Exhibit
10.7


 


THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE SECURITIES LAWS.  THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.


 


CONVERTIBLE
PROMISSORY NOTE


 


	
  $150,000

  	
  September 25, 2008

  



 


FOR VALUE RECEIVED, ProUroCare Medical Inc., a Nevada
corporation (the “Company”), hereby promises to pay to James L. Davis (“Holder”), the principal sum of One Hundred and
Fifty Thousand DOLLARS ($150,000), together with interest as provided for
herein, in lawful currency of the United States of America.  This Convertible Promissory Note (this “Note”)
shall bear interest at a rate of 10% per annum.


 


SECTION 1


Terms


 


Section 1.1     Interest
Rate.  The Company agrees that
interest shall accrue on the outstanding principal amount of this Note from the
date of this Note until the principal and interest have been converted in
accordance with the provisions hereof or paid in full, with interest accruing
at a fixed rate per annum equal to ten percent (10.0%).  Such interest shall be computed on the basis
of actual days elapsed and a year of 360 days.


 


Section 1.2     Annual
Interest Payment.  Subject to the
earlier conversion of this Note, the interest accrued on this Note from the
date of this Note through September 25, 2009 shall be payable to the
Holder in cash on September 25, 2009. 
At the option of the Holder, such accrued interest, in whole or in part,
may be converted into that number of fully paid and nonassessable shares of the
Company’s common stock, $0.00001 par value (the “Common Stock”) as is
obtained by dividing (A) the amount of such accrued interest by (B) the
closing price of the Common Stock on September 25, 2009.


 


Section 1.3     Maturity.  Subject to the earlier conversion of this
Note, the entire outstanding principal amount of this Note, together with the
interest accrued on this Note from the date of this Note through the date of
payment shall be payable to the Holder in cash on the earlier of seven days
after the date the Company closes a Public Offering (as defined below) or March 25,
2010 (the “Maturity Date”).


 


Section 1.4     Warrant.  The Company agrees, as further consideration
for the loan evidenced by this Note, to grant to Holder a warrant to purchase
One Hundred Thousand (100,000) fully paid and nonassessable shares of the
Company’s common stock, $0.00001 par 


 

















 


value (the “Common Stock”) exercisable at any
time or from time to time through September 25, 2013 at an exercise price
of One Dollar and Fifty Cents ($1.50) per share of Common Stock.


 


Section 1.5     Optional
Conversion Upon a Public Offering. 
In the event that a Public Offering is completed before March 25,
2010, within the seven days following completion of such Public Offering, at
the option of the Holder, all or any portion of the outstanding principal
amount of this Note, and the interest accrued thereon (such principal and
accrued interest, the “Converted Balance”) may be converted into that
number of shares of Common Stock as is obtained by dividing (A) the
Converted Balance by (B) the product of (i) the Offering Price and (ii) 0.70.  For purposes of this Note, (i) “Public
Offering” shall mean an underwritten public offering of equity securities
of the Company and (ii) “Offering Price” shall mean the per share
or other unit price at which equity securities of the Company are offered in
the Public Offering.


 


Section 1.6     Optional
Prepayment.  Subject to the Holder’s
right to have some or all of the principal and accrued interest on this Note
converted into Common Stock in accordance with Section 1.4 hereof, the
Company may, at its option, without premium or penalty, upon five (5) days
prior written notice to the Holder, repay the unpaid principal amount of this
Note, at any time in whole or from time to time in part, together with interest
accrued thereon to the date of prepayment. 
Any such prepayment shall be applied first to the payment of accrued
interest and then to repayment of principal. 
Upon any partial prepayment of the unpaid principal amount of this Note,
the Holder shall make notation on this Note of the portion of the principal so
prepaid.


 


Section 1.7     Subordination.  This Note shall be subordinated in all
respects (including right of payment) to all other indebtedness of the Company,
now existing or hereafter owing, to banks and other such financial
institutions.


