**Exhibit 10.39**

** **
| **LOAN NUMBER** | ** ** | **LOAN NAME**           | ** ** | **ACCT. NUMBER** | ** ** | **AGREEMENT DATE** | ** ** | **INITIALS** | ** ** |
|-----------------|------------|-------------------------|------------|------------------|------------|--------------------|------------|--------------|------------|
| 4060026         |       | PROUROCARE MEDICAL, INC |       |             |       | 10/10/07           |       | KRH          |       |

 
| **NOTE AMOUNT** | ** **   | **INDEX (w/Margin)** | ** **                             | **RATE** | ** ** | **MATURITY DATE** | ** ** | **LOAN PURPOSE** | ** ** |
|----------------------|--------------|---------------------------|----------------------------------------|----------|------------|------------------------|------------|-----------------------|------------|
| $                    | 1,200,000.00 |                      | Wall Street  Journal Prime plus 1.000% |     | 6.750      | %                      | 02/28/09   |                  | Commercial |   |
|                      |              |                           |                                        |          |            |                        |            |                       |            |  |

** **

CreditorUse Only

 

COMMERCIAL LOAN AND SECURITY AGREEMENT

SingleAdvance Loan

 

DATEAND PARTIES. The date of this Commercial Loan Agreement (Agreement) is October 10,2007. The parties and their addresses are as follows:

 

LENDER:
| CROWN BANK                       |
|----------------------------------|
| 6600 France Avenue South Ste 125 |
| Edina, Minnesota 55435           |

 

BORROWER:
| PROUROCARE MEDICAL. INC        |
|--------------------------------|
| a Nevada Corporation           |
| 5500 WAYZATA BLVD SUITE 310    |
| GOLDEN VALLEY, Minnesota 55416 |

 

1.    DEFINITIONS. For the purposes of thisAgreement, the following terms have the following meanings.

 

A. Accounting Terms. In this Agreement, any accounting terms thatare not specifically defined will have their customary meanings under generallyaccepted accounting principles.

 

B. Insiders. Insiders include those defined as insiders by theUnited States Bankruptcy Code, as amended; or to the extent left undefined,include without limitation any officer, employee, stockholder or member,director, partner, or any immediate family member of any of the foregoing, orany person or entity which, directly or indirectly, controls, is controlled byor is under common control with me.

 

C. Loan. The Loan refers to this transaction generally, includingobligations and duties arising from the terms of all documents prepared orsubmitted for this transaction.

 

D. Loan Documents. Loan Documents refer to all the documentsexecuted as a part of or in connection with the Loan.

 

E. Pronouns. The pronouns “I”, “me” and “my” refer to everyBorrower signing this Agreement, individually or together. “You” and “your”refers to the Loan’s lender.

 

F. Property. Property is any property, real, personal orintangible, that secures my performance of the obligations of this Loan.

 

2.    SINGLE ADVANCE. In accordance with the termsof this Agreement and other Loan Documents, you will provide me with a termnote in the amount of $1,200,000.00 (Principal). I will receive the funds fromthis Loan in one advance. No additional advances are contemplated, except thosemade to protect and preserve your interests as provided in this Agreement orother Loan Documents.

 

3.    MATURITY DATE. I agree to fully repay the Loanby February 28, 2009.

 

4.*   *SECURITY AGREEMENT.

 

A. Secured Debts. This Security Agreement will secure the followingdebts (Secured Debts), together with all extensions, renewals, refinancings,modifications and replacements of the Secured Debts:

 

(1) Sums Advanced. All sums advanced and expenses incurred by youunder the terms of this Loan Agreement.

 

(2) All Debts. All present and future debts of all Borrowers owingto you, even if this Security 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 Security Agreement, each agrees that it will secure debts incurredeither individually or with others who may not sign this Security Agreement.Nothing in this Security Agreement constitutes a commitment to make additionalor future loans or advances. Any such commitment must be in writing.

 

This Security Agreement will not secure any debt for which you fail togive any required notice of the right of rescission. This Security Agreementwill not secure any debt for which a non-possessory, non-purchase moneysecurity interest is created in “household goods” in connection with a “consumerloan,” as those terms are defined by federal law governing unfair and deceptivecredit practices.

 

B. Security Interest. To secure the payment and performance of theSecured Debts, I give you a security interest in all of the Property describedin this Security Agreement that I own or have sufficient rights in which totransfer an interest, now or in the future, wherever the Property is or will belocated, and all proceeds and products from the Property (including, but notlimited to, all parts, accessories, repairs, replacements, improvements, andaccessions to the Property). Property is all the collateral given as securityfor the Secured Debts and described in this Security Agreement, and includesall obligations that support the payment or performance of the Property, “Proceeds”includes anything acquired upon the sale, lease, license, exchange, or otherdisposition of the Property; any rights and claims arising from the Property;and any collections and distributions on account of the Property,

 

This Security Agreement remains in effect until terminated in writing,even if the Secured Debts are paid and you are no longer obligated to advancefunds to me under any loan or credit agreement.

