**Exhibit 10.36**

 

**SECURITYAGREEMENT**

 

**DATE ANDPARTIES**.  This SecurityAgreement (Agreement) is made effective as of October 15, 2007.  The parties and their addresses are:

 

**SECURED PARTY**:

 

**PHILLIPS W. SMITH FAMILY TRUST**

**Phillips W. Smith, Trustee**

**7501 North Ironwood Drive**

**Paradise Valley, AZ 85253**

 

**DEBTOR**:

 

**PRO URO CARE MEDICAL, INC**

a Minnesota Corporation

ONE CARLSON PARKWAY #125

PLYMOUTH, Minnesota 55447

 

Thepronouns “you” and “your” refer to the Secured Party.  The pronouns “we,” “us” and “our” refer to eachperson or entity signing this Agreement as Debtor and agreeing to give theProperty described in this Agreement as security for the Secured Debts.

 

**1.**              **SECUREDDEBTS.**  The term****“secured debts” includes and this agreement will secureeach of the following:

 

**A.  Specific Debts.**  The following debts and all extensions,renewals, refinancings, modifications and replacements.  A promissory note dated as of the datehereof, from us to you, in the amount of $600,000.

 

LoanDocuments refer to all the documents executed in connection with the SecuredDebts,

 

**2.****     SECURITY INTEREST.**  To secure the payment and performance of theSecured Debts, we give you a security interest in all of the Property describedin this Agreement that we 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 tothe Property).  Property is all thecollateral given as security for the Secured Debts and described in thisAgreement, and includes all obligations that support the payment or performanceof 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 us under anyloan or credit agreement.

 

**3.**     **PROPERTY DESCRIPTION.** The Property is described as follows:

 

**A.  Inventory.**  All inventory which we hold for ultimatesale or lease, or which has been or will be supplied under contracts ofservice, or which are raw materials, work in process, or materials used orconsumed in our business.

 

**B.  Accounts and OtherRights to Payment.**  Allrights we 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 we have earned such payment by performance.  This includes any rights and interests(including all liens and security interests) which we may have by law oragreement against any Account Debtor or obligor of ours.

 

**C.  GeneralIntangibles.**  Allgeneral intangibles including, but not limited to, tax refunds, applicationsfor patents, patents, licenses, copyrights, trademarks, trade secrets, goodwill, trade names, customer lists, permits and franchises, payment intangibles,computer programs and all supporting information provided in connection with atransaction relating to computer programs, and the right to use our name.

 

**D.  Equipment.**  All equipment including, but not limitedto, all machinery, vehicles, furniture, fixtures, manufacturing equipment, shopequipment, office and recordkeeping equipment, and parts and tools.  All equipment described in a list or schedulewhich we give to you will also be included in the Property, but such a list isnot necessary for a valid security interest in our equipment.

 

**4.****     WARRANTIES AND REPRESENTATIONS.**  We make to you the following warranties andrepresentations which will continue as long as this Agreement is in effect:

 

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**A.  Power.**  We are duly organized, and validlyexisting and in good standing in all jurisdictions in which we operate, we havethe power and authority to enter into this transaction and to carry on ourbusiness or activity as it is now being conducted and, as applicable, amqualified to do so in each jurisdiction in which we operate.

 

**B.  Authority.**  The execution, delivery and performanceof this Agreement and the obligation evidenced by this Agreement are within ourpowers, have been duly authorized, have received all necessary governmentalapproval, will not violate any provision of law, or order of court orgovernmental agency, and will not violate any agreement to which we are a partyor to which we are or any of our property is subject.

 

**C.  Name and Location.**  Our name indicated in the DATE ANDPARTIES section is our exact legal name. We are an entity organized and registered under the laws of Nevada.  We will provide verification of registrationand location upon your request.  We willprovide you with at least 30 days notice prior to any change in our name,address, or state of organization or registration.

