Document:

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR THE LAWS OF ANY STATE.  THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION
IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SUCH ACT.

No. PB-84                                    September 8, 2000

            WARRANT TO PURCHASE COMMON STOCK
                          OF
               VANGUARD AIRLINES, INC.

             VOID AFTER SEPTEMBER 8, 2007

     This Warrant is issued to The Hambrecht 1980 Revocable
Trust, or its registered assigns (the "Holder") by Vanguard
Airlines, Inc., a Delaware corporation (the "Company"), on
September 8, 2000 (the "Warrant Issue Date").  This Warrant is
issued pursuant to the terms of that certain Unit Purchase
Agreement dated as of September 8, 2000 (the "Purchase
Agreement").

     1.   PURCHASE SHARES.  Subject to the terms and conditions
hereinafter set forth and set forth in the Purchase Agreement,
the Holder is entitled, upon surrender of this Warrant at the
principal office of the Company (or at such other place as the
Company shall notify the holder hereof in writing), to purchase
from the Company up to one million one hundred eighty six
thousand and eight hundred and ninety eight (1,186,898), fully
paid and nonassessable shares of Common Stock of the Company, as
constituted on the Warrant Issue Date (the "Common Stock").  The
number of shares of Common Stock issuable pursuant to this
Section 1 (the "Shares") shall be subject to adjustment pursuant
to Section 8 hereof.

     2.   EXERCISE PRICE.  The purchase price for the Shares
shall be $1.89 per share as adjusted from time to time pursuant
to Section 8 hereof (the "Exercise Price").

     3.   EXERCISE PERIOD.  This Warrant shall be exercisable, in
whole or in part, during the term commencing on September 8, 2000
and ending at 5:00 p.m. on the seventh anniversary date of the
Warrant Issue Date (the "Exercise Period").

     4.   METHOD OF EXERCISE.  While this Warrant remains
outstanding and exercisable in accordance with Section 3 above,
the Holder may exercise, in whole or in part, the purchase rights
evidenced hereby.  Such exercise shall be effected by:

          (a)  the surrender of the Warrant, together with a duly
executed copy of the form of Notice of Election Exercise attached
hereto, to the Secretary of the Company at its principal offices;
and
<PAGE>
          (b)  the payment to the Company of an amount equal to
the aggregate Exercise Price for the number of Shares being
purchased.

     5.   NET EXERCISE.  In lieu of exercising this Warrant
pursuant to Section 4, the Holder may elect to receive, without
the payment by the Holder of any additional consideration, shares
of Common Stock equal to the value of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at
the principal office of the Company together with notice of such
election, in which event the Company shall issue to the holder
hereof a number of shares of Common Stock computed using the
following formula:

                      X = Y (A-B)
                          -------
                            A

     Where:    X =  The number of shares of Common
                    Stock to be issued to the Holder pursuant to
                    this net exercise;
               Y =  The number of Shares in respect of which the
                    net issue election is made;
               A =  The fair market value of one share of the
                    Common Stock at the time the net issue
                    election is made;
               B =  The Exercise Price (as adjusted to the date
                    of the net issuance).

For purposes of this Section 5, the fair market value of one
share of Common Stock as of a particular date shall be determined
as follows: (i) if traded on a securities exchange or through the
Nasdaq National Market, the value shall be deemed to be the
average of the closing prices of the securities on such exchange
over the twenty (20) day period ending three (3) days prior to
the net exercise election; (ii) if actively traded over-the-
counter, the value shall be deemed to be the average of the
closing bid or sale prices (whichever is applicable) over the
twenty (20) day period ending three (3) days prior to the net
exercise; and (iii) if there is no active public market, the
value shall be the fair market value thereof, as determined in
good faith by the Board of Directors of the Company.

     6.   CERTIFICATES FOR SHARES.  Upon the exercise of the
purchase rights evidenced by this Warrant, one or more
certificates for the number of Shares so purchased shall be
issued as soon as practicable thereafter (with appropriate
restrictive legends, if applicable), and in any event within five
(5) days of the delivery of the subscription notice.

     7.   ISSUANCE OF SHARES.  The Company covenants that the
Shares, when issued pursuant to the exercise of this Warrant,
will be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens, and charges with respect to the
issuance thereof.

