LOAN AGREEMENT

THIS LOAN AGREEMENT ("Agreement") is made and entered into as of      March 4,
2006,   by and between       Pro-Dex, Inc. a Colorado corporation   ("Borrower")
and UNION BANK OF CALIFORNIA, N.A. ("Bank").

1.         THE LOAN.  This Agreement is made with reference to the following
terms and conditions:

1.1       Bank shall make a loan of $     1,650,000.00   (the "Loan") to
Borrower, to be evidenced by a promissory note, including each amendment,
extension and replacement (the "Note").

1.2       The Note shall be secured by, among other things, a first lien deed of
trust (the "Deed of Trust") covering certain real property commonly known as
      2950 Arrowhead Drive, Carson City, NV   and personal property, all as more
particularly described in the Deed of Trust (the "Property"), and such other
collateral as may be required by Bank.  This Agreement, the Note, the Deed of
Trust, and all other documents and instruments evidencing, securing or
pertaining to the Loan are hereinafter collectively referred to as the "Loan
Documents".

1.3       Borrower shall pay to Bank a non-refundable loan fee in the amount of
$     8,250.00    .

2.         CONDITIONS PRECEDENT TO CLOSING OF THE LOAN.  Before Bank is
obligated to disburse all or any portion of the Loan, Bank must have received
(i) this Agreement, the Note, the Deed of Trust and other documentation,
certifications, opinions and information as may be required by Bank, (ii)
assurance of the issuance of an ALTA Loan Policy satisfactory to Bank and the
perfection of Bank's security interest in any other collateral for the Loan,
(iii) payment of any fee or other funds required in connection with the Loan,
and (iv) establishment of such reserve accounts as required by Bank.

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

3.1       Formation.  Borrower is duly organized and in existence under the laws
of the state of Borrower's organization and is duly qualified and in good
standing to conduct business in each jurisdiction in which Borrower's business
is conducted.

3.2       Authority/No Conflict.  The execution, delivery and performance of the
Loan Documents 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 organizational documents of Borrower
or with any law, indenture, agreement or undertaking to which Borrower is a
party or by which Borrower or the Property is bound or affected.  Borrower is
authorized to own and operate the Property.

3.3       No Defaults.  There is no event which is, or with notice or lapse of
time or both would be, an Event of Default (as defined in the "DEFAULTS" Section
below).

3.4       No Material Adverse Effect.  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
the property, Borrower's ability to repay the Loan or perform its obligations
under the Loan Documents, or the validity, priority, or enforceability of the
Deed of Trust or other Loan Documents.

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3.5       Leases and Personal Property.  All leases of the Property including
all amendments, guaranties and subleases ("Leases") are in full force and
effect, and there are no defaults under any of the Leases.  Borrower directly
owns all personal property and fixtures necessary for the operation and
management of the Property for the uses presently being conducted thereon.

3.6       Financial Statements.  All financial statements and financial
information and other information, documentation and other materials provided to
Bank are true, correct and complete in all respects and no materially adverse
change has occurred in the financial condition reflected in any such financial
statement since the date shown thereon.

3.7       Compliance With Law.  Borrower has complied in all material respects
with all laws, regulations, restrictions, requirements, permits, agreements,
covenants or encumbrances affecting Borrower or the Property (collectively, the
"Requirements").  Borrower has received no notices of violations of any
Requirements.

4.         COVENANTS OF BORROWER.  Borrower agrees, so long as the Loan is
outstanding and until full and final payment of all sums outstanding under any
Loan Document, unless otherwise waived by Bank in writing, as follows:

4.1       Leases.

(a)        Notwithstanding the provisions of the Deed of Trust, all Leases shall
be entered into with arms-length third party tenants capable of performing their
obligations under their Leases, and shall reflect the then current market rate. 
All residential Leases shall be documented on a standard lease form previously
provided to Bank.  Borrower shall not (i) accept Tenant's payment of more than
one month's rent in advance (except Borrower may collect in advance, last
month's rent for residential property), (ii) grant any tenant any rights or
options to purchase all or any portion of the Property, or (iii) if the Property
is commercial property, release any tenant or guarantor from any obligation. 
Borrower shall perform all obligations required under any Lease.

