Document:

Exhibit 10.4

 

CONSULTING
AGREEMENT

 

Southwest Casino and Hotel
Corp., a Minnesota corporation (“Southwest”), and Black Diamond
Commercial Finance, L.L.C., a Delaware limited liability company, in its
capacity as Agent (as such term is defined in the Credit Agreement, “Agent”)
under the Credit Agreement (“BDCF”), enter into this Consulting
Agreement (this “Agreement”) effective as of October 19, 2008 (the “Effective
Date”).

 

WITNESSETH

 

WHEREAS,
Southwest owns a 50% Membership Interest (as such term is defined in the Member
Control Agreement, as defined below) (the “Membership Interest”) in
North Metro Harness Initiative, LLC, a Minnesota limited liability company
d/b/a Running Aces Harness Park (“Running Aces”), whose business and
affairs are governed by that certain Member Control Agreement of North Metro
Harness Initiative, LLC, entered into and effective as of June 8, 2004 (as
amended by that certain First Amendment to Member Control Agreement dated as of
April 20, 2007, the “Member Control Agreement”);

 

WHEREAS,
BDCF and Running Aces entered into that certain Credit Agreement, dated as of April 20,
2007 (as has been amended, restated, supplemented or other modified from time
to time, the “Credit Agreement”), by and among Running Aces, as
borrower, the Loan Parties (as such term is defined in the Credit Agreement)
and BDCF, as Agent;

 

WHEREAS,
as a result of the Existing Defaults (as such term is defined in the Settlement
Agreement) and the financial difficulties of Running Aces, Southwest, Southwest
Casino Corporation, a Nevada corporation and owner of 100% of the capital stock
of Southwest, and BDCF, contemporaneously with the execution and delivery of
this Agreement, have entered into that certain Settlement Agreement, dated as
of the date hereof (the “Settlement Agreement”), which Settlement
Agreement, among other things, requires the transfer of Southwest’s Membership
Interest to BCDF, as Agent, and the execution and delivery of this Consulting
Agreement;

 

WHEREAS,
prior to the transfer of Southwest’s Membership Interests as contemplated by
the Settlement Agreement, Southwest, through its officers and employees, has
provided leadership, management, consulting and other services to Running Aces
and its staff;

 

WHEREAS,
in order for Running Aces to continue its operations without interruption
following the sale of its Membership Interests as contemplated by the
Settlement Agreement, BDCF has requested that Southwest provide or cause to be
provided certain services to Running Aces for a limited time; and

 

WHEREAS,
Southwest is willing to provide or cause to be provided such services on the
terms and conditions set forth herein.

 

NOW,
THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally
bound, the parties hereto agree as follows:

 

 

AGREEMENT

 

1.              CONSULTING SERVICES. BDCF engages Southwest to provide
leadership, management and consulting services to Running Aces and BDCF, as
Agent, with a level of care and diligence and in a manner consistent with
Southwest’s provision of leadership, management and consulting services prior
to the sale of the Membership Interest (collectively, the “Consulting Services”),
on the terms and subject to the conditions of this Agreement.  Southwest
hereby represents to BCDF, and BCDF hereby acknowledges, that the Consulting
Services to be provided hereunder shall be provided in good faith and in an
manner consistent with the historical delivery of such Consulting Services to
Running Aces, substantially for the same purposes, in the same manner, with the
same personnel, with the same quality and with the same degree of care as
Southwest has provided such Consulting Services to Running Aces immediately
prior to the Effective Date.

 

2.              TRANSITION SERVICES.  In addition to providing the
Consulting Services, Southwest agrees to assist BDCF, as Agent, in the
transition of the management and operation of Running Aces from Southwest to
BDCF.  The services to be provided by
Southwest in connection with this transition (the “Transition Services”
and, together with the Consulting Services, the “Services”) will consist
of:

 

2.1                               Working with BDCF to train any new management
and operational personnel selected by BDCF (“New Management”), if any,
to operate and manage Running Aces;

 

2.2                               Working with BDCF and New Management to
establish working relationships between BDCF and New Management, on one hand,
and each group or agency with whom relationships are required to manage or
operate Running Aces, including, without limitation, Commissioners and staff of
the Minnesota Racing Commission (the “Commission”), governmental
authorities of Columbus Township and horsemen’s guilds.

