Document:

Exhibit 4.5

 

GUARANTY

(Continuing Debt -
Limited)

 

DATE AND PARTIES. The date of this Guaranty is January 10, 2006. The parties and their
addresses are:

 

LENDER:

CROWN BANK

6600 France Avenue South Ste 125

Edina, Minnesota 55435

Telephone: (9521 285-5800

 

BORROWER:

PROUROCARE MEDICAL INC

a Nevada Corporation
ONE CARLSON PARKWAY SUITE 124
PLYMOUTH, Minnesota 55447

 

GUARANTOR:

JAMES L DAVIS
ONE CARLSON PKWY SUITE 124
PLYMOUTH, Minnesota 55447

 

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

 

A.     Pronouns. The pronouns “I”, “me” and “my” refer to all
persons or entities signing this Guaranty, individually and together. “You” and
“your” refer to the Lender.

B.     Note. “Note” refers to the document that evidences
the Borrower’s indebtedness, and any extensions, renewals, modifications and
substitutions of the Note.

C.     Property. “Property” means any property, real, personal
or intangible, that secures performance of the obligations of the Note, Debt,
or this Guaranty.

 

2.     SPECIFIC AND FUTURE DEBT GUARANTY. For good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and to induce you, at
your option, to make loans or engage in any other transactions with the
Borrower from time to time, I absolutely and unconditionally agree to all terms
of and guaranty to you the payment and performance of each and every Debt, of
every type, purpose and description that the Borrower either individually,
among all or a portion of themselves, or with others, may now or at any time in
the future owe you, including, but not limited to the following described Debts
(including without limitation, all principal, accrued interest, attorneys’ fees
and collection costs, when allowed by law, that may become due from the
Borrower to you in collecting and enforcing the Debt and all other agreements
with respect to the Borrower,

 

A promissory note or other agreement, No. 4060026,
dated January 11, 2006, from PROUROCARE MEDICAL INC (Borrower) to you, in the
amount of $1,200,000.00.

 

In addition, Debt refers to debts, liabilities, and
obligations of the Borrower (including, but not limited to, amounts agreed to
be paid under the terms of any notes or agreements securing the payment of any
debt, loan, liability or obligation, overdrafts, letters of credit, guaranties,
advances for taxes, insurance, repairs and storage, and all extensions,
renewals, refinancings and modifications of these debts) whether now existing
or created or incurred in the future, due or to become due, or absolute or
contingent, including obligations and duties arising from the terms of all
documents prepared or submitted for the transaction such as applications,
security agreements, disclosures, and the Note,

 

My liability will not exceed $600,000.00 of the
principal amount outstanding at default, plus accrued interest, attorneys’ fees
and collection costs, when allowed by law, and all other costs, fees and
expenses agreed to be paid under all agreements evidencing the Debt and
securing the payment of the Debt. You may, without notice, apply this Guaranty
to such Debt of the Borrower as you may select from time to time.

 

3.     EXTENSIONS. I consent to all renewals, extensions,
modifications and substitutions of the Debt which may be made by you upon such
terms and conditions as you may see fit from time to time without further
notice to me and without limitation as to the number of renewals, extensions,
modifications or substitutions.

 

A.     Future Advances. I waive notice of and consent to any and all future advances made to the
Borrower by you.

 

4.     UNCONDITIONAL LIABILITY. I am unconditionally liable under this
Guaranty, regardless of whether or not you pursue any of your remedies against
the Borrower, against any other maker, surety, guarantor or endorser of the
Debt or against any Property. You may sue me alone, or anyone else who is
obligated on this Guaranty, or any number of us together, to collect the Debt.
My liability is not conditioned on the signing of this Guaranty by any other
person and further is not subject to any condition not expressly set forth in
this Guaranty or any instrument executed in connection with the Debt. My
obligation to pay according to the terms of this Guaranty shall not be affected
by the illegality, invalidity or unenforceability of any notes or agreements
evidencing the Debt, the violation of any applicable usury laws, forgery, or
any other circumstances which make the indebtedness unenforceable against the
Borrower. I will remain obligated to pay on this Guaranty even if any other
person who is obligated to pay the Debt, including the Borrower, has such
obligation discharged in bankruptcy, foreclosure, or otherwise discharged by
law.