 

C. Property Description. The Property is described as follows:

 

(1) Inventory. All inventory which I hold for ultimate sale orlease, or which has been or will be supplied under contracts of service, orwhich are raw materials, work In process, or materials used or consumed in mybusiness.

 

(2) Accounts and Other Rights to Payment. All rights I have now orin the future to payments including, but not limited to, payment for propertyor services sold, leased, rented, licensed, or assigned, whether or not I haveearned such payment by performance. This includes any rights and interests (includingall liens and security interests) which I may have by law or agreement againstany Account Debtor or obligor of mine.

 

(3) General Intangibles. All general intangibles including, but notlimited to. tax refunds, applications for patents, patents, copyrights,trademarks, trade secrets, good will, trade names, customer lists, permits andfranchises, payment intangibles, computer programs and all supportinginformation provided in connection with a transaction relating to computerprograms, and the right to use my name.

 

(4) Equipment. All equipment including, but not limited to. allmachinery, vehicles, furniture, fixtures, manufacturing equipment, farmmachinery and equipment, shop equipment, office and recordkeeping equipment,and parts and tools. All equipment described In a list or schedule which I givewill also be included in the Property, but such a list is not necessary for avalid security interest in my equipment.

 

D. Duties Toward Property.

 

(1)        Protection of SecuredParty’s Interest. I will defend the Property against any other claim. I agreeto do whatever you require to protect your security interest and to keep yourclaim in the Property ahead of the claims of other creditors, I will not doanything to harm your position.

 

I will keep books, records and accounts about the Property and mybusiness in general. I will let you examine these and make copies at anyreasonable time. I will prepare any report or accounting you request whichdeals with the Property.

 

(2)        Use, Location, andProtection of the Property. I will keep the Property in my possession and ingood repair. I will use it only for commercial purposes. I will not change thisspecified use without your prior written consent. You have the right ofreasonable access to inspect the Property and I will immediately inform you ofany loss or damage to the Property. I will not cause or permit waste to theProperty.

 

I will keep the Property at my address listed in the DATE AND PARTIESsection unless we agree I may keep it at another location. If the Property isto be used in other states, I will give you a list of those states. Thelocation of the Property is given to aid in the identification of the Property.It does not in any way limit the scope of the security interest granted to you.I will notify you in writing and obtain your prior written consent to anychange in location of any of the Property. I will not use the Property inviolation of any law. I will notify you in writing prior to any change in myaddress, name or, if an organization, any change in my identity or structure.

 

Until the Secured Debts are fully paid and this Security Agreement isterminated, I will not grant a security interest in any of the Property withoutyour prior written consent. I will pay all taxes and assessments levied orassessed against me or the Property and provide timely proof of payment ofthese taxes and assessments upon request.

 

(3)        Selling, Leasing orEncumbering the Property. I will not sell, offer to sell, lease, or otherwisetransfer or encumber the Property without your prior written permission, exceptfor Inventory sold in the ordinary course of business at fair market value, orat a minimum price established between you and me. If I am in default underthis Security Agreement, I may not sell the Inventory portion of the Propertyeven in the ordinary course of business. Any

 

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disposition of the Property contrary to this Security Agreement will violateyour rights. Your permission to sell the Property may be reasonably withheldwithout regard to the creditworthiness of any buyer or transferee. I will notpermit the Property to be the subject of any court order affecting my rights tothe Property in any action by anyone other than you. If the Property includeschattel paper or instruments, either as original collateral or as proceeds ofthe Property, I will note your security interest on the face of the chattelpaper or instruments.

 

(4)        Additional DutiesSpecific to Accounts. I will not settle any Account for less than its fullvalue without your written permission. Until you tell me otherwise, I willcollect all Accounts in the ordinary course of business. I will not dispose ofthe Accounts by assignment without your prior Written consent, I will keep theproceeds from all the Accounts and any goods which are returned to me or whichI take back, I will not commingle them with any of my other property. I willdeliver the Accounts to you at your request. If you ask me to pay you the fullprice on any returned items or items retaken by me, I will do so. I will makeno material change in the terms of any Account, and I will give you anystatements, reports, certificates, lists of Account Debtors (showing names,addresses and amounts owing), invoices applicable to each Account, and otherdata in any way pertaining to the Accounts as you may request.

