**Exhibit 10.32**

 

**PURCHASE AGREEMENT**

** **

**THIS PURCHASE AGREEMENT** (“Agreement”)is made and entered into as ofthis 4th day of April, 2003 between **MedicalCV, Inc.**, a Minnesotacorporation (“Seller”), and **PKM Properties, LLC**, a Minnesota limitedliability company (“Purchaser”).  Forpurposes of this Agreement, the term “Effective Date” shall mean the date thatPurchaser receives a fully executed copy of this Agreement.

 

In consideration of thecovenants and agreements contained herein, the parties agree as follows:

 

1.                                       **Premises**.

 

A.                                   Premises.  Subject to compliance withthe terms and conditions of this Agreement, Seller shall sell to Purchaser andPurchaser shall purchase from Seller the following (collectively, the“Premises”):

 

1.                                       The real property located at 9725 SouthRobert Trail, in the City of Inver Grove Heights, County of Dakota**,**Stateof Minnesota, legally described in **EXHIBIT A** and depicted on **EXHIBIT B**attached hereto, consisting of approximately 19.35 acres of real propertytogether with all easements, tenements, hereditaments, and appurtenancesbelonging thereto (the “Land”); and

 

2.                                       The office-warehouse-manufacturing facilitybuilding (“Building”) and other structures and improvements erected or placedon the land, supplies, tools, and equipment used in connection with themaintenance or operation of the Premises or Building (collectively, the“Personal Property”).

 

B.                                     Excluded Assets; Liabilities of Seller.

 

1.                                       Seller shall retain ownership of any personalproperty located on the Premises not described in Section 1.A. above (includingbut not limited to all supplies, tools, equipment (used in connection with themaintenance or operation of Tenant’s business), inventory, machinery,furniture, fixtures,  and other items ofpersonal property located on or about the Building.

 

2.                                       Except as specifically set forth herein,Purchaser shall not assume or pay any liabilities, expenses, or otherobligations of Seller except as provided in this Agreement.

 

2.                                       **Purchase Price; Payment**.

 

A.                                   Purchase Price.  Thepurchase price for the Premises shall be Three Million Five Hundred Thousandand 00/100 Dollars ($3,500,000.00) (“Purchase Price”).

 

B.                                     Payment.  Purchaser shall pay thepurchase price for the Premises as follows:

 

1.                                       Earnest Money.  Thesum of Ten Thousand and 00/100 Dollars ($10,000.00) earnest money (“EarnestMoney”) shall be deposited by Purchaser with Old Republic National TitleInsurance Company (“Title”) upon execution of this Agreement.  The Earnest Money shall be placed and heldby Title in its

 

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commercial interest bearing account in accordance with the terms ofthis Agreement and shall be credited against the Purchase Price in favor ofPurchaser at closing.  Any and allinterest accruing on the Earnest Money pursuant to this Agreement shall be paidto Purchaser and shall accrue solely for Purchaser’s benefit.  If Purchaser does not provide Seller withwritten notice that a condition to closing set forth in Section 7 of thisAgreement has not been satisfied, then the Earnest Money shall be deemednonrefundable to Purchaser, except as otherwise provided in Sections 3D., 5.B.,5.C., 14.A. or elsewhere in this Agreement.

 

2.                                       Mortgage Note. $2,500,000 by assumption of the principal balance of a promissory noteand mortgage, assignment of rents, security agreement and fixture financingstatement executed by CV Dynamics, Inc., now known as MedicalCV, Inc., in favorof Riverside Bank, now known as Associated Bank-Minnesota, dated November 23,1999 (“Mortgage Note”).

 

3.                                       Cash.  $990,000, the balance of thePurchase Price shall be paid (subject to prorations, reductions and credits asprovided below) by Purchaser paying such amount in immediately available fundsby wire transfer to an account designated by Seller.

 

3.                                       **Title To Be Delivered; Commitment; Survey; Title Objections**.

 

A.                                   Title To Be Delivered.  Atclosing, Seller agrees to convey Marketable Fee Simple Title in the Land andBuilding.  For purposes of thisAgreement, the term “Marketable Fee Simple Title” means title to the Land andBuilding that, when acquired by Purchaser, will be insurable by Title under itsstandard ALTA (Form 10/17/92) Owner’s Title Insurance Policy, at standard ratesand free and clear of all liens, encumbrances, easements, covenants, conditionsand restrictions other than the Permitted Exceptions (defined herein).  Seller shall deliver to Purchaser MarketableFee Simple Title, free and clear of all claims, encumbrances and liens except:

 

1.                                       Mortgage, Assignment of Rents, SecurityAgreement and Fixture Financing Statement executed by CV Dynamics, Inc. infavor of Riverside Bank, dated November 23, 1999, filed December 13, 1999, asDocument No. 1659505 in the original amount of $2,500,000.