 

5.     BANKRUPTCY. If a bankruptcy petition should at any time
be filed by or against the Borrower, the maturity of the Debt, so far as my
liability is concerned, shall be accelerated and the Debt shall be immediately
payable by me. I acknowledge and agree that this Guaranty, and the Debt secured
hereby, will remain in full force and effect at all times, notwithstanding any
action or undertakings by, or against, you or against any Property, in
connection with any obligation in any proceeding in the United States
Bankruptcy Courts. Such action or undertaking includes, without limitation,
valuation of Property, election of remedies or imposition of secured or
unsecured claim status upon claims by you, pursuant to the United States
Bankruptcy Code, as amended. In the event that any payment of principal or
interest received and paid by any other guarantor, borrower, surety, endorser
or co-maker is deemed, by final order of a court of competent jurisdiction, to
have been a voidable preference under the bankruptcy or insolvency laws of the
United States or otherwise, then my obligation will remain as an obligation to
you end will not be considered as having been extinguished.

 

6.     REVOCATION. I agree that this is an absolute and
unconditional Guaranty. I agree that this Guaranty will remain binding on me,
whether or not there are any Debts outstanding, until you have actually received
written notice of my revocation or written notice of my death or incompetence.
Notice of revocation or notice of my death or incompetence will not affect my
obligations under this Guaranty with respect to any Debts incurred by or for
which you have made a commitment to Borrower before you actually receive such
notice, and all renewals, extensions, refinancings, and modifications of such
Debts. I agree that if any other person signing this Guaranty provides a notice
of revocation to you, I will still be obligated under this Guaranty until I
provide such a notice of revocation to you. If any other person signing this
Guaranty dies or is declared incompetent, such fact will not affect my
obligations under this Guaranty.

 

7.     PROPERTY. I agree that any Property may be assigned,
exchanged, released in whole or in part or substituted without notice to me and
without defeating, discharging or diminishing my liability. My obligation is
absolute and your failure to perfect any security interest or any act or omission
by you which impairs the Property will not relieve me or my liability under
this Guaranty. You are under no duty to preserve or protect any Property until
you are in actual or constructive possession. For purposes of this paragraph,
you will only be in “actual” possession when you have physical, immediate and
exclusive control over the Property and have accepted such control in writing.
Further, you will only be deemed to be in “constructive” possession when you
have both the power and intent to exercise control over the Property.

 

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

 

A.     Payments. I
fall to make a payment in full when due.

B.     Insolvency or Bankruptcy. The death, dissolution or insolvency of, appointment of a receiver by or
on behalf of, application of any debtor relief law, the assignment for the
benefit of creditors by or on behalf of, the voluntary or involuntary
termination of existence by, or the commencement of any proceeding under any
present or future federal or state insolvency, bankruptcy, reorganization.
composition or debtor relief law by or against me, Borrower, or any cosigner,
endorser, surety or guarantor of this Guaranty or any Debt,

C.     Death or Incompetency I die or am declared legally incompetent.

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

E.     Other
Documents.
A default occurs under the
terms of any other document relating to the Debt.

 

 

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

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

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

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

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

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

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

M.    Insecurity. You determine in good faith that a material
adverse change has occurred in my financial condition from the conditions set
forth in my most recent financial statement before the date of this Guaranty or
that the prospect for payment or performance of the Debt is impaired for any
reason.

 

9.     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. In addition, to the extent permitted by law, I
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 the
Debt or this Guaranty.

 

(1)    You may renew or extend payments on the Debt,
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.

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

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

(6)    I agree that the Borrower is authorized to
modify the terms of the Debt or any instrument securing, guarantying or
relating to the Debt.

(7)    You may undertake a valuation of any Property
in connection with any proceedings under the United States Bankruptcy Code
concerning the Borrower or me, regardless of any such valuation, or actual
amounts received by you arising from the sale of such Property.