 

2.3                               Working with Running Aces staff, BDCF and New
Management to maintain and renew any and all licenses held by Running Aces that
are necessary or proper to enable the uninterrupted operation of Running Aces.

 

2.4                               Working with Running Aces staff, BDCF and New
Management to obtain approval for Running Aces’ 2009 live and simulcast race
schedules.

 

2.5                               Working with Running Aces staff, BDCF and New
Management in each and all capacities necessary to ensure the uninterrupted
operation of the business of Running Aces, in all cases in good faith and in
the case of current Running Aces staff in a manner consistent with the
historical practices of Southwest, substantially for the same purposes, in the
same manner, with the same personnel, with the same quality and with the same
degree of care as Southwest has worked with Running Aces staff immediately
prior to the Effective Date.

 

3.              LIMITATION OF
CONSULTING AND TRANSITION SERVICES.  Southwest
agrees to provide the Services as it reasonably determines necessary to meet
the standards of care set forth in Section 1 and Section 2
during the Term of this Agreement.  BDCF
acknowledges and agrees that it is the desire of Southwest and BDCF that,
through the provision of the Transition Services, the need for and amount of
Services provided by Southwest may diminish over the Term of this
Agreement.  The aggregate monthly
compensation to Southwest is for all services to 

 

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be
provided under this Agreement and any expenses incurred by Southwest in
connection with the provision of the Services, and any reduction in the amount
of services provided over the course of this Agreement will not result in a
reduction in the monthly compensation due to Southwest.

 

4.              COMPENSATION OF SOUTHWEST.  In consideration for the
Services provided by Southwest under this Agreement, BDCF will pay to Southwest
a consulting fee equal to $50,000 per month (the “Consulting Fee”).  BDCF will make the initial $50,000 payment
within 5 business days of the Effective Date. 
BDCF will then make successive $50,000 payments on the next 3 monthly
anniversaries of the Effective Date.

 

5.              TERM.  The term of this Agreement begins on the
Effective Date and extends until the 4 month anniversary of the Effective Date
(the “Term”), unless extended by written agreement of Southwest and BDCF
or terminated pursuant to Section 11.

 

6.              AUTHORITY.  Each of Southwest and BDCF represents and
warrants that: (i) it has full power, right and authority to execute and
deliver this Agreement and enter into and perform its obligations hereunder and
to consummate the transactions contemplated hereby; and (ii) the
execution, delivery and performance of this Agreement by it and the
consummation by it of the transactions contemplated hereby have been duly authorized
and approved by all necessary action of the part of Southwest or BDCF, as
applicable.  The undersigned
representatives of Southwest and BDCF have full power and authority to enter
into this Agreement and to bind Southwest and BDCF, respectively.

 

7.              COMPLIANCE WITH LAWS; LICENSING.  Neither Southwest nor BDCF will have any
rights or obligations under this Agreement to the extent that performance under
this Agreement violates any law or regulation, except that BDCF will remain
obligated to pay the Consulting Fee if the violation of law or regulation
results from any action or inaction of BDCF or the inability of BDCF to obtain
or maintain any license required by BDCF in connection with BDCF’s ownership of
the Membership Interest.

 

8.              INDEPENDENT CONTRACTOR.  Both
BDCF and Southwest agree that Southwest will act strictly as an independent
contractor in the performance of its duties under this Agreement and, under no
circumstances, will be deemed the agent of BDCF.  Accordingly, Southwest will be wholly responsible
for all Southwest employees and payment of all taxes arising out of Southwest’s
activities in accordance with this contract, including by way of illustration
but not by limitation, federal and state income tax, social security tax,
unemployment insurance taxes, and any other taxes or gaming or business license
fees as required.