 

**D.  Ownership ofProperty.**  We representthat we own all of the Property.  Yourclaim to the Property is ahead of the claims of any other creditor, except forCrown Bank or as otherwise disclosed in writing to you prior to any advance onthe Secured Debts.  We represent that weare the original owner of the Property and, if we are not, that we haveprovided you with a list of prior owners of the Property.

 

# **5.     DUTIES TOWARDPROPERTY.**

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**A.  Protection ofSecured Party’s Interest.**  We will defend the Property against any otherclaim other than the lien in favor of Crown Bank presently in existence.  We agree to do whatever you require toprotect your security interest and to keep your claim in the Property ahead ofthe claims of other creditors other than the lien in favor of Crown Bankpresently in existence.  We will not doanything to harm your position.

 

We will keep books, records and accounts about the Property and ourbusiness in general.  We will let youexamine these and make copies at any reasonable time.  We will prepare any report or accounting yourequest which deals with the Property.

 

**B.  Use, Location, andProtection of the Property.** We will keep the Property in our possession and in good repair.  We will use it only for commercial purposes.  We will not change this specified use withoutyour prior written consent.  You have theright of reasonable access to inspect the Property and we will immediatelyinform you of any loss or damage to the Property.  We will not cause or permit waste to theProperty.

 

We willkeep the Property at our address listed in the DATE AND PARTIES section unless youagree we may keep it at another location. If the Property is to be used in other states, we will give you a listof those states.  The location of theProperty is given to aid in the identification of the Property.  It does not in any way limit the scope of thesecurity interest granted to you.  We willnotify you in writing and obtain your prior written consent to any change inlocation of any of the Property.  We willnot use the Property in violation of any law. We will notify you in writing prior to any change in our address, nameor, if an organization, any change in our identity or structure,

 

Untilthe Secured Debts are fully paid and this Agreement is terminated, we will notgrant a security interest in any of the Property without your prior writtenconsent other than the lien in favor of Crown Bank presently in existence.  We will pay all taxes and assessments leviedor assessed against us or the Property and provide timely proof of payment ofthese taxes and assessments upon request.

 

**C.  Selling, Leasing orEncumbering the Property.**  We will not sell, offer to sell, lease, orotherwise transfer or encumber the Property without your prior writtenpermission, except for Inventory sold in the ordinary course of business atfair market value, or at a minimum price established between you and us andexcept for the lien in favor of Crown Bank presently in existence.  If we are in default under this Agreement, wemay not sell the Inventory portion of the Property even in the ordinary courseof business.  Any disposition of the Propertycontrary to this Agreement will violate your rights.  Your permission to sell the Property may bereasonably withheld without regard to the creditworthiness of any buyer ortransferee.  We will not permit theProperty to be the subject of any court order affecting our rights to theProperty in any action by anyone other than you.  If the Property includes chattel paper orinstruments, either as original collateral or as proceeds of the Property, we willnote your security interest on the face of the chattel paper or instruments.

 

**D.  Additional DutiesSpecific to Accounts.**  Wewill not settle any Account for less than its full value without your writtenpermission.  Until you tell us otherwise,we will collect all Accounts in the ordinary course of business, we will notdispose of the Accounts by assignment without your prior written consent.  We will keep the proceeds from all theAccounts and any goods which are returned to us or which we take back.  We will not commingle them with any of ourother property.  We will deliver theAccounts to you at your request.  If youask us to pay you the full price on any returned items or items retaken by us,we will do so.  We will make no materialchange in the terms of any Account, and we will give you any statements,reports, certificates, lists of Account Debtors (showing names, addresses andamounts owing), invoices applicable to each Account, and other date in any waypertaining to the Accounts as you may request.

 

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**6.****     INSURANCE.**  We agree to keep the Property insured againstthe risks reasonably associated with the Property.  We will maintain this insurance in theamounts you require.  This insurance willlast until the Property is released from this Agreement.  We may choose the insurance company, subjectto your approval, which will not be unreasonably withheld.