(8)    I agree to consent to any waiver granted the
Borrower, and agree that any delay or lack of diligence in the enforcement of
the Debt, or any failure to file a claim or otherwise protect any of the Debt,
in no way affects or impairs my liability.

(9)    I agree to waive reliance on any
anti-deficiency statutes, through subrogation or otherwise, and such Statutes
in no way affect or impair my liability. In addition, until the obligations of
the Borrower to Lender have been paid in full, I waive any right of
subrogation, contribution, reimbursement, indemnification, exoneration, and any
other right I may have to enforce any remedy which you now have or in the
future may have against the Borrower or another guarantor or as to any
Property.

 

Any Guarantor who is an “insider,”
as contemplated by the United States Bankruptcy Code, 11 U.S.C. 101, as
amended, makes these waivers permanently. (An insider includes, among others, a
director, officer, partner, or other person in control of the Borrower, a
person or an entity that is a copartner with the Borrower, an entity in which
the Borrower is a general partner, director, officer or other person in control
or a close relative of any of these other persons). Any Guarantor who is not an
insider makes these waivers until all Debt is fully repaid.

 

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 the
Debt instruments, shall not be construed as a waiver by you, unless any such
waiver is in writing and is signed by you.

C.    Waiver of Claims. I waive all claims for loss or damage caused
by your acts or omissions where you acted reasonably and in good faith.

 

10.  REMEDIES. After the Borrower or I 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 Guaranty immediately due.

B.    Sources. You may use any and all remedies you have
under state or federal law or in any documents relating to the Debt.

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

D.    Payments Made on the Borrower’s
Behalf. Amounts advanced on the Borrower’s behalf will be
immediately due and may be added to the balance owing under the Debt.

E.     Termination. You may terminate my right to obtain advances
and may refuse to make any further extensions of credit.

F.     Attachment. You may attach or garnish my wages or
earnings.

G.    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 Guaranty
against any right I have to receive money from you.

 

My right to receive money
from you includes any deposit or share account balance I have with you; any
money owed to me on an item presented to you or in your possession for
collection or exchange; and any repurchase agreement or other non-deposit
obligation. “Any amount due and payable under the terms of this Guaranty’ means
the total amount to which you are entitled to demand payment under the terms of
this Guaranty at the time you set-off.

 

Subject to any other written
contract, if my right to receive money from you is also owned by someone who
has not agreed to pay the Debt, your right of set-off will apply to my interest
in the obligation and to any other amounts I could withdraw on my sole request
or endorsement.

 

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

 

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

 

H. 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.

 

11.  COLLECTION EXPENSES AND ATTORNEYS’
FEES. On or after Default, to
the extent permitted by law, I agree to pay all expenses of collection,
enforcement or protection of your rights and remedies under this Guaranty or
any other document relating to the Debt. To the extent permitted by law,
expenses include, but are not limited to, reasonable attorneys’ fees, court
costs and other legal expenses. All fees and expenses will be secured by the
Property I have granted to you, if any. In addition, to the extent permitted by
the United States Bankruptcy Code, I 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 me.

 

12.  WARRANTIES AND REPRESENTATIONS. I have the right and authority to enter into
this Guaranty. The execution and delivery of this Guaranty will not violate any
agreement governing me or to which I am a party, In addition, I represent and
warrant that this Guaranty was entered into at the request of the Borrower, and
that I am satisfied regarding the Borrower’s financial condition and existing
indebtedness, authority to borrow and the use and intended use of all Debt
proceeds. I further represent and warrant that I have not relied on any
representations or omissions from you or any information provided by you respecting
the Borrower, the Borrower’s financial condition and existing indebtedness, the
Borrower’s authority to borrow or the Borrower’s use and intended use of all
Debt proceeds.

 

13.  RELIANCE. I acknowledge that you are relying on this
Guaranty in extending credit to the Borrower, and I have signed this Guaranty
to induce you to extend such credit, I represent and Warrant to you that I have
a direct and substantial economic interest in the Borrower and expect to derive
substantial benefits from any loans and financial accommodations resulting in
the creation of indebtedness guarantied hereby. I agree to rely exclusively on
the right to revoke this Guaranty prospectively as to future transactions in
the manner as previously described in this Guaranty if at any time, in my
opinion, the benefits then being received by me in connection with this
Guaranty are not sufficient to warrant the continuance of this Guaranty. You
may rely conclusively on a continuing warranty that I continue to be benefited
by this Guaranty and you will have no duty to inquire into or confirm the
receipt of any such benefits, and this Guaranty will be effective and
enforceable by you without regard to the receipt, nature or value of any such
benefits.

