Document:

Unassociated Document

 

	
LOAN NUMBER

 

4060026

NOTE AMOUNT

$900,000.00

	
LOAN NAME

 

PROUROCARE MEDICAL, INC

INDEX (w/Margin)

Wall Street Journal Prime plus

1.000%

	
ACCT. NUMBER

 

 

RATE

6.000%

	
NOTE DATE

 

09/28/11

MATURITY DATE

10/31/12

	
INITIALS

 

KRH

LOAN PURPOSE

Commercial

	 	 	Creditor Use Only	 	 

PROMISSORY NOTE

(Commercial - Single Advance)

DATE AND PARTIES. The date of this Promissory Note (Note) is September 28, 2011. The parties and their addresses are:

LENDER:

CROWN BANK

6600 France Avenue South Ste 125

Edina, Minnesota 55435

Telephone: (952) 285-5800

BORROWER:

PROUROCARE MEDICAL, INC

a Nevada Corporation

6440 FLYING CLOUD DRIVE #101

EDEN PRAIRIE, Minnesota 55344

 

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

A. Pronouns. The pronouns “I,” “me,” and “my” 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 my 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, I promise to pay you or your order, at your address, or at such other location as you may designate, the principal sum of $900,000.00 (Principal) plus interest from September 28, 2011 on the unpaid Principal balance until this Note matures or this obligation is accelerated.

 

3. INTEREST. Interest will accrue on the unpaid Principal balance of this Note at the rate of 6.000 percent (Interest Rate) until September 29, 2011, 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 the Loan, including for failure to pay in full at maturity, you may increase the Interest Rate otherwise payable as described in this section. In such event, interest will accrue on the unpaid Principal balance of this Note at a rate equal to the rate in effect prior to default, plus 2.000 percent. 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 me.

C. Statutory Authority. The amount assessed or collected on this Note is authorized by the Minnesota usury laws under Minn. Stat. t 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 70% of the 10 largest U.S. banks known as the Wall Street Journal U.S. Prime Rate.

 

The Current Index is the most recent index figure available on each Change Date. You do not guaranty by selecting this Index, or the margin, that the Interest Rate on this Note will be the same rate you charge on any other loans or class of loans you make to me or other borrowers, If this Index is no longer available, you will substitute a similar index. You will give me notice of your choice.

 

(2) Change Date. Each date on which the Interest Rate may change is called a Change Date. The Interest Rate may change September 29, 2011 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 6.000 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, I agree that I will pay these additional fees based on my 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, I will be charged 5.000 percent of the Unpaid Portion of Payment, I will pay this late charge promptly but only once for each late payment. This amount may then increase so as to always be the highest amount allowed by law under Minnesota Statutes 47.59.

 

5. GOVERNING AGREEMENT. This Note is further governed by the Commercial Loan Agreement executed between you and me as a part of this Loan, as modified, amended or supplemented. The Commercial Loan Agreement states the terms and conditions of this Note, including the terms and conditions under which the maturity of this Note may be accelerated. When I sign this Note, I represent to you that I have reviewed and am in compliance with the terms contained in the Commercial Loan Agreement.

 

6. PAYMENT. I agree to pay follows:  12 INTEREST ONLY PAYMENTS BEGINNING OCTOBER 31, 2011 AND CONTINUING AT MONTHLY TIME INTERVALS THEREAFTER.  A PRINCIPAL PAYMENT IN THE AMOUNT OF $200,000.00 IS DUE AND PAYABLE ON OR BEFORE OCTOBER 31, 2011 AND AN ADDITIONAL PRINCIPAL PAYMENT IN THE AMOUNT OF $200,000.00 IS DUE AND PAYABLE ON OR BEFORE MARCH 31, 2012.  A FINAL PAYMENT OF ANY UNPAID PRINCIPAL PLUS ACCRUED INTEREST IS DUE AND PAYABLE OCTOBER 31, 2012,

 

Payments will be rounded up to the nearest $01. With the final payment I also agree to pay any additional fees or charges owing and the amount of any advances you have made to others on my 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 I 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 I owe other than principal and interest. If you and I 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 me. The actual amount of my final payment will depend on my payment record.