 

E. Collection Rights Of The Secured Party. Account Debtor means theperson who is obligated on an account, chattel paper, or general intangible. Iauthorize you to notify my Account Debtors of your security interest and todeal with the Account Debtors’ obligations at your discretion. You may enforcethe obligations of an Account Debtor, exercising any of my rights with respectto the Account Debtors’ obligations to make payment or otherwise renderperformance to me, including the enforcement of any security interest thatsecures such obligations. You may apply proceeds received from the AccountDebtors to the Secured Debts or you may release such proceeds to me.

 

I specifically and irrevocably authorize you to exercise any of thefollowing powers at my expense, without limitation, until the Secured Debts arepaid in full:

 

(1) demand payment and enforce collection from any Account Debtoror Obligor by suit or otherwise.

 

(2) enforce any security interest, lien or encumbrance given tosecure the payment or performance of any Account Debtor or any obligationconstituting Property.

 

(3) file proofs of claim or similar documents in the event ofbankruptcy, insolvency or death of any person obligated as an Account Debtor.

 

(4) compromise, release, extend, or exchange any indebtedness of anAccount Debtor.

 

(5) take control of any proceeds of the Account Debtors’ obligationsand any returned or repossessed goods,

 

(6) endorse all payments by any Account Debtor Which may come intoyour possession as payable to me,

 

(7) deal in all respects as the holder and owner of the AccountDebtors’ obligations.

 

F. Authority To Perform. I authorize you to do anything you deemreasonably necessary to protect the Property, and perfect and continue yoursecurity interest in the Property. If I fail to perform any of my duties underthis Security Agreement or any other security interest, you are authorized toperform the duties or cause them to be performed.

 

These authorizations include, but are not limited to. permission to:

 

(1) pay and discharge taxes, liens, security interests or otherencumbrances at any time levied or placed on the Property.

 

(2) pay any rents or other charges under any lease affecting theProperty.

 

(3) order and pay for the repair, maintenance and preservation ofthe Property.

 

(4) file any financing statements on my behalf and pay for filingand recording fees pertaining to the Property.

 

(5) place a note on any chattel paper indicating your interest inthe Property.

 

(6) take any action you feel necessary to realize on the Property,including performing any part of a contract or endorsing it in my name.

 

(7) handle any suits or other proceedings involving the Property inmy name.

 

(8) prepare, file, and sign my name to any necessary reports oraccountings.

 

(9) make an entry on my books and records showing the existence ofthis Agreement.

 

(10) notify any Account Debtor of your interest in the Property andtell the Account Debtor to make payments to you or someone else you name.

 

If you perform for me, you will use reasonable care. If you exercise thecare and follow the procedures that you generally apply to the collection ofobligations owed to you, you will be deemed to be using reasonable care.Reasonable care will not include: any steps necessary to preserve rightsagainst prior parties; the duty to send notices, perform services or take anyother action in connection with the management of the Property; or the duty toprotect, preserve or maintain any security interest given to others by me orother parties. Your authorization to perform for me will not create anobligation to perform and your failure to perform will not preclude you fromexercising any other rights under the law or this Security Agreement. All cashand 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 you come into actual or constructive possession of the Property, youwill preserve and protect the Property. For purposes of this paragraph, youwill be in actual possession of the Property only when you have physical,immediate and exclusive control over the Property and you have affirmativelyaccepted that control. You will be in constructive possession of the Propertyonly when you have both the power and the intent to exercise control over theProperty.

 

G. Name and Location. My name indicated in the DATE AND PARTIES sectionis my exact legal name. I am an entity organized and registered under the lawsof Nevada. I will provide verification of registration and location upon yourrequest. I will provide you with at least 30 days notice prior to any change inmy name, address, or state of organization or registration.

 

H. Perfection of Security Interest. I authorize you to file a financingstatement covering the Property. I will comply with, facilitate, and otherwiseassist you in connection with obtaining perfection or control over the Propertyfor purposes of perfecting your security interest under the Uniform CommercialCode. I agree to pay all actual costs of terminating your security interest.

 

5.WARRANTIES AND REPRESENTATIONS. I make to you the following warranties andrepresentations which will continue as long as this Loan is in effect, exceptwhen this Agreement provides otherwise.

 

A. Power. I am duly organized, and validly existing and in good standingin all jurisdictions in which I operate. I have the power and authority toenter into this transaction and to carry on my business or activity as it isnow being conducted and, as applicable, am qualified to do so in eachjurisdiction in which I operate.

 

B. Authority. The execution, delivery and performance of this Loan andthe obligation evidenced by the Note are within my powers, have been dulyauthorized, have received all necessary governmental approval, will not violateany provision of law, or order of court or governmental agency, and will notviolate any agreement to which I am a party or to which I am or any of myproperty is subject.

