Form 8-K

Date: February 10, 2011

PRO-DEX, INC (REGISTRANT).

/s/ Harold A. Hurwitz

Harold A. Hurwitz

Chief Financial Officer

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OANSaQ8nw2J0oqiMPBHsfrkR7JxyWXTh15TMCsEzeY+uE8jMbE7HYkIGWvHMZWoF lsTwSUgX6Xap3lnTADVQqw== 0001193125-11-030657.txt : 20110210 0001193125-11-030657.hdr.sgml : 20110210 20110210161608 ACCESSION NUMBER: 0001193125-11-030657 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20110204 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20110210 DATE AS OF CHANGE: 20110210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRO DEX INC CENTRAL INDEX KEY: 0000788920 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 841261240 STATE OF INCORPORATION: CO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14942 FILM NUMBER: 11592732 BUSINESS ADDRESS: STREET 1: 2361 MCGAW AVENUE CITY: IRVINE STATE: CA ZIP: 92614 BUSINESS PHONE: 949-769-3200 MAIL ADDRESS: STREET 1: 2361 MCGAW AVENUE CITY: IRVINE STATE: CA ZIP: 92614 8-K 1 d8k.htm FORM 8-K Form 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)

February 4, 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:

¨	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 2.02.

Results of Operations and Financial Condition.

The information in this Item 2.02 of this Form 8-K, as well as Exhibit 99.1 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On February 10, 2011, Pro-Dex, Inc. (the “Company”) issued a press release announcing its financial performance for the period ended December 31, 2010. On that same date, the Company held a conference call concerning its financial performance for the period ended December 31, 2010. A copy of the press release is attached to this Form 8-K as Exhibit 99.1, which is incorporated herein by this reference.

Item 2.03.

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

On February 4, 2011, the Company entered into a credit facility agreement with Union Bank, N.A. (“Union Bank”) that replaced its previously existing Wells Fargo Bank credit facility. The credit facility agreement with Union Bank provides for the following:

•

Revolving Credit Line—a revolving credit line of up to $1,500,000 in borrowing availability (the “Revolving Credit Line”);

•

Non-Revolving Credit Line—a non-revolving credit line of up to $350,000 in borrowing availability for the purchase of equipment (the “Non-Revolving Credit Line”); and

•

Term Loan—a term loan of $1,250,000 (the “Term Loan”).

The Revolving Credit Line, Non-Revolving Credit Line and Term Loan are collectively referred to herein as the “Credit Facility.”

The terms and conditions of the Credit Facility are set forth in a Business Loan Agreement (the “Business Loan Agreement”), and each of the terms and conditions of the Revolving Credit Line, Non-Revolving Credit Line and Term Loan are set forth in a revolving credit line note (the “Revolving Credit Line Note”), a non-revolving credit line note (the “Non-Revolving Credit Line Note”), and a term loan note (the “Term Loan Note”), respectively.

Pursuant to the terms of a security agreement by the Company and security agreement by Pro-Dex Astromec, Inc, a wholly-owned subsidiary of the Company, (these security agreements are collectively referred to herein as the “Security Agreements”), all personal property assets of the Company and Pro-Dex Astromec, Inc. collateralize the outstanding borrowings under the Credit Facility. The Business Loan Agreement, Revolving Credit Line Note, Non-Revolving Credit Line Note, Term Loan Note and the Security Agreements are collectively referred to herein as the “Loan Documents.”

Revolving Credit Line

Pursuant to the terms of the Revolving Credit Line Note, the maximum amount of borrowing under the Revolving Credit Line is the lesser of:

(a)

$1,500,000; or

(b)

the sum of 80% of eligible domestic accounts receivable, plus the lesser of:

(i)

$400,000; or

(ii)

15% of the eligible raw materials and finished goods inventories.

The terms of the Revolving Credit Line Note require monthly interest payments based on borrowed amounts at a floating interest rate, calculated as Union Bank’s Reference Rate plus 0.5%. The Revolving Credit Line’s initial term expires on December 15, 2012, after which it is renewable annually at Union Bank’s option. Should Union Bank decide not to renew the line, it must give the Company a 60-day notice of such decision.

Non-Revolving Credit Line

The terms of the Non-Revolving Credit Line Note require monthly interest payments based on borrowed amounts at a floating interest rate, calculated as Union Bank’s Reference Rate plus 0.5%. The Non-Revolving Credit Line, which is to be used by the Company to purchase equipment, has a one-year term, after which amounts outstanding under it at the end of the term will automatically convert into a three-year term loan at a floating interest rate calculated in the same manner as described above with respect to the Non-Revolving Credit Line.

Term Loan

The terms of the Term Loan Note require monthly principal payments of $29,762, plus interest over its 42-month term. The Term Loan, the proceeds of which were used to pay off in full the term loan the Company previously had with Wells Fargo Bank, N.A., bears interest at a floating rate, calculated as Union Bank’s Reference Rate plus 0.5%.

The Loan Documents contain customary representations, warranties and covenants, including, among other things, financial covenants that require the Company to comply with minimum quarterly liquidity and annual profitability thresholds, non-financial covenants that include quarterly and annual reporting requirements, and certain operational restrictions.

The Loan Documents contain customary events of default, including, among other things, the failure of the Company to make any required payment when due and the Company’s breach of any of the covenants or conditions of any of the Loan Documents. Among other remedies available to Union Bank, an event of default under the Loan Documents shall make all amounts due under the Credit Facility immediately due and payable.

Copies of the Business Loan Agreement, Revolving Credit Line Note, Non-Revolving Credit Line Note, Term Loan Note, Security Agreement entered into by the Company and Security Agreement entered into by Pro-Dex Astromec, Inc. are attached hereto as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5 and 10.6, 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.

Item 9.01

Financial Statements and Exhibits.

(d)

Exhibits.



Exhibit 10.1		Business Loan Agreement, dated as of February 4, 2011, between Pro-Dex, Inc. and Union Bank, National Association.

Exhibit 10.2		Revolving Credit Line Note, dated as of February 4, 2011, by Pro-Dex, Inc. in favor of Union Bank, National Association.

Exhibit 10.3		Non-Revolving Credit Line Note, dated as of February 4, 2011, by Pro-Dex, Inc. in favor of Union Bank, National Association.

Exhibit 10.4		Term Loan Note, dated as of February 4, 2011, by Pro-Dex, Inc. in favor of Union Bank, National Association.

Exhibit 10.5		Security Agreement, dated as of February 4, 2011, by Pro-Dex, Inc. in favor of Union Bank, National Association.

Exhibit 10.6		Security Agreement, dated as of February 4, 2011, by Pro-Dex Astromec, Inc. in favor of Union Bank, National Association.

Exhibit 99.1		Press Release dated February 10, 2011.

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.

INDEX TO EXHIBITS


Exhibit Number		Description

Exhibit 10.1		Business Loan Agreement, dated as of February 4, 2011, between Pro-Dex, Inc. and Union Bank, National Association.

Exhibit 10.2		Revolving Credit Line Note, dated as of February 4, 2011, by Pro-Dex, Inc. in favor of Union Bank, National Association.

Exhibit 10.3		Non-Revolving Credit Line Note, dated as of February 4, 2011, by Pro-Dex, Inc. in favor of Union Bank, National Association.

Exhibit 10.4		Term Loan Note, dated as of February 4, 2011, by Pro-Dex, Inc. in favor of Union Bank, National Association.

Exhibit 10.5		Security Agreement, dated as of February 4, 2011, by Pro-Dex, Inc. in favor of Union Bank, National Association.

