**Exhibit 10.2**

 

SECURITYAGREEMENT

 

DATE AND PARTIES. The date of this SecurityAgreement (Agreement) is June 12, 2009. The parties and their addressesare:

 

SECURED PARTY:

CROWN BANK

6600 France Avenue South Ste 125 

Edina, MN 55435

 

DEBTOR:

PROUROCARE MEDICAL INC.

a Nevada Corporation

6440 FLYING CLOUD DR #101

EDEN PRAIRIE, MN 55344

 

The pronouns “you” and “your” refer to theSecured Party. The pronouns “I,” “me” and “my” refer to each person or entitysigning this Agreement as Debtor and agreeing to give the Property described inthis Agreement as security for the Secured Debts.

 

Wherethe owner of the Property is different from the obligor or guarantor whoseobligation this Agreement secures, “Debtor” refers to each person or entity whois an owner of the Property and “Obligor” or “Guarantor,” as applicable, referto such parties as designated in the SECURED DEBTS section.

 

1. SECURED DEBTS. The term “Secured Debts”includes and this Agreement will secure each of the following:

 

A. Specific Debts. The following debts and allextensions, renewals, refinancings, modifications and replacements. Apromissory note or other agreement, No. 4090817, dated June 12, 2009,from PROUROCARE MEDICAL INC. and PRO URO CARE, INC. (Obligor) to you, in theamount of $100,000.00.

B. All Debts. All present and future debts fromObligor to you, even if this Agreement is not specifically referenced, thefuture debts are also secured by other collateral, or if the future debt isunrelated to or of a different type than this debt. If more than one personsigns this Agreement, each agrees that it will secure debts incurred eitherindividually or with others who may not sign this Agreement. Nothing in thisAgreement constitutes a commitment to make additional or future loans or advances.Any such commitment must be in writing.

This Agreement will not secure any debt forwhich you fail to give any required notice of the right of rescission. ThisAgreement will not secure any debt for which a non-possessory, non-purchasemoney security interest is created in “household goods” in connection with a “consumerloan,” as those terms are defined by federal law governing unfair and deceptivecredit practices. In addition, this Agreement will not secure any other debtif, as a result, the other debt would become subject to Section 670 of theJohn Warner National Defense Authorization Act for Fiscal Year 2007.

C. Sums Advanced. All sums advanced and expensesincurred by you under the terms of this Agreement.

 

Loan Documents refer to all the documentsexecuted in connection with the Secured Debts.

 

2.SECURITY INTEREST. To secure the payment and performance of the Secured Debts,I give you a security interest in all of the Property described in thisAgreement that I own or have sufficient rights in which to transfer aninterest, now or in the future, wherever the Property is or will be located,and all proceeds and products from the Property (including, but not limited to,all parts, accessories, repairs, replacements, improvements, and accessions to theProperty). Property is all the collateral given as security for the SecuredDebts and described in this Agreement, and includes all obligations thatsupport the payment or performance of the Property. “Proceeds” includesanything acquired upon the sale, lease, license, exchange, or other dispositionof the Property; any rights and claims arising from the Property; and anycollections and distributions on account of the Property.

 

ThisAgreement remains in effect until terminated in writing, even if the SecuredDebts are paid and you are no longer obligated to advance funds to me under anyloan or credit agreement.

 

3. PROPERTY DESCRIPTION. The Property isdescribed as follows:

 

A. Inventory. All inventory which I hold forultimate sale or lease, or which has been or will be supplied under contractsof service, or which are raw materials, work in process, or materials used orconsumed in my business.

B. Accounts and Other Rights to Payment. Allrights I have now or in the future to payments including, but not limited to,payment for property or services sold, leased, rented, licensed, or assigned,whether or not I have earned such payment by performance. This includes anyrights and interests (including all liens and security interests) which I mayhave by law or agreement against any Account Debtor or obligor of mine.

C. General Intangibles. All general intangiblesincluding, but not limited to, tax refunds, applications for patents, patents,copyrights, trademarks, trade secrets, good will, trade names, customer lists,permits and franchises, payment intangibles, computer programs and allsupporting information provided in connection with a transaction relating tocomputer programs, and the right to use my name.

D. Equipment. All equipment including, but not limitedto, all machinery, vehicles, furniture, fixtures, manufacturing equipment, farmmachinery and equipment, shop equipment, office and record keeping equipment,and parts and tools. All equipment described in a list or schedule which I giveto you will also be included in the Property, but such a list is not necessaryfor a valid security interest in my equipment.

