Document:

Exhibit 10.35

 

	
  NOTE AMOUNT

  	
   

  	
  INDEX (w/Margin)

  	
   

  	
  RATE

  	
   

  	
  MATURITY DATE

  	
   

  	
  LOAN PURPOSE

  	
   

  
	
  $

  	
  600,000

  	
   

  	
  Wall Street Journal Prime plus 1.000%

  	
   

  	
  8.750

  	
  %

  	
  02/28/09

  	
   

  	
  Commercial

  	
   

  
											

 

PROMISSORY NOTE

(Commercial
- Term)

 

EFFECTIVE DATE AND PARTIES. This Promissory
Note (Note) is made effective as of October 15, 2007.  The parties and their addresses are:

 

LENDER:

PHILLIPS
W. SMITH FAMILY TRUST

Phillips W. Smith, Trustee

7501 North Ironwood Drive

Paradise Valley, AZ 85253

 

BORROWER:

PROUROCARE
MEDICAL INC

a
Nevada Corporation

ONE CARLSON PARKWAY SUITE
124

PLYMOUTH, Minnesota 66447

 

1.                                      DEFINITIONS.  As used in this Note, the terms have the
following meanings:

 

A.                                    Pronouns.  The pronouns “we,’ ‘us,’ and “our” refer to
each Borrower signing this Note, individually and together.  “You” and “Your” refer to the Lender.

 

B.                                    Note.  Note refers to this document, and any
extensions, renewals, modifications and substitutions of this Note.

 

C.                                    Loan.  Loan refers to this transaction generally,
including obligations and duties arising from the terms of all documents
prepared or submitted for this transaction such as applications, security
agreements, disclosures or notes, and this Note.

 

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

 

E.                                      Property.  Property is any property, real, personal or
intangible, that secures our performance of the obligations of this Loan.

 

F.                                      Percent.  Rates and rate change limitations are
expressed as annualized percentages.

 

2.                                      PROMISE TO PAY.  For value received, we promise to pay you or
your order, at your address, or at such other location as you may designate,
amounts advanced from time to time under the terms of this Note up to the
maximum total principal balance of $600,000 (Principal), plus interest from the
date of disbursement, on the unpaid outstanding Principal balance until this
Note is paid in full.

 

3.                                      INTEREST.  Interest will accrue on the unpaid Principal
balance of this Note at the rate of 8.750 percent (Interest Rate) until October 31,
2007, after which time it may change as described in the Variable Rate
subsection.

 

A.                                    Interest After Default.  If you declare a default under the terms of
this Loan, including for failure to pay in full at maturity, you may increase
the Interest Rate payable on the outstanding Principal balance of this Note
until such default is cured.  In such
event, interest will accrue on the outstanding Principal balance at the
Interest Rate in effect from time to time under the terms of this Loan, until
paid in full.

 

 

B.                                    Maximum Interest Amount.  Any amount assessed or collected as interest
under the terms of this Note will be limited to the maximum lawful amount of
interest allowed by state or federal law, whichever is greater.  Amounts collected in excess of the maximum
lawful amount will be applied first to the unpaid Principal balance.  Any remainder will be refunded to us.

 

C.                                    Statutory Authority.  The amount assessed or collected on this Note
is authorized by the Minnesota usury laws under Minn. Stat. 47.59.

 

D.                                    Accrual.  Interest accrues using an Actual/360 days
counting method.

 

E.                                      Variable Rate.  The Interest Rate may change during the term
of this transaction.

 

(1)                                 Index.  Beginning with the first Change Date, the
Interest Rate will be based on the following index:  the base rate on corporate loans posted by at
least 75% of the nation’s 30 largest banks known as the Wall Street Journal
Prime Rate.  The Current Index is the
most recent index figure available on each Change Date.

