings.  If, at any time, an additional amount is borrowed above $500,000, the line will convert to a formula based facility, with specific borrowing amounts allowed based on eligible receivables and inventory, still carrying the overall $1 million cap.  The Company’s current eligible accounts receivable and inventory support borrowings well in excess of the $1 million limit, meaning that, in either form, the Company believes that it will be in a position to access the full $1 million available to borrow.

The Company has not borrowed against the credit line since last March and continues to carry a zero balance on the line.  It has increased its balance of cash and cash equivalents from $504,000 on March 31, 2009 to over $1 million on June 30, 2009.

Pro-Dex, Inc., with operations in Irvine, California, Beaverton, Oregon and Carson City, Nevada, provides a pathway to product solutions rarely envisioned by customers.  A unique blend of creativity and systemic discipline enables us to develop and manufacture innovative designs that powerfully complete a customer’s strategic product offering. Pro-Dex leverages extraordinary human collaboration and superior technical capability to power and control products used in medical, aerospace, military, research and industrial applications requiring high precision in harsh environments.  With expertise in multi-axis motion control, fractional horsepower motors and rotary drive systems, we identify and create unexpected value for our customers.

For more information, visit the Company's website at www.pro-dex.com.

Statements herein concerning the Company's plans, growth and strategies may include 'forward-looking statements' within the context of the federal securities laws. Statements regarding the Company's future events, developments and future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. The Company's actual results may differ materially from those suggested as a result of various factors. Interested parties should refer to the disclosure concerning the operational and business concerns of the Company set forth in the Company's filings with the Securities and Exchange Commission.