Exhibit 10.6		Security Agreement, dated as of February 4, 2011, by Pro-Dex Astromec, Inc. in favor of Union Bank, National Association.

Exhibit 99.1		Press Release dated February 10, 2011.

EX-10.1 2 dex101.htm BUSINESS LOAN AGREEMENT Business Loan Agreement

Exhibit 10.1


		BUSINESS LOAN AGREEMENT

This Business Loan Agreement (this “Agreement”) is entered into as of the date set forth below between Union Bank, N.A. (“Bank”) and the undersigned (“Borrower”) with respect to each and every extension of credit (whether one or more, collectively referred to as the “Loan”) from Bank to Borrower. In consideration of the Loan, Bank and Borrower agree to the following terms and conditions:

1.	THE LOAN.

1.1

The Note. One or more promissory notes or other evidences of indebtedness, which are incorporated herein by this reference (whether one or more, collectively referred to as the “Note”, evidence the Loan including each amendment, extension, renewal or replacement thereof.

1.2

Borrowing Base. An amount of the Loan equal to $1,500,000, evidenced by a Note dated February 1, 2011 is a revolving loan subject to a borrowing base (“Borrowing Base Loan”). Notwithstanding any other provision of this Agreement or any other Loan Document, Bank shall not be obligated to advance funds under the Borrowing Base Loan, if the principal amount of such Borrowing Base Loan including such advance exceeds 80% of Borrower’s Eligible Accounts plus 15% of Borrower’s Eligible Inventory. However, extensions of credit under the Borrowing Base Loan which are based on availability under Borrower’s Eligible Inventory shall not at any time exceed $400,000. (If at any time Borrower’s obligations to Bank under the Borrowing Base Loan exceed the sum so permitted, Borrower shall immediately repay to Bank such excess.)

The term “Accounts” means all presently existing and hereafter arising accounts receivable, contract rights, chattel paper, and all other forms of obligations owing to Borrower, payable in U.S. Dollars, arising out of the sale or lease of goods, or the rendition of services by Borrower, whether or not earned by performance, and any and all credit insurance, guaranties and other security, as well as all merchandise returned to or reclaimed by Borrower and Borrower’s books and records relating to any of the foregoing.

The term “Eligible Accounts” means those Accounts, net of finance charges, which have been validly assigned as collateral to Bank and strictly comply with all of Borrower’s representations and warranties to Bank, but Eligible Accounts shall not include:

(a)

Any Account with respect to which the account debtor is an officer, shareholder, director, employee or agent of Borrower;

(b)

Any Account with respect to which the account debtor is a subsidiary of, related to, or affiliated or has common officers or directors with Borrower;

(c)

Any Account with respect to which goods are placed on consignment, guaranteed sale or other terms by reason of which the payment by the account debtor may be conditional;

(d)

Any Account with respect to which the account debtor is not located in the United States or Canada except for Accounts owed by account debtors located in the Province of Quebec, which shall not be eligible;

(e)

Any Account with respect to which the account debtor is a Federal, state or local governmental entity or agency, unless Bank, in its sole discretion, has agreed to the contrary in writing and Borrower, if necessary or desirable has complied with the Assignment of Claims Act of 1940 or any applicable state statute or municipal ordinance of similar purpose and effect with respect thereto;

(f)

Any Account with respect to which Borrower is or may become liable to the account debtor for goods sold or services rendered by the account debtor to Borrower;

(g)

Any Account with respect to which there is asserted a defense, counterclaim, discount or setoff, whether well-founded or otherwise, except for those discounts, allowances and returns arising in the ordinary course of Borrower’s business;

(h)

Any Account with respect to which the account debtor becomes insolvent, fails to pay its debts as they mature or goes out of business or is owed by an account debtor which has become the subject of a proceeding under any provision of the United States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including, but not limited to, assignments for the benefit of creditors, formal or informal moratoriums, compositions or extensions with all or substantially all of its creditors;

(i)

Any Account owed by any account debtor with respect to which 25% or more of the aggregate dollar amount of its Accounts is not paid within 60 days from the date of the invoice;

(j)

Any Account that is not paid by the account debtor within 60 days from the date of the invoice;

(k)

That portion of any Account owed by any single account debtor which exceeds 15% of all of the Accounts with the exception of Arthrex, Inc. who will be allowed a 35% concentration, to be reduced by 5% for each additional 5% portion of the Arthrex, Inc. receivables that become ineligible;

(l)

Any Account which Bank deems not to be an Eligible Account; and

The term “Inventory” means all present and hereafter acquired inventory of Borrower wherever located, including but not limited to all present and future goods held for sale or lease or to be furnished under a contract of service and all raw materials, work in progress or materials used or consumed in a business, finished goods and all proceeds and products or any of the foregoing, all guaranties and other security therefore, and all of Borrower’s present and future books and records relating thereto (including computer-stored information and all software relating thereto) and all contract rights with third parties relating to the maintenance of any such books, records and information.

The term “Eligible Inventory” means that portion of Borrower’s Inventory of raw materials and finished goods consisting of Borrower’s main line(s) of business products, which is (a) owned by Borrower free and clear of all Liens except those in favor of Bank, (b) held for sale or lease by Borrower and normally and currently saleable in the ordinary course of Borrower’s business, (c) of good and merchantable quality, free from defects, (d) located only at locations of which Bank is notified in writing, and (e) subject to a first priority security interest in favor of Bank. Eligible Inventory does not include work in process, spare parts, returned items, damaged, defective or recalled items, items unfit for further processing, obsolete or unmerchantable items, items used as salesperson’s samples or demonstrators, Inventory held in stock more than twelve (12) months, or Inventory which Bank otherwise deems ineligible.

1.3

Fee. Borrower shall pay to Bank a fee of $7,500.00

1.4

Collateral. The payment and performance of all obligations of Borrower under the Loan Documents is and shall be during the term of the Loan secured by a perfected security interest in such real or personal property collateral as is required by Bank and each security interest shall rank in first priority unless otherwise specified in writing by Bank.

CONDITIONS TO AVAILABILITY OF THE LOAN. Before Bank is obligated to disburse all or any portion of the Loan, Bank must have received (a) the Note and every other document required by Bank in connection with the Loan, each of which must be in form and substance satisfactory to Bank (together with this Agreement, referred to as the “Loan Documents”), (b) confirmation of the perfection of its security interest in any collateral for the Loan, and (c) payment of any fee required in connection with the Loan.

3.	REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants (and each request for a disbursement of the proceeds of the Loan shall be deemed a representation and warranty made on the date of such request) that:

3.1

Borrower is an individual or Borrower is duly organized and existing under the laws of the state of its organization and is duly qualified to conduct business in each jurisdiction in which its business is conducted;

3.2

The execution, delivery and performance of the Loan Documents executed by Borrower are within Borrower’s power, have been duly authorized, are legal, valid and binding obligations of Borrower, and are not in conflict with the terms of any charter, bylaw, or other organization papers of Borrower or with any law, indenture, agreement or undertaking to which Borrower is a party or by which Borrower is bound or affected;

3.3

All financial statements and other financial information submitted by Borrower to Bank are true and correct in all material respects, and there has been no material adverse change in Borrower’s financial condition since the date of the latest of such financial statements;

3.4

Borrower is properly licensed and in good standing in each state in which Borrower is doing business, and Borrower has complied with all laws and regulations affecting Borrower, including without limitation, each applicable fictitious business name statute;

3.5

There is no event which is, or with notice or lapse of time or both would be, an Event of Default (as defined in Article 5);

3.6

Borrower is not engaged in the business of extending credit for the purpose of, and no part of the Loan will be used, directly or indirectly, for purchasing or carrying margin stock within the meaning of Federal Reserve Board Regulation U; and

3.7

Borrower is not aware of any fact, occurrence or circumstance, which Borrower has not disclosed to Bank in writing which, has, or could reasonably be expected to have, a material adverse effect on Borrower’s ability to repay the Loan or perform its obligations under the Loan Documents.

