PROMISSORY NOTE

 

Principal

$500,000.00

Loan Date

02-15-2013

Maturity

02-15-2014

Loan No

4060026

Call/Coll

610

Account

Officer

KRH

Initials

 

References in the boxes above are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.

Any item above containing"' •• " has been omitted due to text length
limitations.

___________________________________________________________________________________________________________

 

Borrower:   PROUROCARE MEDICAL. INC Lender: Crown Bank 6440 FLYING CLOUD DR #101
  Edina Office EDEN PRAIRIE. MN 55344   6600 France Avenue South Suite 125      
Edina. MN 55435

 

 

Principal Amount: $500,000.00 Date of Note: February 15, 2013

 

PROMISE TO PAY. PROUROCARE MEDICAL. INC ("Borrower”) promises to pay to Crown
Bank ("Lender”), or order. in lawful money of the United States of America, the
principal amount of Five Hundred Thousand & 00/100 Dollars ($500.000.00)
together with interest on the unpaid principal balance from February 15. 2013,
until paid in full.

 

PAYMENT. Borrower will pay this loan in full immediately upon Lender's demand.
If no demand is made, subject to any payment changes resulting from changes in
the Index. Borrower will pay this loan in accordance with the following payment
schedule:

 

11 INTEREST ONLY PAYMENTS BEGINNING MARCH 15. 2013 AND CONTINUING AT MONTHLY
TIME INTERVALS THEREAFTER. A PRINCIPAL PAYMENT IN THE AMOUNT OF $50.000.00 IS
DUE AND PAYABLE JANUARY 15. 2014. A FINAL PAYMENT OF ANY UNPAID PRINCIPAL PLUS
ACCRUED INTEREST IS DUE AND PAYABLE FEBRUARY 15, 2014.

 

Unless otherwise agreed or required by applicable law, payments will be applied
first to any accrued unpaid interest; then to principal; then to any late
charges; and then to any unpaid collection costs. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing.

 

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is Lender's Prime Rate (the
"Index"'). This is the rate Lender charges, or would charge, on 90-day unsecured
loans to the most creditworthy corporate customers. This rate may or may not be
the lowest rate available from Lender at any given time. Lender will tell
Borrower the current Index rate upon Borrower's request. The interest rate
change will not occur more often than each day. Borrower understands that Lender
may make loans based on other rates as well. The Index currently is 3.250% per
annum. Interest on the unpaid principal balance of this Note will be calculated
as described in the "INTEREST CALCULATION METHOD" paragraph using a rate of
1.000 percentage point over the Index, rounded up to the nearest 0.001 percent,
adjusted if necessary for any minimum and maximum rate limitations described
below, resulting in an initial rate of 6.000% per annum based on a year of 360
days. NOTICE: Under no circumstances will the interest rate on this Note be less
than 6.000% per annum or more than the maximum rate allowed by applicable law.
Whenever increases occur in the interest rate, Lender, at its option, may do one
or more of the following: (A) increase Borrower's payments to ensure Borrower's
loan will payoff by its original final maturity date. (B) increase Borrower's
payments to cover accruing interest. (C) increase the number of Borrower's
payments, and (D) continue Borrower's payments at the same amount and increase
Borrower's final payment.

 

INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/360
basis; that is, by applying the ratio of the interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. All interest payable under
this Note is computed using this method. This calculation method results in a
higher effective interest rate than the numeric interest rate stated in this
Note.

 

PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
under the payment schedule. Rather, early payments will reduce the principal
balance due and may result in Borrower's making fewer payments. Borrower agrees
not to send Lender payments marked "paid in full", "without recourse", or
similar language. If Borrower sends such a payment, Lender may accept it without
losing any of Lender's rights under this Note, and Borrower will remain
obligated to pay any further amount owed to Lender. All written communications
concerning disputed amounts, including any check or other payment instrument
that indicates that the payment constitutes "payment in full" of the amount owed
or that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: Crown Bank, Edina Office.
6600 France Avenue South Suite 125 Edina. MN 55435.

 

LATE CHARGE. If a payment is 11 days or more late. Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment.

