PRO-DEX, INC. (NASDAQ:PDEX) Files An 8-K Entry into a Material Definitive AgreementItem 1.01
Entry into a Material Definitive Agreement.
On September 20, 2017 (the “Closing Date”), Pro-Dex, Inc. (the “Company”) entered into a Participation Agreement with FS Special Opportunities I, L.P., a Minnesota limited partnership (“Principal”), to which the Company paid Principal $1,150,000 in cash to purchase a 50% (“Participation Percentage”) undivided interest (the “Participation”) in Principal’s $2,300,000 loan (the “Loan”) to 414 New York LLC, a New York limited liability company (“Borrower”). The Participation constitutes the purchase by the Company of a property interest in the Loan from Principal and does not create a creditor-debtor relationship between the Company and Borrower. Borrower intends to use the proceeds from the Loan to acquire a leasehold interest in certain real estate operated as a hotel in the Borough of Manhattan, County, City and State of New York.
Terms of the Loan
to the loan agreement entered into on the Closing Date between Principal and Borrower (the “Loan Agreement”), the Loan initially bears interest at a fixed rate of 22% per annum, with payments of all accrued and unpaid interest due monthly commencing on October 1, 2017 and on the first day of each month thereafter. Borrower may reduce the interest rate by 1% for each $100,000 repayment of principal up to a maximum reduction of 2%, thereby reducing the interest rate to a minimum amount equal to 20% per annum. If the principal balance of the Loan is not paid in full by September 30, 2018, commencing on October1, 2018 and continuing on the first day of the next 83 months thereafter, Borrower shall, in addition to the aforementioned monthly interest payments, pay installments of principal equal to 1/84th of the principal balance outstanding under the Loan as of September 30, 2018. The Company is entitled to receive from Principal the Company’s Participation Percentage of any payments of principal and interest.
Borrower may prepay the Loan in full at any time. If the Loan is prepaid in full on or before December31, 2017, Borrower shall pay a prepayment fee equal to $414,000 less the amount of interest paid by Borrower prior to the date of prepayment. If the Loan is prepaid in full after December 31, 2017 but prior to September 30, 2018, Borrower shall pay a prepayment fee equal to $460,000 less the amount of interest paid by Borrower prior to the date of prepayment. There is no prepayment fee if the Loan is paid in full on or after September 30, 2018. The Company is entitled to receive from Principal the Company’s Participation Percentage of any prepayment fee.
The Loan is guaranteed by two individual owners of Borrower and secured by a first priority security interest in substantially all of Borrower’s personal property and a pledge of 50% of the equity interests of Borrower. The Loan Agreement and other loan documents also contain certain representations, warranties, indemnifications and covenants of the parties customary for a transaction of this type.
In connection with the making of the Loan, Borrower is obligated to issue Principal (or its participants, such as the Company) warrants to purchase 10% of the equity of Borrower. In addition, if the Loan is not paid in full by September 30, 2018, Borrower will issue Principal (or its participants, such as the Company) a warrant to purchase an additional 1% of the equity of Borrower for each month after September, 2018, until the Loan is paid in full. The exercise price of the warrants is generally equal to a proportionate amount (based on ownership percentage) of capital contributions made by existing owners of Borrower. The Company is entitled to its Participation Percentage of all warrants issued by Borrower to the terms of the Loan Agreement.
Related Party Nature of Transaction
Raymond E. Cabillot, a director of the Company,is the managing partner of Farnam Street Capital, Inc. (“Farnam”) and Farnam is the founding partner of FS Special Opportunities I, L.P.
A complete copy of the Participation Agreement is attached hereto as Exhibit 10.1 and is incorporated herein by reference. A copy of the Loan Agreement is attached as an exhibit to the Participation Agreement and is also incorporated herein by reference. The foregoing description of the Participation Agreement and the Loan Agreement is qualified in its entirety by reference to the complete text of the Participation Agreement and Loan Agreement.
Financial Statements and Exhibits.
Participation Agreement by and between FS Special Opportunities I, L.P. and Pro-Dex, Inc., dated September 20, 2017.
PRO DEX INC ExhibitEX-10.1 2 pdex_ex10z1.htm PARTICIPATION AGREEMENT Participation Agreement Exhibit 10.1 PARTICIPATION AGREEMENT This Participation Agreement (this Agreement) is made and entered into as of September 20,…To view the full exhibit click
About PRO-DEX, INC. (NASDAQ:PDEX)
Pro-Dex, Inc. (Pro-Dex) designs and produces surgical and dental instruments and motion control products used in the medical, factory automation and scientific research industries. The Company operates through four segments: Pro-Dex, OMS, Fineline and Engineering Services Division (ESD). The Pro-Dex segment provides primarily medical and dental instruments using shared production and assembly machines and workforce. The OMS segment is engaged in providing multi-axis motion control applications. The Fineline segment manufactures plastic injection molds for various industries. The ESD segment provides permanent placement and contract services in the fields of engineering, manufacturing and quality to diverse businesses. In addition to Pro-Dex, the names Micro Motors and Oregon Micro Systems are used for marketing purposes as brand names. It provides engineering consulting services, as well as quality and regulatory consulting services, to a range of industries through EDS.