 

We will have the insurance company name you as loss payee on anyinsurance policy.  We will give you andthe insurance company immediate notice of any loss.  You may apply the insurance proceeds towardwhat is owed on the Secured Debts.  Youmay require added security as a condition of permitting any insurance proceedsto be used to repair or replace the Property.

 

If you acquire the Property in damaged condition, our right to anyinsurance policies and proceeds will pass to you to the extent of the SecuredDebts.

 

We will immediately notify you of cancellation or termination ofinsurance.  If we fail to keep theProperty insured, you may obtain insurance to protect your interest in theProperty and we will pay for the insurance on your demand.  You may demand that we pay for the insuranceall at once, or you may add the insurance premiums to the balance of theSecured Debts and charge interest on it at the rate that applies to the SecuredDebts.  This insurance may includecoverages not originally required of us, may be written by a company other thanone we would choose, and may be written at a higher rate than we could obtainif we purchased the insurance.  We acknowledgeand agree that you or one or your affiliates may receive commissions on thepurchase of this insurance.

 

**7.****     COLLECTIONRIGHTS OF THE SECURED PARTY.**  AccountDebtor means the person who is obligated on an account, chattel paper, orgeneral intangible.  We authorize you tonotify our Account Debtors of your security interest and to deal with theAccount Debtors’ obligations at your discretion.  You may enforce the obligations of an AccountDebtor, exercising any of our rights with respect to the Account Debtors’obligations to make payment or otherwise render performance to us, includingthe enforcement of any security interest that secures such obligations.  You may apply proceeds received from theAccount Debtors to the Secured Debts or you may release such proceeds to us.

 

We specifically and irrevocably authorize you to exercise any of thefollowing powers at our expense, without limitation, until the Secured Debtsare paid in full:

 

**A.  **demandpayment and enforce collection from any Account Debtor or Obligor by suit orotherwise,

 

**B.  **enforceany security interest, lien or encumbrance given to secure the payment orperformance of any Account Debtor or any obligation constituting Property.

 

**C.  **fileproofs of claim or similar documents in the event of bankruptcy, insolvency ordeath of any person obligated as an Account Debtor.

 

**D.  **compromise,release, extend, or exchange any indebtedness of an Account Debtor.

 

**E.  **takecontrol of any proceeds of the Account Debtors obligations and any returned orrepossessed goods.

 

**F.  **endorseall payments by any Account Debtor which may come into your possession aspayable to us.

 

**G.  **dealin all respects as the holder and owner of the Account Debtors’ obligations.

 

**8.****     AUTHORITY TOPERFORM.**  We authorize you to doanything you deem reasonably necessary to protect the Property, and perfect andcontinue your security interest in the Property.  If we fail to perform any of our duties underthis Agreement or any other Loan Document, you are authorized to perform theduties or cause them to be performed.

 

Theseauthorizations include, but are not limited to, permission to:

 

**A.  **payand discharge taxes, liens, security interests or other encumbrances at anytime levied or placed on the Property.

 

**B.  **payany rents or other charges under any lease affecting the Property.

 

**C.  **orderand pay for the repair, maintenance and preservation of the Property.

 

**D.  **fileany financing statements on our behalf and pay for filing and recording feespertaining to the Property.

 

**E.  **placea note on any chattel paper indicating your interest in the Property.

 

**F.  **takeany action you feel necessary to realize on the Property, including performingany part of a contract or endorsing it in our name.

 

**G.  **handle any suitsor other proceedings involving the Property in our name.

 

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**H.  **prepare,file, and sign our name to any necessary reports or accountings.

 

**I.  **makean entry on our books and records showing the existence of this Agreement

 

**J.  **notifyany Account Debtor of your interest in the Property and tell the Account Debtorto make payments to you or someone else you name.