 

INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, the interest rate on this Note shall be increased by adding an
additional 2.000 percentage point margin ("Default Rate Margin"). The Default
Rate Margin shall also apply to each succeeding interest rate change that would
have applied had there been no default. However, in no event will the interest
rate exceed the maximum interest rate limitations under applicable law.

 

DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:

 

Payment Default. Borrower fails to make any payment when due under this Note.

 

Other Defaults. Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Note or in any of the
related documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower.

 

False Statements. Any warranty, representation or statement made or furnished to
Lender by Borrower or on Borrower's behalf under this Note or the related
documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time thereafter.

 

Insolvency. The dissolution or termination of Borrower's existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower's property. any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.

 

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method by any creditor of Borrower or by any governmental agency against
any collateral securing the loan. This includes a garnishment of any of
Borrower's accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute. 

 

 

 

PROMISSORY NOTE

 

Loan No: 4060026  (Continued) Page 2

 

 

Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
guaranty of the indebtedness evidenced by this Note.

 

Change In Ownership. Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.

 

Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of this
Note is impaired.

 

Insecurity. Lender in good faith believes itself insecure.

 

LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance under this Note and all accrued unpaid interest immediately due, and
then Borrower will pay that amount.

 

ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's reasonable
attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit,
including reasonable attorneys' fees, expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction), and
appeals. If not prohibited by applicable law, Borrower also will pay any court
costs, in addition to all other sums provided by law.

 

GOVERNING LAW. This Note will be governed by federal law applicable to Lender
and, to the extent not preempted by federal law, the laws of the State of
Minnesota without regard to its conflicts of law provisions. This Note has been
accepted by Lender in the State of Minnesota.

 

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of Hennepin County, State of Minnesota.

 

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.

 

COLLATERAL. Borrower acknowledges this Note is secured by AN EXISTING SECURITY
AGREEMENT DATED 10/10/2007 AND GUARANTEED BY 2 EXISTING GUARANTIES BOTH DATED
06/28/2010.

 

CORPORATE TAX RETURN. BORROWER WILL PROVIDE AN ANNUAL CORPORATE TAX RETURN
WITHIN 120 DAYS OF YEAR END.

 

YEAR END STATEMENT. BORROWER WILL PROVIDE AN ANNUAL FINANCIAL STATEMENT WITHIN
120 DAYS OF YEAR END.

 

PERSONAL FINANCIAL STATEMENT. GUARANTOR WILL PROVIDE AN ANNUAL PERSONAL
FINANCIAL STATEMENT WITHIN 30 DAYS OF YEAR END.

 

PERSONAL TAX RETURN. GUARANTOR WILL PROVIDE AN ANNUAL PERSONAL TAX RETURN WITHIN
120 DAYS OF YEAR END

 

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.

 

GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. If any part of this Note cannot be
enforced, this fact will not affect the rest of the Note. Lender may delay or
forgo enforcing any of its rights or remedies under this Note without losing
them. In addition, Lender shall have all the rights and remedies provided in the
related documents or available at law, in equity, or otherwise. Except as may be
prohibited by applicable law, all of Lender's rights and remedies shall be
cumulative and may be exercised singularly or concurrently. Election by Lender
to pursue any remedy shall not exclude pursuit of any other remedy, and an
election to make expenditures or to take action to perform an obligation of
Borrower shall not affect Lender's right to declare a default and to exercise
its rights and remedies. Borrower and any other person who signs, guarantees or
endorses this Note, to the extent allowed by law, waive presentment, demand for
payment, and notice of dishonor. Upon any change in the terms of this Note, and
unless otherwise expressly stated in writing, no party who signs this Note,
whether as maker, guarantor, accommodation maker or endorser, shall be released
from liability. All such parties agree that Lender may renew or extend
(repeatedly and for any length of time) this loan or release any party or
guarantor or collateral; or impair, fail to realize upon or perfect Lender's
security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made. The obligations
under this Note are joint and several.

 

SECTION DISCLOSURE. To the extent not preempted by federal law, this loan is
made under Minnesota Statutes, Section 47.59.

 

PRIOR TO SIGNING THIS NOTE. BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE.

 

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

 

BORROWER:

 

By: /s/Richard B Thon

 

RICHARD THON, Chief Financial Officer of--

PROUROCARE MEDICAL, INC