EXHIBIT 10.3

 

INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

 

DATE:

October 29, 2004

 

 

 

 

PARTIES:

PKM Properties, LLC

 

 

c/o Gracon Contracting, Inc.

 

 

606 24th Avenue South, Suite B12

 

 

Minneapolis, MN 55454

 

 

Attention: Paul K. Miller

(“Secured Party”)

 

 

 

 

MedicalCV, Inc.

 

 

9725 South Robert Trail

 

 

Inver Grove Heights, MN 55077

 

 

Organizational Identification Number: 7J-436

(“Debtor”)

 

AGREEMENTS:

 

IN CONSIDERATION of one dollar and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

 

1.             Grant of Security Interest and Collateral.  To secure the payment
and performance of each and every other debt, liability and obligation of every
type and description which Debtor may now or at any time hereafter owe to
Secured Party whether such debt, liability or obligation now exists or is
hereafter created or incurred, whether it arises under or is evidenced by this
Intellectual Property Security Agreement, one or more credit agreements
evidencing loans made by Secured Party to Debtor (collectively, the “Loan
Agreement”), or any other present or future instrument or agreement or by
operation of law, and whether it is or may be direct or indirect, due or to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or sole, joint, several or joint and several (all such debts,
liabilities and obligations are herein collectively referred to as the
“Obligations”), Debtor hereby grants Secured Party a security interest (the
“Security Interest”) in all of the intellectual property of Debtor (the
“Collateral”), including but not limited to the intellectual property described
in Exhibit A and the following:

 

(a)           Patents.  (i) All patents and patent applications on Schedule 1 of
Exhibit A hereto, (ii) all reissues, divisions, continuations, renewals,
extensions, continuations-in-part thereof, (iii) all income, royalties, damages
and payments now or hereafter due and/or payable with respect thereto, including
but not limited to under any licenses and any damages for past, present or
future infringement thereof, (iv) the right to sue for past, present or future
infringements thereof, and (v) all rights corresponding thereto throughout the
world (all such items described in this subsection (a) referred to as
“Patents”);

 

(b)           Trademarks.  (i) All tradenames, trademarks, service marks and any
registrations thereof and applications therefor listed on Schedule 2 of Exhibit
A hereto, (ii) any renewals thereof, (iii) all income, royalties, damages and
payments now or hereafter due and/or payable with respect thereto, including but
not limited to under any licenses and any damages for past, present or future
infringement thereof, (iv) the right to sue for past, present or future
infringements thereof, (v) all rights corresponding thereto throughout the
world, and (vi) all

 

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goodwill of Debtor’s business connected with and symbolized by the foregoing
(all such items described in this subsection (b) referred to as “Trademarks”);

 

(c)           Copyrights.  (i) All copyrights and registrations thereof listed
on Schedule 3 of Exhibit A hereto, (ii) any renewals thereof, (iii) all income,
royalties, damages and payments now or hereafter due and/or payable with respect
thereto, including but not limited to under any licenses and any damages for
past, present or future infringement thereof, (iv) the right to sue for past,
present or future infringements thereof, and (v) all rights corresponding
thereto throughout the world (all such items described in this subsection (c)
referred to as “Copyrights”);

 

(d)           Miscellaneous.  All inventions, discoveries, ideas, technology,
know-how, trade secrets, processes, formulas, models, prototypes, jigs, dies,
molds or other tooling, drawings and designs, computer software programs, and
documents, computer disks, source codes, object codes, lab books or other
materials related thereto; and

 

(e)           Proceeds.  All proceeds of any of the foregoing.

 

2.             Representations, Warranties and Agreements.  Debtor represents,
warrants and agrees that:

 

(a)           Debtor is a corporation.  Debtor’s chief executive office and only
place of business is located at the address specified at the top of this
Agreement.

 

(b)           The Patents, Trademarks and Copyrights listed on Schedules 1, 2
and 3, respectively, constitute all of the patents, trademarks, copyrights and
applications therefor now owned by Debtor.  If, before the Obligations shall
have been satisfied in full, Debtor shall (i) obtain rights to any new
patentable inventions, registrable trademarks, trademark registrations, trade
names or registered copyrights, or (ii) become entitled to the benefit of any
patent, trademark, copyright or registration thereof, or patent for any reissue,
division, continuation, renewal, extension or continuation-in-part of any Patent
or any improvement on any Patent, then the provisions of Section 1 above shall
automatically apply thereto and Debtor shall give to Secured Party prompt
written notice thereof.  Debtor hereby authorizes Secured Party to modify this
Agreement by amending Schedule 1, 2 and/or 3, as applicable, to include any
future patents, patent applications, trademarks, trademark registrations,
trademark applications, trade names and copyright registrations which are
Patents, Trademarks or Copyrights, as applicable, under Section 1 above.