 

4. WARRANTIES AND REPRESENTATIONS. I make to youthe following warranties and representations which will continue as long asthis Agreement is in effect:

 

A. Power. I am duly organized, and validlyexisting and in good standing in all jurisdictions in which I operate. I havethe power and authority to enter into this transaction and to carryon mybusiness or activity as it is now being conducted and, as applicable, amqualified to do so in each jurisdiction in which I operate.

B. Authority. The execution, delivery andperformance of this Agreement and the obligation evidenced by this Agreementare within my powers, have been duly authorized, have received all necessarygovernmental approval, will not violate any provision of law, or order of courtor governmental agency, and will not violate any agreement to which I am aparty or to which I am or any of my property is subject.

C. Name and Location. My name indicated in theDATE AND PARTIES section is my exact legal name. I am an entity organized andregistered under the laws of Minnesota. I will provide verification ofregistration and location upon your request. I will provide you with at least30 days notice prior to any change in my name, address, or state oforganization or registration.

D. Business Name. Other than previouslydisclosed in writing to you I have not changed my name or principal place ofbusiness within the last 10 years and have not used any other trade orfictitious name. Without your prior written consent, I do not and will not useany other name and will preserve my existing name, trade names and franchises.

E. Ownership of Property. I represent that I ownall of the Property. Your claim to the Property is ahead of the claims of anyother creditor, except as disclosed in writing to you prior to any advance onthe Secured Debts. I represent that I am the original owner of the Propertyand, if I am not, that I have provided you with a list of prior owners of theProperty.

 

5. DUTIES TOWARD PROPERTY.

 

A. Protection of Secured Party’s Interest. Iwill defend the Property against any other claim. I agree to do whatever yourequire to protect your security interest and to keep your claim in theProperty ahead of the claims of other creditors. I will not do anything to harmyour position.

 

I will keep books, records and accounts aboutthe Property and my business in general. I will let you examine these and makecopies at any reasonable time. I will prepare any report or accounting yourequest which deals with the Property.

 

B. Use, Location, and Protection of theProperty. I will keep the Property in my possession and in good repair. I willuse it only for commercial purposes. I will not change this specified usewithout your prior written consent. You have the right of reasonable access toinspect the Property and I will immediately inform you of any loss or damage tothe Property. I will not cause or permit waste to the Property.

 

I will keep the Property at my address listed inthe DATE AND PARTIES section unless we agree I may keep it at another location.If the Property is to be used in other states, I will give you a list of thosestates. The location of the Property is given to aid in the identification ofthe Property. It does not in any way limit the scope of the security interestgranted to you. I will notify you in writing and obtain your prior writtenconsent to any change in location of any of the Property. I will not use theProperty in violation of any law. I will notify you in writing prior to anychange in my address, name or, if an organization, any change in my identity orstructure.

 

Until the Secured Debts are fully paid and thisAgreement is terminated, I will not grant a security interest in any of theProperty without your prior written consent. I will pay all taxes andassessments levied or assessed against me or the Property and provide timelyproof of payment of these taxes and assessments upon request.

 

C. Selling, Leasing or Encumbering the Property.I will not sell, offer to sell, lease, or otherwise transfer or encumber theProperty without your prior written permission, except for Inventory sold inthe ordinary course of business at fair market value, or at a minimum priceestablished between you and me. If I am in default under this Agreement, I maynot sell the Inventory portion of the Property even in the ordinary course ofbusiness. Any disposition of the Property contrary to this Agreement willviolate your rights. Your permission to sell the Property may be reasonablywithheld without regard to the creditworthiness of any buyer or transferee. Iwill not permit the Property to be the subject of any court order affecting myrights to the Property in any action by anyone other than you. If the Propertyincludes chattel paper or instruments, either as original collateral or asproceeds of the Property, I will note your security interest on the face of thechattel paper or instruments.

 

D. Additional Duties Specific to Accounts. Iwill not settle any Account for less than its full value without your writtenpermission. Until you tell me otherwise, I will collect all Accounts in theordinary course of business. I will not dispose of the Accounts by assignment withoutyour prior written consent. I will keep the proceeds from all the Accounts andany goods which are returned to me or which I take back. I will not comminglethem with any of my other property. I

 

Initials

 

1

----

 

will deliver the Accounts to you at yourrequest. If you ask me to pay you the full price on any returned items or itemsretaken by me, I will do so. I will make no material change in the terms of anyAccount, and I will give you any statements, reports, certificates, lists ofAccount Debtors (showing names, addresses and amounts owing), invoicesapplicable to each Account, and other data in any way pertaining to theAccounts as you may request.