4.	COVENANTS. Borrower agrees, so long as the Loan or any commitment to make any advance under the Loan is outstanding and until full and final payment of all sums outstanding under any Loan Document, that Borrower will:

4.1

Maintain:

(a)

A ratio of current assets to current liabilities of at least 1.25: 1.00 to be measured at each fiscal quarter end;

(b)

A ratio of total liabilities to Tangible Net Worth of not greater than 1.50: 1.00, to be measured at each fiscal quarter end. (As used herein “Tangible Net Worth” means net worth increased by indebtedness of Borrower subordinated to Bank and decreased by patents, licenses, trademarks, trade names, goodwill and other similar intangible assets, organizational expenses, and monies due from affiliates including officers, shareholders and directors);

(c)

A profit after taxes of not less than $1.00, to be measured annually beginning the period ending June 30, 2011;

(d)

A ratio of Cash Flow to Debt Service of at least: 1.25: 1.00. Compliance with this subsection to be measured as of the end of each fiscal year of Borrower. (As used herein, “Debt Service” means that portion of long-term liabilities and capital leases coming due within 12 months of the date of calculation, and “Cash Flow” means net profit after taxes, to which depreciation, amortization and other non-cash expenses are added for the 12 month period immediately preceding the date of calculation);

All accounting terms used in this Agreement shall have the definitions given them by generally accepted accounting principles, unless otherwise defined herein.

4.2

Give written notice to Bank within 15 days of the following:

(a)

Any litigation or arbitration proceeding affecting Borrower where the amount in controversy is $50,000.00 or more;

(b)

Any material dispute which may exist between Borrower and any government regulatory body or law enforcement body;

(c)

Any Event of Default or any event which, upon notice, or lapse of time, or both, would become an Event of Default;

(d)

Any other matter which has resulted or is likely to result in a material adverse change in Borrower’s financial condition or operation; and

(e)

Any change in Borrower’s name or the location of Borrower’s principal place of business, or the location of any collateral for the Loan, or the establishment of any new place of business or the discontinuance of any existing place of business.

4.3

Furnish to Bank a statement of operations, balance sheet, and statement of cash flows (“Financial Statement”) and any other financial information requested by Bank, prepared in accordance with generally accepted accounting principles and in a form satisfactory to Bank as follows:

(a)

Within 45 days after the close of each quarter except for the final quarter of each fiscal year, Borrower’s Financial Statement as of the close of such period;

(b)

Within 90 days after the close of each fiscal year, a copy of Borrower’s annual Financial Statement audited by an independent certified public accountant selected by Borrower and reasonably satisfactory to Bank;

(c)

Within 20 days after each calendar month end, a copy of Borrower’s accounts receivable and accounts payable agings as of the close of such period, a copy of the Borrower’s inventory report, and a certification of compliance with the borrowing base described in Section 1.2 above, executed by Borrower, which certificate shall accurately report Borrower’s Accounts, Eligible Accounts and Eligible Inventory.

(d)

Within 45 days after the close of each fiscal quarter, a certification of compliance with all covenants under this Agreement, executed by Borrower’s duly authorized officer, in form acceptable to Bank.

(e)

Promptly upon request, any other financial information requested by Bank.

4.4

Pay or reimburse Bank for all costs, expenses and fees incurred by Bank in preparing and documenting this Agreement and the Loan, and all amendments and modifications thereof, including but not limited to all filing and recording fees, costs of appraisals, insurance and attorney’s fees, including the reasonable estimate of the allocated costs and expenses of in-house legal counsel and staff.

4.5

Maintain and preserve Borrower’s existence, present form of business and all rights, privileges and franchises necessary or desirable in the normal course of its business, and keep all of Borrower’s properties in good working order and condition.

4.6

Maintain and keep in force insurance with companies acceptable to Bank and in such amounts and types, including without limitation fire and public liability insurance, as is usual in the business carried on by Borrower, or as Bank may reasonably request. Such insurance policies must be in form and substance satisfactory to Bank.

4.7

Maintain adequate books, accounts and records and prepare all financial statements required hereunder in accordance with generally accepted accounting principles, and in compliance with the regulations of any governmental regulatory body having jurisdiction over Borrower or Borrower’s business and permit employees or agents of Bank at any reasonable time to inspect Borrower’s assets and properties, and to examine or audit Borrower’s books, accounts and records and make copies and memoranda thereof.

4.8

At all times comply with, or cause to be complied with, all laws, statutes, rules, regulations, orders and directions of any governmental authority having jurisdiction over Borrower or Borrower’s business, and all material agreements to which Borrower is a party.

4.9

Except as provided in this Agreement, or in the ordinary course of its business as currently conducted, not make any loans or advances, become a guarantor or surety, pledge its credit or properties in any manner, or extend credit.

4.10

Not purchase the debt or equity of another person or entity except for savings accounts and certificates of deposit of Bank, direct U.S. Government obligations and commercial paper issued by corporations with top ratings of Moody’s or Standard & Poor’s, provided that all such permitted investments shall mature within one year of purchase.

4.11

Not create, assume or suffer to exist any mortgage, encumbrance, security interest, pledge or lien (“Lien”) on Borrower’s real or personal property, whether now owned or hereafter acquired, or upon the income or profits thereof except the following: (a) Liens in favor of Bank or (b) Liens for taxes or other items not delinquent or contested in good faith.

4.12

Not sell or discount any account receivable greater than $10,000 on any single account or $50,000 in the aggregate annually or evidence of indebtedness.

4.13

Neither liquidate, dissolve, enter into any consolidation, merger, partnership, or other combination; nor convey, sell or lease all or the greater part of its assets or business; nor purchase or lease all or the greater part of the assets or business of another.

4.14

Not engage in any business activities or operations substantially different from or unrelated to present business activities and operations.

4.15

Borrower will promptly, upon demand by Bank, take such further action and execute all such additional documents and instruments in connection with this Agreement as Bank in its reasonable discretion deems necessary and promptly supply Bank with such other information concerning its affairs as Bank may request from time to time.

EVENTS OF DEFAULT. The occurrence of any of the following events (“Events of Default”) shall terminate any obligation on the part of Bank to make or continue the Loan and automatically, unless otherwise provided under the Loan Documents, shall make all sums of interest and principal and any other amounts owing under the Loan immediately due and payable, without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or any other notices or demands:

5.1

Borrower shall default in the due and punctual payment of the principal of or the interest on the Note or any of the Loan Documents;

5.2

Any default shall occur under the Note;

5.3

Borrower shall default in the due performance or observance of any covenant or condition of the Loan Documents;

5.4

Any guaranty or subordination agreement required hereunder is breached or becomes ineffective, or any guarantor or subordinating creditor dies or disavows or attempts to revoke or terminate such guaranty or subordination agreement; or

5.5

Intentionally Deleted.

6.	MISCELLANEOUS.

6.1

The rights, powers and remedies given to Bank hereunder shall be cumulative and not alternative and shall be in addition to all rights, powers, and remedies given to Bank by law against Borrower or any other person, including but not limited to Bank’s rights of setoff or banker’s lien.

6.2

Any forbearance or failure or delay by Bank in exercising any right, power or remedy hereunder shall not be deemed a waiver thereof and any single or partial exercise of any right, power or remedy shall not preclude the further exercise thereof. No waiver shall be effective unless it is in writing and signed by an officer of Bank.