 

  

  

  

 

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

 

8. LOAN PURPOSE. The purpose of this Loan is WORKING CAPITAL.

 

9. ADDITIONAL TERMS. THIS NOTE IS GUARANTEDD BY EXISTING GUARANTIES IN THE NAME OF WILLAIM REILING AND JAMES DAVIS BOTH DATED JUNE 28, 2010.

 

THE BORROWER IS REQUIRED TO SUBMIT FINANCIAL STATEMENTS ON AN ANNUAL BASIS AND TAX RETURNS ON AN ANNUAL BASIS BOTH WITHIN 120 DAYS OF YEAR END.

 

THE GUARANTORS ARE REQUIRED TO SUBMIT FINANCIAL STATEMENTS ON AN ANNUAL BASIS WITHIN 30 DAYS AND TAX RETURNS ON AN ANNUAL BASIS WITHIN 120 DAYS OF YEAR END.

 

10. SECURITY.  This loan is secured by separate instruments prepared together with this Note as follows;

 

	Document Name	 	Parties to Document	 	Date of Security Document
	 	 	 	 	 
	Commercial Loan And Security Agreement- PROUROCARE MEDICAL, INC	 	PROUROCARE MEDICAL, INC.	 	October 10, 2007

 

11. 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 I am in default under this Agreement, I may not sell the inventory portion of the Property even in the ordinary course of business,

 

12. WAIVERS AND CONSENT. To the extent not prohibited by law, I 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, I, and any party to this Note and Loan, 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.

(2) You may release any Borrower, endorser, guarantor, surety, accommodation maker or any other co-signer.

(3) you may release, substitute or impair any Property securing this Note.

(4) You, or any institution participating in this Note, may invoke your right of set-off.

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

(6) I agree that any of us signing this Note as a Borrower is authorized to modify the terms of this Note or any instrument securing, guarantying or relating to this Note.

(7) I agree that you may inform any party who guarantees this Loan of any Loan accommodations, renewals, extensions, modifications, substitutions or future advances.

 

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 my 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.

 

13. COMMISSIONS. I understand and agree that you or your affiliate will earn commissions or fees on any insurance products, and may earn such fees on other services that I buy through you or your affiliate.

 

14. 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.

 

15. JOINT AND INDIVIDUAL LIABILITY AND SUCCESSORS. My obligation to pay the Loan is independent of the obligation of any other person who has also agreed to pay it. You may sue me alone, or anyone else who is obligated on the Loan, or any number of us together, to collect the Loan. Extending the Loan or new obligations under the Loan, will not affect my duty under the Loan and I will still be obligated to pay the Loan. 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 me and my personal representatives, successors, heirs and assigns.

 

16. 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 me. 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.  No present or future agreement securing any other debt I owe you will secure the payment of this Loan if, as a result, this Loan would become subject to Section 670 of the John Warner National Defense Authorization Act for Fiscal Year 2007.

 

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 Note.

 

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 Borrower will be deemed to be notice to all Borrowers. I will inform you in writing of any change in my name, address or other application information. 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 Loan and to confirm your lien status on any Property. Time is of the essence.

 

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

 

20. ERRORS AND OMISSIONS. I 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 me. I 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.

 

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

 

BORROWER:

 

PROUROCARE MEDICAL, INC

 

By /s/ RICHARD THON

RICHARD THON, CFOUnassociated Document

 

October 11, 2011

Name and Address

Dear __________,

This letter is to document our agreement today concerning the consideration ProUroCare Medical Inc. (the “Company”) will provide to you regarding the extension of your guaranty of our currently outstanding loan with Crown Bank (the “Crown Loan”).