 

C. Business Name. Other than previously disclosed in writing to you Ihave not changed my name or principal place of business within the last 10years and have not used any other trade or fictitious name. Without your priorwritten consent, I do not and will not use any other name and will preserve myexisting name, trade names and franchises.

 

D. Ownership of Property. I represent that I own all of the Property.Your claim to the Property is ahead of the claims of any other creditor, exceptas disclosed in writing to you prior to any advance on the Secured Debts. Irepresent that I am the original owner of the Property and, if I am not, that Ihave provided you with a list of prior owners of the Property.

 

E. Hazardous Substances. Except as I previously disclosed in writing andyou acknowledge in writing, no Hazardous Substance, underground tanks, privatedumps or open wells are currently located at, on, in, under or about theProperty.

 

F. Use of Property. After diligent inquiry, I do not know or have reasonto know that any Hazardous Substance has been discharged, leached or disposedof, in violation of any Environmental Law, from the property onto, over or intoany other property, or from any other property onto, over or into the property.

 

G. Environmental Laws. I have no knowledge or reason to believe thatthere is any pending or threatened investigation, claim, judgment or order,violation, lien, or other notice under any Environmental Law that concerns meor the property. The property and any activities on the property are in fullcompliance with all Environmental Law.

 

H. Loan Purpose. The purpose of this Loan is WORKING CAPITAL.

 

I. No Other Liens. I own or lease all property that I need to conduct mybusiness and activities. I have good and marketable title to all property thatI own or lease. All of my Property is free and clear of all liens, securityinterests, encumbrances and other adverse claims and interests, except those toyou or those you consent to in writing.

 

J. Compliance With Laws. I am not violating any laws, regulations,rules, orders, judgments or decrees applicable to me or my property, except forthose which I am challenging in good faith through proper proceedings afterproviding adequate reserves to fully pay the claim and its challenge should Ilose.

 

K. Legal Dispute. There are no pending or threatened lawsuits,arbitrations or other proceedings against me or my property that singly ortogether may materially and adversely affect my property, operations, financialcondition, or business.

 

L. Adverse Agreements. I am not a party to, nor am I bound by, anyagreement that is now or is likely to become materially adverse to my business.Property or operations.

 

M. Other Claims. There are no outstanding claims or rights that wouldconflict with the execution, delivery or performance by me of the terms andconditions of this Agreement or the other Loan Documents. No outstanding claimsor rights exist that may result in a lien on the Property, the Property’sproceeds and the proceeds of proceeds, except liens that were disclosed to andagreed to by you in writing.

 

N. Solvency. I am able to pay my debts as they mature, my assets exceedmy liabilities and I have sufficient capital for my current and plannedbusiness and other activities. I will not become insolvent by the execution orperformance of this Loan.

 

6.FINANCIAL STATEMENTS. I will prepare and maintain my financial records usingconsistently applied generally accepted accounting principles then in effect, Iwill provide you with financial information in a form that you accept and underthe following terms.

 

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A. Certification. I represent and warrant that any financial statementsthat I provide you fairly represents my financial condition for the statedperiods, is current, complete, true and accurate in all material respects,includes all of my direct or contingent liabilities and there has been nomaterial adverse change in my financial condition, operations or business sincethe date the financial information was prepared.

 

B. Frequency. In addition to the financial statements provided to youprior to closing, I will provide you with current financial statements on anannual basis, or as otherwise requested by you, until I have performed all ofmy obligations under the Loan and you terminate the Loan in writing.

 

C. SEC Reports. I will provide you with true and correct copies of allreports, notices or statements that I provide to the Securities end ExchangeCommission, any securities exchange or my stockholders, owners, or the holdersof any material indebtedness as soon as available or at least within days afterissuance.

 

D. Requested Information. I will provide you with any other informationabout my operations, financial affairs and condition within days after yourrequest.

 

**7.**COVENANTS.Until the Loan and all related debts, liabilities and obligations are paid anddischarged, I will comply with the following terms, unless you waive compliancein writing.

 

A. Participation. I consent to you participating or syndicatingthe Loan and sharing any information that you decide is necessary about me andthe Loan with the other participants or syndicators.

 

B. Inspection. Following your written request, I will immediately payfor all one-time and recurring out-of-pocket costs that are related to theinspection of my records, business or Property that secures the Loan. Uponreasonable notice, I will permit you or your agents to enter any of my premisesand any location where my Property is located during regular business hours todo the following.

 

(1) You may inspect, audit, check, review and obtain copies from mybooks, records, journals, orders, receipts, and any correspondence and otherbusiness related data.

 

(2) You may discuss my affairs, finances and business with any onewho provides you with evidence that they are a creditor of mine, thesufficiency of which will be subject to your sole discretion.