     8.   ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES.  The
number of and kind of securities purchasable upon exercise of
this Warrant and the Exercise Price shall be subject to
adjustment from time to time as follows:
<PAGE>
          (a)  SUBDIVISIONS; COMBINATIONS AND OTHER ISSUANCES.
If the Company shall at any time prior to the expiration of this
Warrant subdivide its Common Stock, by split-up or otherwise, or
combine its Common Stock, or issue additional shares of its
Common Stock (or securities convertible into, or otherwise
entitling the holders thereof to receive, Common Stock) as a
dividend with respect to any shares of its Common Stock, the
number of Shares issuable on the exercise of this Warrant shall
forthwith be increased in the case of a subdivision or stock
dividend, or proportionately decreased in the case of a
combination.  Appropriate adjustments shall also be made to the
Exercise Price payable per share, but the aggregate Exercise
Price payable for the total number of Shares purchasable under
this Warrant (as adjusted) shall remain the same.  Any adjustment
under this Section 8(a) shall become effective at the close of
business on the date the subdivision or combination becomes
effective, or as of the record date of such dividend, or in the
event that no record date is fixed, upon the making of such
dividend.

          (b)  RECLASSIFICATION, REORGANIZATION AND
CONSOLIDATION.  In case of any reclassification, capital
reorganization, or change in the Common Stock of the Company
(other than as a result of a subdivision, combination, or stock
dividend provided for in Section 8(a) above), then, as a
condition of such reclassification, reorganization, or change,
lawful provision shall be made, and duly executed documents
evidencing the same from the Company or its successor shall be
delivered to the Holder, so that the Holder shall have the right
at any time prior to the expiration of this Warrant to purchase,
at a total price equal to that payable upon the exercise of this
Warrant, the kind and amount of shares of stock and other
securities and property receivable in connection with such
reclassification, reorganization, or change by a holder of the
same number of shares of Common Stock as were purchasable by the
Holder immediately prior to such reclassification,
reorganization, or change.  In any such case appropriate
provisions shall be made with respect to the rights and interests
of the Holder so that the provisions hereof shall thereafter be
applicable with respect to any shares of stock or other
securities and property deliverable upon exercise hereof, and
appropriate adjustments shall be made to the Exercise Price per
share payable hereunder, provided the aggregate Exercise Price
shall remain the same.

          (c)  DILUTIVE ISSUANCES.  The Exercise Price shall be
subject to adjustment from time to time as follows:

               (i)  (A)  If the Company shall issue, after the
Warrant Issue Date, any Additional Stock (as defined below)
without consideration or for a consideration per share less than
the Unit Purchase Price (as defined in the Unit Purchase
Agreement) in effect immediately prior to the issuance of such
Additional Stock, the Exercise Price in effect immediately prior
to each such issuance shall forthwith (except as otherwise
provided in this clause (i)) be adjusted to a price equal to the
price paid per share for such Additional Stock [plus ten percent
(10%)]; provided, however that the Exercise Price shall not be
adjusted to a price below $0.10 (as adjusted for stock splits,
stock dividends, combinations, recapitalizations or like changes
in the Company's capital structure).
<PAGE>
                    (B)  In the case of the issuance of Common
Stock for cash, the consideration shall be deemed to be the
amount of cash paid therefor before deducting any reasonable
discounts, commissions or other expenses allowed, paid or
incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof.

                    (C)  In the case of the issuance of Common
Stock for a consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to be the fair
value thereof as determined by the Board of Directors
irrespective of any accounting treatment.

                    (D)  In the case of the issuance of options
to purchase or rights to subscribe for Common Stock, securities
by their terms convertible into or exchangeable for Common Stock
or options to purchase or rights to subscribe for such
convertible or exchangeable securities, the following provisions
shall apply for all purposes of this subsection 8(c)(i) and
subsection 8(c)(ii):

                        (1)  The number of shares of Common
Stock deliverable upon exercise (to the extent then exercisable)
of such options to purchase or rights to subscribe for Common
Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to
the consideration (determined in the manner provided in
subsections 8(c)(i)(B) and 8(c)(i)(C)), if any, received by the
Company upon the issuance of such options or rights plus the
minimum exercise price provided in such options or rights for the
Common Stock covered thereby.

