**Exhibit10.46**

 

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

 

**CONVERTIBLE PROMISSORYNOTE**

 

| $142,500.00 |   | Promissory Note  No.                                                                                                                         |
|-------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |   | [                          ,  2007] |

 

FOR VALUE RECEIVED, ProUroCare Medical Inc., a Nevadacorporation (the “Company”), hereby promises to pay to James Davis (“Holder”), the principal sum of One HundredForty-Two Thousand and Five Hundred DOLLARS ($142,500.00), together withinterest as provided for herein, in lawful currency of the United States ofAmerica.  This Convertible PromissoryNote (this “Note”) shall bear interest at a rate of 10% per annum.

 

This Note is issued pursuant to, and is entitled tothe benefits of the provisions of that certain Unit Purchase Agreement, datedas of December 27, 2007,(the “Unit Purchase Agreement”), between the Company and theHolder.  Capitalized terms used hereinand not otherwise defined herein shall have the meanings ascribed to them inthe Unit Purchase Agreement.

 

# SECTION 1Terms

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

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## Section 1.2 Annual Interest Payment. Subject to the earlier conversion of this Note, the interest accrued onthis Note from the date of this Note through the December 27, 2008 shallbe payable to the Holder in cash on December 27, 2008.  At the option of the Holder, such accruedinterest, in whole or in part, may be converted into that number of fully paidand nonassessable shares of the Company’s common stock, $0.00001 par value (the“Common Stock”) as is obtained by dividing (A) the amount of suchaccrued interest by (B) the closing price of the Common Stock on December 27,2008.

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## Section 1.3 Conversion Date.  On June 27,2009 (the “Maturity Date”), the entire outstanding principal amount ofthis Note shall automatically convert into that number of fully 

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## paid and nonassessable shares of Common Stock as is obtained bydividing (A) the entire outstanding principal amount of this Note by (B) $0.005(the “Conversion Price”).  All orany portion of the accrued but unpaid interest on the Note shall, at the optionof the Holder, be (i) converted into that number of fully paid andnonassessable shares of Common Stock as is obtained by dividing (A) suchaccrued but unpaid interest by (B) the Conversion Price or (ii) paidto the Holder in cash.

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## Section 1.4 Conversion Upon a Public Offering.  In the event that a Public Offering iscompleted before the Maturity Date, without any act by the Company or theHolder hereof, at the effective date of such Public Offering, the entireoutstanding principal amount of this Note, together with all interest accruedthereon (such principal and accrued interest, the “Outstanding Balance”)shall be automatically converted into that number and type of equity securitiesissued by the Company in a Public Offering as is obtained by dividing (A) theOutstanding Balance by (B) the product of (i) the Offering Price and (ii) 0.50.  For purposes of this Note, (i) “PublicOffering” shall mean an underwritten public offering of equity securitiesof the Company and (ii) “Offering Price” shall mean the per shareor other unit price at which equity securities of the Company are offered inthe Public Offering.

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## Section 1.5 Optional Prepayment. Subject to the Holder’s right to have all interest accrued from the dateof this Note through the December 27, 2008 converted into Common Stock inaccordance with Section 1.2 hereof, beginning on December 27, 2008,the Company may, at its option, without premium or penalty, upon five (5) daysprior written notice to the Holder, repay the unpaid principal amount of thisNote, at any time in whole or from time to time in part, together with interestaccrued thereon to the date of prepayment. Any such prepayment shall be applied first to the payment of accruedinterest 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 soprepaid.

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## Section 1.6 Subordination.  This Noteshall be subordinated in all respects (including right of payment) to all otherindebtedness of the Company, now existing or hereafter owing, to banks andother such financial institutions.

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Section 1.6  No Fractional Shares or Scrips.  No fractional shares or scrip representingfractional 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 toHolder.

 

Section 1.7  No Impairment.  Without limiting or altering the provisionsor obligations of the Company under this Note or the Unit Purchase Agreement,the Company shall not avoid or seek to avoid the observance or performance ofany of the terms to be observed or performed by it pursuant to this Note andthe Unit Purchase Agreement and shall at all times in good faith assist in theobservance or performance of any of the terms to be observed or performed by itpursuant to this Note and the Unit Purchase Agreement.

 

Section 1.8  Issuance of Shares.  Holder acknowledges that the Company currently has insufficientauthorized shares of Common Stock to permit the conversion of this Note inaccordance with Section 1.3 hereof.

 

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Section 1.9  Release of Obligations.  Upon conversion or prepayment of this Note,the Company shall be forever released from all its obligations and liabilitiesunder this Note.

 

Section 1.10  Adjustment.

 

### (a)                                  Adjustments for Dividends andDistributions.  In the event the Company at any time or fromtime to time after the date hereof shall make, issue, or fix a record date forthe determination of holders of capital stock entitled to receive a dividend orother distribution (including a stock split or subdivision) payable insecurities of the Company, then and in such event provisions shall be made sothat the Holder shall receive, upon conversion of this Note, in addition to thenumber of shares of Common Stock receivable thereupon, the amount of securitiesof the Company that the Holder would have received had this Note been convertedinto 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 conversiondate, retained such securities receivable by the Holder as aforesaid duringsuch period, giving application to all adjustments called for during suchperiod under this Note with respect to the rights of the Holder under the Note.