(b)        Notwithstanding the provisions of the Deed of Trust, for any Lease
which is less than 20% of the Property's net rentable area or is for an initial
term of less than 10 years, Borrower may: (i) cancel, terminate or consent to
the surrender of such Lease, (ii) modify or alter the terms of such Lease
(except as otherwise expressly provided for in subparagraph (a) above, (iii)
assign or sublet such Lease, and (iv) enter into any new Lease.  Borrower shall
submit to Bank, within 10 days of execution, all new Leases, all modifications,
amendments, consents to assignment or subletting of existing Leases, and shall
promptly notify Bank of the termination of surrender of any Lease.

4.2       Record Keeping Financial and Other Information.

(a)        Notwithstanding the provisions of the Deed of Trust, Borrower shall
maintain full and complete books of account and other records reflecting the
results of operations of the Property in accordance with sound accounting
principles, and will furnish or cause to be furnished to Bank such financial
information concerning the Property, Borrower and any guarantors (collectively,
"Loan Party"), as Bank may require.  Without limiting the generality of the
foregoing, Borrower shall furnish to Bank, without prior request or demand.

(i)         within 120 days after the close of each fiscal year, an annual
balance sheet, income statement, and statement of retained earnings with
supporting schedules (collectively, the "Financial Statements") for Borrower;

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(ii)        within 120 days after the close of each operating year, an annual
operating statement showing all elements of income and expense related to the
operation of the Property, together with a current certified rent roll, and if a
retail property, a schedule of gross sales of each tenant (collectively, the
"Operating Statements"); and

(iii)       within 30 days after filing, a copy of the most recent filed Federal
income tax returns for Borrower and each Loan Party, together with all
supporting schedules (collectively, the "Tax Returns").

(b)        Borrower shall promptly deliver to Bank such rent rolls, leasing
schedules and reports, operating statements or other leasing information as Bank
may request, and shall promptly notify Bank of any material tenant dispute or
material adverse change in leasing activity on the Property.  With respect to
commercial tenants, Borrower shall promptly obtain and deliver to Bank such
estoppel certificates and subordination and attornment agreements as Bank may
required.

4.3       Notices.  Borrower shall give written notice to Bank within 15 days of
the following:

(a)        Any litigation or arbitration proceeding affecting Borrower or the
Property;

(b)        Any material dispute which may exist between Borrower and any
government regulatory body or law enforcement body or which may affect the
Property.

(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 (i) the physical condition or operation of the
Property, (ii) the financial condition of Borrower or any Loan Party, or (iii)
Borrower's ability to perform in a timely manner any of Borrower's obligations
under any of the Loan Documents;

(e)        Any change in Borrower's name, business structure, state of
organization, principal place of business (if a general partnership or other
nonregistered entity) or residence (as applicable), or the location of any
collateral for the Loan other than the Property, or any change in Borrower's
officers and any other senior management; and

(f)         The Property or Borrower's business fails to comply with any
applicable Requirement.

4.4       Negative Covenants.     Without Bank's prior written consent, Borrower
shall not:

(a)        engage in any business activities substantially different from
Borrower's present business;

(b)        amend or modify in any material respect any organizational documents
of Borrower;

(c)        lease or dispose of all or a substantial part of Borrower's business
or Borrower's assets:

(d)        liquidate or dissolve Borrower's business; or

(e)        enter into any consolidation, merger, joint venture, syndication or
other combination affecting, involving or relating to Borrower's business
operations at the Property.

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4.5       Performance of Acts.    Upon request by Bank, Borrower shall perform
all acts may be necessary or advisable to perfect any lien or security interest
provided for in the Loan Documents or to carry out the intent of the Loan
Documents.  Borrower shall obtain, preserve and maintain all rights, privileges
and franchises necessary or desirable for the operation of the Property and the
conduct of Borrower's business.