 

 

 

14.  APPLICABLE LAW. This Guaranty 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.

 

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

 

16.  ASSIGNMENT. If you assign any of the Debts, you may
assign all or any part of this Guaranty without notice to me or my consent, and
this Guaranty 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
Guaranty as to any of the Debts that are not assigned. This Guaranty 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 Debts and
shall be binding upon and enforceable against me and my personal
representatives, successors, heirs and assigns.

 

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 Guaranty.

 

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

 

19.  CREDIT INFORMATION. I agree that from time to time you may obtain
credit information about me from others, including other lenders and credit
reporting agencies, and report to others (such as a credit reporting agency)
your credit experience with me. I agree that you will not be liable for any
claim arising from the use of information provided to you by others or for
providing such information to others.

 

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

 

 

GUARANTOR:

 

	
   

  	
  /s/James L. Davis

  	
   

  
	
   

  	
  JAMES L DAVIS

  
	
   

  	
   

  
	
   

  	
  IndividuallyExhibit 4.6

 

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAW. THESE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ASSIGNED OR OTHERWISE DISPOSED OF, AND NO
TRANSFER OF THE SECURITIES WILL BE MADE BY THE COMPANY OR ITS TRANSFER AGENT,
IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

PROUROCARE MEDICAL INC.

 

10% UNSECURED CONVERTIBLE
SUBORDINATED DEBENTURE

 

	
  Principal: $200,000.00

  	
  February 17, 2006

  
	
  Debenture Number— D-001

  	
  Plymouth, Minnesota

  

 

For Value Received, the undersigned, ProUroCare
Medical Inc.,
organized and validly existing under the laws of the State of Nevada, whose
mailing address is One Carlson Parkway, Suite 124, Plymouth, Minnesota 55447,
and its successors and assigns (the “Maker”),
hereby unconditionally promises to pay to the order of James L. Davis, a resident of the State of Nevada, having a mailing
address of 2204 Hot Oak Ridge Street, Las Vegas, Nevada 89134 and his/her
successors and assigns (the “Holder”),
at such place as may be designated from time to time by the Holder, the
principal sum of $200,000.00, the original principal balance hereof, together
with all accrued and unpaid interest thereon in accordance with the terms of
this 10% Unsecured Convertible Subordinated Debenture (this “Debenture”).

 

The parties acknowledge that this Debenture is being issued as one in a
series of Debentures in connection with a $2,000,000 private placement of
Debentures (subject to possible increase in the sole discretion of the Maker
without notice) conducted by the Maker (the “Placement”).
The Debentures issued in the Placement are being issued pursuant to the Holders’
personal guarantees providing credit enhancement to and support for up to a
$6,000,000 senior credit facility of Maker (the “Senior
Credit Facility”). This Debenture and all other Debentures
issued in the Placement have identical terms and provisions (except for the
specific sums at issue) and are due and payable in full in thirty six (36)
months from issuance and delivery. This Debenture is being issued pursuant to
and is subject to the terms and provisions of a Subscription and Representation
Agreement between the Maker and Holder (the “Subscription
Agreement”). The provisions of the Holder’s Subscription
Agreement are incorporated herein by reference with the same force and effect
as if fully set forth herein.

 

 

Acceptance of
this Debenture by the Holder shall be deemed agreement by the Holder of the
terms included or incorporated in this Debenture. All payments under this
Debenture shall be made in U.S. dollars and by check mailed by the Maker to the
address of the Holder set forth above.

 

1. Interest
Payment; Maturity; Subordination.

 

(a)          Stated Rate and Accrued Interest; Interest Paid Monthly. This Debenture shall
accrue interest on the outstanding principal balance at an annual rate of 10%
until paid in full, or otherwise converted into Maker’s common stock, as
permitted or required hereunder. All interest due hereon shall be paid to
Holder monthly and on the first business day of each calendar month hereunder.