6.3

The benefits of this Agreement shall inure to the successors and assigns of Bank and the permitted successors and assignees of Borrower, and any assignment by Borrower without Bank’s consent shall be null and void.

6.4

This Agreement and all other agreements and instruments required by Bank in connection herewith shall be governed by and construed according to the laws of the State of California.

6.5

Should any one or more provisions of this Agreement be determined to be illegal or unenforceable, all other provisions nevertheless shall be effective. In the event of conflict between the provisions of this Agreement and the provisions of any note or reimbursement agreement evidencing any indebtedness hereunder, the provisions of such note or reimbursement agreement shall prevail.

6.6

Except for documents and instruments specifically referenced herein, this Agreement constitutes the entire agreement between Bank and Borrower regarding the Loan and all prior communications, verbal or written,

between Borrower and Bank shall be of no further effect or evidentiary value.

6.7

The section and subsection headings herein are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

6.8

This Agreement may be amended only in writing signed by all parties hereto.

6.9

Borrower and Bank may execute one or more counterparts to this Agreement, each of which shall be deemed an original, but taken together, shall be one and the same instrument.

6.10

Any notices or other communications provided for or allowed hereunder shall be effective only when given by one of the following methods and addressed to the respective party at its address given with the signatures at the end of this Agreement and shall be considered to have been validly given: (a) upon delivery, if delivered personally; (b) upon receipt, if mailed, first class postage prepaid, with the United States Postal Service; (c) on the next business day if sent by overnight courier service of recognized standing; and (d) upon telephoned confirmation of receipt, if telecopied.

7.	ADDITIONAL PROVISIONS. The following additional provision, if any, are hereby made part of this Agreement:

7.1

On or before the sixtieth (60^th) day prior to the maturity date of Borrowing Base Loan, Bank shall deliver written notice to Borrower of the Bank’s intent to renew or not renew the Borrowing Base Loan (“Renewal Notice”) for another term of one (1) year (it being understood and agreed by Bank and Borrower that the Renewal Notice as required by this Section 7.1 shall not be required upon the occurrence of any Event of Default, and that the Bank may exercise any right or remedy as provided in the Loan Documents).

7.2

Provided that no default has occurred or is then continuing, on the maturity date (“Termination Date”) of that certain non-revolving loan in the amount of $350,000 (evidenced by a promissory note dated February 1, 2011 (“Non-Revolving Note”)), Bank shall make a term loan (“Term Loan”) to Borrower in an initial principal amount equal to the aggregate principal then due under the Non-Revolving Note, plus any accrued but unpaid interest thereon (“Outstanding Principal”). The Outstanding Principal amount of the Term Loan shall be payable in 36 equal consecutive installments, each in an amount sufficient to fully repay the amount of the Term Loan by the Term Loan Maturity Date, commencing on March 2, 2012, and continuing thereafter through and including February 2, 2015 (“Term Loan Maturity Date”), on which date all unpaid Outstanding Principal, all accrued but unpaid interest thereon, and all other costs, expenses, fees and other charges due shall become immediately due and payable. Borrower’s obligation to repay the Outstanding Principal amount of the Term Loan together with accrued but unpaid interest shall be evidenced by a new note issued by Borrower in favor of Bank on or prior to the Termination Date.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of February 4, 2011.


Union Bank, N.A. (“Bank”)		Pro-Dex, Inc. (“Borrower”)

By:	/s/ Robert Louvar	By:	/s/ Mark P. Murphy
Printed Name	Robert Louvar	Printed Name	Mark Murphy
Title:	Vice President	Title:	CEO

		By:	/s/ Harold A. Hurwitz
		Printed Name	Harold A. Hurwitz
		Title:	CFO & Secretary

EX-10.2 3 dex102.htm REVOLVING CREDIT LINE NOTE Revolving Credit Line Note

Exhibit 10.2


		COMMERCIAL PROMISSORY NOTE


Debtor Name Pro-Dex, Inc., a Colorado corporation

Debtor Address 2361 McGaw Avenue Irvine, CA 92614-5831	Office 45064	Loan Number 715-672-305-2
Debtor Address 2361 McGaw Avenue Irvine, CA 92614-5831	Maturity Date December 17, 2012	Amount $1,500,000.00


$ 1,500,000.00		Date February 4, 2011

FOR VALUE RECEIVED, on December 17, 2012 the undersigned (“Debtor”) promises to pay to the order of UNION BANK, N.A. (“Bank”), as indicated below, the principal sum of One Million Five Hundred Thousand and 00/100ths Dollars ($1,500,000.00), or so much thereof as is disbursed, together with interest on the balance of such principal sum from time to time outstanding, at a per annum rate of one-half percent (00.5%) in excess of the Reference Rate, such per annum rate to change as and when the Reference Rate shall change. As used herein, the term “Reference Rate” shall mean the rate announced by Bank from time to time at its corporate headquarters as its Reference Rate. The Reference Rate is an index rate determined by Bank from time to time as a means of pricing certain extensions of credit and is neither directly tied to any external rate of interest or index nor necessarily the lowest rate of interest charged by Bank at any given time.

1. INTEREST PAYMENTS. Debtor shall pay interest on the 1st day of each month commencing March 1, 2011. Should interest not be so paid, it shall become a part of the principal and thereafter bear interest as herein provided.

All computations of interest under this note shall be made on the basis of a year of 360 days, for actual days elapsed.

At any time prior to the maturity date of this note, Debtor may borrow, repay and reborrow hereon so long as the total outstanding at any one time does not exceed the principal amount of this note.

Debtor shall pay all amounts due under this note in lawful money of the United States at Bank’s P.O. Box 30115, Los Angeles, CA 90030-0115 Office, or such other office as may be designated by Bank, from time to time.

2. LATE PAYMENTS. If any payment required by the terms of this note shall remain unpaid ten days after same is due, at the option of Bank, Debtor shall pay a fee of $100 to Bank.

3. INTEREST RATE FOLLOWING DEFAULT. In the event of default, at the option of Bank, and, to the extent permitted by law, interest shall be payable on the outstanding principal under this note at a per annum rate equal to five percent ( 5 %) in excess of the interest rate specified in the initial paragraph of this note, calculated from the date of default until all amounts payable under this note are paid in full.

4. DEFAULT AND ACCELERATION OF TIME FOR PAYMENT. Default shall include, but not be limited to, any of the following: (a) the failure of Debtor to make any payment required under this note when due; (b) any breach, misrepresentation or other default by Debtor, any guarantor, co-maker, endorser, or any person or entity other than Debtor providing security for this note (hereinafter individually and collectively referred to as the “Obligor”) under any deed of trust, security agreement, guaranty or other agreement between Bank and any Obligor; (c) the insolvency of any Obligor or the failure of any Obligor generally to pay such Obligor’s debts as such debts become due; (d) the commencement as to any Obligor of any voluntary or involuntary proceeding under any laws relating to bankruptcy, insolvency, reorganization, arrangement, debt adjustment or debtor relief; (e) the assignment by any Obligor for the benefit of such Obligor’s creditors; (f) the appointment, or commencement of any proceedings for the

Page 1

appointment of a receiver, trustee, custodian or similar official for all or substantially all of any Obligor’s property; (g) the commencement of any proceeding for the dissolution or liquidation of any Obligor; (h) the termination of existence or death of any Obligor; (i) the revocation of any guaranty or subordination agreement given in connection with this note; (j) the failure of any Obligor to comply with any order, judgment, injunction, decree, writ or demand of any court or other public authority; (k) the filing or recording against any Obligor, or the property of any Obligor, of any notice of levy, notice to withhold, or other legal process for taxes other than property taxes; (l) the default by any Obligor personally liable for amounts owed hereunder on any obligation concerning the borrowing of money; (m) the issuance against any Obligor, or the property of any Obligor, of any writ of attachment, execution, or other judicial lien; or (n) the deterioration of the financial condition of any Obligor which results in Bank deeming itself, in good faith, insecure. Upon the occurrence of any such default, Bank, in its discretion, may cease to advance funds hereunder and may declare all obligations under this note immediately due and payable; however, upon the occurrence of an event of default under (d), (e), (f), or (g) all principal and interest shall automatically become immediately due and payable.