 

(3) You may inspect my Property, audit for the u8e and disposition of theProperty’s proceeds and proceeds of proceeds; or do whatever you decide isnecessary to preserve and protect the Property and your interest in theProperty.

 

After prior notice to me, you may discuss my financial condition andbusiness operations with my independent accountants, if any, or my chieffinancial officer and I may be present during these discussions. As long as theLoan is outstanding, I will direct all of my accountants and auditors to permityou to examine my records in their possession and to make copies of theserecords. You will use your best efforts to maintain the confidentiality of theinformation you or your agents obtain, except you may provide your regulator,if any, with required information about my financial condition, operation andbusiness or that of my parent, subsidiaries or affiliates.

 

C. Business Requirements. Iwill preserve and maintain my present existence and good standing in thejurisdiction where I am organized and all of my rights, privileges andfranchises. I will do all that is needed or required to continue my business oractivities as presently conducted, by obtaining licenses, permits and bondseverywhere I engage in business or activities or own, lease or locate myproperty. I will obtain your prior written consent before I cease my businessor before I engage in any new line of business that is materially differentfrom my present business.

 

D. Compliance with Laws. Iwill not violate any laws, regulations, rules, orders, judgments or decreesapplicable to me or my Property, except for those which I challenge in goodfaith through proper proceedings after providing adequate reserves to fully paythe claim and its appeal should I lose. Laws include without limitation theFederal Fair Labor Standards Act requirements for producing goods, the federalEmployee Retirement Income Security Act of 1974’s requirements for theestablishment, funding and management of qualified deferred compensation plansfor employees, health and safety laws, environmental laws, tax laws, licensingand permit laws. On your request, I will provide you with written evidence thatI have fully and timely paid my taxes, assessments and other governmentalcharges levied or imposed on me, my income or profits and my property. Taxesinclude without limitation sales taxes, use taxes, personal property taxes,documentary stamp taxes, recordation taxes, franchise taxes, income taxes,withholding taxes, FICA taxes and unemployment taxes, I will adequately providefor the payment of these taxes, assessments and other charges that have accruedbut are not yet due and payable.

 

E. New Organizations. I will obtain your written consent and anynecessary changes to the Loan Documents before I organize or participate in theorganization of any entity, merge into or consolidate with any one, permit anyone else to merge into me, acquire all or substantially all of the assets ofany one else or otherwise materially change my legal structure, management,ownership or financial condition.

 

F. Dealings with Insiders. I will not purchase, acquire or lease anyproperty or services from, or sell, provide or lease any property or servicesto, or permit any outstanding loans or credit extensions to, or otherwise dealwith, any Insiders except as required under contracts existing at the time Iapplied for the Loan and approved by you or as this Agreement otherwisepermits. I will not change or breach these contracts existing at Loanapplication so as to cause an acceleration of or an increase in any paymentsdue,

 

G. Other Debts. I will pay when due any and all other debts owed orguaranteed by me and will faithfully perform, or comply with all the conditionsand obligations imposed on me concerning the debt or guaranty,

 

H. Other Liabilities. I will not incur, assume or permit any debtevidenced by notes, bonds or similar obligations, except: debt in existence onthe date of this Agreement and fully disclosed to you; debt subordinated inpayment to you on conditions and terms acceptable to you; accounts payableincurred in the ordinary course of my business and paid under customary tradeterms or contested in good faith with reserves satisfactory to you.

 

I. Notice to You. I will promptly notify you of any materialchange in my financial condition, of the occurrence of a default under theterms of this Agreement or any other Loan Document, or a default by me underany agreement between me and any third party which materially and adverselyaffects my property, operations, financial condition or business.

 

J. Certification of No Default. On your request, my chief financial officer or myindependent accountant will provide you with a written certification that tothe best of their knowledge no event of default exists under the terms of thisAgreement or the other Loan Documents, and that there exists no other action,condition or event which with the giving of notice or lapse of time or bothwould constitute a default. As requested, my chief financial officer or myindependent accountant will also provide you with computations demonstratingcompliance with any financial covenants and ratios contained in this Agreement.If an action, condition or event of default does exist, the certificate mustaccurately and fully disclose the extent and nature of this action, conditionor event and state what must be done to correct it,

 

K. Use of Loan Proceeds. I will not permit the loan proceeds to be usedto purchase, carry, reduce, or retire any loan originally incurred to purchaseor carry any margin stock or otherwise cause the Loan to violate FederalReserve Board Regulations U or X, orSection 8 of the Securities and Exchange Act of 1934 and its regulations,as amended.