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

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### (c)                                  Reorganization; Mergers; Consolidations;Sales of Assets.  If at any time or from time to time thereshall be a capital reorganization of the Common Stock issuable on conversion ofthis Note (other than a subdivision, combination, reclassification, or exchangeof shares provided for elsewhere) or a merger or consolidation of the Companywith or into another corporation, or the sale of all or substantially all ofthe Company’s properties and assets to any other entity, then, as a part ofsuch reorganization, merger, consolidation, or sale, provision shall be made sothat the Holder shall thereafter be entitled to receive upon conversion of thisNote, the number of shares of capital stock or other securities or property ofthe Company, or of the successor corporation resulting from such merger orconsolidation or sale, to which a holder of Common Stock deliverable uponconversion would have been entitled on such capital reorganization, merger,consolidation, or sale. In any such case, appropriate adjustment shall be madein the application of the provisions of this Note with respect to the rights ofthe Holder after the reorganization, merger, consolidation, or sale to the endthat the 

 

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### provisions of this Noteshall be applicable after the event as nearly equivalent as may be practicable.

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### (d)                                 Adjustment for Stock Splits andCombinations.  If the Company at any time or from time to timeeffects a subdivision of the outstanding capital stock, the Conversion Pricethen in effect immediately before that subdivision shall be proportionatelydecreased, and conversely, if the Company at any time or from time to timecombines the outstanding shares of capital stock, the Conversion Price then ineffect immediately before the combination shall be proportionately increased.Any adjustment under this subsection (d) shall become effective at theclose of business on the date the subdivision or combination becomes effective.

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### (e)                                  Effects of Reverse Stock Split.  Notwithstanding any of the foregoing, theprice at which this Note converts under Section 1.4 hereof in the event ofa Public Offering shall not be adjusted under this Section 1.10 for the Company’sReverse Stock Split.  For purposes ofthis Note, “Reverse Stock Split” shall mean the ten-for-one reverse split of the Company’s CommonStock effective prior to the effectiveness of aPublic Offering.  For example, after the Reverse Stock Split,the Outstanding Balance shall still be automatically converted into that number andtype of equity securities issued by the Company in a Public Offering as isobtained by dividing (A) the Outstanding Balance by (B) the productof (i) the Offering Price and (ii) 0.50.

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Section 1.11  Lock-Up.  In addition to any restrictions on transferunder applicable law, the Holder acknowledges and agrees that this Note and theequity securities issued or issuable upon conversion of this Note may not besold, offered for sale, pledged or otherwise transferred or disposed of priorto the expiration of a period of one-year beginning on the effective date ofthe Public Offering.

 

# SECTION 2Events of Default

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

 

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

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### (b)                                 the Company shall default in the dueperformance or observance of any expressed or implied covenant, agreement orprovision of this Note or the Unit Purchase Agreement and such default shallhave continued uncured for a period of thirty (30) days after written noticethereof to the Company from the Holder.

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

 

# SECTION 3Miscellaneous

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## Section 3.1     Lost,Stolen or Mutilated Notes.  Uponreceipt of evidence satisfactory to the Company of the loss, theft, destructionor mutilation of this Note, and in case of any such loss, theft or destruction,upon delivery of any customary indemnity agreement reasonably satisfactory tothe Company, or in any case of any such mutilation, upon surrender andcancellation of this Note, the Company at its expense will issue and deliver anew Note of like tenor in an amount equal to the amount of such lost, stolen ormutilated Note and any such lost, stolen or destroyed Note shall thereuponbecome void.

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## Section 3.2     Benefitof Note.  This Note shall be bindingupon, and shall inure to the benefit of and be enforceable by, Holder and hissuccessors and assigns.  All of thecovenants and the agreements contained in this Note by or on behalf of theCompany are binding on the Company’s successors and assigns, whether byconsolidation, merger, transfer or license of all or substantially all of theproperty of the Company.

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## Section 3.3     Costsof Collection.  The Company herebywaives presentment for payment, notice of dishonor, protest and notice ofprotest and, following an Event of Default, the Company shall pay all of Holder’scosts of collecting or attempting to collect any amount due hereunder,including but not limited to, all reasonable attorneys’ fees and legalexpenses.

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Section 3.4  Notices.  All notices required under this Note shall bedeemed to have been given or made for all purposes (i) upon personaldelivery, (ii) upon confirmation receipt that the communication wassuccessfully sent to the applicable number if sent by facsimile; (iii) oneday after being sent, when sent by professional overnight courier service, or (iv) fivedays after posting when sent by registered or certified mail.  Notices to the Company shall be sent to theprincipal office of the Company (or at such other place as the Company shallnotify the Holder hereof in writing). Notices to the Holder shall be sent to the address of the Holder setforth in Schedule A to the Unit Purchase Agreement (or at such otherplace as the Holder shall notify the Company hereof in writing).

 

Section 3.5  Amendment; Waiver.  Any term of this Note may be amended, changedor modified, and the observance of any term of this Note may be waived (eithergenerally or in a 

 

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particular instance andeither retroactively or prospectively), with the written consent of the Companyand the Holder.

 

Section 3.6  Governing Law and Construction.  This Note shall be construed in accordancewith and governed by the laws of the State of Minnesota, without regard to theprinciples of conflicts of law.  Wheneverpossible, each provision of this Note and any other statement, instrument ortransaction contemplated hereby and valid under such applicable law, but, ifany provision of this Note or any other statement, instrument or transactioncontemplated hereby or relating hereto shall be held to be prohibited orinvalid under such applicable law, such provision shall be ineffective only tothe extent of such prohibition or invalidity, without invalidating theremainder of such provision or the remaining provisions of this Note or anyother statement, instrument or transaction contemplated hereby or relatinghereto.  In the event of any conflictwith, between or among the provisions of this Note or the Unit PurchaseAgreement, the Unit Purchase Agreement shall govern.

 

**IN WITNESS WHEREOF**, the Company has executed this Note asof the date first above written.

 

 
|   | PROUROCARE MEDICAL INC. |
|--------|-------------------------|
|   |                    |   |
|   |                    |   |
|   | By:                     | /s/ Richard B. Thon |
|   |                    | Name: | Richard B. Thon |
|   |                    | Title: | CFO |

 

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