 

6. INSURANCE. I agree to keep the Propertyinsured against the risks reasonably associated with the Property. I willmaintain this insurance in the amounts you require. This insurance will lastuntil the Property is released from this Agreement. I may choose the insurancecompany, subject to your approval, which will not be unreasonably withheld.

 

I will have the insurance company name you asloss payee on any insurance policy. I will give you and the insurance companyimmediate notice of any loss. You may apply the insurance proceeds toward whatis owed on the Secured Debts. You may require added security as a condition ofpermitting any insurance proceeds to be used to repair or replace the Property.

 

If you acquire the Property in damagedcondition, my right to any insurance policies and proceeds will pass to you tothe extent of the Secured Debts.

 

I will immediately notify you of cancellation ortermination of insurance. If I fail to keep the Property insured, you mayobtain insurance to protect your interest in the Property and I will pay forthe insurance on your demand. You may demand that I pay for the insurance allat once, or you may add the insurance premiums to the balance of the SecuredDebts and charge interest on it at the rate that applies to the Secured Debts.This insurance may include coverages not originally required of me, may bewritten by a company other than one I would choose, and may be written at ahigher rate than I could obtain if I purchased the insurance. I acknowledge andagree that you or one or your affiliates may receive commissions on thepurchase of this insurance.

 

7. COLLECTION RIGHTS OF THE SECURED PARTY.Account Debtor means the person who is obligated on an account, chattel paper,or general intangible. I authorize you to notify my Account Debtors of yoursecurity interest and to deal with the Account Debtors’ obligations at yourdiscretion. You may enforce the obligations of an Account Debtor, exercisingany of my rights with respect to the Account Debtors’ obligations to makepayment or otherwise render performance to me, including the enforcement of anysecurity interest that secures such obligations. You may apply proceedsreceived from the Account Debtors to the Secured Debts or you may release suchproceeds to me.

 

I specifically and irrevocably authorize you toexercise any of the following powers at my expense, without limitation, untilthe Secured Debts are paid in full:

 

A.     demand payment and enforce collection fromany Account Debtor or Obligor by suit or otherwise.

B.      enforce any security interest, lien orencumbrance given to secure the payment or performance of any Account Debtor orany obligation constituting Property.

C.      file proofs of claim or similar documentsin the event of bankruptcy, insolvency or death of any person obligated as anAccount Debtor.

D.      compromise, release, extend, or exchangeany indebtedness of an Account Debtor.

E.      take control of any proceeds of theAccount Debtors’ obligations and any returned or repossessed goods.

F.      endorse all payments by any Account Debtorwhich may come into your possession as payable to me.

G.      deal in all respects as the holder andowner of the Account Debtors’ obligations.

 

8. AUTHORITY TO PERFORM. I authorize you to doanything you deem reasonably necessary to protect the Property, and perfect andcontinue your security interest in the Property. If I fail to perform any of myduties under this Agreement or any other Loan Document, you are authorized toperform the duties or cause them to be performed.  These authorizations include, but are notlimited to, permission to:

 

A.     pay and discharge taxes, liens, securityinterests or other encumbrances at any time levied or placed on the Property.

B.      pay any rents or other charges under anylease affecting the Property.

C.      order and pay for the repair, maintenanceand preservation of the Property.

D.      file any financing statements on my behalfand pay for filing and recording fees pertaining to the Property.

E.      place a note on any chattel paperindicating your interest in the Property.

F.      take any action you feel necessary torealize on the Property, including performing any part of a contract orendorsing it in my name.

G.      handle any suits or other proceedingsinvolving the Property in my name.

H.      prepare, file, and sign my name to anynecessary reports or accountings.

I.       make an entry on my books and recordsshowing the existence of this Agreement.

J.       notify any Account Debtor of your interestin the Property and tell the Account Debtor to make payments to you or someoneelse you name.

 

If you perform for me, you will use reasonablecare. If you exercise the care and follow the procedures that you generallyapply to the collection of obligations owed to you, you will be deemed to beusing reasonable care. Reasonable care will not include: any steps necessary topreserve rights against prior parties; the duty to send notices, performservices or take any other action in connection with the management of theProperty; or the duty to protect, preserve or maintain any security interestgiven to others by me or other parties. Your authorization to perform for mewill not create an obligation to perform and your failure to perform will notpreclude you from exercising any other rights under the law or this Agreement.All cash and non-cash proceeds of the Property may be applied by you only uponyour actual receipt of cash proceeds against such of the Secured Debts, maturedor unmatured, as you determine in your sale discretion.