 

If youperform for us, you will use reasonable care. 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 carewill not include:  any steps necessary topreserve rights against prior parties; the duty to send notices, perform servicesor take any other action in connection with the management of the Property; orthe duty to protect, preserve or maintain any security interest given to othersby us or other parties.  Yourauthorization to perform for us will not create an obligation to perform andyour failure to perform will not preclude you from exercising any other rightsunder the law or this Agreement.  Allcash and non-cash proceeds of the Property may be applied by you only upon youractual receipt of cash proceeds against such of the Secured Debts, matured orunmatured, as you determine in your sole discretion.

 

If youcome into actual or constructive possession of the Property, you will preserveand protect the Property.  For purposesof this paragraph, you will be in actual possession of the Property only whenyou have physical, immediate and exclusive control over the Property and youhave affirmatively accepted that control. You will be in constructive possession of the Property only when youhave both the power and the intent to exercise control over the Property.

 

**9.****     DEFAULT.**  We will be in default if any of the followingoccur:

 

**A.  Payments.**  We fail to make a payment in full whendue, and fail to make such payment within three (3) days’ of your givingus notice of such failure to make the payment.

 

**B.  Insolvencyor Bankruptcy.**  Thedeath, dissolution or insolvency of, appointment of a receiver by or on behalfof, 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 us.

 

**C.  BusinessTermination.**  We merge,dissolve, reorganize, end our business or existence.

 

**D.  Failureto Perform.**  We fail toperform any condition or to keep any promise or covenant of this Agreement andfail to cure this lack of performance within fifteen (15) days of your givingus notice of thereof..

 

**E.  OtherDocuments.**  A defaultoccurs under the terms of any other Loan Document.

 

**F.  Misrepresentation.**  We make any verbal or written statementor provide any financial information that is untrue, inaccurate, or conceals amaterial fact at the time it is made or provided.

 

**G.  Judgment.**  We fail to satisfy or appeal anyjudgment against us.

 

**H.  Forfeiture.**  The Property is used in a manner or fora purpose that threatens confiscation by a legal authority.

 

**I.  NameChange.**  We change ourname or assume an additional name without notifying you before making such achange.

 

**10.  DUE ONSALE OR ENCUMBRANCE.**  Youmay, at your option, declare the entire balance of this Agreement to beimmediately due and payable upon the creation of, or contract for the creationof, any lien, encumbrance, transfer or sale of all or any part of theProperty.  This right is subject to therestrictions imposed by federal law 112 C.F.R. 591), as applicable.  However, if we are in default under thisAgreement, we may not sell the inventory portion of the Property even in theordinary course of business.

 

**11.  REMEDIES.**  After we default, and after you give anylegally required notice and opportunity to cure the default, you may at youroption do any one or more of the following.

 

**A.  Acceleration.**  You may make all or arty part of theamount owing by the teens of the Secured Debts immediately due.

 

**B.  Sources.**  You may use any and all remedies youhave under State or federal law or in any Loan Document.

 

**C.  Assemblyof Property.**  You mayrequire us to gather the Property and make it available to you in a reasonablefashion.

 

**D.  Repossession.**  You may repossess the Property so longas the repossession does not involve a breach of the peace.  You may sell, lease or otherwise dispose ofthe Property as provided by law.  You mayapply what you receive from the disposition of the Property to your expenses,your attorneys fees and legal expenses (where not prohibited by law), and anydebt we owe you.  If 

 

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what you receive from thedisposition of the Property does not satisfy the debt, we will be liable forthe deficiency (where permitted by law). In some cases, you may keep the Property to satisfy the debt.

 

Where a notice is required, we agreethat ten days prior written notice sent by first class mail to our addresslisted in this Agreement will be reasonable notice to us under the MinnesotaUniform Commercial Code.  If the Propertyis perishable or threatens to decline speedily in value, you may, withoutnotice to us, dispose of any or all of the Property in a commerciallyreasonable manner at our expense following any commercially reasonablepreparation or processing.

