Exhibit 10.2





Exhibit 10.2


	

WELLS FARGO
	 REVOLVING
LINE OF CREDIT NOTE
	 	 
	

$4,000,000.00
	 Irvine,
    California
	

 


    	November 1, 2007



FOR VALUE RECEIVED, the undersigned Pro-Dex, Inc.
(“Borrower) promises to pay to the order of WELLS FARGO BANK, NATIONAL
ASSOCIATION (“Bank”) at its office at Orange County RCBO, 2030 Main Street,
Suite #900, Irvine, CA 92614, or at such other place as the holder hereof
may designate, in lawful money of the United States of America and in
immediately available funds, the principal sum of $4,000,000.00, or so
much thereof as may be advanced and be outstanding, with interest thereon, to
be computed on each advance from the date of its disbursement as set forth
herein.


1.         DEFINITIONS:


As used herein, the following terms shall have the meanings set
forth after each, and any other term defined in this Note shall have the
meaning set forth at the place defined:


1.1       “Business Day” means any day except a Saturday,
Sunday or any other day on which commercial banks in California are authorized
or required by law to close.


1.2       “Fixed Rate Term” means a period commencing on a
Business Day and continuing for 1, 2, 3 or 6 months, as designated by Borrower,
during which all or a portion of the outstanding principal balance of this Note
bears interest determined in relation to LIBOR; provided however, that no Fixed
Rate Term may be selected for a principal amount less than $100,000.00; and
provided further, that no Fixed Rate Term shall extend beyond the scheduled
maturity date hereof. If any Fixed Rate Term would end on a day which is not a
Business Day, then such Fixed Rate Term shall be extended to the next
succeeding Business Day.


1.3       “LIBOR” means the rate per annum (rounded upward,
if necessary, to the nearest whole 1/8 of 1%) determined by dividing Base LIBOR
by a percentage equal to 100% less any LIBOR Reserve Percentage.


(a)        “Base LIBOR” means the
rate per annum for United States dollar deposits quoted by Bank as the
Inter-Bank Market Offered Rate, with the understanding that such rate is quoted
by Bank for the purpose of calculating effective rates of interest for loans
making reference thereto, on the first day of a Fixed Rate Term for delivery of
funds on said date for a period of time approximately equal to the number of
days in such Fixed Rate Term and in an amount approximately equal to the
principal amount to which such Fixed Rate Term applies. Borrower understands
and agrees that Bank may base its quotation of the Inter-Bank Market Offered
Rate upon such offers or other market indicators of the Inter-Bank Market as
Bank in its discretion deems appropriate including, but not limited to, the
rate offered for U.S. dollar deposits on the London Inter-Bank Market.

 


                                                                                                           


                                                                                                           


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(b)        “LIBOR Reserve
Percentage” means the reserve percentage prescribed by the Board of Governors
of the Federal Reserve System (or any successor) for “Eurocurrency Liabilities”
(as defined in Regulation D of the Federal Reserve Board, as amended), adjusted
by Bank for expected changes in such reserve percentage during the applicable
Fixed Rate Term.


1.4       “Prime Rate” means at any time the rate of
interest most recently announced within Bank at its principal office as its
Prime Rate, with the understanding that the Prime Rate is one of Bank’s base
rates and serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto, and is evidenced by the
recording thereof after its announcement in such internal publication or
publications as Bank may designate.


2.         INTEREST:


2.1       Interest. The outstanding principal balance
of this Note shall bear interest (computed on the basis of a 360-day year,
actual days elapsed) either (a) at a fluctuating rate per annum equal to the
Prime Rate in effect from time to time, or (b) at a fixed rate per annum
determined by Bank to be 1.75000% above LIBOR in effect on the first day of the
applicable Fixed Rate Term. When interest is determined in relation to the
Prime Rate, each change in the rate of interest hereunder shall become
effective on the date each Prime Rate change is announced within Bank. With
respect to each LIBOR selection option selected hereunder, Bank is hereby
authorized to note the date, principal amount, interest rate and Fixed Rate
Term applicable thereto and any payments made thereon on Bank’s books and
records (either manually or by electronic entry) and/or on any schedule
attached to this Note, which notations shall be prima facie evidence of the
accuracy of the information noted.