 

(2)                                 Change
Date.  Each date on which the Interest
Rate may change is called a Change Date. 
The Interest Rate may change November 1, 2007 and daily thereafter,

 

(3)                                 Calculation
Of Change.  On each Change Date you will
calculate the Interest Rate, which will be the Current Index plus 1.000
percent.  The result of this calculation
will be rounded up to the nearest .001 percent. 
Subject to any limitations, this will be the Interest Rate until the
next Change Date.  The new Interest Rate
will become effective on each Change Date. 
The Interest Rate and other charges on this Note will never exceed the
highest rate or charge allowed by law for this Note.

 

(4)                                 Limitations.  The Interest Rate changes are subject to the
following limitations:

 

(a)                                  Lifetime.  The Interest Rate will never be less than
6.500 percent.

 

(5)                                 Effect
Of Variable Rate.  A change in the
Interest Rate will have the following effect on the payments:  The amount of scheduled payments and the
amount of the final payment will change.

 

4.                                      REMEDIAL CHARGES.  In addition to interest or other finance
charges, we agree that we will pay these additional fees based on our method
and pattern of payment.  Additional
remedial charges may be described elsewhere in this Note.

 

A.                                    Late Charge.  If a payment is more than 10 days late, we will
be charged 5.000 percent of the Unpaid Portion of Payment.  We will pay this late charge promptly but
only once for each late payment.

 

5.                                      PAYMENT.  We agree to pay this Note on demand, but if
no demand is made, we agree to pay this Note in installments of accrued
interest beginning October 31, 2007, and then on the 31st day of each
month thereafter.  We agree to pay the
entire unpaid Principal and any accrued but unpaid interest on February 28,
2009.

 

Payments will be rounded up to the nearest $.01.  With the final payment we also agree to pay
any additional fees or charges owing and the amount of any advances you have
made to others on our behalf.  Payments
scheduled to be paid on the 29th, 30th or 31st day of a month that contains no
such day will, instead, be made on the last day of such month.

 

Each payment we make on this Note will be applied first to interest
that is due then to principal that is due, and finally to any charges that we owe
other than principal and interest.  If
you and we agree to a different application of payments, we will describe our
agreement on this Note.  You may change
how payments are applied in your sole discretion without notice to us.  The actual amount of our final payment will
depend on our payment record.

 

2

 

6.                                      PREPAYMENT.  We may prepay this Loan in full or in part at
any time.  Any partial prepayment will
not excuse any later scheduled payments until we pay in full.

 

7.                                      LOAN PURPOSE.  The purpose of this Loan is REPAYMENT OF
EXISTING CROWN BANK OBLIGATION.

 

8.                                      SECURITY.  This Loan is secured by separate security
instruments prepared together with this Note as follows:

 

	
  Document
  Name

  	
   

  	
  Parties
  to Document

  
	
   

  	
   

  	
   

  
	
  Security Agreement. PROUROCARE MEDICAL INC

  	
   

  	
  PROUROCARE MEDICAL INC

  

 

9.                                      DEFAULT.  You may demand payment in full if any of the
following occur:

 

A.                                    Payments.  We fail to make a payment in full when due,
and fail to make such payment within three (3) days’ of your giving us
notice of such failure to make the payment.

 

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 us.

 

C.                                    Business Termination.  We merge, dissolve, reorganize, end our
business or existence.

 

D.                                    Failure to Perform.  We fail to perform any condition or to keep
any promise or covenant of this Note and fail to cure this lack of performance
within fifteen (15) days of your giving us notice of thereof.

 

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

 

F.                                      Misrepresentation.  We 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.

 

G.                                    Judgment.  We fail to satisfy or appeal any judgment
against us.

 

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

 

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

 

10.                               DUE ON SALE OR ENCUMBRANCE.  You may, at your option, declare the entire
balance of this Note 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 112 C.F.R. 5911, as
applicable.  However, if we are in
default under this Agreement, we may not sell the inventory portion of the
Property even in the ordinary course of business.

 

11.                               WAIVERS AND CONSENT.  To the extent not prohibited by law, we waive
protest, presentment for payment, demand, notice of acceleration, notice of
intent to accelerate and notice of dishonor.