 

9.              NO PARTNERSHIP.  Nothing in this Agreement will be
deemed as creating a partnership, joint venture or similar business
relationship between Southwest and BDCF. 
Nothing in this Agreement will be construed to create any contract right
on the part of any third party or any duty or obligation to such third party on
the part of Southwest or BDCF whatsoever.

 

10.       CONFIDENTIAL INFORMATION. Each party agrees that any information
received by it or any agent, employee or consultant retained by it, concerning
the other party, or with respect to Southwest, concerning Running Aces, during
the performance of this Agreement, regarding the parties’, or with respect to
Southwest, Running Aces’ organization, financial matters, marketing plans, or
other information of a proprietary nature, will be treated by both parties in
full 

 

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confidence and, except as
required by law, will not be revealed to any other persons, firms or
organizations without the written permission of the other party.  In addition, BDCF acknowledges and agrees
that Southwest is a public company that is required to file periodic reports
and other information with United States Securities and Exchange Commission and
provide public information in accordance with the rules and regulations of
the Securities and Exchange Commission. 
Nothing in this Agreement limits the ability of Southwest to make such
filings and announcements as Southwest reasonably determines, in its sole
discretion, are required or advisable under applicable securities laws.  This provision will survive the termination
of this Agreement.  Southwest will take
all measures deemed reasonably necessary by Southwest to protect BDCF’s and
Running Aces’ data that comes into the possession of Southwest from
destruction, deletion, loss or unauthorized change and to cause its recovery in
events of force majure.

 

11.       TERMINATION AND DEFAULT.

 

11.1                        INVOLUNTARY TERMINATION DUE TO CHANGES IN OR
COMPLIANCE WITH APPLICABLE LAWS.  It is the understanding of the parties that
the operation of Running Aces will comply with all applicable laws.  If this Agreement is determined by a court of
competent jurisdiction no longer to be lawful, the obligations of the parties
will immediately cease, except that BDCF will remain obligated to pay the
Consulting Fee if the determination of unlawfulness results directly from any
action or inaction of BDCF or the inability of BDCF to obtain or maintain any
license required by BDCF in connection with BDCF’s ownership of the Membership
Interest.  If Southwest determines
Running Aces or its operations may not comply with rules, regulations or laws
applicable to Running Aces, BDCF or Southwest, Southwest may terminate this
Agreement, and any obligation of BDCF to pay the Consulting Fee shall also be
terminated.

 

11.2                        EVENTS OF DEFAULT.  Any one or more of the following will
constitute an event of default (an “Event of Default”) as that term is
used in this Agreement:

 

11.2.A            Default in the
payment of any amount due under this Agreement, if such default continues for
more than 5 days after written notice of such default is delivered by Southwest
to BCDF; or

 

11.2.B            Default
in the observance or performance of any covenant, condition, or agreement by
either BDCF or Southwest that continues for more than 30 days after written
notice to cure the default.

 

11.3                        TERMINATION UPON EVENT OF DEFAULT.  BDCF or Southwest may terminate
this Agreement immediately upon an Event of Default by the other party.

 

11.4                        RIGHTS ON TERMINATION.  If BDCF exercises its right to terminate this
Agreement, BDCF will pay Southwest all Consulting Fees due Southwest under this
Agreement up to the date this Agreement terminates as determined under Section 10.3
(the “Early Termination Date”). 
BDCF will pay all such fees on or before the Early Termination
Date.  If Southwest exercises its right
to terminate this Agreement, BDCF shall have no obligation to pay the Consulting
Fee for any periods after the Early Termination Date.  Following the termination or expiration of
this Agreement, all obligations of the parties hereto shall terminate, except
that 

 

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the provisions of Section 10, 14,
15, 16, 17, 21 and 22 shall remain in full
force and effect following such termination or expiration.

