Exhibit 10.2


 


SECURITY
AGREEMENT


 


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


 


SECURED PARTY:


CROWN BANK


6600 France Avenue South Ste 125 


Edina, MN 55435


 


DEBTOR:


PROUROCARE MEDICAL INC.


a Nevada Corporation


6440 FLYING CLOUD DR #101


EDEN PRAIRIE, MN 55344


 


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


 


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


 


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


 


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


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


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


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


 


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


 


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


 


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


 


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


 


A. Inventory. All inventory which I hold for
ultimate sale or lease, or which has been or will be supplied under contracts
of service, or which are raw materials, work in process, or materials used or
consumed in my business.


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


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


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


 


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


 


A. Power. I am duly organized, and validly
existing and in good standing in all jurisdictions in which I operate. I have
the power and authority to enter into this transaction and to carryon my
business or activity as it is now being conducted and, as applicable, am
qualified to do so in each jurisdiction in which I operate.


B. Authority. The execution, delivery and
performance of this Agreement and the obligation evidenced by this Agreement
are within my powers, have been duly authorized, have received all necessary
governmental approval, will not violate any provision of law, or order of court
or governmental agency, and will not violate any agreement to which I am a
party or to which I am or any of my property is subject.


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


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


E. 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, except as disclosed in writing to you prior to any advance on
the Secured Debts. I represent that I am the original owner of the Property
and, if I am not, that I have provided you with a list of prior owners of the
Property.


 


5. DUTIES TOWARD PROPERTY.


 


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


 


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


 


B. Use, Location, and Protection of the
Property. I will keep the Property in my possession and in good repair. I will
use it only for commercial purposes. I will not change this specified use
without your prior written consent. You have the right of reasonable access to
inspect the Property and I will immediately inform you of any loss or damage to
the Property. I will not cause or permit waste to the Property.


 


I will keep the Property at my address listed in
the DATE AND PARTIES section unless we agree I may keep it at another location.
If the Property is to be used in other states, I will give you a list of those
states. The location 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 any change in location of any of the Property. I will not use the
Property in violation of any law. I will notify you in writing prior to any
change in my address, name or, if an organization, any change in my identity or
structure.


 


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


 


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


 


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


 


Initials


 


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


 


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


 


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


 


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


 


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


 


7. COLLECTION RIGHTS OF THE SECURED PARTY.
Account Debtor means the person who is obligated on an account, chattel paper,
or general intangible. I authorize you to notify my Account Debtors of your
security interest and to deal with the Account Debtors’ obligations at your
discretion. You may enforce the obligations of an Account Debtor, exercising
any of my rights with respect to the Account Debtors’ obligations to make
payment or otherwise render performance to me, including the enforcement of any
security interest that secures such obligations. You may apply proceeds
received from the Account Debtors to the Secured Debts or you may release such
proceeds to me.


 


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


 


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


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


C.      file proofs of claim or similar documents
in the event of bankruptcy, insolvency or death of any person obligated as an
Account Debtor.


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


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


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


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


 


8. AUTHORITY TO PERFORM. I authorize you to do
anything you deem reasonably necessary to protect the Property, and perfect and
continue your security interest in the Property. If I fail to perform any of my
duties under this Agreement or any other Loan Document, you are authorized to
perform the duties or cause them to be performed.  These authorizations include, but are not
limited to, permission to:


 


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


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


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


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


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


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


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


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


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


J.       notify any Account Debtor of your interest
in the Property and tell 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 the care and follow the procedures that you generally
apply to the collection of obligations owed to you, you will be deemed to be
using reasonable care. Reasonable care will not include: any steps necessary to
preserve rights against prior parties; the duty to send notices, perform
services or take any other action in connection with the management of the
Property; or the duty to protect, preserve or maintain any security interest
given to others by me or other parties. Your authorization to perform for me
will not create an obligation to perform and your failure to perform will not
preclude you from exercising any other rights under the law or this Agreement.
All cash and non-cash proceeds of the Property may be applied by you only upon
your actual receipt of cash proceeds against such of the Secured Debts, matured
or unmatured, as you determine in your sale discretion.


 


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


 


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


 


A.     Payments. I or Obligor 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 relief law, the assignment for the benefit of
creditors by or on behalf of, the voluntary or involuntary termination of
existence by, or the commencement of any proceeding under any present or future
federal or state insolvency, bankruptcy, reorganization, composition or debtor
relief law by or against me, Obligor, or any co-signer, endorser, surety or
guarantor of this Agreement or any other obligations Obligor has with you.


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


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


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


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


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


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


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


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


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


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


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


N.      Insecurity. You determine in good faith
that a material adverse change has occurred in Borrower’s financial condition
from the conditions set forth in Borrower’s most recent financial statement
before the date of this Agreement or that the prospect for payment or
performance of the Secured Debts is impaired for any reason.


 


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


 


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


 


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


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


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


D.      Payments Made On My Behalf. Amounts
advanced on my behalf will be immediately due and may be added to the Secured
Debts.


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


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


 


Where a notice is required, I agree that ten
days prior written notice sent by first class mail to my address listed in this
Agreement will be reasonable notice to me under the Minnesota Uniform
Commercial Code. If the Property 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 commercially reasonable manner at my expense following any commercially reasonable
preparation or processing.


 


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If any items not otherwise subject to this
Agreement are contained in the Property when you take possession, you may hold
these items for me at my risk and you will not be liable for taking possession
of them.


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


H. Waiver. By choosing anyone or more 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 not to use any
remedy, you do not waive your right to later consider the event a default and
to use any remedies if the default continues or occurs again.


 


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


 


13.  PERFECTION
OF SECURITY INTEREST AND COSTS. I authorize you to file a financing statement
covering the Property. I will comply with, facilitate, and otherwise assist you
in connection with obtaining perfection or control over the Property for
purposes of perfecting your security interest under the Uniform Commercial
Code. I agree to pay all taxes, fees and costs you payor incur in connection
with preparing, filing or recording any financing statements or other security
interest filings on the Property. I agree to pay all actual costs of
terminating your security interest.


 


14.  APPLICABLE
LAW. This Agreement is governed by the laws of Minnesota, the United States of
America, and to the extent 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 exclusive forum, venue and place of
jurisdiction will be in Minnesota, unless otherwise required by law.


 


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


 


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


 


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


 


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


 


 


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


 


	
  PROUROCARE MEDICAL INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ RICHARD C. CARLSON

  	
   

  
	
   

  	
  RICHARD C. CARLSON, CEO

  	
   

  
				



 


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