 


Section 1.7 
No Fractional Shares or Scrips. 
No fractional shares or scrip representing fractional shares shall be
issued upon the conversion of this Note. 
In lieu of issuing such fractional shares, the Company shall pay all of
the cash value of any fractional interest to Holder.


 


Section 1.8 
No Impairment.  Without
limiting or altering the provisions or obligations of the Company under this
Note, the Company shall not avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed by it pursuant to
this Note and shall at all times in good faith assist in the observance or
performance of any of the terms to be observed or performed by it pursuant to this
Note.


 


Section 1.9 
Issuance of Shares.  Holder acknowledges that the Company
currently has insufficient authorized shares of Common Stock to permit the
conversion of this Note and all of the other similar outstanding notes.


 


Section 1.10 
Release of Obligations. 
Upon conversion or prepayment of this Note, the Company shall be forever
released from all its obligations and liabilities under this Note.


 


Section 1.11 
Adjustment.


 


(a)                                  Adjustments
for Dividends and Distributions.  In
the event the Company at any time or from time to time after the date hereof
shall make, issue, or fix a record 


 


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date for the
determination of holders of capital stock entitled to receive a dividend or
other distribution (including a stock split or subdivision) payable in
securities of the Company, then and in such event provisions shall be made so
that the Holder shall receive, upon conversion of this Note, in addition to the
number of shares of Common Stock receivable thereupon, the amount of securities
of the Company that the Holder would have received had this Note been converted
into Common Stock on the date of such event and had the Holder thereafter,
during the period from the date of such event to and including the conversion
date, retained such securities receivable by the Holder as aforesaid during
such period, giving application to all adjustments called for during such
period under this Note with respect to the rights of the Holder under the Note.


 


(b)                                 Adjustment
for Reclassifications, Exchanges, or Substitutions.  If the Common Stock issuable upon the
conversion of this Note shall be changed into the same or different number of
shares of any class or classes of capital stock, whether by capital
reorganization, reclassification, or otherwise (other than a subdivision or
combination of shares or stock dividend, or a reorganization, merger,
consolidation, or sale of assets provided for elsewhere), then and in each such
event the Holder shall have the right thereafter to convert this Note into the
kind and amount of shares of capital stock and other securities and property
receivable upon such reorganization, reclassification, or other change, by
holders of the number of shares of Common Stock into which this Note might have
been converted immediately prior to such reorganization, reclassification or
change, all subject to further adjustment as provided herein.


 


(c)                                  Reorganization;
Mergers; Consolidations; Sales of Assets. 
If at any time or from time to time there shall be a capital
reorganization of the Common Stock issuable on conversion of this Note (other
than a subdivision, combination, reclassification, or exchange of shares
provided for elsewhere) or a merger or consolidation of the Company with or
into another corporation, or the sale of all or substantially all of the
Company’s properties and assets to any other entity, then, as a part of such
reorganization, merger, consolidation, or sale, provision shall be made so that
the Holder shall thereafter be entitled to receive upon conversion of this
Note, the number of shares of capital stock or other securities or property of
the Company, or of the successor corporation resulting from such merger or
consolidation or sale, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such capital reorganization, merger,
consolidation, or sale. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Note with respect to the rights of
the Holder after the reorganization, merger, consolidation, or sale to the end
that the provisions of this Note shall be applicable after the event as nearly
equivalent as may be practicable.


 


(d)                                 Adjustment
for Stock Splits and Combinations. 
If the Company at any time or from time to time effects a subdivision of
the outstanding capital stock, the Conversion Price then in effect immediately
before that subdivision shall be proportionately decreased, and conversely, if
the Company at any time or from 


 


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time to time
combines the outstanding shares of capital stock, the Conversion Price then in
effect immediately before the combination shall be proportionately increased.
Any adjustment under this subsection (d) shall become effective at the
close of business on the date the subdivision or combination becomes effective.


 


(e)                                  Effects of Reverse Stock Split. 
Notwithstanding any of the foregoing, the price at which this Note
converts under Section 1.4 hereof in the event of a Public Offering shall
not be adjusted under this Section 1.11 for the Company’s Reverse Stock
Split.  For purposes of this Note, “Reverse
Stock Split” shall mean the ten-for-one reverse split of the Company’s
Common Stock effective on February 14, 2008.