 

L. Dispose of No Assets. Without your prior written consent or as theLoan Documents permit, I will not sell, lease, assign, transfer, dispose of orotherwise distribute all or substantially all of my assets to any person otherthan in the ordinary course of business for the assets’ depreciated book valueor more.

 

M. No Other Liens. I will not create, permit or suffer any lienor encumbrance upon any of my properties for or by anyone, other than you,except for:

 

nonconsensual liens imposed by law arising out of the ordinary course ofbusiness on obligations that are not overdue or which I am contesting in goodfaith after making appropriate reserves; valid purchase money securityinterests on personal property; or any other liens specifically agreed to byyou in writing,

 

N. Guaranties. I will not guaranty or become liable in any way as surety, endorser (otherthan as endorser of negotiable instruments in the ordinary course of business)or accommodation endorser or otherwise for the debt or obligations of any otherperson or entity, except to you or as you otherwise specifically agree inwriting.

 

0. No Default under Other Agreements. I will not allow to occur, or to continueunremedied, any act, event or condition which constitutes a default , or which,with the passage of time or giving of notice, or both, would constitute adefault under any agreement, document, instrument or undertaking to which I ama party or by which I may be bound.

 

P. Legal Disputes. I will promptly notify you in writing of anythreatened or pending lawsuit, arbitration or other proceeding against me orany of my property, not identified in my financial statements, or that singlyor together with other proceedings may materially and adversely affect myproperty, operations, financial condition or business. I will use my bestefforts to bring about a favorable and speedy result of any of these lawsuits,arbitrations or other proceedings.

 

Q. Other Notices. I will immediately provide you with any informationthat may materially and adversely affect my ability to perform this Agreementand of its anticipated effect.

 

R. No Change in Capital. I will not release, redeem, retire, purchase orotherwise acquire, directly or indirectly, any of my capital stock or otherequity security or partnership interest, or make any change in my capitalstructure, except to the extent required by any agreements signed prior to thisAgreement and disclosed to you or with your prior written consent,

 

S. Loan Obligations. I will make full and timely payment of allprincipal and interest obligations. and comply with the other terms andagreements contained in this Agreement and in the other Loan Documents,

 

T. Insurance, I will obtain and maintain insurance with insurers, inamounts and coverages that era acceptable to you and customary with industrypractice. This may include without limitation insurance policies for publicliability, fire, hazard and extended risk, workers compensation, and, at yourrequest, business interruption and/or rent loss insurance. I will keep theProperty insured against the risks reasonably associated with the Property.This insurance will last until the Property is released from this Agreement. Imay choose the insurance company, subject to your approval, which will not beunreasonably withheld. At your request, I will deliver to you certified copiesof all of these insurance policies, binders or certificates, I will obtain andmaintain a mortgagee or lender lost payee endorsement for you when theseendorsements are available, I will immediately notify you of cancellation ortermination of insurance, I will require all insurance policies to provide youwith at least 10 days prior written notice to you of cancellation ormodification, I consent to you using or disclosing information relative to anycontract of insurance required by the Loan for the purpose of replacing thisInsurance, I also authorize my insurer and you to exchange all relevantinformation related to any contract of insurance required by any documentexecuted as pert of this Loan.

 

You may apply the insurance proceeds toward which is owned on theSecured Debts, You may require added security as a condition of permitting anyinsurance proceeds to be used to repair or replace the Property.

 

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

 

If I fail to keep the Property insured, you may obtain insurance toprotect your interest in the Property and I will pay for the insurance on yourdemand. Your may demand that I pay for the insurance all at once, or you mayadd the insurance premiums to the balance of the Secured Debts and chargeinterest on it at

 

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the rate that applies to the Secured Debts. This insurance may includecoverages not originally required of me, may be written by a company other thanone would choose, and may be written at a higher rate than I could obtain if Ipurchased the insurance. I acknowledge and agree that you or one of youraffiliates may receive commissions on the purchase of this insurance.

 

U. Property Maintenance. I will keep all tangible and intangibleproperty that I consider necessary or useful in my business in good workingcondition by making all needed repairs, replacements and improvements and bymaking all rental, lease or other payments due on this property.

 

V. Property Loss. I will immediately notify you, and the insurancecompany when appropriate, of any material casualty, loss or depreciation to theProperty or to my other property that affects my business.

 

W. Accounts Receivable Collection. I will collect and otherwise enforceall of my unpaid Accounts Receivable at my cost and expense, until you end myauthority to do so, which you may do at any time to protect your bestinterests. I will not sell, assign or otherwise dispose of any AccountsReceivable without your written consent. I will not commingle the AccountsReceivable proceeds with any of my other property.

 

X. Reserves. You may set aside and reserve Loan proceeds for Loaninterest, fees and expenses, taxes, end insurance. I grant you a securityinterest in the reserves.

