LOAN AGREEMENT-Exhibit 10.2

















 

 

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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