 

A.                                    Additional Waivers By Borrower.  In addition, we, to the extent permitted by
law, consent to certain actions you may take, and generally waive defenses that
may be available based on these actions or based on the status of a party to
this Note.

 

(1)                                 You
may renew or extend payments on this Note, regardless of the number of such
renewals or extensions.

 

3

 

(2)                                 You
may release, substitute or impair any Property securing this Note.

 

(3)                                 You
may invoke your right of set-off.

 

(4)                                 You
may enter into any sales, repurchases or participations of this Note to any
person in any amounts and we waive notice of such sales, repurchases or
participations.

 

B.                                    No Waiver By Lender.  Your course of dealing, or your forbearance
from, or delay in, the exercise of any of your rights, remedies, privileges or
right to insist upon our strict performance of any provisions contained in this
Note, or any other Loan Document, shall not be construed as a waiver by you,
unless any such waiver is in writing and is signed by you.

 

12.                               REMEDIES.  After we default, and after you give any
legally required notice and opportunity to cure the 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 the terms of this Note immediately due.

 

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

 

C.                                    Set-Off.  You may use the right of set-off.  This means you may set-off any amount due and
payable under the terms of this Note against any right we have to receive money
from you.

 

D.                                    Waiver.  Except as otherwise required by law, by
choosing any one 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.

 

13.                               COLLECTION EXPENSES AND ATTORNEYS’ FEES.  On or after Default, to the extent permitted
by law, we agree to pay all expenses of collection, enforcement or protection
of your rights and remedies under this Note or any other Loan Document.  Expenses include, but are not limited to,
attorneys’ fees, court costs and other legal expenses.  All fees and expenses will be secured by the
Property we have granted to you, if any. 
In addition, to the extent permitted by the United States Bankruptcy
Code, we agree to pay the reasonable attorneys’ fees incurred by you to protect
your rights and interests in connection with any bankruptcy proceedings
initiated by or against us,

 

14.                               WARRANTIES AND REPRESENTATIONS.  We make to you the following Warranties and
representations which will continue as long as this Note is in effect:

 

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

 

B.                                    Authority.  The execution, delivery and performance of
this Note and the obligation evidenced by this Note are within our 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 we are a party or to which we are or
any of our Property is subject.

 

15.                               APPLICABLE LAW.  This Note 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.

 

16.                               SUCCESSORS.  This Note shall inure to the benefit of and be
enforceable by you and your successors and assigns and shall be binding upon
and enforceable against us and our successors and assigns.

 

4

 

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

 

18.                               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 Note.

 

19.                               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.  We will inform you in writing of any change
in our name, address or other application information.  We will provide you any financial statement
or information you request.  All
financial statements and information we give you will be correct and complete.  We agree to sign, deliver, and file any
additional documents or certifications that you may consider necessary to
perfect, continue, and preserve our obligations under this Loan and to confirm
your lien status on any Property.  Time
is of the essence.

 

20.                               CREDIT INFORMATION.  We agree to supply you with whatever
information you reasonably request.  You
will make requests for this information without undue frequency, and will give
us reasonable time in which to supply the information.

 

21.                               ERRORS AND OMISSIONS.  We agree, if requested by you, to fully
cooperate in the correction, if necessary, in the reasonable discretion of you
of any and all loan closing documents so that all documents accurately describe
the loan between you and us.  We agree to
assume all costs including by way of illustration and not limitation, actual
expenses, legal fees and marketing losses for failing to reasonably comply with
your requests within thirty (30) days.

 

5

 

22.                               SIGNATURES.  By signing, we agree to the terms contained
in this Note.  We also acknowledge
receipt of a copy of this Note.