As consideration for your guaranty commencing September 29, 2011 through October 31, 2012 of the Crown Loan, the Company agrees to provide compensation to you as described below:

Compensation will be paid in the form of shares of the Company’s common stock, based on the same formula we have used for previous guarantee periods, (10% of the guaranteed amount per year divided by the stock’s value).

	
·  

	
The amount of compensation to be provided will be determined on the first of each month by applying the compensation formula to the amount of your Crown Bank guaranty commitment on that date.

	
·  

	
Any funds you loan to the Company after the date of this agreement for the purpose of reducing the principal amount of the Crown Loan will be included as part of your commitment for purposes of the compensation calculation.

	
·  

	
The Company will provide a minimum of six months of compensation based on the initial $900,000 Crown Loan principal amount.

	
·  

	
All compensation will cease when the Crown Loan is paid in full or you no longer have a guarantee commitment to Crown Bank related to the Crown Loan.

The parties agree that the stock value used for purposes of determining the number of shares to be issued will be based on the average closing price of the Company’s common stock as of the date of this letter over the previous 10 trading days, discounted by 40%.  The parties agree that the 40% discount is appropriate at this time in recognition of the following:

	
·  

	
The shares issued are restricted securities and cannot be sold for a period of six months pursuant to Rule 144;

	
·  

	
The recipients have no registration rights;

	
·  

	
The Company’s common stock suffers from a lack of liquidity;

	
·  

	
Shares are traded in the OTBCC Capital Market (a small company quotation system, not an exchange);

	
·  

	
No market maker exists;

	
·  

	
Shares issued in large blocks can further decrease the value to the recipient;

	
·  

	
The Company is pre-revenue;

	
·  

	
The Company has never had any positive earnings;

	
·  

	
The Company’s common stock has a high volatility (~ 130%); and

	
·  

	
The Company’s only product has not been cleared by the FDA;

 

  

  

  

 

October 11, 2011

Guarantor Letter Agreement

Page 2

As of the date of this letter agreement, the discounted stock price so calculated is $0.58 per share.  Accordingly, for the 6 month period, September 29, 2011 through March 31, 2012 you will receive 77,586 common shares (($900,000 * 10% * 1⁄2 year)/$0.58 per share), irrespective of whether or not the Crown Loan is paid in full at any time prior to March 31, 2012.  These shares will be issued upon your instruction within three years following the date of this agreement.

In the event that the Company fails to fully pay off the Crown Loan on or before March 31, 2012, the calculated amount of compensation you will earn between April 1, 2012 through October 31, 2012 will be multiplied by two.  The compensation shares so earned, if any, will be issued upon your instruction on or before October 31, 2015.

You also hereby agree to lend to the Company $100,000 on October 31, 2011 included in the Company’s current private placement of convertible secured notes for the purpose of principal reduction of the Crown Loan.  You also agree to lend to the Company, at the Company’s option, $100,000 on March 31, 2012 pursuant to a convertible secured note with the same terms as the October 31, 2011 note for the purpose of principal reduction of the Crown Loan.  If the Company exercises the March 31, 2012 option to borrow $100,000 from you as described above, in consideration of your loan commitment and the Company’s exercise thereof, the Company will issue to you 75,000 additional shares of its common stock.  These shares will be issued upon will be issued upon your instruction on or before March 31, 2015.

Thank you for your continued support!

Sincerely,

Richard C. Carlson

Chief Executive Officer

If you agree to the above terms, please sign and date below, and fax it back to Dick Thon at 952-698-4499 or email it to rthon@prourocare.com.

 

 

	___________________________	___________________________
	Signature	Date

Guarantor Letter Agreement 101111

 

 

ProUroCare Medical Inc., 6440 Flying Cloud Drive, Suite 101, Eden Prairie, MN 55344Phone: 952.476.9093  Fax: 952.698.4499

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