 

12.       FORCE MAJEURE.  All
obligations set forth in this Agreement will be subject to impossibility of
performance as a consequence of any strike, lock-out, fire, destruction, acts
of God, restrictions of any governmental authority, civil commotion,
unavoidable casualty or other cause beyond the control of either party.

 

13.       SEVERABILITY.  If any
provision of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal or unenforceable, such provision will be severed and
considered deleted from this Agreement and the remainder of that provision and
this Agreement will be unaffected and will continue in full force and effect or
modified in such a way as to make it enforceable, and the invalidity,
illegality or unenforceability thereof shall not affect the validity, legality
or enforceability of the remaining provisions of this Agreement.

 

14.       GOVERNING LAW.  THIS
AGREEMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.

 

15.       CONSENT TO JURISDICTION.  EACH OF SOUTHWEST AND BDCF HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN NEW YORK COUNTY,
STATE OF NEW YORK AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY SHALL BE LITIGATED IN SUCH COURTS. 
EACH OF SOUTHWEST AND BDCF EXPRESSLY SUBMITS AND CONSENTS TO THE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS.  EACH OF SOUTHWEST AND BDCF
HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH
SERVICE OF PROCESS  MAY BE
MADE UPON SOUTHWEST OR BDCF, AS APPLICABLE, BY CERTIFIED OR REGISTERED MAIL,
RETURN RECEIPT REQUESTED, ADDRESSED TO SOUTHWEST OR BDCF, AS APPLICABLE, AT THE
ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE  SO
MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

16.       WAIVER OF JURY TRIAL.  SOUTHWEST AND BDCF HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT.  SOUTHWEST
AND BDCF ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THE OTHER ACQUISITION DOCUMENTS AND THAT EACH WILL CONTINUE TO
RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.  SOUTHWEST AND BDCF WARRANT AND REPRESENT THAT
EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL,
AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS

 

5

 

17.       NOTICES.  Any notice or
other communication required shall be in writing addressed to the respective
party as set forth below and may be personally served, sent by e-mail,
telecopied, sent by overnight courier service or U.S. mail and shall be deemed
to have been given:  (a) if
delivered in person, when delivered; (b) if delivered by fax, on the date
of transmission if transmitted on a business day before 4:00 p.m. New York
time;  (c) if sent by e-mail, by the
sender’s receipt of an e-mail acknowledgment confirming delivery thereof, (d) if
delivered by overnight courier, one (1) Business Day after delivery to the
courier properly addressed; or (e) if delivered by U.S. mail, four (4) Business
Days after deposit with postage prepaid and properly addressed:

 

To BDCF at:

 

Black Diamond Commercial Finance, L.L.C.

100 Field Drive

Lake Forest, IL 60045-2580

ATTN: 
Hugo H. Gravenhorst

Fax: 
(847) 615-9064

 

With a copy to:

 

Black Diamond Capital Management, L.L.C.

One Sound Shore Drive

Suite 200

Greenwich, CT 06830

ATTN: 
Bob Rosenbloom

Fax: 
(203) 552-1014

 

and:

 

Latham & Watkins LLP

233 South Wacker Drive

Suite 5800, Sears Tower

Chicago, Illinois 60606

ATTN: 
Jeff Moran

Fax: 
(312) 993-9767

 

To Southwest at:

 

Southwest Casino Corporation

2001 Killebrew Drive, Suite 306

Minneapolis, Minnesota 55425

Attention: Thomas E. Fox, President

Fax: 
(952) 853-9991

 

With a copy to:

 

Oppenheimer Wolff & Donnelly, LLP

Plaza VII, Suite 3200

35 South 7th Street

Minneapolis, MN 55402

ATTN: 
D. William Kaufman

Fax: 
(612) 607-7100

 

6

 

The above addresses may be changed at any
time by written notice.

 

18.       ASSIGNMENTS.  This
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties hereto, and their respective heirs, personal representatives,
successors and permitted assigns. 
Notwithstanding the foregoing, this Agreement is for personal services
and specialized experience and expertise of Southwest and may not be assigned
by either party without the prior written consent of the other party, except
that Agent may assign this agreement without prior consent to any Lender (as
such term is defined in the Credit Agreement).