 

(c)           Debtor has (or will have at the time Debtor acquires rights in
Collateral hereafter arising) absolute title to each item of Collateral free and
clear of all security interests, liens and encumbrances.  Debtor will keep all
Collateral free and clear of all security interests, liens and encumbrances and
will defend the Collateral against all claims or demands of all persons other
than Secured Party and the security interests set forth on Exhibit B.

 

(d)           Until the Obligations shall have been satisfied in full, Debtor
will not, without Secured Party’s prior written consent, sell any of the
Collateral or enter into any agreement which is inconsistent with Debtor’s
obligations or Secured Party’s rights under this Agreement, provided that Debtor
may enter into license agreements with respect to the Collateral in the ordinary
course of business so long as such agreements are not inconsistent with Secured
Party’s rights or Debtor’s obligations under the Loan Agreement or this
Agreement.  Debtor further agrees that it will not take any action, or permit
any action to be taken by others subject to its control, including licensees, or
fail to take any action, which would affect the validity of the Collateral or
enforcement of Secured Party’s rights in the Collateral.

 

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(e)           This Agreement has been duly and validly authorized by all
necessary corporate action by Debtor.

 

(f)            Debtor will use commercially reasonable efforts to prosecute
diligently any patent application that is part of the Patents, any trademark
application that is part of the Trademarks, and any copyright registration that
is part of the Copyrights, pending as of the date hereof or thereafter until the
Obligations shall have been paid in full.  Debtor will file and prosecute
applications or registrations on unpatented but patentable inventions, on
trademarks and on copyrightable works, as recommended by reputable legal
counsel.  Debtor will preserve and maintain all rights in patent applications
and patents that are part of the Patents, in trademark applications, trademarks,
and trademark registrations that are part of the Trademarks, and in
copyrightable works and copyright registrations that are part of the
Copyrights.  Any expenses incurred in connection with such registrations or
applications shall be borne by Debtor.

 

(g)           Debtor will at all reasonable times, permit Secured Party or its
representatives to examine or inspect any Collateral, wherever located, and to
examine, inspect and copy Debtor’s books and records pertaining to the
Collateral and its business and financial condition.

 

(h)           Debtor will keep accurate and complete records pertaining to the
Collateral and pertaining to Debtor’s business and financial condition and
submit to Secured Party such periodic reports concerning the Collateral and
Debtor’s business and financial condition as Secured Party may from time to time
reasonably request.

 

(i)            Debtor will pay when due or reimburse Secured Party on demand for
all costs of collection of any of the Obligations and all other out-of-pocket
expenses (including in each case all reasonable attorneys’ fees) incurred by
Secured Party in connection with the creation, perfection, satisfaction,
protection, defense or enforcement of the Security Interest or the creation,
continuance, protection, defense or enforcement of this Agreement or of the
Obligations, including expenses incurred in any litigation or bankruptcy or
insolvency proceedings.

 

(j)            Debtor will execute, deliver or endorse any and all instruments,
documents, assignments, security agreements and other agreements and writings
which Secured Party may at any time reasonably request in order to secure,
protect, perfect or enforce the Security Interest and Secured Party’s rights
under this Agreement.

 

(k)           If Debtor at any time fails to perform or observe any agreement
contained in this Section 2, Secured Party may (but need not) perform or observe
such agreement on behalf and in the name, place and stead of Debtor (or, at
Secured Party’s option, in Secured Party’s own name) and may (but need not) take
any and all other actions which Secured Party may reasonably deem necessary to
cure or correct such failure and, except to the extent that the effect of such
payment would be to render any loan or forbearance of money usurious or
otherwise illegal under any applicable law; Debtor shall thereupon pay Secured
Party on demand the amount of all monies expended and all costs and expenses
(including reasonable attorneys’ fees) incurred by Secured Party in connection
with or as a result of Secured Party’s performing or observing such agreements
or taking such actions, together with interest thereon from the date expended or
incurred by Secured Party at the highest rate then applicable to the
Obligations.  To facilitate the performance or observance by Secured Party of
such agreements of Debtor, Debtor hereby irrevocably appoints (which appointment
is coupled with an interest) Secured Party, or its delegate, as the
attorney-in-fact of Debtor with the right (but not the duty) from time to time
to create, prepare, complete, execute, deliver, endorse or file, in the name and
on behalf of Debtor, any and all instruments, documents, financing statements,
applications for insurance and other

 

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agreements and writings required to be obtained, executed, delivered or endorsed
by Debtor under this Section 2.