 

(b)         Maturity Date. The entire principal amount of this Debenture shall be due and
payable in full at 5:00 p.m. in the Central Time Zone on February 16, 2009,
unless otherwise previously converted into Maker’s common stock in accordance
herewith. (the “Maturity Date”).

 

(c)          Subordination By Holder. The Holder, by acceptance of
this Debenture, covenants and agrees that the payment of principal and interest
under this Debenture is hereby expressly subordinated to any and all existing
Maker Senior Debt (as defined below). The Holder acknowledges and agrees that
all Debentures, loan agreements and other documents and instruments related to
Senior Debt (the “Senior Debt Documents”) may limit the actions that may be
taken by the Holder hereunder and, in such event, the Holder agrees to take
only such action and to such extent as may then be allowed by the Senior Debt
Documents. “Senior Debt” shall mean all principal of (and premium of, if any)
and unpaid interest on all indebtedness of the Maker created, incurred,
assumed, or guaranteed by the Maker, or for which the Maker is otherwise
directly or indirectly liable, for money borrowed: (i) from any banks, finance
companies, trust companies, pension trusts, insurance companies, or other
financial institutions unless the instrument under which such debt is created, incurred,
assumed or guaranteed by the Maker expressly provide that such debt is not
senior or superior in right of payment to this Debenture; and (ii) from any
other third parties where any of the instruments under which such other third
party debt is created, incurred, assumed or guaranteed by the Maker expressly
provides that such debt is senior or superior in right of payment to this
Debenture.

 

2

 

Upon (i) the maturity of
Senior Debt, including by acceleration or otherwise, or (ii) any distribution
of the assets of the Maker upon dissolution, winding up, liquidation or
reorganization of the Maker, the holders of such Senior Debt are entitled to
receive payment in full before the Holder of this Debenture is entitled to
receive any payment. With the exception of the foregoing, this Debenture shall
rank equally with the Maker’s other unsecured debt (including, without
limitation, all other Debentures) to the extent such other unsecured debt, by
its express terms, is not superior in right of payment to this Debenture with
respect to receiving payments or other distributions.

 

2.               Compliance with Securities Laws
and Other Transfer Restrictions.

 

(a)          Investment Intent. The Holder of this Debenture, by acceptance hereof, agrees, represents
and warrants that this Debenture is being acquired for investment purposes,
that the Holder has no present intention to resell or otherwise dispose of all
or any part of this Debenture.

 

(b)         Transfer. In the event the Holder of this Debenture desires to transfer this
Debenture, the Holder shall provide the Maker with a Form of Assignment, in the
form attached hereto describing the manner of such transfer, and an opinion of
counsel ( acceptable to the Maker and its counsel) that the proposed transfer
may be effected without registration or qualification under applicable
securities laws, whereupon such Holder shall be entitled to transfer this
Debenture in accordance with the notice delivered by such Holder to the Maker. If,
in the opinion of the counsel referred to in this Subsection, the proposed
transfer or disposition described in the written notice given may not be
effected without registration or qualification of this Debenture, the Maker
shall give written notice thereof to the Holder hereof, and such Holder will
limit his/her activities in respect to such proposed transfer or disposition
as, in the opinion of such counsel, are permitted by law. 

 

(c)          Restrictive Legend. The Maker shall place one or more restrictive legends on the
Debenture, which legends set forth the restrictions contained herein, and may
further place a “stop transfer” restriction in the Maker’s books and records
with respect to the Debenture. The restrictions set forth in this Debenture
shall be binding upon any holder, donee, assignee or transferee of the
Debenture.

 

3

 

3.               No Rights as Shareholder. This Debenture shall
not entitle the Holder to any right to vote or receive distributions or any
other rights as a shareholder or owner of the Maker, unless and until any
portion of this Debenture is converted into the Maker’s common stock, as
permitted or required herein.