 

19.       ENTIRE AGREEMENT.  This
Agreement, together with the Settlement Agreement and the other documents
referred to therein, contains the entire agreement of the parties on the
subject matters stated herein, and supersedes and renders null and void all
prior agreements or understandings, whether written or oral, which exist or may
have existed between the parties with respect to its subject matters.  This document will be deemed drafted by both
parties and will not be construed against any party by virtue of such
draftsmanship.

 

20.       NATURE OF SERVICES AND RECOMMENDATIONS.  Southwest will use commercially reasonable
efforts when providing its services under this agreement.  Southwest and BDCF agree that the nature of
the services and recommendations that Southwest will provide under this
agreement require Southwest to apply its experience and expertise on behalf of
BDCF and Running Aces, which requires the application of considerable judgment
and the making of assumptions, all of which may prove inaccurate.  BDCF and Southwest acknowledge and agree that
in providing the Services under this Agreement, Southwest is not guaranteeing
the success of Running Aces and nothing in this Agreement can be construed as
an assurance or guarantee of any operating result or level of performance of
Running Aces.

 

BDCF further acknowledges and agrees that: (a) except
as provided under Section 2.3, BDCF has not requested and Southwest
will not provide any services in connection with any licenses or approvals that
BDCF or New Management must obtain in connection with the sale of the
Membership Interest; (b) the Commission is an independent regulatory body
over which Southwest has no control; (c) the ability of BDCF and New
Management to establish working relationships with the Commission is ultimately
the responsibility of BDCF and New Management; (d) Southwest does not know
and cannot control how the Commission will respond to the sale of the
Membership Interest; and (e) Southwest will have no liability or
responsibility to BDCF or Running Aces in connection with any decision made,
action taken, or failure to act by the Commission.

 

21.       INDEMNIFICATION OF BDCF.  Southwest hereby agrees to indemnify and hold
harmless BDCF and its affiliates and their respective officers, directors,
managers, employees, agents and representatives from and against any and all
claims, losses, damages, liabilities, deficiencies, obligations or out-of-pocket
costs or expenses, including, without limitation, reasonable attorneys’ fees
and expenses and costs and expenses of investigation (collectively “Losses”),
arising out of or resulting from (a) any breach of this Agreement by
Southwest, or 

 

7

 

(b) the gross negligence
or willful misconduct of Southwest in the performance of any obligations
hereunder, except to the extent such Losses result directly from the breach of
this Agreement by BDCF or the gross negligence or willful misconduct of BDCF in
the performance of any obligations hereunder.

 

22.       LIMITATION ON LIABILITY.  In no event will Southwest be liable
hereunder, for any payment to BDCF or Running Aces in excess of the fees
actually paid to Southwest by BDCF nor will Southwest be liable to BDCF or
Running Aces, whether in contract, warranty, tort (including negligence or
strict liability) or otherwise for any special, indirect, incidental or
consequential damages of any kind or nature whatsoever.

 

23.       AMENDMENTS.  This Agreement may only be amended in a
writing signed by both parties.

 

24.       NO WAIVER.  Any extension or waiver of the obligations
herein of either party shall be valid only if set forth in an instrument in
writing referring to this section and signed by the party to be bound
hereby.  Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or a
subsequent waiver of the same term or condition, or a waiver of any other term
or condition, of this Agreement.  The
failure of any party to assert any of its rights hereunder shall not constitute
a waiver of any such rights.

 

25.       EXPENSES.  Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement shall be paid by the party incurring such costs
and expenses.

 

26.       ADDITIONAL DOCUMENTS.  The parties hereto will, without additional
consideration, execute and deliver such further instruments or take such other
action as may be reasonably requested by any other party hereto in order to
carry out the purposes of this Agreement.

 

27.       OTHER BUSINESS.  Nothing in this Agreement shall prevent any
party from providing any service to any other person.  Nothing in this Agreement shall prevent BDCF
from obtaining services the same or substantially the same as the Services from
its own employees or from providers other than Southwest.