 

If you come into actual or constructivepossession of the Property, you will preserve and protect the Property. Forpurposes of this paragraph, you will be in actual possession of the Propertyonly when you have physical, immediate and exclusive control over the Propertyand you have affirmatively accepted that control. You will be in constructivepossession of the Property only when you have both the power and the intent toexercise control over the Property.

 

9. DEFAULT. I will be in default if any of thefollowing occur:

 

A.     Payments. I or Obligor fail to make apayment in full when due.

B.      Insolvency or Bankruptcy. The death,dissolution or insolvency of, appointment of a receiver by or on behalf of,application of any debtor relief law, the assignment for the benefit ofcreditors by or on behalf of, the voluntary or involuntary termination ofexistence by, or the commencement of any proceeding under any present or futurefederal or state insolvency, bankruptcy, reorganization, composition or debtorrelief law by or against me, Obligor, or any co-signer, endorser, surety orguarantor of this Agreement or any other obligations Obligor has with you.

C.      Business Termination. I merge, dissolve,reorganize, end my business or existence, or a partner or majority owner diesor is declared legally incompetent.

D.      Failure to Perform. I fail to perform anycondition or to keep any promise or covenant of this Agreement.

E.      Other Documents. A default occurs underthe terms of any other Loan Document.

F.      Other Agreements. I am in default on anyother debt or agreement I have with you.

G.      Misrepresentation. I make any verbal orwritten statement or provide any financial information that is untrue,inaccurate, or conceals a material fact at the time it is made or provided.

H.      Judgment. I fail to satisfy or appeal anyjudgment against me.

I.       Forfeiture. The Property is used in amanner or for a purpose that threatens confiscation by a legal authority.

J.       Name Change. I change my name or assume anadditional name without notifying you before making such a change.

K.      Property Transfer. I transfer all or asubstantial part of my money or property.

L.      Property Value. You determine in goodfaith that the value of the Property has declined or is impaired.

M.     Material Change. Without first notifyingyou, there is a material change in my business, including ownership,management, and financial conditions.

N.      Insecurity. You determine in good faiththat a material adverse change has occurred in Borrower’s financial conditionfrom the conditions set forth in Borrower’s most recent financial statementbefore the date of this Agreement or that the prospect for payment orperformance of the Secured Debts is impaired for any reason.

 

10. DUE ON SALE OR ENCUMBRANCE. You may, at youroption, declare the entire balance of this Agreement to be immediately due andpayable upon the creation of, or contract for the creation of, any lien,encumbrance, transfer or sale of all or any part of the Property. This right issubject to the restrictions imposed by federal law (12 C.F.R. 591), asapplicable. However, if I am in default under this Agreement, I may not sellthe inventory portion of the Property even in the ordinary course of business.

 

11. REMEDIES.After I default, you may at your option do anyone or more of the following.

 

A.     Acceleration. You may make all or any partof the amount owing by the terms of the Secured Debts immediately due.

B.      Sources. You may use any and all remediesyou have under state or federal law or in any Loan Document.

C.      Insurance Benefits. You may make a claimfor any and all insurance benefits or refunds that may be available on mydefault.

D.      Payments Made On My Behalf. Amountsadvanced on my behalf will be immediately due and may be added to the SecuredDebts.

E.      Assembly of Property. You may require meto gather the Property and make it available to you in a reasonable fashion.

F.      Repossession. You may repossess theProperty so long as the repossession does not involve a breach of the peace.You may sell, lease or otherwise dispose of the Property as provided by law.You may apply what you receive from the disposition of the Property to yourexpenses, your attorneys’ fees and legal expenses (where not prohibited bylaw), and any debt I owe you. If what you receive from the disposition of theProperty does not satisfy the debt, I will be liable for the deficiency (wherepermitted by law). In some cases, you may keep the Property to satisfy thedebt.

 

Where a notice is required, I agree that tendays prior written notice sent by first class mail to my address listed in thisAgreement will be reasonable notice to me under the Minnesota UniformCommercial Code. If the Property is perishable or threatens to decline speedilyin value, you may, without notice to me, dispose of any or all of the Propertyin a commercially reasonable manner at my expense following any commercially reasonablepreparation or processing.