                         (2)  The number of shares of Common
Stock deliverable upon conversion of, or in exchange (to the
extent then convertible or exchangeable) for, any such
convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible
or exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such
securities were issued or such options or rights were issued and
for a consideration equal to the consideration, if any, received
by the Company for any such securities and related options or
rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Company upon the
conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be
determined in the manner provided in subsections 8(c)(i)(B) and
(c)(i)(C)).

                         (3)  In the event of any change in the
consideration payable to the Company upon exercise of such
options or rights or upon conversion of or in exchange for such
convertible or exchangeable securities, including, but not
limited to, a change resulting from the antidilution provisions
thereof, the Exercise Price, to the extent in any way affected by
such options, rights or securities, shall be recomputed to
reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such
consideration upon the exercise of any such options or rights or
the conversion or exchange of such securities.

                         (4)  Upon the expiration of any such
options or rights, the termination of any such rights to convert
<PAGE>
or exchange or the expiration of any options or rights related to
such convertible or exchangeable securities without the exercise,
conversion or exchange of any of the foregoing into Common Stock,
the Exercise Price  shall be recomputed to reflect the assumption
that none of such options, rights, or convertible or exchangeable
securities had ever been issued.

                         (5)  The Common Stock deemed issued and
the consideration deemed paid therefor pursuant to subsections
8(c)(i)(D)( 1) and (2) shall be appropriately adjusted to reflect
any change, termination or expiration of the type described in
either subsection 8(c)(i)(D)(3) or (4).

               (ii)  "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection
8(c)(i)(D)) by the Company after the date hereof other than:

                    (A)  Common Stock issued pursuant to a transaction described
in subsection 8(a) or (b) hereof; or

                    (B)  Shares of Common Stock issuable or issued to employees,
consultants, directors or vendors (if in transactions with
primarily non-financing purposes) of the Company directly or
pursuant to a stock option plan, employee stock purchase plan or
other plan or agreement approved by the Board of Directors of the
Company.

          (D)  NOTICE OF ADJUSTMENT.  When any adjustment is
required to be made in the number or kind of shares purchasable
upon exercise of the Warrant, or in the Exercise Price, the
Company shall promptly notify the holder of such event and of the
number of shares of Common Stock or other securities or property
thereafter purchasable upon exercise of this Warrant.

     9.   NO FRACTIONAL SHARES OR SCRIP.  No fractional shares or
scrip representing fractional shares shall be issued upon the
exercise of this Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor on the basis of
the Exercise Price then in effect.

     10.  NO STOCKHOLDER RIGHTS.  Prior to exercise of this
Warrant, the Holder shall not be entitled to any rights of a
stockholder with respect to the Shares, including (without
limitation) the right to vote such Shares, receive dividends or
other distributions thereon, exercise preemptive rights or be
notified of stockholder meetings, and such holder shall not be
entitled to any notice or other communication concerning the
business or affairs of the Company.  However, nothing in this
Section 10 shall limit the right of the Holder to be provided the
Notices required under this Warrant or the Purchase Agreement.
<PAGE>
     11.  TRANSFER RESTRICTIONS.  This Warrant may not be
exercised and neither this Warrant nor any of the Common Stock
issuable upon exercise of the Warrant (collectively, the
"Securities"), nor any interest in either, may be sold, assigned,
pledged, hypothecated, encumbered or in any other manner
transferred or disposed of, in whole or in part, except in
compliance with applicable United States federal and state
securities or Blue Sky laws and the terms and conditions herein
and in the Registration Rights Agreement dated March 18, 1998
among the Company and various holders of the Company's
securities. Purchase Agreement.

     12.  RESERVATION OF SHARES.  The Company will at all times
following receipt of the Stockholder Approval (as defined in the
Purchase Agreement) reserve for issuance and delivery upon
exercise of this Warrant all Shares and other shares of capital
stock of the Company from time to time receivable upon exercise
of this Warrant.

     13.  SUCCESSORS AND ASSIGNS.  The terms and provisions of
this Warrant and the Purchase Agreement shall inure to the
benefit of, and be binding upon, the Company and the Holders
hereof and their respective successors and assigns.

     14.  AMENDMENTS AND WAIVERS.  Any term of this Warrant may
be amended and the observance of any term of this Warrant may be
waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of
the Company and the Holder.