 

4.               Events of Default. The occurrence of any one or
more of the following events (whether such occurrence shall be voluntary or
involuntary or occur or be effected by operation of law or otherwise) shall
constitute an event of default hereunder:

 

(a)          if the Maker fails to pay when due any monthly interest payment due
hereunder, or any other amount payable to Holder under the terms of this
Debenture, and such failure to pay is not cured by Maker within 45 calendar
days after written notice thereof is delivered by Holder to Maker;

 

(b)         if the Maker makes an assignment for the benefit of creditors;

 

(c)          if any order, judgment, or decree is entered adjudicating the Maker
bankrupt; or

 

(d)         if the Maker petitions or applies to any tribunal for the appointment
of a trustee or receiver or commences any proceeding under any bankruptcy,
reorganization, insolvency, dissolution or liquidation law of any jurisdiction.

 

5.               Unsecured
Maker Debenture. Holder acknowledges and agrees that the
indebtedness represented by this Debenture is unsecured, and thus, is not
secured by any assets or properties of Maker, or subject to any credit
enhancement or guaranty of any type.

 

6.                  Conversion of Indebtedness into
Maker’s Common Stock;  “Piggy-Back” and
Demand Registration Rights for Common Stock Acquired Upon Conversion.

 

(a)Conversion
of Indebtedness into Maker’s Common Stock. While this indebtedness in favor
of Holder remains outstanding, Holder shall be entitled to convert, at Holders’
sole option, the entire principal balance of this Debenture, or any part
hereof, into Maker’s common stock at a price of $.50 per share. However, if
Maker’s existing Senior Debt Facility is not repaid, and Holder’s guarantee not
released by August 31, 2007 (or subsequently, by October 31, 2007), then, in
such instances, the conversion ratio set forth above shall be immediately be
modified and altered on

 

4

 

such dates, such that the
principal balance of this Debenture, or any part hereof, shall be convertible
into Maker’s common stock at a price of $.40 per share, and subsequently, $.30
per share, respectively. Holder shall provide Maker and its counsel with ten
(10)  business days advance written
notice of Holder’s intent to convert all, or any part, of this Debenture in
accordance with this section. In connection with such conversion, Maker shall remit
and pay to Holder all accrued and unpaid interest due hereon. All common stock
of Maker so acquired by Holder in accordance with such conversion shall be
entitled to “piggy back” and/or demand registration rights described below.

 

(b)         Piggy-back Registration Rights. If, at any time prior to payment
in full of this Debenture, or any conversion hereof, Maker proposes to claim an
exemption under Section 3(b) of the Securities Act of 1933, as amended (the “Act”),
for a public Placement of any of its securities, or seeks to register any of
its securities under the Act (except by registration statement on a form that
does not permit the inclusion of shares by its security holders), Maker will
provide written notice of its intentions to Holders. Upon written request of
each such Holder given within 10 business days after receipt of such notice,
Maker shall use its best efforts to cause all common shares acquired by the
Holder’s conversion of indebtedness to equity hereunder to be included in such
proposed notification or registration statement, subject to approval by Maker’s
then-existing broker-dealer or underwriter. The Holder’s written request shall
specify the number of shares of Maker’s common stock intended to be sold or
disposed of by the Holder, and describe the nature of any proposed sale or
other disposition thereof. All notification or registration expenses shall be
borne by Maker.

 

(c)          Demand Registration Rights. If, at any time prior to payment
in full of this Debenture, or any conversion hereof, Holders of at least 60% or
more of the value of the Debentures issued in the Placement elect to convert
their Debentures into Maker’s common stock and demand registration of their
shares for resale, Maker shall use its reasonable efforts to register the shares
and to cause such registration to become effective within 90 calendar days of
such demand.

 

(d)         One Registration. Upon completing a registration of the Maker’s common stock pursuant to
paragraph (b) or (c) of this Section, the Maker shall have no further
obligation to register shares hereunder. If a Holder does not elect to
participate in such registration, he shall have no future right to demand a
registration of his/her shares or participate in another registration through
piggy-back rights.