 

If any items not otherwisesubject to this Agreement are contained in the Property when you takepossession, you may hold these items for us at our risk and you will not beliable for taking possession of them.

 

**E.  Useand Operation.**  You mayenter upon our premises and take possession of all or any part of our propertyfor the purpose of preserving the Property or its value, so long as you do notbreach the peace.  You may use andoperate our property for the length of time you feel is necessary to protectyour interest, all without payment or compensation to us.

 

**F.  Waiver.**  By choosing any one 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 any remedy, you do notwaive your right to later consider the event a default and to use any remediesif the default continues or occurs again.

 

**12.  WAIVEROF CLAIMS.**  We waiveall claims for loss or damage caused by your acts or omissions where you actedreasonably and in good faith,

 

**13.  PERFECTIONOF SECURITY INTEREST AND COSTS.**  We authorize you to file a financing statementcovering the Property.  We will complywith, facilitate, and otherwise assist you in connection with obtainingperfection or control over the Property for purposes of perfecting yoursecurity interest under the Uniform Commercial Code.  We agree to pay all taxes, fees and costs youpay or incur in connection with preparing, filing or recording any financingstatements or other security interest filings on the Property.  We agree to pay all actual costs ofterminating your security interest.

 

**14.  APPLICABLELAW.**  This Agreement isgoverned by the laws of Minnesota, the United States of America, and to theextent required, by the laws of the jurisdiction where the Property is located,except to the extent such state laws are preempted by federal law.  In the event of a dispute, the exclusiveforum, venue end place of jurisdiction will be in Minnesota, unless otherwiserequired by law,

 

**15.  SUCCESSORS.**  If you assign any of the Secured Debts,you may assign all or any part of this Agreement without notice to us or ourconsent, and this Agreement will inure to the benefit of your assignee to theextent of such assignment.  You willcontinue to have the unimpaired right to enforce this Agreement as to any ofthe Secured Debts that are not assigned. This Agreement shall inure to the benefit of and be enforceable by youand your successors and assigns and any other person to whom you may grant aninterest in the Secured Debts and shall be binding upon and enforceable againstus and our successors and assigns.

 

**16.  AMENDMENT,INTEGRATION AND SEVERABILITY.**  This Agreement may not be amended or modifiedby oral agreement.  No amendment ormodification of this Agreement is effective unless made in writing and executedby you and us.  This Agreement and theother Loan Documents are the complete and final expression of the understandingbetween you and us.  If any provision ofthis Agreement is unenforceable, then the unenforceable provision will besevered and the remaining provisions will still be enforceable.

 

**17.  INTERPRETATION.**  Whenever used, the singular includes theplural and the plural includes the singular. The section headings are for convenience only and are not to be used tointerpret or define the terms of this Agreement.

 

**18.  NOTICE,FINANCIAL REPORTS AND ADDITIONAL DOCUMENTS.**  Unless otherwise required by law, any noticewill be given by delivering it or mailing it by first class mail to theappropriate party’s address listed in the DATE AND PARTIES section, or to anyother address designated in writing.  We willinform you in writing of any change in our name, address or other applicationinformation.  We will provide you anyfinancial statement or information you request. All financial statements and information we give you will be correct andcomplete.  We agree to sign, deliver, andfile any additional documents or certifications that you may consider necessaryto perfect, continue, and preserve our obligations under this Agreement and toconfirm your lien status on any Property. Time is of the essence.

 

**SIGNATURES.**  By signing, we agree to the terms containedin this Agreement.  We also acknowledgereceipt of a copy of this Agreement.

 

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**DEBTOR**:

 

PROUROCARE, INC.

 

 
| By:                                      | /s/ Rick Carlson        |   | Date:  | October 31,2007 |
|------------------------------------------|-------------------------|--------|--------|----------------------|
|       Its: | Chief Executive Officer |   |   |
|                                          |                         |        |        |                      |  |

 

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