 

BORROWER:

 

	
  PROUROCARE MEDICAL INC

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By 

  	
  /s/
  Richard C. Carlson

  	
   

  	
  10/31/07

  
	
   

  	
  Richard
  C. Carlson

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  	
   

  
	
  Its:
  

  	
  Chief
  Executive Officer

  	
   

  	
   

  
									

 

6Exhibit 10.36

 

SECURITY
AGREEMENT

 

DATE AND
PARTIES.  This Security
Agreement (Agreement) is made effective as of October 15, 2007.  The parties and their addresses are:

 

SECURED PARTY:

 

PHILLIPS W. SMITH FAMILY TRUST

Phillips W. Smith, Trustee

7501 North Ironwood Drive

Paradise Valley, AZ 85253

 

DEBTOR:

 

PRO URO CARE MEDICAL, INC

a Minnesota Corporation

ONE CARLSON PARKWAY #125

PLYMOUTH, Minnesota 55447

 

The
pronouns “you” and “your” refer to the Secured Party.  The pronouns “we,” “us” and “our” 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.

 

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 dated as of the date
hereof, from us to you, in the amount of $600,000.

 

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, we give you a security interest in all of the Property described
in this Agreement that we 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 us under any
loan or credit agreement.

 

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

 

A.  Inventory.  All inventory which we 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 our business.

 

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

 

C.  General
Intangibles.  All
general intangibles including, but not limited to, tax refunds, applications
for patents, patents, licenses, 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 our name.

 

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

 

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

 

 

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

 

B.  Authority.  The execution, delivery and performance
of this Agreement and the obligation evidenced by this Agreement are within our
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 we are a party
or to which we are or any of our property is subject.

 

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

 

D.  Ownership of
Property.  We represent
that we own all of the Property.  Your
claim to the Property is ahead of the claims of any other creditor, except for
Crown Bank or as otherwise disclosed in writing to you prior to any advance on
the Secured Debts.  We represent that we
are the original owner of the Property and, if we are not, that we have
provided you with a list of prior owners of the Property.

 

5.     DUTIES TOWARD
PROPERTY.

 

A.  Protection of
Secured Party’s Interest.  We will defend the Property against any other
claim other than the lien in favor of Crown Bank presently in existence.  We 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 other than the lien in favor of Crown Bank
presently in existence.  We will not do
anything to harm your position.

 

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

 

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

 

We will
keep the Property at our address listed in the DATE AND PARTIES section unless you
agree we may keep it at another location. 
If the Property is to be used in other states, we 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.  We will
notify you in writing and obtain your prior written consent to any change in
location of any of the Property.  We will
not use the Property in violation of any law. 
We will notify you in writing prior to any change in our address, name
or, if an organization, any change in our identity or structure,

 

Until
the Secured Debts are fully paid and this Agreement is terminated, we will not
grant a security interest in any of the Property without your prior written
consent other than the lien in favor of Crown Bank presently in existence.  We will pay all taxes and assessments levied
or assessed against us or the Property and provide timely proof of payment of
these taxes and assessments upon request.

 

C.  Selling, Leasing or
Encumbering the Property.  We 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 us and
except for the lien in favor of Crown Bank presently in existence.  If we are in default under this Agreement, we
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.  We will not permit the
Property to be the subject of any court order affecting our 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, we will
note your security interest on the face of the chattel paper or instruments.

 

D.  Additional Duties
Specific to Accounts.  We
will not settle any Account for less than its full value without your written
permission.  Until you tell us otherwise,
we will collect all Accounts in the ordinary course of business, we will not
dispose of the Accounts by assignment without your prior written consent.  We will keep the proceeds from all the
Accounts and any goods which are returned to us or which we take back.  We will not commingle them with any of our
other property.  We will deliver the
Accounts to you at your request.  If you
ask us to pay you the full price on any returned items or items retaken by us,
we will do so.  We will make no material
change in the terms of any Account, and we will give you any statements,
reports, certificates, lists of Account Debtors (showing names, addresses and
amounts owing), invoices applicable to each Account, and other date in any way
pertaining to the Accounts as you may request.

 

2

 

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

 

We will have the insurance company name you as loss payee on any
insurance policy.  We 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, our right to any
insurance policies and proceeds will pass to you to the extent of the Secured
Debts.