4.6       Dividends and Distributions.       Following the occurrence and during
the continuance of an Event of Default, Borrower shall not make any distribution
either in cash, stock or any other property; nor redeem, retire, repurchase or
otherwise acquire any shares or interest in Borrower; nor repay any outstanding
indebtedness or other advance to any shareholder, partner, member or, if a
trust, any trustor, or beneficiary, of Borrower.

4.7       Impound and Reserve Accounts.

(a)        Borrower shall establish and maintain with Bank such operating,
replacement and/or tenant improvement reserves for the Property as required by
Bank.

(b)        Upon the occurrence of any Event of Default hereunder, at Bank's
option, Borrower shall establish with Bank (i) a non-interest bearing tax and/or
insurance impound account and shall deposit therein, on a monthly basis,
sufficient funds to pay real property taxes, assessments, and premiums for fire
and hazard insurance, rent loss insurance, and such other insurance covering the
Property as Bank may require, not later than 30 days prior to their due date(s);
and/or (ii) a non-interest bearing account and shall deposit therein, on a
monthly basis, an amount (as determined by Bank) sufficient to accumulate funds
to pay operating, replacement and/or tenant improvements costs when the same are
projected to become payable.

4.8       Cash Flow Coverage Ratio.  Borrower will maintain a ratio of Cash Flow
to Debt Service of not less than 1.25:1.0 as of the close of each fiscal year. 
"Cash Flow" means net profit after taxes to which depreciation, amortization and
other noncash expenses are added for the twelve (12) month period immediately
preceding the date of calculation.  "Debt Service" means that portion of
long-term liabilities and capital leases coming due within twelve (12) months
following the date of calculation.

5.         DEFAULTS.  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, notice of nonpayment or dishonor, or any other
notices or demands:

5.1       Failure to Pay According to Note and Other Loan Documents.  Borrower
shall default on the due and punctual payment of the principal of the interest
on the Note or any obligations of the Loan Documents;

5.2       Failure to Perform Under the Loan Documents.  Borrower shall default
in the due performance of observance of any condition, covenant or obligation or
the Loan Documents; or

5.3       First Lien.  Bank fails to have an enforceable first lien on or
security interest in any property given as security for the Loan; or

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5.4       Default Under Major Leases.  Failure in the due and complete
observance or performance of any condition, covenant or obligation of Borrower
contained in any Lease which covers 20% or more of the net rentable area of the
Property.

If an Event of Default occurs under this agreement, Bank may exercise any right
or remedy which it has under any of the Loan Documents, or which is otherwise
available at law or in equity or by statute, and all of Bank's rights and
remedies shall be cumulative.

6.         MISCELLANEOUS.

6.1       Notices.  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 the address given with the signatures at
the end of this Agreement and shall be considered to have been validly given:
(i) upon delivery, if delivered personally, (ii) upon receipt, if mailed first
class postage prepaid, with the United States Postal Service, (iii) on the next
business day if sent by overnight courier service of recognized standing, and
(iv) upon telephone confirmation of receipt, if telecopied.

6.2       Waivers.  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 office of Bank.

6.3       Bank's Expenses: Rights of Bank.  Borrower shall promptly pay to Bank,
upon demand, with interest thereon from the date of demand at the rate
applicable from time to time under the Note, reasonable attorneys' fees
(including the allocated costs of Bank's in-house counsel and legal staff), and
all costs and other expenses paid or incurred by Bank in exercising its rights
or remedies provided for in this Agreement or any other Loan Document, and
payment thereof shall be secured by the Deed of trust.  If at any time Borrower
fails to do any of the things provided herein, Bank shall have the right, but
not the obligation, to do the same but at the expense of Borrower.

6.4       Successors and Assigns.  This Agreement may not be assigned by
Borrower without the prior written consent of Bank.  Subject to the foregoing
restriction, this Agreement shall inure to the benefit of Bank and its
successors and assigns, and shall bind Borrower and its successors and assigns. 
Bank shall have the right in its sole discretion, to assign all or any part,
either outright or through participating interests, of Bank's rights in the Loan
and the Loan Documents.  Bank is authorized to disclose to any prospective
assignee or participant in the Loan any and all information in the possession of
Bank in respect of Borrower, any Loan Party, the Property and the Loan.