5. ADDITIONAL AGREEMENTS OF DEBTOR. Debtor promises to pay all costs and expenses, including reasonable attorneys fees (including the allocated costs of Bank’s in-house counsel and legal staff) incurred by Bank in the negotiation, documentation, and modification of this note and all related documents and in the collection or enforcement of any amount outstanding hereunder. Debtor and any endorsers of this note for the maximum period of time and the full extent permitted by law (a) waive diligence, presentment, demand, notice of nonpayment, protest, notice of protest, and notice of every kind; (b) waive the right to assert the defense of any statute of limitations to any debt or obligation hereunder; and (c) consent to renewals and extensions of time for the payment of any amounts due under this note. If this note is signed by more than one party, the term “Debtor” includes each of the undersigned and any successors in interest thereof, all of whose liability shall be joint and several. Any married person who signs this note agrees that recourse may be had against the separate property of that person for any obligations hereunder. The receipt of any check or other item of payment by Bank, at its option, shall not be considered a payment on account until such check or other item of payment is honored when presented for payment at the drawee bank. Bank may delay the credit of such payment based upon Bank’s schedule of funds availability, and interest under this note shall accrue until the funds are deemed collected. In any action brought under or arising out of this note, Debtor and any Obligor, including their successors and assigns, hereby consent to the jurisdiction of any competent court within the state of California, as provided in any alternative dispute resolution agreement executed between Debtor and Bank, and consent to service of process by any means authorized by said state’s law. The term “Bank” includes, without limitation, any holder of this note. This note shall be construed in accordance with and governed by the laws of the state of California. This note hereby incorporates any alternative dispute resolution agreement previously, concurrently or hereafter executed between Debtor and Bank.

SEE FOLLOWING PAGE FOR ALL (OR ADDITIONAL) SIGNATURES

Page 2


DEBTOR: Pro-Dex, Inc., a Colorado corporation

By:		/s/ Mark P. Murphy
		Mark Murphy, CEO

By:		/s/ Harold A. Hurwitz
		Harold A. Hurwitz, CFO & Secretary

Page 3

EX-10.3 4 dex103.htm NON-REVOLVING CREDIT LINE NOTE Non-Revolving Credit Line Note

Exhibit 10.3


		COMMERCIAL PROMISSORY NOTE


Debtor Name Pro-Dex, Inc., a Colorado corporation

Debtor Address 2361 McGaw Avenue Irvine, CA 92614-5831	Office 45064	Loan Number 715-672-305-2
Debtor Address 2361 McGaw Avenue Irvine, CA 92614-5831	Maturity Date February 2, 2015	Amount $350,000.00


$ 350,000.00		Date February 4, 2011

FOR VALUE RECEIVED, on February 2, 2015 the undersigned (“Debtor”) promises to pay to the order of UNION BANK, N.A. (“Bank”), as indicated below, the principal sum of Three Hundred Fifty Thousand and 00/100ths Dollars ($350,000.00), or so much thereof as is disbursed, together with interest on the balance of such principal sum from time to time outstanding, at a per annum rate of one-half percent (00.5%) in excess of the Reference Rate, such per annum rate to change as and when the Reference Rate shall change. As used herein, the term “Reference Rate” shall mean the rate announced by Bank from time to time at its corporate headquarters as its Reference Rate. The Reference Rate is an index rate determined by Bank from time to time as a means of pricing certain extensions of credit and is neither directly tied to any external rate of interest or index nor necessarily the lowest rate of interest charged by Bank at any given time.

1. PRINCIPAL AND INTEREST PAYMENTS. Debtor shall pay interest on the 2nd day of each month commencing March 2, 2011. Principal shall be payable in 36 equal consecutive monthly installments, each installment in an amount sufficient to fully amortize the principal balance by the final maturity date, beginning March 2, 2012 and continuing on the 2^nd day of each consecutive month. The availability under this note shall be reduced on the same day and in the same amount as each scheduled principal payment.

All computations of interest under this note shall be made on the basis of a year of 360 days, for actual days elapsed.

At any time prior to February 3, 2012, Debtor may borrow under this note; provided that at no time may Debtor reborrow any amounts repaid to Bank.

2. LATE PAYMENTS. If any payment required by the terms of this note shall remain unpaid ten days after same is due, at the option of Bank, Debtor shall pay a fee of $100 to Bank.

Page 1

any Obligor of any voluntary or involuntary proceeding under any laws relating to bankruptcy, insolvency, reorganization, arrangement, debt adjustment or debtor relief; (e) the assignment by any Obligor for the benefit of such Obligor’s creditors; (f) the appointment, or commencement of any proceedings for the appointment of a receiver, trustee, custodian or similar official for all or substantially all of any Obligor’s property; (g) the commencement of any proceeding for the dissolution or liquidation of any Obligor; (h) the termination of existence or death of any Obligor; (i) the revocation of any guaranty or subordination agreement given in connection with this note; (j) the failure of any Obligor to comply with any order, judgment, injunction, decree, writ or demand of any court or other public authority; (k) the filing or recording against any Obligor, or the property of any Obligor, of any notice of levy, notice to withhold, or other legal process for taxes other than property taxes; (l) the default by any Obligor personally liable for amounts owed hereunder on any obligation concerning the borrowing of money; (m) the issuance against any Obligor, or the property of any Obligor, of any writ of attachment, execution, or other judicial lien; or (n) the deterioration of the financial condition of any Obligor which results in Bank deeming itself, in good faith, insecure. Upon the occurrence of any such default, Bank, in its discretion, may cease to advance funds hereunder and may declare all obligations under this note immediately due and payable; however, upon the occurrence of an event of default under (d), (e), (f), or (g) all principal and interest shall automatically become immediately due and payable.

SEE FOLLOWING PAGE FOR ALL (OR ADDITIONAL) SIGNATURES

Page 2


DEBTOR: Pro-Dex, Inc., a Colorado corporation

By:		/s/ Mark P. Murphy
		Mark Murphy, CEO

By:		/s/ Harold A. Hurwitz
		Harold A. Hurwitz, CFO & Secretary

Page 3

EX-10.4 5 dex104.htm TERM LOAN NOTE Term Loan Note

Exhibit 10.4


		COMMERCIAL PROMISSORY NOTE


Debtor Name Pro-Dex, Inc., a Colorado corporation

Debtor Address 2361 McGaw Avenue Irvine, CA 92614-5831	Office 45064	Loan Number 715-672-305-2
Debtor Address 2361 McGaw Avenue Irvine, CA 92614-5831	Maturity Date August 1, 2014	Amount $1,250,000.00


$ 1,250,000.00		Date February 4, 2011

FOR VALUE RECEIVED, on August 1, 2014 the undersigned (“Debtor”) promises to pay to the order of UNION BANK, N.A. (“Bank”), as indicated below, the principal sum of One Million Two Hundred Fifty Thousand and 00/100ths Dollars ($1,250,000.00), or so much thereof as is disbursed, together with interest on the balance of such principal sum from time to time outstanding, at a per annum rate of one-half percent (00.5%) in excess of the Reference Rate, such per annum rate to change as and when the Reference Rate shall change. As used herein, the term “Reference Rate” shall mean the rate announced by Bank from time to time at its corporate headquarters as its Reference Rate. The Reference Rate is an index rate determined by Bank from time to time as a means of pricing certain extensions of credit and is neither directly tied to any external rate of interest or index nor necessarily the lowest rate of interest charged by Bank at any given time.