     15.  ASSUMPTION OF WARRANT.  If at any time, while this
Warrant, or any portion thereof, is outstanding and unexpired
there shall be (i) an acquisition of the Company by another
entity by means of a merger, consolidation, or other transaction
or series of related transactions resulting in the exchange o2f
the outstanding shares of the Company's Capital Stock or (ii) a
sale or transfer of all or substantially all of the Company's
assets to any other person, then, as a part of such acquisition,
sale or transfer, lawful provision shall be made so that the
Holder shall thereafter be entitled to receive upon exercise of
this Warrant, during the period specified herein and upon payment
of the Exercise Price then in effect, the number of shares of
stock or other securities or property of the successor
corporation resulting from such acquisition, sale or transfer
which a holder of the shares deliverable upon exercise of this
Warrant would have been entitled to receive in such acquisition,
sale or transfer if this Warrant had been exercised immediately
before such acquisition, sale or transfer, all subject to further
adjustment as provided in this Section 15; and, in any such case,
appropriate adjustment (as determined by the Company's Board of
Directors) shall be made in the application of the provisions
herein set forth with respect to the rights and interests
thereafter of the Holder to the end that the provisions set forth
herein (including provisions with respect to changes in and other
adjustments of the number of Warrant Shares of the Holder is
entitled to purchase) shall thereafter be applicable, as nearly
as possible, in relation to any shares of Common Stock or other
securities or other property thereafter deliverable upon the
exercise of this Warrant.

     16.  NOTICES.  All notices required under this Warrant shall
be deemed to have been given or made for all purposes (i) upon
personal delivery, (ii) upon confirmation receipt that the
communication was successfully sent to the applicable number if
sent by facsimile; (iii) one day after being sent, when sent by
professional overnight courier service, or (iv) five (5) days
after posting when sent by registered or certified mail.  Notices
<PAGE>
to the Company shall be sent to the principal office of the
Company (or at such other place as the Company shall notify the
Holder hereof in writing).  Notices to the Holder shall be sent
to the address of the Holder on the books of the Company (or at
such other place as the Holder shall notify the Company hereof in
writing).
     17.  CAPTIONS.  The section and subsection headings of this
Warrant are inserted for convenience only and shall not
constitute a part of this Warrant in construing or interpreting
any provision hereof.
     18.  GOVERNING LAW.  This Warrant shall be governed by the
laws of the State of California as applied to agreements among
California residents made and to be performed entirely within the
State of California.

                                   VANGUARD AIRLINES, INC.

                                   By: /s/ Jeff S. Potter
                                   Name:  Jeff S. Potter
                                   Title: CEO and President

UMB Bank na
Warrant Agent
By:  _____________________________
Date:  ____________________________

<PAGE>
                        NOTICE OF EXERCISE

To:  Vanguard Airlines, Inc.

          The undersigned hereby elects to [check applicable
subsection]:
________       (a)  Purchase _________shares of Common Stock of
               Vanguard Airlines, Inc., pursuant to the terms of
               the attached Warrant and payment of the Exercise
               Price per share required under such Warrant
               accompanies this notice;
               OR
________       (b)  Surrender [all of the shares] [_____________
               of the shares] [cross out inapplicable phrase]
               purchasable under the Warrant pursuant to the net
               exercise provisions of Section 5 of such Warrant.

WARRANTHOLDER:

-----_______________________________

By:_________________________________
Name: ______________________________
Title:______________________________
Address:____________________________
         ___________________________

Date:_______________________________

Name in which shares should be registered:

___________________________________
<PAGE>EX-10.27

Reinstatement of Forbearance Agreement

Mr. George J. Isaac

Vice President and CFO

Pro-Dex, Inc.