 

28.       COMMUNICATION.  Each of Southwest and BDCF shall designate in
writing to the other party its general representative who shall be the primary
liaison between Southwest and BDCF in the implementation of this Agreement and
who shall be copied on all correspondence between the parties.  These general representatives shall
correspond regularly and in good faith to insure that, whenever possible, both
parties’ concerns as to the day-to-day management of the business are acted
upon and resolved to the mutual satisfaction of the parties.

 

29.       COUNTERPARTS.  This Agreement may be executed in
counterparts, each of which shall be an original, and all of which, taken
together, shall constitute one and the same instrument.  The parties agree that telecopied or
electronically scanned pages of signatures will be sufficient, with
original signature pages to be supplied and exchanged at a later date.

 

Signature page follows.

 

8

 

IN
WITNESS WHEREOF,
Southwest and BDCF have executed this Agreement as of the Effective Date.

 

	
   

  	
  SOUTHWEST CASINO AND HOTEL CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  Thomas E. Fox

  
	
   

  	
   

  	
  Thomas E. Fox

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BLACK DIAMOND COMMERCIAL

  FINANCE, L.L.C., as Agent

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  Hugo H. Gravenhorst

  
	
   

  	
   

  	
  Hugo H. Gravenhorst

  
	
   

  	
   

  	
  Managing DirectorExhibit 4.1

 

THE WARRANT AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT (COLLECTIVELY, THE
“SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS
(“BLUE SKY LAWS”).  NO TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS WARRANT OR THE
SECURITIES OR ANY INTEREST THEREIN MAY BE MADE EXCEPT (A) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE
BLUE SKY LAWS OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH BOTH AN
OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND COUNSEL SHALL BE
SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT NO REGISTRATION IS REQUIRED
BECAUSE OF THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT AND APPLICABLE BLUE SKY LAWS, AND ASSURANCES THAT THE TRANSFER,
SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION WILL BE MADE ONLY
IN COMPLIANCE WITH THE CONDITIONS OF ANY SUCH REGISTRATION OR EXEMPTION.

 

WARRANT

FOR

SHARES OF COMMON STOCK

OF

PROUROCARE MEDICAL INC.

 

	
  Warrant No. 08-04

  	
  Golden
  Valley, Minnesota

  
	
   

  	
  September 25, 2008

  

 

FOR VALUE RECEIVED, James L. Davis, or
his successors or assigns (“Holder”), is entitled to subscribe for and
purchase from ProUroCare Medical Inc., a Nevada corporation (the “Company”),
up to One-Hundred Thousand (100,000) fully
paid and non-assessable shares of the Company’s common stock, $0.00001 par
value per share (the “Common Stock”), at the price of $1.50 per share, subject to adjustments as noted in section 3
below (the “Warrant Exercise Price”).

 

This warrant may be exercised by Holder at any time or from time to
time on or prior to the fifth anniversary of the date hereof.

 

This warrant is subject to the following provisions, terms and
conditions:

 

1.             Exercise
of Warrant.  The rights represented by
this warrant may be exercised by the Holder, in whole or in part, by written
notice of exercise delivered to the Company at least three days prior to the
intended date of exercise and by the surrender of this warrant (properly
endorsed if required) at the principal office of the Company and upon payment
to it by cash, certified check or bank draft of the purchase price for such
shares. The shares so purchased shall be deemed to be issued as of the close of
business on the date on which this warrant has been exercised by its surrender
and payment to the Company of the Warrant Exercise Price.  Certificates for the shares of stock so
purchased, bearing the restrictive legend set forth in Section 5 of this
warrant, shall be delivered to the Holder within 15 days after the rights
represented by this warrant shall have been so exercised, and, unless this
warrant has expired, a new warrant representing the number of shares, if 

 

1

 

any, with respect to
which this warrant has not been exercised shall also be delivered to the Holder
within such time.  No fractional shares
shall be issued upon the exercise of this warrant.