 

5

 

7.                  Mandatory
Conversion by Maker. Upon
20 day calendar notice by Maker upon retirement and payment in full of Maker’s
Senior Debt Facility with its senior lender, Maker shall then henceforth, in
its sole discretion, have the right and ability to call the Debentures and
either pay such Debentures in full or require their immediate conversion into
Maker’s common stock.

 

8.                  Miscellaneous.

 

(a) Wavier. No waiver
hereunder or amendment of this Debenture shall be effective unless it is in
writing and signed by the Maker, Holder and all the Holders of the Debentures
issued pursuant to this Placement. The acceptance by the Holder of any payment
hereunder that is less than payment in full of all amounts due and payable at
the time of such payment shall not constitute a waiver of the right to exercise
any of the options hereunder at that time or at any subsequent time.

 

(b) Right to Grant
Extension. Except as provided in Section 1 of this Debenture, Maker hereby
agrees that the Holder has the right (but not the obligation) to grant any
extension of time for payment of any indebtedness evidenced by this Debenture.

 

(c) Successors. The
terms and provisions hereof shall inure to the benefit of, and be binding upon,
the respective successors and assigns of the Maker and Holder. This Debenture
shall be governed by and construed and enforced in accordance with the laws of
the State of Minnesota without giving effect to such state’s choice of law
principles.

 

(d) No Recourse. No
recourse for the payment of the principal of or any interest on this Debenture,
or for any claim based hereon or otherwise in respect hereof, and no recourse
under or upon any obligation, covenant or agreement of the Maker in any
Debenture, or because of the creation of any indebtedness represented thereby,
shall be against any organizer, member, officer, director, shareholder, or
manager as such, past, present or future, of the Maker or of any successor
entity either directly or through the Maker or any successor entity, whether by
virtue of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.

 

6

 

(e)          Replacement. Upon receipt by the Maker of evidence reasonably satisfactory to it
and its counsel, of the loss, theft, destruction or mutilation of this
Debenture, and in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it, and upon reimbursement to the Maker of all legal
and out of pocket expenses incidental thereto, and upon surrender and
cancellation of this Debenture, if mutilated, the Maker will make and deliver a
new Debenture of like tenor and dated as of the initial Debenture, in lieu of
this Debenture.

 

(f)            Integration. This Debenture embodies
the entire agreement and understanding between the parties relating to the
subject matter hereof and supersedes all prior oral or written agreements and
understandings relating to such subject matter.

 

(g)         Governing Law. This Debenture shall be
construed and interpreted pursuant to and in accordance with the laws of the
State of Minnesota.

 

(h)         Binding Effect. This Debenture shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective heirs, executors, administrators, successors, and assigns.

 

(i)             Notices.
All notices or other communications required or permitted hereunder shall be in
writing. A written notice or other communication shall be deemed to have been
sufficiently given: (i) if delivered by hand, when such notice is received from
the notifying party; (ii) if transmitted by facsimile or timely delivered to a
reputable express courier, on the next business day following the day so
transmitted or delivered; or (iii) if delivered by mail, on the fifth day
following the date such notice or other communication is deposited in the U.S.
Mail for delivery by certified or registered mail addressed to the other party,
or when actually received, whichever occurs earlier. All notices required or
permitted to be given to Maker hereunder, to be deemed appropriately and timely
given, shall also be simultaneously given to Maker’s counsel: Thomas J. Puff,
Esq., Venture Law Resources, PLLC, 8400 Normandale Lake Blvd., Suite 920,
Bloomington, Minnesota 55437.

 

7

 

IN WITNESS WHEREOF, the Maker has caused this
Debenture to be executed by its authorized representative, who certifies that
he has all necessary authority on behalf of the Maker to execute this Debenture
and bind the Maker to the terms hereof.

 

 

	
   

  	
  PROUROCARE MEDICAL INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Maurice
  Taylor

  	
   

  
	
   

  	
   

  	
  Maurice Taylor

  
	
   

  	
   

  	
   

  
	
   

  	
  Its: 

  	
  CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attested:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/Thomas J. Puff

  	
   

  	
   

  
	
  Thomas J. Puff, Esq.

  	
   

  
	
  Corporate Secretary

  	
   

  
						

 

8

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