650 S. Taylor Avenue, Suite 20A

Louisville, Colorado  80027

Re:     Continued default by Pro-Dex, Inc. (the "Company") and request

for reinstatement and extension of forbearance under that certain

Credit Agreement dated as of July 24, 1996 as previously

               
amended (the "Credit Agreement")     

Dear George:

        As you know, the Company has still not repaid the Loans and the other Obligations that matured about nine months ago on December 31, 1999 under the Credit Agreement.  We previously had
agreed to forbear from enforcing collection of the overdue Loans and other Obligations under our December 30, 1999 Forbearance Agreement with the Company and its Subsidiaries.  At the Company's request, we extended that forbearance four times by a
series of Extension Agreements dated February 2, 2000, March 7, 2000, April 5, 2000 and May 8, 2000 (such Forbearance Agreement, as extended by those Extension Agreements, being hereinafter referred to as the "Forbearance Agreement").  We notified the Company in a letter dated June 30, 2000 (the "Standstill Termination Letter") that a Standstill Termination under the Forbearance Agreement had occurred by virtue of the Company's failure to
comply with provisions of the May 8, 2000 Extension Agreement.  Even ignoring this noncompliance, the forbearance arrangements contemplated by the Forbearance Agreement expired on July 31st of this year.  For convenience, terms defined in the Forbearance Agreement are used herein with the same meanings.

        The Company has informed us that it continues to attempt to close a transaction (perhaps a refinancing or sale) that will result in repayment in full of the Obligations and in that connection,
has again requested that this Bank reinstate the forbearance and extend the duration of the Forbearance Agreement -- this time until February 28, 2001 -- during which time the Company will attempt to close this transaction.  The Bank is willing to
accommodate the Company's request, but reaffirms its expectation that this letter represents the last such extension.  The Bank believes this additional five months should be sufficient time for the Company to close such a transaction.  

        This letter will confirm the terms, conditions and provisions upon which the Bank is willing at this time to reinstate and extend the forbearance arrangements.  Accordingly, notwithstanding
anything contained in the Standstill Termination Letter to the contrary and effective upon the Company's and the Subsidiaries' acceptance of this letter in the space provided for that purpose below (which acceptance must occur without any modification of
the terms of this letter and no later than 2:00 p.m., Chicago time, on September 25, 2000), the Bank agrees to reinstate and extend the forbearance arrangements with the Company under the following terms and conditions:
        1.    
Extension.  The Scheduled Standstill Expiration Date shall be and hereby is extended from July 31, 2000 to February 28, 2001.  The reference in the Forbearance Agreement to July 31, 2000 in the first full paragraph of the second
page thereof shall be deemed a reference instead to February 28, 2001.

        2.    
Acknowledgment of Amounts Owing.  The Company acknowledges and agrees that the aggregate principal amount of Loans outstanding as of September 1, 2000 is $6,739,522.86 ($2,739,522.86 in Term Loan and $4,000,000 in Revolving Loans) and such
amount (together with interest thereon) is justly and truly owing by the Company to the Bank without defense, offset or counterclaim.

        3.    
No Additional Credit.  The Company acknowledges that the Bank is under no obligation to extend any additional credit under the Credit Agreement, such obligation having terminated long ago prior to maturity of the Loans.

        4.    
Default Rate.  The Company acknowledges and agrees that the Loans and other Obligations shall continue to bear interest at the rate per annum determined by adding 2% to the Domestic Rate as from time to time in effect, with such interest to be due
and payable monthly on the last day of each month and upon any Standstill Termination and on demand.  The Company hereby promises to pay such interest when due.  The failure by the Company to make any of these payments shall constitute a Standstill
Termination under the Forbearance Agreement.

        5.    
Payments on Term Loans.  The Company hereby promises to continue making monthly payments of $125,000 each on the principal of the Term Loans (to be allocated as between such Loans as the Bank deems appropriate) on the last day of each calendar
month.  The failure by the Company to make any of these payments shall constitute a Standstill Termination under the Forbearance Agreement.  

        6.    
Excess Cash Balance Recapture.  The Company shall promptly determine, and report to the Bank, the Company's actual balance of cash on hand as of the last day of each calendar month (cash on hand to be determined after giving effect to principal
and interest payments, if any, due on the date of determination and the amount so determined, for each month, to be referred to herein as that month's "Actual Ending Cash Balance").  No later than 2:00 p.m. (Chicago time) on the third Business Day of each calendar month, the Company hereby agrees to pay the principal of the Term Loans (to be allocated as between such Loans as the Bank deems
appropriate) in an amount equal to 50% of the excess (if any) of (x) Actual Cash Balance as of the last day of such month over (y) $350,000.  Payments under this paragraph 6 are in additional to those required by paragraph 5 above.