6.5       Governing Jurisdiction.  This Agreement shall be governed by and
construed in accordance with the laws of the state in which the Property is
located.  Subject to any alternative dispute resolution agreement between Bank
and Borrower, Bank and Borrower consent to the exclusive jurisdiction and venue
of any state of federal court located in     Carson City    County, Nevada.

6.6       Entire Agreement.  This Agreement and all of the other Loan Documents
constitute the entire understanding between the parties hereto with respect to
the subject matter hereof, superseding all prior written or oral
understandings.  This Agreement and the Loan Documents may be modified, amended
or terminated only in a writing signed by all parties hereto.

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6.7       Joint and Several Liability.  If Borrower consists of more than one
person or entity, each shall be jointly and severally liable to Bank for the
performance of this Agreement and the other Loan Documents.

6.8       Loan Commission.  Bank shall not be obligated to pay any brokerage
commission or fee in connection with or arising out of the Loan.  Borrower shall
pay any and all brokerage commissions or fees arising out of or in connection
with the Loan.

6.9       Headings.  The various headings of this Agreement are included for
reference only and shall not limit or otherwise affect the meaning hereof.

6.10     Severability.  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 any conflict between the provisions of this
Agreement and the provisions of the Note, the provisions of the Note shall
prevail.

6.11     Counterparts.  This Agreement may be executed in 2 or more
counterparts, each of which shall be deemed an original but taken together shall
be one and the same document.

6.12     Publicity.  Borrower hereby agrees that Bank, at its expense, may
publicize the financing of the Property (including the name of Borrower and its
financial consultant, if any) and, in connection therewith, may use the project
name and address, and a description, photograph or other illustrative drawing of
the Property.

6.13     Disbursement Schedule.  The proceeds of the Loan shall be disbursed in
accordance with the Disbursement Schedule attached hereto as Exhibit A and
incorporated herein by this reference.

Bank is subject to the USA Patriot Act and hereby notifies Borrower that
pursuant to the requirements of that Act, Bank is required to obtain, verify and
record information that identifies Borrower, which information includes the name
and address of Borrower and other information that will allow Bank to identify
Borrower in accordance with the Act.

IN WITNESS WHEREOF, the parties have executed this Loan Agreement as of the date
first hereinabove written.

BORROWER:

Pro-Dex, Inc. a Colorado corporation

By:____________________________
       Jeffrey J. Ritchey, CFO

By:_____________________________
       Patrick L. Johnson, President/CEO

 

 

 

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Address for Notice to Borrower:
Pro-Dex, Inc.
Attn:  Jeff Ritchey
151 East Columbine Avenue
Santa Ana, CA  92707
Fax No.

BANK:
UNION BANK OF CALIFORNIA, N.A.

By:___________________________________

Name:_________________________________

Title:__________________________________

Address for Notice to Bank:
UNION BANK OF CALIFORNIA, N.A.
Commercial Banking Real Estate
Attn:  Craig Sandberg
18300 Von Karman Ave. #310
Irvine, CA  92612
Fax No.

With a Copy of All Bank Notices To:
UNION BANK OF CALIFORNIA, N.A.
Commercial Real Estate Loan Administration
Attn:  Michele Desselle
18300 Von Karman Avenue, Suite 200
Irvine, CA  92612-1048
Fax No.

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EXHIBIT A TO LOAN AGREEMENT

DISBURSEMENT SCHEDULE AND AUTHORIZATION

 

This Disbursement Schedule and Authorization is attached to and made a part of
that certain Loan Agreement dated     March 4, 2006    by and between
     Pro-Dex, Inc. a Colorado corporation     ("Borrower") and UNION BANK OF
CALIFORNIA, N.A. ("Bank").