 

3.             Royalties; Terms.  Neither the Security Interest granted herein,
nor the exercise by Secured Party of any of its rights under this Agreement,
shall (a) impose on Secured Party any liability to Debtor for royalties or other
similar charges, or (b) be limited geographically.  The term of the Security
Interest granted herein shall extend until the earlier of (i) the expiration of
each of the respective Patents, Trademarks and Copyrights included within the
Collateral, or (ii) the date the Obligations have been paid in full or the
Collateral has been retained in satisfaction thereof.

 

4.             Events of Default.  The occurrence of any Event of Default as
defined in the Loan Agreement, shall constitute an Event of Default hereunder.

 

5.             Remedies upon Event of Default.  Upon the occurrence of an Event
of Default and at any time thereafter, Secured Party may exercise any one or
more of the following rights and remedies:

 

(a)           declare all Obligations to be immediately due and payable, and the
same shall thereupon be immediately due and payable, without presentment or
other notice or demand;

 

(b)           exercise and enforce any or all rights and remedies available upon
default to a secured party under the Uniform Commercial Code, including but not
limited to the right to take possession of any Collateral, proceeding without
judicial process or by judicial process (without a prior hearing or notice
thereof, which Debtor hereby expressly waives), and the right to sell, lease,
license or otherwise dispose of any or all of the Collateral, and in connection
therewith, Secured Party may require Debtor to make the Collateral available to
Secured Party at a place to be designed by Secured Party which is reasonably
convenient to both parties, and if notice to Debtor of any intended disposition
of Collateral or any other intended action is required by law in a particular
instance, such notice shall be deemed commercially reasonable if given (in the
manner specified in Section 7) at least ten (10) calendar days prior to the date
of intended disposition or other action; or

 

(c)           exercise or enforce any or all other rights or remedies available
to Secured Party by law or agreement against the Collateral, against Debtor or
against any other person or property.

 

6.             Secured Party’s Right to Sue.  From and after the occurrence of
any Event of Default and the provision by Secured Party of written notice to
Debtor of Secured Party’s intention to enforce its rights and claims against any
of the Patents, Trademarks or Copyrights, Secured Party shall have the right,
but shall in no way be obligated, to bring suit in its own name to enforce the
Patents, Trademarks and Copyrights, and any licenses thereunder and, if Secured
Party shall commence any such suit, Debtor shall, at the request of Secured
Party, do any and all lawful acts and execute any and all proper documents
required by Secured Party in aid of such enforcement and Debtor shall indemnify
and shall, upon demand, promptly reimburse Secured Party for all reasonable
costs and expenses incurred by Secured Party in the exercise of its rights under
this Section 6.

 

7.             Miscellaneous.  This Agreement can be waived, modified, amended,
terminated or discharged, and the Security Interest can be released, only
explicitly in a writing signed by Secured Party.  A waiver signed by Secured
Party shall be effective only in the specific instance and for the specific
purpose given.  Mere delay or failure to act shall not preclude the exercise or
enforcement of any of Secured Party’s rights or remedies.  All rights and
remedies of Secured Party shall be cumulative and may be exercised singularly or
concurrently, at Secured Party’s option, and the exercise or enforcement of any
one such right or remedy shall neither be a condition to nor bar the exercise or
enforcement of any other. 

 

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All notices to be given to Debtor shall be deemed sufficiently given if
delivered or mailed by registered or certified mail, postage prepaid, to Debtor
at its address set forth above or at the most recent address shown on Secured
Party’s records.  Secured Party’s duty of care with respect to Collateral in its
possession (as imposed by law) shall be deemed fulfilled if Secured Party
exercises reasonable care in physically safekeeping such Collateral or, in the
case of Collateral in the custody or possession of a bailee or other third
person, exercises reasonable care in the selection of the bailee or other third
person, and Secured Party need not otherwise preserve, protect, insure or care
for any Collateral.  Secured Party shall not be obligated to preserve any rights
Debtor may have against prior parties, to realize on the Collateral at all or in
any particular manner or order, or to apply any cash proceeds of Collateral in
any particular order of application.  This Agreement shall be binding upon and
inure to the benefit of Debtor and Secured Party and their respective heirs,
representatives, successors and assigns and shall take effect when signed by
Debtor and delivered to Secured Party, and Debtor waives notice of Secured
Party’s acceptance hereof.  Secured Party may execute this Agreement if
appropriate for the purpose of filing, but the failure of Secured Party to
execute this Agreement shall not affect or impair the validity or effectiveness
of this Agreement.  A carbon, photographic or other reproduction of this
Agreement or of any financing statement or other recording document signed by
the Debtor shall have the same force and effect as the original for all purposes
of a financing statement or other recording document.  This Agreement shall be
governed by the internal laws of the State of Minnesota.  If any provision or
application of this Agreement is held unlawful or unenforceable in any respect,
such illegality or unenforceability shall not affect other provisions or
applications which can be given effect and this Agreement shall be construed as
if the unlawful or unenforceable provision or application had never been
contained herein or prescribed hereby.  All representations and warranties
contained in this Agreement shall survive the execution, delivery and
performance of this Agreement and the creation and payment of the Obligations.