        7.    
Transaction.  The Bank's willingness to enter into the arrangements contemplated by this letter is made in reliance upon the Company's assertions of its intent to close a transaction before the Scheduled Standstill Expiration Date that will result
in the repayment in full of the Obligations.  The Company acknowledges and agrees that a Standstill Termination under the Forbearance Agreement shall occur if the Company ceases to pursue such a transaction in good faith.

        8.    
Sale of Challenge Products Real Estate.  If some or all of the real estate of Challenge Products, Inc. in Missouri shall be sold or otherwise disposed of, the Company shall prepay the Loans (to be allocated between the Loans as the Bank in its
discretion deem appropriate) by an amount equal to the available excess proceeds of such sale.  For purposes hereof, the term "Available Excess Proceeds" shall mean the gross proceeds of such sale or other disposition, less the amount necessary to repay all principal of and interest on the indebtedness secured by the first mortgage on the property sold in favor of Central
Bank of Lake of the Ozarks, and less the reasonable out of pocket cost to the Seller of the applicable disposition, taxes and reasonable sales commissions in each case directly incurred and payable as a result of such disposition. 

        9.    
Extension Fee.  In consideration of the Bank's agreements in this letter, the Company shall pay the sum of $67,395.23 (representing 1% of the principal amount now outstanding on the Loans) to the Bank as and for an extension fee, such fee to be
deemed fully earned upon the Bank's execution of this letter.  Half of such fee shall be due and payable concurrently with the Company's acceptance of this letter , with the balance of such fee to be due and payable on December 31, 2000.
Notwithstanding the foregoing, if the Obligations have been fully repaid before December 31, 2000, the Bank agrees to waive the half of the extension fee due on such date.

        10.    
Borrowing Base Certificates.  The Company acknowledges and agrees that it must continue to furnish the Bank, weekly Borrowing Base certificates as previously required by the Forbearance Agreement.  The Company also acknowledges and agrees that it
must continue to furnish the Bank a Compliance Certificate for each month no later than 20 days after that month's close, showing in reasonable detail (i) compliance as of the close of such month with the covenants in paragraph numbered 9 below and
(ii) for informational purposes, the Company's actual Funded Debt to Capitalization Ratio, "fixed charge coverage ratio" (as per Section 8.10 of the Credit Agreement) and Cash Flow Leverage Ratio also as of such close, such Certificate to be prepared by the Company and certified by its president or chief financial officer.  The
Company's failure to timely deliver any such Borrowing Base Certificate or Compliance Certificate shall constitute a Standstill Termination under the Forbearance Agreement.

        11.    
Financial Covenants.  The Company need not comply with the financial covenants set forth in Sections 8.7 through 8.12, inclusive, of the Credit Agreement during the Standstill Period.  In lieu of compliance with those covenants, the Company
must, however, comply with the following:
    (a)     The Company must maintain its EBITDA on a cumulative basis for each period of twelve calendar months ending on a date specified below to be not less than the amount specified below to the
right of such ending date:

	
For 12-Month Period Ending:
	
EBITDA Must Not Be Less Than:

	
September 30, 2000
	
$5,130,000

	
October 31, 2000
	
$4,965,000

	
November 30, 2000
	
$4,715,000

	
December 31, 2000
	
$4,220,000

	
January 31, 2001
	
$4,195,000

    (b)    
The Company shall not, nor shall it permit any Subsidiary to, expend or become obligated for capital expenditures (as determined in accordance with GAAP) during the period commencing September 1, 2000 and ending on the Scheduled Standstill
Expiration Date in an aggregate amount (for the Company and its Subsidiaries taken together) in excess of $300,000.

    (c)     The Company will not at any time permit its Tangible Net Worth to be less than $2,500,000.

    (d)     The Company will not as of the last day of any monthly accounting period of the Company, permit its Interest Coverage Ratio to fall below 3.0 to 1.

        12.    
Revolver Borrowing Base Cushion.  The Company agrees to make such payments on the principal of the Revolving Loans as shall be necessary to assure that the Revolver Borrowing Base shall at all times during the Standstill Period exceed the
principal amount of Revolving Loans then outstanding by no less than $500,000 (it being understood and agreed that no such payments are available for reborrowing).  The failure by the Company at any time during the Standstill Period to maintain such an
excess shall constitute a Standstill Termination under the Forbearance Agreement.