 

2.             Certain
Covenants of the Company.  The
Company covenants and agrees that all shares that may be issued upon the
exercise of the rights represented by this warrant shall, upon issuance, be
duly authorized and issued, fully paid and non-assessable shares.  The Company further covenants and agrees that
during the period within which the rights represented by this warrant may be
exercised, the Company will at all times have authorized, and reserved for the
purpose of issue or transfer upon exercise of the subscription rights evidenced
by this warrant, a sufficient number of shares of Common Stock to provide for
the exercise of the rights represented by this warrant.

 

3.             Adjustment
of Exercise Price and Number of Shares. 
The number of shares the Holder may purchase and the Warrant Exercise
Price shall be subject to adjustment from time to time as hereinafter provided
in this section 3.

 

(a)           Stock
Dividend, Stock Split or Stock Combination. 
If the Company at any time divides the outstanding shares of its Common
Stock into a greater number of shares (whether pursuant to a stock split, stock
dividend or otherwise), and conversely, if the outstanding shares of its Common
Stock are combined into a smaller number of shares, the Warrant Exercise Price
in effect immediately prior to such division or combination shall be
proportionately adjusted to reflect the reduction or increase in the value of
each such Common Stock.

 

(b)           Effect
of Reorganization, Reclassification or Merger.  If any capital reorganization or reclassification
of the capital stock of the Company, or consolidation or merger of the Company
with another corporation, or the sale of all or substantially all of its assets
to another corporation shall be effected in such a way that holders of the
Common Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for such Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, the Holder
shall have the right to purchase and receive upon the basis and upon the terms
and conditions specified in this warrant and in lieu of the shares of the
Common Stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, such shares of stock, other securities
or assets as would have been issued or delivered to the Holder if it had
exercised this warrant and had received such shares of Common Stock prior to
such reorganization, reclassification, consolidation, merger or sale.

 

(c)           Notice
of Adjustment.  Upon any adjustment
of the Warrant Exercise Price, the Company shall give written notice thereof,
by first class mail, postage prepaid, addressed to the registered Holder of
this warrant at the address of such Holder as shown on the books of the
Company, which notice shall state the Warrant Exercise Price resulting from
such adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.

 

4.             No
rights as Shareholder.  This warrant
shall not entitle the Holder to any voting rights or other rights as a
shareholder of the Company.

 

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5.             Application
of Restrictions of Transfer.

 

(a)           No transfer of this
warrant may be completed unless and until (i) the Company has received an
opinion of counsel for the Company that such securities may be sold pursuant to
an exemption from registration under the Securities Act of 1933, as amended
(the “Securities Act”), or (ii) a registration statement relating
to this warrant has been filed by the Company and declared effective by the
Commission.  Subject to the foregoing,
this warrant and all rights hereunder are transferable, in whole or in part, at
the principal office of the Company by the Holder in person or by duly
authorized attorney, upon surrender of this warrant properly endorsed to any
person or entity who represents in writing that he/she/it is acquiring the
warrant for investment and without any view to the sale or other distribution
thereof.  Each Holder of this warrant, by
taking or holding the same, consents and agrees that the bearer of this warrant,
when endorsed, may be treated by the Company and all other persons dealing with
this warrant as the absolute owner hereof for any purpose and as the person
entitled to exercise the rights represented by this warrant or perform the
obligations required hereby, or to the transfer hereof on the books of the
Company, any notice to the contrary notwithstanding; but until such transfer on
such books, the Company may treat the registered owner hereof as the owner for
all purposes.

 

(b)           In
no event shall the Holder(s) sell any shares of Common Stock that are
issued upon the exercise of the rights represented by this warrant within 180
days following the effective date of an initial public offering of the Common
Stock of the Company.

