PROMISSORY NOTE SECURED BY DEED OF TRUST
(FIXED RATE)

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$   1,650,000.00   

Date    March 4, 2006

FOR VALUE RECEIVED, on     April 1, 2016  (the "Maturity Date"), the undersigned
("Debtor") promises to pay to the order of UNION BANK OF CALIFORNIA, N.A.
("Bank"), the principal sum of      One Million Six Hundred Fifty Thousand and
00/100ths    Dollars

($   1,650,000.00     ), or so much thereof as is disbursed, together with
interest on the balance of such principal from time to time outstanding, at the
per annum rate equal to      six and seventy three-hundredths     percent (     
6.73       %) (the "Note Rate").  All computations of interest under this note
shall be made on the basis of a year of 360 days, comprised of twelve 30-day
months.

1.         PAYMENTS.  Debtors shall pay principal and interest in      one
hundred twenty     

(   120   ) equal installments of     Eleven Thousand Three Hundred Seventy Nine
and 21/100ths  Dollars ($   11,379.21   ) on the first day of each month
beginning     May 1, 2006    .  The principal and interest payments are
sufficient to pay in the aggregate principal and accrued interest due hereunder
over a    three hundred      (   300   ) month amortization period.  If the
payment is made within 10 days of the due date, it will be treated as if made on
the due date.  Each payment will be applied first to accrued but unpaid interest
then due, and then to principal.  Interest for the period from the date funds
are advanced shall be paid in advance by deducting the amount due from the funds
disbursed at closing.  The interest for this period shall be calculated on the
full amount advanced under this note.  Debtor shall pay all amounts due under
this note in lawful money of the United States to Union Bank of California,
N.A.,     Commercial Real Estate Loan Administration, 19300 Von Karman Avenue,
Suite 200, Irvine, CA 92612-1048    , or such other office as may be designated
by Bank from time to time.

2.         LATE PAYMENTS.  If Bank has not received the full amount of any
payment by the end of ten (10) calendar days after the date it is due, Debtor
will pay to Bank a late charge in the amount of six percent (6%) of the overdue
payment, such late charge to be immediately due and payable without notice or
demand by Bank.  Debtor will pay this late charge only once on any late
payment.  Debtor agrees that Bank will incur administrative costs and other
damages not compensated by payment of interest as a result of any payment not
being made when due and acknowledges that calculation of actual damages is
extremely difficult and impracticable and that the foregoing amount is a
reasonable estimate of these damages.

 

 

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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 Note Rate calculated from the date of default
until all amounts payable under this note are paid in full.

4.         PREPAYMENT.

4.1       Debtor may prepay amounts outstanding under this note in whole or in
part provided Debtor has given Bank not less than five (5) Business Days prior
written notice of Debtor's intention to make such prepayment and pays the
prepayment fee due as a result.  The prepayment fee shall also be paid if Bank,
for any other reason, including acceleration or foreclosure, receives all or any
portion of principal prior to its scheduled payment date.

4.2       Once Debtor has exercised the Fixed Rate Conversion Option, upon any
prepayment hereunder, Debtor shall pay to Bank a prepayment fee equal to: five
percent (5.00%) of the principal prepaid during the first year of the loan term;
four percent (4.00%) of the principal prepaid during the second year of the loan
term; three percent (3.00%) of the principal prepaid during the third year of
the loan term; two percent (2.00%) of the principal prepaid during the fourth
year of the loan term and one percent (1.00%) of the principal prepaid during
the fifth year.  No prepayment fee will be due after the fifth year.  In no
event shall Bank be obligated to make any payment or refund to Debtor nor shall
Debtor be entitled to any setoff or other claim against Bank, should the return
which Bank could obtain under this prepayment formula exceed the interest that
Bank would have received if no prepayment had occurred.  A determination by Bank
as to the prepayment fee amount, if any, shall be conclusive.  Bank shall
provide Debtor a statement of the amount payable on account of prepayment. 
Debtor acknowledges that (x) Bank establishes the Fixed Note Rate upon the
understanding that it applies for the entire remaining term of this note, and
(y) Bank would not lend to Debtor at the Fixed Note Rate without Debtor's
express agreement to pay Bank the prepayment fee described above.

4.3       In no event shall Bank be obligated to make any payment or refund to
Debtor, nor shall Debtor be entitled to any setoff or other claim against Bank,
should the return which Bank could obtain under this prepayment formula exceed
the interest that Bank would have received if no prepayment had occurred.  All
prepayments shall include payment of accrued interest on the principal amount so
prepaid and shall be applied to payment of interest before application to
principal.  A determination by Bank as to the prepayment fee amount, if any,
shall be conclusive.  In the event of partial prepayment, such prepayment shall
be applied to principal payments in the inverse order of their maturity.

4.4       Bank shall provide Debtor a statement of the amount payable on account
of prepayment.  Debtor acknowledges that (i) Bank establishes an interest rate
upon the understanding that it applies for the entire interest Period, and (ii)
Bank would not lend to Debtor without Debtor's express agreement to pay Bank the
prepayment fee described above.

DEBTOR INITIALS HERE:    ________      _________      ________     ________

 

 

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5.         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 (thereinafter
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
proceeding 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)
a default occurs under any instrument encumbering or affecting all or any
portion of the property of any Obligor, of any writ of attachment, execution, or
other judicial lien; or (o) 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.

 

 

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6.         ADDITIONAL AGREEMENTS OF DEBTOR.  If any amounts owning under this
note are not paid when due, Debtor promises to pay all costs and expenses,
including reasonable  attorneys' fees (including the fees and 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
Obligor, for the maximum period of time and to 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 Nevada, 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 Nevada. 
This note hereby incorporates any alternative dispute resolution agreement
previously, concurrently or hereafter executed between Debtor and Bank.  The
deed of trust securing this note permits the Bank to declare all obligations
hereunder immediately due and payable upon the occurrence of certain events
described therein.

DEBTOR:

Pro-Dex, Inc. a Colorado corporation

By:/s/ Jeffrey J. Ritchey                        
       Jeffrey J. Ritchey, CFO

By:/s/ Patrick L. Johnson                     
       Patrick L. Johnson, President/CEO

 

 

 

 

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