1. PRINCIPAL AND INTEREST PAYMENTS. Debtor shall pay interest on the 1st day of each month commencing March 1, 2011. Debtor shall pay principal installments of $29,761.90 each on the 1^st day of each month commencing March 1, 2011. The availability under this note shall be reduced on the same day and in the same amount as each scheduled payment.

All computations of interest under this note shall be made on the basis of a year of 360 days, for actual days elapsed.

2. LATE PAYMENTS. If any payment required by the terms of this note shall remain unpaid ten days after same is due, at the option of Bank, Debtor shall pay a fee of $100 to Bank.

Page 1

termination of existence or death of any Obligor; (i) the revocation of any guaranty or subordination agreement given in connection with this note; (j) the failure of any Obligor to comply with any order, judgment, injunction, decree, writ or demand of any court or other public authority; (k) the filing or recording against any Obligor, or the property of any Obligor, of any notice of levy, notice to withhold, or other legal process for taxes other than property taxes; (l) the default by any Obligor personally liable for amounts owed hereunder on any obligation concerning the borrowing of money; (m) the issuance against any Obligor, or the property of any Obligor, of any writ of attachment, execution, or other judicial lien; or (n) the deterioration of the financial condition of any Obligor which results in Bank deeming itself, in good faith, insecure. Upon the occurrence of any such default, Bank, in its discretion, may cease to advance funds hereunder and may declare all obligations under this note immediately due and payable; however, upon the occurrence of an event of default under (d), (e), (f), or (g) all principal and interest shall automatically become immediately due and payable.

SEE FOLLOWING PAGE FOR ALL (OR ADDITIONAL) SIGNATURES

Page 2


DEBTOR: Pro-Dex, Inc., a Colorado corporation

By:		/s/ Mark P. Murphy
		Mark Murphy, CEO

By:		/s/ Harold A. Hurwitz
		Harold A. Hurwitz, CFO & Secretary

Page 3

EX-10.5 6 dex105.htm SECURITY AGREEMENT Security Agreement

Exhibit 10.5


		SECURITY AGREEMENT

This Security Agreement is executed at Irvine, California on February 4, 2011 , by Pro-Dex, Inc., a Colorado corporation (herein called “Debtor”).

As security for the payment and performance of all of Debtor’s obligations to UNION BANK, N.A., (herein called “Bank”), regardless of the manner in which or the time at which such obligations arose or shall arise, whether direct or indirect, alone or with others, or absolute or contingent, Debtor hereby grants a continuing security interest in, and assigns and transfers to Bank, the following personal property, whether or not delivered to or in the possession or control of Bank or its agents, and whether now or hereafter owned or in existence, and all proceeds thereof (hereinafter called the “Collateral”):

All present and hereafter acquired personal property including but not limited to all accounts, chattel paper, instruments, contract rights, general intangibles, goods, equipment, inventory, documents, certificates of title, deposit accounts, returned or repossessed goods, fixtures, commercial tort claims, insurance claims, rights and policies, letter of credit rights, investment property, supporting obligations, and the proceeds, products, parts, accessories, attachments, accessions, replacements, substitutions, additions, and improvements of or to each of the foregoing.

Entities executing this Security Agreement as Debtor agree not to change their state of organization, principal place of business (if a general partnership or other nonregistered entity) or name, as identified below, without Bank’s prior written consent:


LEGAL NAME OF DEBTOR		STATE OF ORGANIZATION / PRINCIPAL PLACE OF BUSINESS

Pro-Dex, Inc.		State of Colorado

AGREEMENT

1. The term “credit” or “indebtedness” is used throughout this Agreement in its broadest and most comprehensive sense. Credit may be granted at the request of any one Debtor without further authorization by or notice to any other Debtor. Collateral shall be security for all nonconsumer indebtedness of Debtor to Bank in accordance with the terms and conditions herein.

2. Debtor will: (a) pay when due all indebtedness to Bank; (b) execute such other documents and do such other acts and things as Bank may from time to time require to establish and maintain a valid perfected security interest in Collateral, including payment of all costs and fees in connection with any of the foregoing when deemed necessary by Bank; (c) furnish Bank such reasonable information concerning Debtor and Collateral as Bank may from time to time request, including but not limited to current financial statements; (d) keep Collateral separate and identifiable where such Collateral is currently located and permit Bank and its representatives to inspect Collateral and/or records pertaining thereto from time to time during normal business hours; (e) not sell, assign or create or permit to exist any lien on or security interest in Collateral in favor of anyone other than Bank unless Bank consents thereto in writing and at Debtor’s expense upon Bank’s request remove any unauthorized lien or security interest and defend any claim affecting the Collateral; (f) pay all charges against Collateral prior to delinquency including but not limited to taxes, assessments, encumbrances, insurance and diverse claims, and upon Debtor’s failure to do so Bank may pay any such charge as it deems necessary and add the amount paid to the indebtedness of Debtor hereunder; (g) protect, defend and maintain the Collateral and the perfected security interest of Bank and initiate, commence and maintain any action or proceeding to protect the Collateral; (h) reimburse Bank for any expenses, including but not limited to reasonable attorneys’ fees and expenses (including the allocated costs of Bank’s in-house counsel and legal staff) incurred by Bank in seeking to protect, collect or enforce any rights in Collateral; (i) when required, provide insurance in form and amounts and with companies acceptable to Bank and when required, assign the policies or the rights thereunder to Bank; (j) maintain Collateral in good condition and not use Collateral for any unlawful purpose; (k) perform all of the obligations of the Debtor under the Collateral and save Bank harmless from the consequence of any failure to do so; and (l) at its own expense, upon request of Bank following a default, notify any parties obligated to Debtor on any Collateral to make payment to Bank and Debtor hereby irrevocably grants Bank power of attorney to make said notifications and collections. Debtor hereby appoints Bank the true and lawful attorney of Debtor and authorizes Bank to perform any and all acts which Bank in good faith deems necessary for the protection and preservation of Collateral or its value or Bank’s perfected security interest therein, including transferring any Collateral into its own name and receiving the income thereon as additional security hereunder. Bank does not assume any of the obligations arising under the Collateral.

3. Debtor warrants that: (a) it is and will be the lawful owner of all Collateral free of all claims, liens, encumbrances and setoffs whatsoever, other than the security interest granted pursuant hereto; (b) it has the capacity to grant a security interest in Collateral to Bank; (c) all information furnished by Debtor to Bank heretofore or hereafter, whether oral or written, is and will be correct and true as of the date given; and (d) if Debtor is an entity, the execution, delivery and performance hereof are within its powers and have been duly authorized.

4. The term default shall mean the occurrence of any of the following events: (a) failure of Debtor to make any payment of any indebtedness to Bank when due; (b) deterioration or impairment of the value of any of the Collateral; (c) any breach, misrepresentation or other default by Debtor under this Agreement or any other agreements between Bank and Debtor; (d) “intentionally deleted” (e) the deterioration of financial condition of Debtor which results in Bank deeming itself, in good faith, insecure.