2.2       Selection of Interest Rate Options. At any
time any portion of this Note bears interest determined in relation to LIBOR,
it may be continued by Borrower at the end of the Fixed Rate Term applicable
thereto so that all or a portion thereof bears interest determined in relation
to the Prime Rate or to LIBOR for a new Fixed Rate Term designated by Borrower.
At any time any portion of this Note bears interest determined in relation to
the Prime Rate, Borrower may convert all or a portion thereof so that it bears
interest determined in relation to LIBOR for a Fixed Rate Term designated by
Borrower. At such time as Borrower requests an advance hereunder or wishes to
select a LIBOR option for all or a portion of the outstanding principal balance
hereof, and at the end of each Fixed Rate Term, Borrower shall give Bank notice
specifying: (a) the interest rate option selected by Borrower; (b) the
principal amount subject thereto; and (c) for each LIBOR selection, the length
of the applicable Fixed Rate Term. Any such notice may be given by telephone
(or such other electronic method as Bank may permit) so long as, with respect
to each LIBOR selection, (i) if requested by Bank, Borrower provides to Bank
written confirmation thereof not later than 3 Business Days after such notice
is given, and (ii) such notice is given to Bank prior to 10:00 a.m. on the first
day of the Fixed Rate Term, or at a later time during any Business Day if Bank,
at it’s sole option but without obligation to do so, accepts Borrower’s notice
and quotes a fixed rate to Borrower. If Borrower does not immediately accept a
fixed rate when quoted by Bank, the quoted rate shall expire and any subsequent
LIBOR request from Borrower shall be subject to a redetermination by Bank of
the applicable fixed rate. If no specific designation of interest is made at
the time any advance is requested hereunder or at the end of any Fixed Rate
Term, Borrower shall be deemed to have made a Prime Rate interest selection for
such advance or the principal amount to which such Fixed Rate Term applied.


 

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2.3       Taxes and Regulatory Costs. Borrower shall
pay to Bank immediately upon demand, in addition to any other amounts due or to
become due hereunder, any and all (a) withholdings, interest equalization
taxes, stamp taxes or other taxes (except income and franchise taxes) imposed
by any domestic or foreign governmental authority and related in any manner to
LIBOR, and (b) future, supplemental, emergency or other changes in the LIBOR
Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance
Corporation, or similar requirements or costs imposed by any domestic or
foreign governmental authority or resulting from compliance by Bank with any
request or directive (whether or not having the force of law) from any central
bank or other governmental authority and related in any manner to LIBOR to the
extent they are not included in the calculation of LIBOR. In determining which
of the foregoing are attributable to any LIBOR option available to Borrower
hereunder, any reasonable allocation made by Bank among its operations shall be
conclusive and binding upon Borrower.


2.4       Payment of Interest. Interest accrued on
this Note shall be payable on the 1st day of each month, commencing December
1, 2007.


2.5       Default Interest. From and after the
maturity date of this Note, or such earlier date as all principal owing hereunder
becomes due and payable by acceleration or otherwise, the outstanding principal
balance of this Note shall bear interest until paid in full at an increased
rate per annum (computed on the basis of a 360-day year, actual days elapsed)
equal to 4% above the rate of interest from time to time applicable to this
Note.


3.         BORROWING AND
REPAYMENT:


3.1       Borrowing and Repayment. Borrower may from
time to time during the term of this Note borrow, partially or wholly repay its
outstanding borrowings, and reborrow, subject to all of the limitations, terms
and conditions of this Note and of the Credit Agreement between Borrower and
Bank defined below; provided however, that the total outstanding borrowings
under this Note shall not at any time exceed the principal amount stated above.
The unpaid principal balance of this obligation at any time shall be the total
amounts advanced hereunder by the holder hereof less the amount of principal
payments made hereon by or for Borrower, which balance may be endorsed hereon
from time to time by the holder. The outstanding principal balance of this Note
shall be due and payable in full on November 1, 2009.


3.2       Advances. Advances hereunder, to the total
amount of the principal sum available hereunder, may be made by the holder at
the oral or written request of (a) Mark P. Murphy or Jeffrey Ritchey,
any one acting alone, who are authorized to request advances and direct the
disposition of any advances until written notice of the revocation of such
authority is received by the holder at the office designated above, or (b) any
person, with respect to advances deposited to the credit of any deposit account
of Borrower, which advances, when so deposited, shall be conclusively presumed
to have been made to or for the benefit of Borrower regardless of the fact that
persons other than those authorized to request advances may have authority to
draw against such account. The holder shall have no obligation to determine
whether any person requesting an advance is or has been authorized by Borrower.