 

No interest will accrue on any reserve Loan proceeds. Disbursement ofreserves is disbursement of the Loan’s proceeds, At my request, you willdisburse the reserves for the purpose they were set aside for, as long as I amnot in default under this Agreement. You may directly pay these reserved items,reimburse me for payments I made, or reduce the reserves and increase the Loanproceeds available for disbursement.

 

Y. Additional Taxes. I will pay all filing and recording costs and fees,including any recordation, documentary or transfer taxes or stamps, that arerequired to be paid with respect to this Loan and any Loan Documents.

 

Z. Additional Covenants. CROWN BANK WILL REQUIRE THE BORROWER TOMAINTAIN A MINIMUM 4 MONTH FUNDED INTEREST RESERVE AT CROWN BANK UNTIL CLOSINGOF SECONDARY OFFERING. AT THAT TIME, THE INTEREST RESERVE WILL BE FUNDED TOEQUAL REMAINING INTEREST DUE ON LOAN THROUGH MATURITY AND INTEREST PAYMENTS MAY BEDRAWN FROM THE ACCOUNT.  THE TERMAS ANDCONDITIONS OF THIS COMMERCIAL LOAN AND SECURITY AGREEMENT DATED OCTOBER 10,2007 SHALL NOT BE EFFECTIUVE UNTIL THE 4-MONTH INTEREST RESERVE IS FUNDED.

 

8.DEFAULT. I will be in default if any of the following occur:

 

A. Payments. I fail to make a payment 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 relieflaw, the” C... assignment for the benefit of creditors by or on behalf of, thevoluntary or involuntary termination of existence by, or the commencement ofany proceeding under any present or future federal or state insolvency,bankruptcy, reorganization, composition or debtor relief law by or against meor any co-signer, endorser, surety or guarantor of this Agreement or any otherobligations I have with you.

 

*C.*Business Termination. I merge, dissolve, reorganize, end my business orexistence, or a partner or majority owner dies or is declared legallyincompetent.

 

D. Failure to Perform. I fail to perform any condition or to keep anypromise or covenant of this Agreement.

 

E. Other Documents. A default occurs under the terms of any other LoanDocument.

 

F. Other Agreements. I am in default on any other debt or agreement Ihave with you.

 

G. Misrepresentation. I make any verbal or written statement or provideany financial information that is untrue, inaccurate, or conceals a materialfact at the time it is made or provided.

 

H. Judgment. I fail to satisfy or appeal any judgment against me.

 

I. Forfeiture. The Property is used in a manner or for a purpose thatthreatens confiscation by a legal authority,

 

J. Name Change. I change my name or assume an additional name withoutnotifying you before making such a change,

 

K. Property Transfer. I transfer all or a substantial part of my moneyor property.

 

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

 

M. Material Change. Without first notifying you, there is a materialchange in my business, including ownership, management, and financialconditions.

 

N. Insecurity. You determine in good faith that a material adversechange has occurred in my financial condition from the conditions set forth inmy most recent financial statement before the date of this Agreement or thatthe prospect for payment or performance of the Loan is impaired for any reason.

 

*9.*REMEDIES.After I default, you may at your option do any one or more of the following.

 

A. Acceleration. You may make all or any part of the amount owing by theterms of the Loan immediately due, If I am a debtor in a bankruptcy petition orin an application filed under section 5(a)(3) of the Securities InvestorProtection Act, the Loan is automatically accelerated and immediately due andpayable without notice or demand upon filing of the petition or application,

 

B. Sources. You may use any and all remedies you have under state orfederal law or in any Loan Document.

 

C. Insurance Benefits. You may make a claim for any and all insurancebenefits or refunds that may be available on my default.

 

D. Payments Made On My Behalf. Amounts advanced on my behalf will beimmediately due and may be added to the balance owing under the terms of theLoan, and accrue interest at the highest post-maturity interest rate.

 

E. Set-Off. You may use the right of set-off, This means you may set-offany amount due and payable under the terms of the Loan against any right I haveto receive money from you.

 

My right to receive money from you includes any deposit or share accountbalance I have with you; any money owed to me on an item presented to you or inyour possession for collection or exchange; and any repurchase agreement orother non-deposit obligation. “Any amount due and payable under the terms ofthe Loan” means the total amount to which you are entitled to demand paymentunder the terms of the Loan at the time you set-off.

 

Subject to any other written contract, if my right to receive money fromyou is also owned by someone who has not agreed to pay the Loan, your right ofset- off will apply to my interest in the obligation and to any other amounts Icould withdraw on my sole request or endorsement.