5. Whenever a default exists, Bank, at its option, may: (a) without notice accelerate the maturity of any part or all of the indebtedness and terminate any agreement for the granting of further credit to Debtor; (b) sell, lease or otherwise dispose of Collateral at public or private sale; (c) transfer any Collateral into its own name or that of its nominee; (d) retain Collateral in satisfaction of obligations secured hereby, with notice of such retention sent to Debtor as required by law; (e) notify any parties obligated on any Collateral consisting of accounts, instruments, chattel paper, choses in action or the like to make payment to Bank and enforce collection of any Collateral; (f) file any action or proceeding which Bank may deem necessary or appropriate to protect and preserve the right, title and interest of the Bank in the Collateral; (g) require Debtor to assemble and deliver any Collateral to Bank at a reasonably convenient place designated by Bank; (h) apply all sums received or collected from or on account of Collateral, including the proceeds of any sale thereof, to the payment of the costs and expenses incurred in preserving and enforcing rights of Bank, including reasonable attorneys’ fees (including the allocated costs of Bank’s in-house counsel and legal staff), and indebtedness secured hereby in such order and manner as Bank in its sole discretion determines; Bank shall account to Debtor for any surplus remaining thereafter, and shall pay such surplus to the party entitled thereto, including any second secured party who has made a proper demand upon Bank and has furnished proof to Bank as requested in the manner provided by law; in like manner, Debtor agrees to pay to Bank without demand any deficiency after any Collateral has been disposed of and proceeds applied as aforesaid; and (i) exercise its banker’s lien or right of setoff in the same manner as though the credit were unsecured. Bank shall have all the rights and remedies of a secured party under the Uniform Commercial Code of California and in any jurisdiction where enforcement is sought, whether in said state or elsewhere. All rights, powers and remedies of Bank hereunder shall be cumulative and not alternative. No delay on the part of Bank in the exercise of any right or remedy shall constitute a waiver thereof and no exercise by Bank of any right or remedy shall preclude the exercise of any other right or remedy or further exercise of the same remedy.

6. Debtor waives: (a) all right to require Bank to proceed against any other person including any other Debtor hereunder or to apply any Collateral Bank may hold at any time or to pursue any other remedy; Collateral, endorsers or guarantors may be released, substituted or added without affecting the liability of Debtor hereunder; (b) the defense of the Statute of Limitations in any action upon any obligations of Debtor secured hereby; (c) any right of subrogation and any right to participate in Collateral until all obligations secured hereby have been paid in full; (d) to the fullest extent permitted by law, any right to oppose the appointment of a receiver or similar official to operate Debtor’s business.

7. The right of Bank to have recourse against Collateral shall not be affected in any way by the fact that the credit is secured by a mortgage, deed of trust or other lien upon real property.

8. The security interest granted herein is irrevocable and shall remain in full force and effect until there is payment in full of the indebtedness or the security interest is released in writing by Bank.

Page 1

9. Debtor shall be obligated to request the release, reassignment or return of Collateral after the payment in full of all existing obligations. Bank shall be under no duty or obligation to release, reassign or return any Collateral except upon the express written request of Debtor and then only where all of Debtor’s obligations hereunder have been paid in full.

10. If more than one Debtor executes this Agreement, the obligations hereunder are joint and several. All words used herein in the singular shall be deemed to have been used in the plural when the context and construction so require. Any married person who signs this Agreement expressly agrees that recourse may be had against his/her separate property for all of his/her obligations to Bank.

11. This Agreement shall inure to the benefit of and bind Bank, its successors and assigns and each of the undersigned, their respective heirs, executors, administrators and successors in interest. Upon transfer by Bank of any part of the obligations secured hereby, Bank shall be fully discharged from any liability with respect to Collateral transferred therewith.

12. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but, if any provision of this Agreement shall be prohibited or invalid under applicable law, such provisions shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such or the remaining provisions of this Agreement.

The grant of a security interest in proceeds does not imply the right of Debtor to sell or dispose of any Collateral without the express consent in writing by Bank.


“Debtor” Pro-Dex, Inc., a Colorado corporation

By:		/s/ Mark P. Murphy
		Mark Murphy, CEO

By:		/s/ Harold A. Hurwitz
		Harold A. Hurwitz, CFO & Secretary

Page 2

EX-10.6 7 dex106.htm SECURITY AGREEMENT Security Agreement

Exhibit 10.6


		SECURITY AGREEMENT

This Security Agreement is executed at Irvine, California on February 4, 2011 , by Pro-Dex Astromec, Inc., a Nevada corporation (herein called “Debtor”).


LEGAL NAME OF DEBTOR		STATE OF ORGANIZATION / PRINCIPAL PLACE OF BUSINESS

Pro-Dex Astromec, Inc.		State of Nevada

AGREEMENT

7. The right of Bank to have recourse against Collateral shall not be affected in any way by the fact that the credit is secured by a mortgage, deed of trust or other lien upon real property.

Page 1

The grant of a security interest in proceeds does not imply the right of Debtor to sell or dispose of any Collateral without the express consent in writing by Bank.


“Debtor” Pro-Dex Astromec, Inc., a Colorado corporation

By:		/s/ Mark P. Murphy
		Mark Murphy, CEO

By:		/s/ Harold A. Hurwitz
		Harold A. Hurwitz, CFO & Secretary

Page 2

EX-99.1 8 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

Contact:

Mark Murphy, Chief Executive Officer

(949) 769-3200

For Immediate Release

PRO-DEX, INC. ANNOUNCES FISCAL SECOND QUARTER AND SIX MONTH RESULTS

Revenues Up 6% and Operating Profit Up 165% For Comparative Six-Month Periods

Company Announces New Credit Facility with Union Bank

IRVINE, CA, February 10, 2011—PRO-DEX, INC. (NasdaqCM: PDEX) today announced financial results for its fiscal second quarter and six months ended December 31, 2010.

Sales for the quarter ended December 31, 2010 increased 8% to $6.2 million from $5.7 million for the corresponding quarter in 2009, resulting primarily from growth in sales of the Company’s medical device products to its largest customer, and from growth in sales of dental products. For the six months ended December 31, 2010, sales increased 6% to $12.0 million from $11.3 million for the corresponding period in 2009, resulting from growth in sales of the Company’s medical device and motion control products.

Operating income was $571,000 for the quarter, a 333% improvement from $132,000 in the corresponding 2009 period. For the six months ended December 31, 2010, operating income improved 165% to $977,000 from $369,000 for the corresponding six-month period in 2009.

Net income for the 2010 quarter was $401,000, or $0.12 per fully-diluted share, which represents a 31% decrease from net income of $580,000, or $0.18 per fully-diluted share, in the corresponding 2009 quarter which included recognition of deferred tax credits of $499,000. For the six months ended December 31, 2010, net income was $743,000, a decrease of 3% from net income of $763,000 for the corresponding period in 2009 which included recognition of deferred tax credits of $494,000. The 2009 deferred tax credits were attributable to income tax benefits recognized in 2009 resulting from utilization of net operating loss carryovers.

Gross profit for the quarter ended December 31, 2010 grew to $2.4 million, a 39% gross profit margin, compared to gross profit of $2.0 million, a 35% gross profit margin, for the year-ago period. The increase in gross profit as a percentage of sales during this three-month period was due to a change in mix toward sales of medical device products with relatively higher margins, and to cost reductions. For the six months ended December 31, 2010, gross profit was $4.6 million, a 38% gross profit margin, compared to gross profit and margin of $3.9 million and 34%, respectively, for the corresponding six-month period in 2009. The increase in gross profit as a percentage of sales during this six-month period was due to a change in mix toward sales of medical device and motion control products at relatively higher margins, and to cost reductions.