 

We will immediately notify you of cancellation or termination of
insurance.  If we fail to keep the
Property insured, you may obtain insurance to protect your interest in the
Property and we will pay for the insurance on your demand.  You may demand that we 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 us, may be written by a company other than
one we would choose, and may be written at a higher rate than we could obtain
if we purchased the insurance.  We 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.  We authorize you to
notify our 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 our rights with respect to the Account Debtors’
obligations to make payment or otherwise render performance to us, 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 us.

 

We specifically and irrevocably authorize you to exercise any of the
following powers at our 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 us.

 

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

 

8.     AUTHORITY TO
PERFORM.  We authorize you to do
anything you deem reasonably necessary to protect the Property, and perfect and
continue your security interest in the Property.  If we fail to perform any of our 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 our 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 our name.

 

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

 

3

 

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

 

I.  make
an entry on our 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 us, 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 us or other parties.  Your
authorization to perform for us 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 sole 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.  We will be in default if any of the following
occur:

 

A.  Payments.  We fail to make a payment in full when
due, and fail to make such payment within three (3) days’ of your giving
us notice of such failure to make the payment.

 

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 us.

 

C.  Business
Termination.  We merge,
dissolve, reorganize, end our business or existence.

 

D.  Failure
to Perform.  We fail to
perform any condition or to keep any promise or covenant of this Agreement and
fail to cure this lack of performance within fifteen (15) days of your giving
us notice of thereof..

 

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

 

F.  Misrepresentation.  We 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.

 

G.  Judgment.  We fail to satisfy or appeal any
judgment against us.

 

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

 

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

 

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 112 C.F.R. 591), as applicable.  However, if we are in default under this
Agreement, we may not sell the inventory portion of the Property even in the
ordinary course of business.

 

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

 

A.  Acceleration.  You may make all or arty part of the
amount owing by the teens 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.  Assembly
of Property.  You may
require us to gather the Property and make it available to you in a reasonable
fashion.

 

D.  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 we owe you.  If 

 

4

 

what you receive from the
disposition of the Property does not satisfy the debt, we 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, we agree
that ten days prior written notice sent by first class mail to our address
listed in this Agreement will be reasonable notice to us under the Minnesota
Uniform Commercial Code.  If the Property
is perishable or threatens to decline speedily in value, you may, without
notice to us, dispose of any or all of the Property in a commercially
reasonable manner at our expense following any commercially reasonable
preparation or processing.

 

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

 

E.  Use
and Operation.  You may
enter upon our premises and take possession of all or any part of our 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 our property for the length of time you feel is necessary to protect
your interest, all without payment or compensation to us.

 

F.  Waiver.  By choosing any one 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.  We 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.  We authorize you to file a financing statement
covering the Property.  We 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.  We agree to pay all taxes, fees and costs you
pay or incur in connection with preparing, filing or recording any financing
statements or other security interest filings on the Property.  We 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 end place of jurisdiction will be in Minnesota, unless otherwise
required by law,

 

15.  SUCCESSORS.  If you assign any of the Secured Debts,
you may assign all or any part of this Agreement without notice to us or our
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
us and our successors 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 us.  This Agreement and the
other Loan Documents are the complete and final expression of the understanding
between you and us.  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.  We will
inform you in writing of any change in our name, address or other application
information.  We will provide you any
financial statement or information you request. 
All financial statements and information we give you will be correct and
complete.  We agree to sign, deliver, and
file any additional documents or certifications that you may consider necessary
to perfect, continue, and preserve our obligations under this Agreement and to
confirm your lien status on any Property. 
Time is of the essence.

 

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

 

5

 

DEBTOR:

 

PROUROCARE, INC.

 

 

	
  By:

  	
  /s/ Rick Carlson

  	
   

  	
  Date:

  	
  October 31,2007

  
	
        Its:

  	
  Chief Executive Officer

  	
   

  	
   

  
						

 

6

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