 


SECTION 2


Events of Default


 


Section 2.1  Events of Default.   The Outstanding Balance of this Note shall
become due and payable without any action on the part of the Holder thereof
upon the happening of any of the following events (each, an “Event of
Default”):


 


(a)                                  the
Company shall generally not pay its debts as such debts become due, or shall
admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding shall be
instituted by or against the Company seeking to adjudicate it bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, custodianship, protection, or relief of it or its debts under any
law relating to bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment of a receiver,
custodian trustee, or other similar official for it or for any substantial part
of its property; or


 


(b)                                 the
Company shall default in the due performance or observance of any expressed or
implied covenant, agreement or provision of this Note or the Unit Purchase
Agreement and such default shall have continued uncured for a period of thirty
(30) days after written notice thereof to the Company from the Holder of any
outstanding Note.


 


Section 2.2 
Suits for Enforcement.  In
case any one or more Events of Default shall have occurred and be continuing,
unless such Events of Default shall have been waived in the manner provided in Section 3.5,
Holder may proceed to protect and enforce his rights under this Section 2.2
by suit in equity or action at law.  It is agreed that in the event the Holder
prevails in such action, the Holder shall be entitled to receive all reasonable
fees, costs and expenses incurred, including without limitation such reasonable
fees and expenses of attorneys (whether or not litigation is commenced) and
reasonable fees, costs and expenses of appeals.


 


SECTION 3


Miscellaneous


 


Section 3.1     Lost,
Stolen or Mutilated Notes.  Upon receipt
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note, and in case of any such loss, 


 


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theft or destruction, upon delivery of any customary
indemnity agreement reasonably satisfactory to the Company, or in any case of
any such mutilation, upon surrender and cancellation of this Note, the Company
at its expense will issue and deliver a new Note of like tenor in an amount
equal to the amount of such lost, stolen or mutilated Note and any such lost,
stolen or destroyed Note shall thereupon become void.


 


Section 3.2     Benefit
of Note.  This Note shall be binding
upon, and shall inure to the benefit of and be enforceable by, Holder and its
successors and assigns.  All of the
covenants and the agreements contained in this Note by or on behalf of the
Company are binding on the Company’s successors and assigns, whether by
consolidation, merger, transfer or license of all or substantially all of the
property of the Company.


 


Section 3.3     Costs
of Collection.  The Company hereby
waives presentment for payment, notice of dishonor, protest and notice of
protest and, following an Event of Default, the Company shall pay all of Holder’s
costs of collecting or attempting to collect any amount due hereunder,
including but not limited to, all reasonable attorneys’ fees and legal
expenses.


 


Section 3.4 
Notices.  All notices
required under this Note 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 days after posting when sent by
registered or certified mail.  Notices 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 as set forth in the books and records of the Company on
the date hereof (or at such other place as the Holder shall notify the Company
hereof in writing).


 


Section 3.5 
Amendment; Waiver.  Any
term of this Note may be amended, changed or modified, and the observance of
any term of this Note 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


 


Section 3.6 
Governing Law and Construction. 
This Note shall be construed in accordance with and governed by the laws
of the State of Minnesota, without regard to the principles of conflicts of
law.  Whenever possible, each provision
of this Note and any other statement, instrument or transaction contemplated
hereby and valid under such applicable law, but, if any provision of this Note
or any other statement, instrument or transaction contemplated hereby or
relating hereto shall be held to be prohibited or invalid under such applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note or any other statement, instrument or
transaction contemplated hereby or relating hereto.  In the event of any conflict with, between or
among the provisions of this Note or the Unit Purchase Agreement, the Unit
Purchase Agreement shall govern.


 


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


 


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  PROUROCARE
  MEDICAL INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/Richard
  C. Carlson

  
	
   

  	
   

  	
  Name:  Richard
  C. Carlson

  
	
   

  	
   

  	
  Title:  CEO

  



 


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