Mark Murphy, the Company’s President and Chief Executive Officer, commented, “We are very pleased with the results for the first half of fiscal 2011. Sales for both quarters in this period increased sequentially and year-over-year. This performance, combined with improved gross margins and control

over operating expenses resulted in income from operations at significantly higher levels than in the corresponding periods of last year.”

Bank Credit Facility

On February 4, 2011, the Company entered into a credit facility agreement with Union Bank that replaced its previously existing Wells Fargo Bank credit facility. The Union Bank facility consists of (a) a revolving credit line of up to $1.5 million based on eligible accounts receivable and inventories, (b) a non-revolving credit line of up to $350,000 for the acquisition of equipment, which will convert to a 3-year term loan in one year, unless sooner converted based on amounts borrowed under the line, and (c) a 3¹/2-year term loan that replaced the previously existing term loan with Wells Fargo Bank.

Mr. Murphy remarked, “Our new relationship with Union Bank gives us expanded credit capacity and is an important step in pursuit of our strategic objectives.”

Teleconference Information:

Investors and analysts are invited to listen to a broadcast review of the Company’s fiscal 2011 second quarter financial results today at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) that may be accessed by visiting the Company’s website at www.pro-dex.com. The conference call may also be accessed at www.InvestorCalendar.com. Investors and analysts who would like to participate in the conference call may do so via telephone at (877) 407-8033, or at (201) 689-8033 if calling from outside the U.S.

For those who cannot access the live broadcast, a replay will be available from two hours after the completion of the call until midnight (Eastern Time) on February 25, 2011 by calling (877) 660-6853, or (201) 612-7415 if calling from outside the U.S., and then entering account number 286 and conference I.D. number 366897. An online archive of the broadcast will be available on the Company’s website www.pro-dex.com for a period of 365 days.

Pro-Dex, Inc., with operations in California, Oregon and Nevada, specializes in bringing speed to market in the development and manufacture of technology-based solutions that incorporate miniature rotary drive systems, embedded motion control and fractional horsepower DC motors, serving the medical, dental, semi-conductor, scientific research and aerospace markets. Pro-Dex’s products are found in hospitals, dental offices, medical engineering labs, commercial and military aircraft, scientific research facilities and high tech manufacturing operations around the world. 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.

(tables follow)

PRO-DEX, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


	December 31, 2010			June 30, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	2,019,000		$	3,794,000
Accounts receivable, net of allowance for doubtful accounts of $15,000 at December 31, 2010 and $25,000 at June 30, 2010		2,566,000			2,682,000
Other current receivables		—			22,000
Inventories		3,906,000			3,228,000
Prepaid expenses		205,000			174,000
Deferred income taxes		209,000			209,000

Total current assets		8,905,000			10,109,000
Property, plant, equipment and leasehold improvements, net		3,767,000			4,092,000
Other assets		60,000			78,000

Total assets	$	12,732,000		$	14,279,000

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	935,000		$	1,279,000
Accrued expenses		1,681,000			1,947,000
Income taxes payable		74,000			79,000
Current portion of bank term loan		331,000			400,000
Current portion of real estate loan		—			35,000

Total current liabilities		3,021,000			3,740,000
Long-term liabilities:
Bank term loan		836,000			967,000
Real estate loan		—			1,493,000
Deferred income taxes		209,000			209,000
Deferred rent		270,000			255,000

Total long-term liabilities		1,315,000			2,924,000

Total liabilities		4,336,000			6,664,000

Commitments and contingencies
Shareholders’ equity:
Common shares; no par value; 50,000,000 shares authorized; 3,272,350 shares issued and outstanding at December 31, 2010 3,251,850 shares issued and outstanding at June 30, 2010		16,714,000			16,675,000
Accumulated deficit		(8,318,000	)		(9,060,000	)

Total shareholders’ equity		8,396,000			7,615,000

Total liabilities and shareholders’ equity	$	12,732,000		$	14,279,000

PRO-DEX, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	For The Three Months Ended December 31, (unaudited)
	2010			2009
Net sales	$	6,157,000		$	5,696,000
Cost of sales		3,733,000			3,696,000

Gross profit		2,424,000			2,000,000
Operating expenses:
Selling expenses		351,000			353,000
General and administrative expenses		897,000			799,000
Impairment of intangible asset		—			140,000
Research and development costs		605,000			576,000

Total operating expenses		1,853,000			1,868,000

Income from operations		571,000			132,000
Other income (expense):
Royalty income		—			2,000
Interest expense		(22,000	)		(53,000	)

Total other income (expense)		(22,000	)		(51,000	)

Income before provision (benefit) for income taxes		549,000			81,000
Provision (benefit) for income taxes		148,000			(499,000	)

Net income	$	401,000		$	580,000

Net income per share:
Basic	$	0.12		$	0.18

Diluted	$	0.12		$	0.18

Weighted average shares outstanding—basic		3,263,437			3,222,890

Weighted average shares outstanding—diluted		3,272,152			3,231,839

PRO-DEX, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	For the Six Months Ended December 31, (unaudited)
	2010			2009
Net sales	$	11,986,000		$	11,329,000
Cost of sales		7,378,000			7,456,000

Gross profit		4,608,000			3,873,000
Operating expenses:
Selling expense		775,000			641,000
General and administrative expenses		1,660,000			1,526,000
Impairment of intangible asset		—			140,000
Research and development costs		1,196,000			1,197,000

Total operating expenses		3,631,000			3,504,000

Income from operations		977,000			369,000
Other income (expense):
Royalty income		—			3,000
Interest expense		(80,000	)		(103,000	)

Total other income (expense)		(80,000	)		(100,000	)

Income before provision (benefit) for income taxes		897,000			269,000
Provision (benefit) for income taxes		154,000			(494,000	)

Net income	$	743,000		$	763,000

Net income (loss) per share:
Basic	$	0.23		$	0.24

Diluted	$	0.23		$	0.24

Weighted average shares outstanding—basic		3,257,643			3,222,890

Weighted average shares outstanding—diluted		3,263,654			3,228,777

PRO-DEX, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	For The Six Months Ended December 31, (unaudited)
	2010			2009
Cash flows from operating activities:
Net income	$	743,000		$	763,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		342,000			371,000
Impairment of intangible asset		—			140,000
(Decrease) increase in allowance for doubtful accounts		(10,000	)		5,000
Stock based compensation		12,000			71,000
Decrease in deferred taxes		—			(525,000	)
Changes in:
Decrease in accounts receivable and other current receivables		148,000			226,000
(Increase) decrease in inventories		(678,000	)		148,000
(Increase) in prepaid expenses		(30,000	)		(185,000	)
Decrease in other assets		17,000			—
(Decrease) in accounts payable and accrued expenses		(597,000	)		(68,000	)
(Decrease) increase in income taxes payable		(5,000	)		25,000

Net cash (used in) provided by operating activities		(58,000	)		971,000

Cash flows from investing activities:
Purchases of equipment and leasehold improvements		(16,000	)		(90,000	)

Net cash used in investing activities		(16,000	)		(90,000	)

Cash flows from financing activities:
Principal payments on bank term loan		(200,000	)		(200,000	)
Principal payments on real estate loan		(1,528,000	)		(16,000	)
Proceeds from exercise of stock options		27,000

Net cash used in financing activities		(1,701,000	)		(216,000	)

Net (decrease) increase in cash and cash equivalents		(1,775,000	)		665,000
Cash and cash equivalents, beginning of period		3,794,000			1,125,000

Cash and cash equivalents, end of period	$	2,019,000		$	1,790,000


Supplemental Information
Cash payments for interest	$	21,000		$	105,000
Cash payments for income taxes	$	159,000		$	6,000

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