 

Your right of set-off does not apply to an account or other obligationwhere my rights arise only in a representative capacity, It also does not applyto any Individual Retirement Account or other tax-deferred retirement account.

 

You will not be liable for the dishonor of any check when the dishonoroccurs because you set-off against any of my accounts, I agree to hold youharmless from any such claims arising as a result of your exercise of yourright of set-off.

 

F. Assembly of Property. You may require me to gather the Property andmake it available to you in a reasonable fashion.

 

*G.*Repossession. You may repossess the Property so long as the repossessiondoes not involve a breach of the peace. You may sell, lease or otherwisedispose of the Property as provided by law, You may apply what you receive fromthe disposition of the Property to your expenses, your attorneys’ fees andlegal expenses (where not prohibited by law), and any debt I owe you. If whatyou receive from the disposition of the Property does not satisfy the debt, Iwill be liable for the deficiency (where permitted by law). In some cases, youmay keep the Property to satisfy the debt.

 

Where a notice is required, I agree that ten days prior written noticesent by first class mail to my address listed in this Loan Agreement will bereasonable notice to me under the Minnesota Uniform Commercial Code. If theProperty is perishable or threatens to decline speedily in value, you may,without notice to me, dispose of any or all of the Property in a commerciallyreasonable manner at my expense following any commercially reasonablepreparation or processing. If any items not otherwise subject to this LoanAgreement 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.

 

H. Use and Operation. You may enter upon my premises and take possessionof all or any part of my property for the purpose of preserving the Property orits value, so long as you do not breach the peace. You may use and operate myproperty for the length of time you feel is necessary to protect your interest,all without payment or compensation to me.

 

I. Waiver. Except as otherwise required by law, by choosing any one ormore of these remedies you do not give up your right to use any other remedy.You do not waive a default if you choose not to use a remedy. By electing notto use any remedy, you do not waive your right to later consider the event adefault and to use any remedies if the default continues or occurs again,

 

10.COLLECTION EXPENSES AND ATTORNEYS’ FEES. On or after Default, to the extentpermitted by law, I agree to pay all expenses of collection, enforcement orprotection of your rights and remedies under this Agreement or any other LoanDocument, Expenses include, but are not limited to, attorneys’ fees, courtcosts and other legal expenses. If not paid immediately, these expenses willbear interest from the date of payment until paid in full at the highestinterest in effect as provided in the terms of this Loan. All fees and expenseswill be secured by the Property I have granted to you, if any. In addition, tothe extent permitted by the United States Bankruptcy Code, I agree to pay thereasonable attorneys’ fees incurred by you to protect your rights and interestsin connection with any bankruptcy proceedings initiated by or against me.

 

11.APPLICABLE LAW. This Agreement is governed by the laws of Minnesota, the UnitedStates of America, and to the extent required, by the laws of the jurisdictionwhere the Property is located, except to the extent such state laws arepreempted by federal law. In the event of a dispute, the exclusive forum, venueand place of jurisdiction will be in Minnesota, unless otherwise required bylaw.

 

12.JOINT AND INDIVIDUAL LIABILITY AND SUCCESSORS. My obligation to pay the Loan isindependent of the obligation of any other parson who has also agreed to payit. You may sue me alone, or anyone else who is obligated on the Loan, or anynumber of us together, to collect the Loan. Extending the Loan or newobligations under the Loan, will not affect my duty under the Loan and I willstill be obligated to pay the Loan. You may assign all or part of your rightsor duties under this Agreement or the Loan Documents without my consent. If youassign this Agreement, all of my covenants, agreements, representations endwarranties contained in this Agreement or the Loan Documents will benefit yoursuccessors and assigns. I may not assign this Agreement or any of my rightsunder it without your prior written consent. The duties of the Loan will bindmy successors and assigns.

 

13.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

 

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ofthe understanding 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.

 

14.INTERPRETATION. Whenever used, the singular includes the plural and the pluralincludes the singular. The section headings are for convenience only and arenot to be used to interpret or define the terms of this Agreement.

 

15.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 Borrower will bedeemed to be notice to all Borrowers. I will inform you in writing of anychange in my name, address or other application information. I will provide youany financial statement or information you request. All financial statementsand information I give you will be correct and complete. I agree to sign,deliver, and file any additional documents or certifications that you mayconsider necessary to perfect, continue, and preserve my obligations under thisLoan and to confirm your lien status on any Property. Time is of the essence.

 

16.SIGNATURES. By signing, I agree to the terms contained in this Agreement. Ialso acknowledge receipt of a copy of this Agreement.

 

 
| BORROWER:              |
|------------------------|
| PROURCARE MEDICAL INC. |
|                   |
| /s / RICK CARLSON      |   |
| RICK  CARLSON. CEO     |

 

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