        13.    
Limitation on the Reduction of Accounts Payable.  No later than twenty days following the close of each calendar month (commencing with the close of August, 2000), if the Company's accounts payable (as determined in accordance with its
current accounting practices, which include accrued liabilities, except for payroll accruals) reduce during such month to an amount less than $915,905 (representing 80% of the accounts payable, as so determined, outstanding as of June 30, 2000), the
Company shall make a payment on the principal of the Loans (to be allocated between the Loans as the Bank in its discretion deems appropriate) equal to the amount of the reduction during that month below such 80% amount.  The failure to make such payment
shall constitute a Standstill Termination under the Forbearance Agreement.

        14.    
Additional Information.  In addition to furnishing the Bank with the information currently required by the Loan Documents, the Company shall also furnish the Bank:
    (a)     as soon as available, and in any event by the 20th day of each calendar month, an accounts payable and accounts receivable aging summaries as the last business day of the
immediately preceding month, each prepared by the Company and certified by its president or chief financial officer; and

    (b)     as and when received, a copy of each financing proposal or commitment or letter of intent or expression of interest or definitive agreement for a transaction of the type described in
paragraph 6 above. 

The failure by the Company to provide any such information by the relevant deadline shall constitute a Standstill Termination under the Forbearance Agreement.

        15.    
Additional Standstill Termination.  Any failure by the Company to comply with the terms of this letter shall constitute a Standstill Termination under the Forbearance Agreement.  

        16.    
Release.  For value received, including without limitation, the agreements of the Bank in this letter, the Company hereby releases the Bank, its current and former shareholders, directors, officers, agents, employees and professional advisors
(collectively, the "Released Parties") of and from any and all demands, actions, causes of action, suits, controversies, acts and omissions, liabilities, and other claims of every kind or nature whatsoever, both in law and in equity, known or unknown, which the
Company has or ever had against the Released Parties from the beginning of the world to this date, including, without limitation, those arising out of the existing financing arrangements or actions to sell the Company or any of its Property and the
Company further acknowledges that, as of the date hereof, it does not have any counterclaim, set-off or defense against the Released Parties, each of which the Company hereby expressly waives.

        17.    
Compliance With Forbearance Agreement.  The Company must continue to comply with all the terms, conditions and provisions of the Forbearance Agreement as modified by this letter.

        18.    
Miscellaneous.  The Company agrees to pay the out-of-pocket costs and expenses of the Bank (including attorney's fees) in connection with the negotiation, preparation, execution and delivery of this letter and the other instruments or documents
contemplated hereby or to be delivered hereunder.  Except as specifically modified by this letter, the terms, conditions and provisions of the Forbearance Agreement remain in full force and effect.

 

Dated as of September ___, 2000.

  	

Harris Trust And Savings Bank

      
	

By

  

Its                                   
     

      

Accepted and agreed to.

  	

Pro-Dex, Inc.

      
	

By

  

Its                                   
    

      

 

 

 

Guarantor's Acknowledgment and Consent

        Each of the undersigned heretofore executed and delivered to the Bank a Guaranty dated July 24, 1996.  Each of the undersigned hereby consents to this letter as set forth above and
confirms that its Guaranty and all of its obligations thereunder remain in full force and effect.  Each of the undersigned also heretofore executed and delivered a Subsidiary Security Agreement dated July 24, 1996.  Each of the undersigned hereby
acknowledges and agrees that the Liens created and provided for by the Subsidiary Security Agreements continue to secure, among other things, the Obligations arising under the Credit Agreement; and the Subsidiary Security Agreements and the rights and
remedies of the Bank thereunder, the obligations of each of the undersigned thereunder, and the Liens created and provided for thereunder remain in full force and effect and shall not be affected, impaired or discharged hereby.  Nothing herein contained
shall in any manner affect or impair the priority of liens and security interests created and provided for by the Subsidiary Security Agreements as to the indebtedness which would be secured thereby prior to giving effect to this letter.

  	

Biotrol International, Inc.

      
	

By

  

Its                               

      
	

      
	
 

 

Challenge Products, Inc.

      
	

 By

  

Its                              

      
	

      
	

      
	
 

 

Micro Motors, Inc.

      
	

 By

  

Its                              

      
	

      
	

      
	
 

 

Oregon Micro Systems, Inc.

      
	

By

  

Its

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