 

THE PARTIES have executed this Intellectual Property Security Agreement as of
the day and year first above written.

 

Debtor:

 

MEDICAL CV, INC.

 

 

 

 

 

 

 

 

 

 

By:

  /s/ John H. Jungbauer

 

 

 

Its:

 

Vice President, Finance

 

 

 

 

 

 

 

 

 

 

 

 

Secured Party:

 

PKM PROPERTIES, LLC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

  /s/ Paul K. Miller

 

 

 

 

Its:

 

Chief Executive Officer

 

 

 

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EXHIBIT A – INTELLECTUAL PROPERTY

 

Schedule 1 – Patents

 

5,593,424

 

1997

 

Apparatus and Method for Reducing and Stabilizing the Circumference of a
Vascular Structure

 

 

 

 

 

 

 

 

 

Two additional U.S. Patents for related subject matter; U.S. Patent Nos.
5,709,695 and 5,961,539

 

 

 

 

 

 

 

 

 

In addition, the Company has six foreign patents or patent applications
corresponding to the ‘424 patent; Issued patents from the European Application
registered in Germany (DE), Spain (ES), France (FR), Great Britain (GB) & Italy
(IT), and an application pending in Japan (JP), for which the Company recently
filed a response.

 

 

 

 

 

(US) 09/574,479

 

2000

 

Pyrolytic Carbon Coating Apparatus Having Feed Gas Actuator

 

 

 

 

 

 

 

 

 

Application issued July 22, 2003 as U.S. Patent No. 6,596,084

 

 

 

 

 

 

 

 

 

• Request for Examination due May 19, 2005

 

 

 

 

 

EU 00932640.6
CA 2,374,512

 

 

 

Annuity (maintenance) payments for both of these applications are due on May 19,
2005, and as noted above a request for examination is also due on that date

 

 

 

 

 

60/516,242

 

2003

 

Epicardial Laser Surgical Wand (provisional application expiring on 10-30-04)

 

 

 

 

 

6,296,663

 

2001

 

Bileaflet Heart Valve Having Open Channel and Swivel Pivots

 

 

 

 

 

 

 

 

 

Underlying patent, U.S. Patent No. 6,183,511 and a prior patent for a different
Bileaflet Valve, U.S. Patent No. 5,824,062

 

Patent Applications

 

1.             U.S. patent application Ser. No.                       filed
October 28, 2004 (based on U.S. provisional patent application Ser. No.
60/516,242 filed October 30, 2003).

 

2.             PCT international patent application Ser. No.
                      filed October 28, 2004 (also based on U.S. provisional
patent application Ser. No. 60/516,242 filed October 30, 2003).

 

Schedule 2 – Trademarks

 

ULTRAPURE

 

® 76/304,124

 

September 21, 2004

 

 

 

 

•  Statement of Use needed

 

 

 

 

 

 

 

 

 

Awaiting a Notice of Allowance

 

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OMNICARBON

 

® 76/304,229

 

October 22, 2002

 

 

 

 

(Notice of Allowance)

 

 

 

 

 

 

 

 

 

Registered 12/03/02; U.S. Registration No. 2,657,198

 

 

 

 

 

MEDICALCV

 

® 76/304,121

 

• Affidavit of Continued Use due 1/7/2009; then good to 1/7/2013

 

 

 

 

*NEED TO USE ® INSTEAD OF ™*

 

 

 

 

 

 

 

 

 

U.S. Registration No. 2,673,163

 

 

 

 

 

INTERFACE

 

® 76/304,258

 

Will lapse 12/31/2008

 

 

 

 

U.S. Registration No. 2,670,175

 

 

 

 

 

ATRILAZE

 

™ 76/549,041

 

May 11, 2004

 

 

 

 

(Notice of Allowance)

 

 

 

 

 

 

 

 

 

Statement of Use or a Request for an Extension of Time to file same is due
2/3/05

 

Schedule 3 – Copyrights 

 

No registered copyrights      

 

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EXHIBIT B

 

PERMITTED LIENS

 

The security interests evidenced by the following financing statements:

 

Minnesota Secretary of State

 

File No.

 

Debtor

 

Date

 

Creditor

 

20024930253

 

MedicalCV

 

8/19/02

 

Segmed, Inc.

 

20036276297

 

MedicalCV

 

1/17/03

 

PKM Properties, LLC

 

 

The security interest created in favor of Hauser under the May Security
Agreement to secure the Hauser Note.

 

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