(c)           Each certificate for
shares issued upon the exercise of the rights represented by this warrant shall
bear a legend as follows unless, in the opinion of counsel to the Company, such
legend is not required in order to ensure compliance with the Securities Act:

 

“THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE ISSUED, AND THE
SECURITIES ISSUABLE IN CONNECTION WITH THE CONVERSION OF SUCH SECURITIES WILL
BE ISSUED, IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, AND IN RELIANCE UPON
THE HOLDER’S REPRESENTATION THAT SUCH SECURITIES WERE BEING ACQUIRED FOR
INVESTMENT AND NOT FOR RESALE.  NO
TRANSFER OF THE SECURITIES OR THE SECURITIES ISSUABLE IN CONNECTION WITH THE
CONVERSION OF SUCH SECURTITIES MAY BE MADE ON THE BOOKS OF THE COMPANY
UNLESS (i) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS OR (ii) UNLESS THE HOLDER SHALL HAVE PROVIDED THE COMPANY
WITH AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT
THAT NO SUCH REGISTRATION IS REQUIRED.”

 

6.             Governing
Law.  This Warrant shall be governed
by and construed in accordance with the laws of the State of Minnesota without
regard to its conflicts-of-law provisions.

 

7.             Amendments
and Waivers.  The provisions of this
Warrant may not be amended, modified or supplemented, and waiver or consents to
departures from the provisions 

 

3

 

hereof may not be given,
unless the Company agrees in writing and has obtained the written consent of
the Holder.

 

8.             Successors
and Assigns.  All the terms and
conditions of this Warrant shall be binding upon and inure to the benefit of
the permitted successors and assigns of the Company and the Holder.

 

9.             Headings
and References.  The headings of this
Warrant are for convenience only and shall not affect the interpretation of
this Warrant.  Unless the context
indicates otherwise, all references herein to Sections are references to
Sections of this Warrant.

 

10.           Notices.  All notices or communications hereunder,
except as herein otherwise specifically provided, shall be in writing.  Notices sent to the Holder shall be mailed,
hand delivered or faxed and confirmed to the Holder at his, her or its address
set forth in the Company’s records. 
Notices sent to the Company shall be mailed, hand delivered or faxed and
confirmed to ProUroCare Medical Inc., 5500 Wayzata Blvd., Suite 310,
Golden Valley, Minnesota 55416, or to such other address as the Company or the
Holder shall notify the other as provided in this Section.

 

IN WITNESS WHEREOF, the Company has caused this
warrant to be signed and delivered by its duly authorized officer.

 

 

	
  Dated:
  September 25, 2008.

  	
   

  
	
   

  	
   

  
	
   

  	
  PROUROCARE MEDICAL INC.:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
         /s/Richard
  C. Carlson

  
	
   

  	
  Name:

  	
  Richard C. Carlson

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
				

 

4

 

WARRANT
EXERCISE (CASH/CHECK)

 

(To be signed only upon exercise of warrant
for cash/check)

 

The undersigned, the holder of the foregoing warrant,
hereby irrevocably elects to exercise the purchase right represented by such
warrant for, and to purchase thereunder,                             of the shares of Common Stock of ProUroCare
Medical Inc. to which such warrant relates and herewith makes payment of $                        therefor in cash or by check and requests
that the certificates for such shares be issued in the name of, and be
delivered to
                                                              ,
whose address is set forth below the signature of the undersigned.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
  (Signature)

  

 

 

INSTRUCTIONS FOR REGISTRATION OF SECURITIES

 

	
  Name and Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (please typewrite or print in block letters)

  

 

 

WARRANT
ASSIGNMENT

 

(To be signed only upon transfer of warrant)

 

FOR VALUE RECEIVED,                                                                                   hereby
sells, assigns and transfers unto:

 

	
  Name and Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (please typewrite or print in block letters)

  

 

the right to purchase                     
shares of Common Stock as represented by this warrant to the extent of
                        
shares of Common Stock and as to which such right is exercisable and does
hereby irrevocably constitute and appoint
                                         
attorney, to transfer the same on the books of the Company with full power of
substitution in the premises.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
  (Signature)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00148-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00148-of-00352.parquet"}]]