BANK IS HEREBY AUTHORIZED TO DISBURSE LOAN PROCEEDS IN THE AMOUNT OF $   
1,650,000,000    , PLUS BORROWERS FUNDS IN THE AMOUNT OF $    5,000.00  TOTALING
$     1,655,000.00   , AS FOLLOWS:

1.

To Bank, as a non-refundable Loan Fee   

$    8,250.00 2.

To Bank, for Appraisal Fee  

$    4,414.00 3

To Bank for Phase I Preliminary Site Assessment  

$    3,201.00 4.

To Bank, for Seismic Risk Assessment

$       160.00 5.

To Bank, as reimbursement for Secretary of State charges in connection
                        with UCC Filing and Search and ordering Certificates of
Status

$         16.00 6.

To Bank, as reimbursement for Flood Determination/Life-of-Loan Certificate.

$         19.00 7.

To Bank, as reimbursement for Messenger/Overnight Delivery charges

$         12.00 8.

To Bank, for prepaid interest to April 1, 2006, (2 days @ @282,79000
                      Per day) (ESTIMATED-SUBJECT TO ADJUSTMENT AT CLOSING)

$       565.58 9.

To First American Tax Valuation, for tax service contract

$        570.00 10.

To First American Title Insurance Company, for title charges,
                       Sub-escrow fee and recording fees (ESTIMATED - SUBJECT TO
ADJUSTMENT AT CLOSING)

$    13,100.75 11.

To First American Title Insurance Company, for credit to Borrower

     

            (ESTIMATED - SUBJECT TO ADJUSTMENT AT CLOSING)

$ 1,628.187.99  

SUBTOTAL

$ 1,658,496.32  

Less Deposits Received from Borrower

$       5,000.00  

Less Loan Proceeds to be Disbursed   

$ 1,650,000.00  

FUNDS REQUIRED FROM BORROWER AT CLOSING
(ESTIMATED-SUBJECT TO ADJUSTMENT AT CLOSING)

$       3,496.32

 

Bank is authorized to charge Account No. 3520003672 in the name(s) of Pro-Dex,
Inc for payments, fees and expenses due in connection with the Note and all
renewals and extensions thereof.  If no account number is designated, Borrower
agrees to pay Bank's usual and customary fees for non-automated processing.

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GOOD FUNDS DISCLOSURE:  BORROWER ACKNOWLEDGES THAT STATE LAW REQUIRES ANY ESCROW
AGENT HANDLING FUNDS IN AN ESCROW CAPACITY (INCLUDING ANY TITLE INSURANCE
COMPANY) TO HAVE DEPOSITED INTO ITS ESCROW DEPOSITORY ACCOUNT, PRIOR TO
RECORDING A TRANSACTION, IMMEDIATELY AVAILABLE FUNDS REPRESENTING ALL
DISBURSEMENTS TO BE MADE BY THE ESCROW AGENT.  ACCORDINGLY, WITH RESPECT TO ALL
FUNDS TO BE DISBURSED PURSUANT TO THE AGOVE, BORROWER AUTHORIZES BANK TO MAKE
SUCH DISBURSEMENT TO THE TITLE INSURER ON THE DATE SPECIFIED BY SAID TITLE
INSURER, WHICH DATE MAY BE PRIOR TO THE RECORDING OF THE DEED OF TRUST. 
INTEREST ON AMOUNTS OUTSTANDING UNDER THE NOTE SHALL ACCRUE FROM THE DATE OF
DISBURSEMENT, WHICH MAY NOT BE THE DATE OF RCORDING OF THE DEED OF TRUST.  TITLE
INSURER SHALL SPECIFY THE DATE IT REQUIRES SUCH PROCEEDS (INCLUDING LOAN
PROCEEDS) FOR USE IN SAID ESCROW.

This Disbursement Schedule is executed by Borrower and Bank.  Certain costs and
expenses referred to above are estimates, and Borrower shall remain fully
responsible for the payment of all costs and expenses in accordance with the
terms of the Loan Documents.

BORROWER:
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

BANK:
UNION BANK OF CALIFORNIA, N.A.

By:____________________________________

Name:__________________________________

Title:___________________________________

           

           

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