Document:

Exhibit 4.7

 

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 William S. Reiling, a resident of the State of Florida, having a mailing
address of 4351 Gulf Shore Blvd. North, Unit 6 North, Naples, Florida 34103 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

  	
   

  
						

 

8Exhibit 4.8

 

SECURITY
AGREEMENT

 

DATE AND PARTIES. The date of this Security Agreement
(Agreement) is January 11, 2006. The parties and their addresses are:

 

SECURED
PARTY:

CROWN BANK

6600 France Avenue South Ste 125

Edina, Minnesota 55435

 

DEBTOR:

PRO URO
CARE, INC

a Minnesota Corporation

ONE CARLSON PARKWAY #125
PLYMOUTH, Minnesota 55447

 

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

 

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

 

A.  Specific Debts. The following debts and all extensions,
renewals, refinancings, modifications and replacements. A promissory note or
other agreement, No. 4060026, dated January 11, 2006, from me to you, in the
amount of $1,200,000.00.

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

 

This Agreement will not
secure any debt for which you fall to give any required notice of the right of
rescission. This Agreement will not secure any debt for which a non-possessory,
non-purchase money security interest is created in “household goods” in
connection with a “consumer loan,” as those terms are defined by federal law
governing unfair and deceptive credit practices.

 

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

 

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

 

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

 

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

 

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

 

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

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

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

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

 

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

 

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

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

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

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

E.   Ownership of Property. I represent that I own all of the Property.
Your claim to the Property is ahead of the claims of any other creditor, except
as disclosed in writing to you prior to any advance on the Secured Debts. I
represent that I am the original owner of the Property and, if I am not, that I
have provided you with a list of prior owners of the Property.

 

5.     DUTIES TOWARD PROPERTY.

 

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

 

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

 

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

 

I will keep the Property at my address listed in the
DATE AND PARTIES section unless we agree I may keep it at another location. If
the Property is to be used in other states, I will give you a list of those
states. The location of the Property is given to aid in the identification of
the Property. It does not in any way limit the scope of the security interest

 

 

granted to you. I will notify you in writing and
obtain your prior written consent to any change in location of any of the
Property. I will not use the Property in violation of any law. I will notify
you in writing prior to any change in my address, name or, if an organization,
any change in my identity or structure,

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

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

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

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

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

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

 

8.     AUTHORITY TO PERFORM. I authorize you to do anything you deem
reasonably necessary to protect the Property, and perfect and continue your
security interest in the Property. If I fail to perform any of my duties under
this Agreement or any other Loan Document, you are authorized to perform the
duties or cause them to be performed.

 

These authorizations include, but are not limited to,
permission to:

 

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

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

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

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

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

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

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

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

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

J.   notify any Account Debtor of your interest in
the Property and tell the Account Debtor to make payments to you or someone
else you name.

 

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

 

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

B.     Insolvency or Bankruptcy. The
death, dissolution or insolvency of, appointment of a receiver by or on behalf
of, application of any debtor relief law, the assignment for the benefit of
creditors by or on behalf of, the voluntary or involuntary termination of
existence by, or the commencement of any proceeding under any present or future
federal or state insolvency, bankruptcy, reorganization, composition or debtor
relief law by or against me, Obligor, or any co-signer, endorser, surety or
guarantor of this Agreement or any other obligations Obligor has with you.

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

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

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

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

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

 

 

provided.

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

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

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

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

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

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

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

 

10.  DUE
ON SALE OR ENCUMBRANCE. You
may, at your option, declare the entire balance of this Agreement to be
immediately due and payable upon the creation of, or contract for the creation
of, any lien, encumbrance, transfer or sale of all or any part of the Property.
This right is subject to the restrictions imposed by federal law 112 C.F.R.
591), as applicable. However, if I am in default under this Agreement, I may
not sell the inventory portion of the Property even in the ordinary course of
business.

 

11.  REMEDIES. After I default, 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 terms of the Secured Debts immediately due.

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

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

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

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

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

 

Where a notice is required, I
agree that ten days prior written notice sent by first class mail to my address
listed in this Agreement will be reasonable notice to me under the Minnesota
Uniform Commercial Code. If the Property is perishable or threatens to decline
speedily in value, you may, without notice to me, dispose of any or all of the
Property in a commercially reasonable manner at my expense following any
commercially reasonable preparation or processing.

 

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

 

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

H.    Waiver. By choosing 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. I waive all claims for loss or damage caused
by your acts or omissions where you acted reasonably and in good faith,

 

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

 

14.  APPLICABLE LAW. This Agreement is governed by the laws of Minnesota, the United States
of America, and to the extent required, by the laws of the jurisdiction where
the Property is located, except to the extent such state laws are preempted by
federal law. In the event of a dispute,
the exclusive forum, venue end place of jurisdiction will be in Minnesota,
unless otherwise required by law,

 

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

 

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

 

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

 

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

 

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

 

 

DEBTOR:

 

	
   

  	
  PROUROCARE,
  INC.

  
	
   

  	
   

  
	
   

  	
  By- 

  	
  /s/Maurice
  R. Taylor II

  	
   

  
	
   

  	
  MAURICE R. TAYLOR II, CEO

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