 

2

----

 

If any items not otherwise subject to thisAgreement are contained in the Property when you take possession, you may holdthese items for me at my risk and you will not be liable for taking possessionof them.

G. Use and Operation. You may enter upon mypremises and take possession of all or any part of my property for the purposeof preserving the Property or its value, so long as you do not breach thepeace. You may use and operate my property for the length of time you feel isnecessary to protect your interest, all **withoutpayment or compensation to**me.

H. Waiver. By choosing anyone or more of theseremedies you do not give up your right to use any other remedy. You do notwaive a default if you choose not to use a remedy. By electing not to use anyremedy, you do not waive your right to later consider the event a default andto use any remedies if the default continues **or**occurs again.

 

12.  WAIVEROF CLAIMS. I waive all claims for loss or damage caused by your acts oromissions where you acted reasonably and in good faith.

 

13.  PERFECTIONOF SECURITY INTEREST AND COSTS. I authorize you to file a financing statementcovering the Property. I will comply with, facilitate, and otherwise assist youin connection with obtaining perfection or control over the Property forpurposes of perfecting your security interest under the Uniform CommercialCode. I agree to pay all taxes, fees and costs you payor incur in connectionwith preparing, filing or recording any financing statements or other securityinterest filings on the Property. I agree to pay all actual costs ofterminating your security interest.

 

14.  APPLICABLELAW. This Agreement is governed by the laws of Minnesota, the United States ofAmerica, and to the extent required, by the laws of the jurisdiction where theProperty is located, except to the extent such state laws are preempted byfederal law. In the event of a dispute, the exclusive forum, venue and place ofjurisdiction will be in Minnesota, unless otherwise required by law.

 

15.JOINT AND INDIVIDUAL LIABILITY AND SUCCESSORS. Each Debtor’s obligations underthis Agreement are independent of the obligations of any other Debtor. You maysue each Debtor individually or together with any other Debtor. You may releaseany part of the Property and I will still be obligated under this Agreement forthe remaining Property. Debtor agrees that you and any party to this Agreementmay extend, modify or make any change in the terms of this Agreement or anyevidence of debt without Debtor’s consent. Such a change will not releaseDebtor from the terms of this Agreement. If you assign any of the SecuredDebts, you may assign all or any part of this Agreement without notice to me ormy consent, and this Agreement will inure to the benefit of your assignee tothe extent of such assignment. You will continue to have the Unimpaired rightto enforce this Agreement as to any of the Secured Debts that are not assigned.This Agreement shall inure to the benefit of and be enforceable by you and yoursuccessors and assigns and any other person to whom you may grant an interestin the Secured Debts and shall be binding upon and enforceable against me andmy personal representatives, successors, heirs and assigns.

 

16.AMENDMENT, INTEGRATION AND SEVERABILITY. This Agreement may not be amended ormodified by oral agreement. No amendment or modification of this Agreement iseffective unless made in writing and executed by you and me. This Agreement andthe other Loan Documents are the complete and final expression of theunderstanding between you and me. If any provision of this Agreement isunenforceable, then the unenforceable provision will be severed and theremaining provisions will still be enforceable.

 

17. INTERPRETATION. Whenever used, the singularincludes the plural and the plural includes the singular. The section headingsare for convenience only and are not to be used to interpret or define theterms of this Agreement.

 

18.NOTICE, FINANCIAL REPORTS AND ADDITIONAL DOCUMENTS. Unless otherwise requiredby law, any notice will be given by delivering it or mailing it by first classmail to the appropriate party’s address listed in the DATE AND PARTIES section,or to any other address designated in writing. Notice to one Debtor will bedeemed to be notice to all Debtors. I will inform you in writing of any changein my name, address or other application information. I will provide you anyfinancial statement or information you request. All financial statements andinformation I give you will be correct and complete. I agree to sign, deliver,and file any additional documents or certifications that you may considernecessary to perfect, continue, and preserve my obligations under this Agreementand to confirm your lien status on any Property. Time is of the essence.

 

 

SIGNATURES. By signing, I agree to the termscontained in this Agreement. I also acknowledge receipt of a copy of thisAgreement.

 
| PROUROCARE MEDICAL INC. |                    |
|-------------------------|-------------------------|
|                    |                    |   |
|                    | By                      | /s/ RICHARD C. CARLSON |   |
|                    | RICHARD C. CARLSON, CEO |   |
|                         |                         |  |  |

 

3

----