 

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3.3       Application of Payments. Each payment made
on this Note shall be credited first, to any interest then due and second, to
the outstanding principal balance hereof. All payments credited to principal
shall be applied first, to the outstanding principal balance of this Note which
bears interest determined in relation to the Prime Rate, if any, and second, to
the outstanding principal balance of this Note which bears interest determined
in relation to LIBOR, with such payments applied to the oldest Fixed Rate Term
first.


4.         PREPAYMENT:


4.1       Prime Rate. Borrower may prepay principal
on any portion of this Note which bears interest determined in relation to the
Prime Rate at any time, in any amount and without penalty.


4.2       LIBOR. Borrower may prepay principal on any
portion of this Note which bears interest determined in relation to LIBOR at
any time and in the minimum amount of $100,000.00; provided however, that if
the outstanding principal balance of such portion of this Note is less than
said amount, the minimum prepayment amount shall be the entire outstanding
principal balance thereof. In consideration of Bank providing this prepayment
option to Borrower, or if any such portion of this Note shall become due and
payable at any time prior to the last day of the Fixed Rate Term applicable
thereto by acceleration or otherwise, Borrower shall pay to Bank immediately
upon demand a fee which is the sum of the discounted monthly differences for
each month from the month of prepayment through the month in which such Fixed
Rate Term matures, calculated as follows for each such month:


(a)        Determine the
amount of interest which would have accrued each month on the amount prepaid at
the interest rate applicable to such amount had it remained outstanding until
the last day of the Fixed Rate Term applicable thereto.


(b)        Subtract from the
amount determined in (a) above the amount of interest which would have accrued
for the same month on the amount prepaid for the remaining term of such Fixed
Rate Term at LIBOR in effect on the date of prepayment for new loans made for
such term and in a principal amount equal to the amount prepaid.


(c)        If the result obtained
in {6) for any month is greater than zero, discount that difference by LIBOR
used in (b) above.


Borrower acknowledges that prepayment of such amount may
result in Bank incurring additional costs, expenses and/or liabilities, and
that it is difficult to ascertain the full extent of such costs, expenses
and/or liabilities. Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to
pay any prepayment fee when due, the amount of such prepayment fee shall
thereafter bear interest until paid at a rate per annum 2.000% above the
Prime Rate in effect from time to time (computed on the basis of a 360-day
year, actual days elapsed).

 

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5.         EVENTS OF
DEFAULT:


This Note is made pursuant to and is subject to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of November 1, 2007, as amended from time to time (the “Credit
Agreement”). Any default in the payment or performance of any obligation under
this Note, or any defined event of default under the Credit Agreement, shall
constitute an “Event of Default” under this Note.


6.         MISCELLANEOUS:


6.1       Remedies. Upon the occurrence of any Event
of Default, the holder of this Note, at the holder’s option, may declare all
sums of principal and interest outstanding hereunder to be immediately due and
payable without presentment, demand, notice of nonperformance, notice of
protest, protest or notice of dishonor, all of which are expressly waived by
Borrower, and the obligation, if any, of the holder to extend any further
credit hereunder shall immediately cease and terminate. Borrower shall pay to
the holder immediately upon demand the full amount of all payments, advances,
charges, costs and expenses, including reasonable attorneys’ fees (to include
outside counsel fees and all allocated costs of the holder’s in-house counsel),
expended or incurred by the holder in connection with the enforcement of the
holder’s rights and/or the collection of any amounts which become due to the
holder under this Note, and the prosecution or defense of any action in any way
related to this Note, including without limitation, any action for declaratory
relief, whether incurred at the trial or appellate level, in an arbitration
proceeding or otherwise, and including any of the foregoing incurred in
connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to Borrower or any other person or entity.


6.2       Obligations Joint and Several. Should more
than one person or entity sign this Note as a Borrower, the obligations of each
such Borrower shall be joint and several.


6.3       Governing Law. This Note shall be governed
by and construed in accordance with the laws of the State of California.


IN WITNESS WHEREOF, the undersigned has executed this Note
as of the date first written above. 


Pro-Dex, Inc.


By:                   /s/ Mark P. Murphy                     

            Mark P. Murphy, Chief
Executive Officer




By:                  
/s/ Jeffrey J. Ritchey                    

            Jeffrey Ritchey, CFO, Treasurer, Secretary




  

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