 

2.                                       Trunk, watermain, sanitary sewer extensionand utility easement(s) over the southeasterly 20 feet lying south of the north417.42 feet of the Northwest 1⁄4 of the Southwest 1⁄4 in favor of the City of InverGrove Heights, recorded as Document No. 1740919.

 

3.                                       Conditional Use Permit issued by the City ofInver Grove Heights dated July 14, 1997 recorded July 24, 1997 as documentnumber 1434761.

 

4.                                       Road Easement in favor of the State ofMinnesota set forth in final certificate recorded February 2, 1955 in Book 64p.240.

 

5.                                       Easement between Soo Line Railroad Company, aMinnesota corporation dated November 15, 1991 recorded January 10, 1992, asDocument No. 1022688.

 

6.                                       The lien of real estate taxes due and payablein 2003 and subsequent years.

 

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7.                                       The lien of the following specialassessments:

 

(1)                                  1998-12 CV - $168,000 payable in installmentsin 2004 and thereafter;

 

(2)           2003 installment -$39,360

 

8.                                       Laws, regulations, or ordinances of anygovernmental unit or agency which do not prohibit the current use of thePremises.

 

9.                                       An unrecorded tower lease between CVDynamics, Inc. and U.S. West Communications Wireless Group, a division of U.S.West Communications dated April 16, 1997 (“Tower Lease”).

 

B.                                     Commitment.  Seller at its sole cost andexpense shall cause to be issued and delivered to Purchaser a commitment(“Commitment”) covering the Premises issued by Title wherein Title agrees toissue to Purchaser upon the recording of the Deed (defined herein) and theconveyance documents described herein an ALTA (Form 10/17/92) Owner’s TitleInsurance Policy, with standard coverage, in the full amount of the PurchasePrice.  Such Commitment shall include a(i) non-imputation endorsement, (ii) an endorsement insuring that theconveyance to the Purchaser complies with Sections 302A.661 and 302A.673 of theMinnesota Business Corporation Act (collectively, “MBCA Endorsement”), and(iii) Uniform Commercial Code financing statement search, tax lien search,state and federal court judgment and lien search.  Seller shall deliver a copy of the Survey (defined herein) to Titleso that the initial Commitment may be amended or supplemented to contain anysurvey exceptions to title.

 

C.                                     Survey.  Seller at its sole cost andexpense shall cause to be delivered to Purchaser a current ALTA/ACSM Urban LandTitle Survey (“Survey”) of the Premises prepared by a duly licensed landsurveyor in the State of Minnesota reasonably approved by Purchaser, whichSurvey shall meet the then current accuracy standards jointly adopted by ALTAand ACSM and shall contain a certification as set forth in the attached **EXHIBIT C**dated after the date of this Agreement and shall contain items 1 through 4, 6,7(a), 8 through 11(a), and 13 and 14 of Table A of the 1999 MinimumStandard Detail Requirements for ALTA/ACSM Land Title Surveys. The Survey shallbe issued in the names of Seller, Purchaser, Title and Associated Bank and TCFNational Bank.  Seller shall deliver tosaid surveyor a copy of the Commitment to be delivered to Purchaser as providedabove, so that the Survey delivered to Purchaser will include and identify thelocation of any encroachments, easements, encumbrances or other restrictionsthat are identified or disclosed in the Commitment.

 

D.                                    Title Objections. Purchaser shall have until ten (10) days from the date it receives thelatter of the Commitment or Survey (or any update or supplement thereto) tomake its objections to matters disclosed in the Commitment or Survey (or anyupdate or supplement thereto) in writing to Seller.  Any exception disclosed in the Commitment or Survey (or any updateor supplement thereto) and not timely objected to by Purchaser within theapplicable ten (10) day period shall be deemed a “Permitted Exception”hereunder.  Seller shall have untiltwenty (20) days after it receives such objections to have the same removed orsatisfied, using its best efforts.  IfSeller shall fail to have such objections removed within that time, thenwithout limiting any other remedies Purchaser may have at law or in equity,Purchaser may, at its sole discretion, either (a) terminate

 

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this Agreement without any liability on its part and receive theEarnest Money (together with interest) back, (b) waive such objections inwriting and proceed to closing with the understanding that such uncuredobjections shall be deemed Permitted Exceptions at closing, or (c) attempt tocure such uncured objections, in which event Purchaser shall have an additionaltwenty (20) days to attempt to cure such objections, and if Purchaser is notsuccessful in curing such objections, Purchaser shall then have the right toeither terminate this Agreement pursuant to clause (a) above or waive suchobjections pursuant to clause (b) above.

 

4.                                       **Property Information; Purchaser’s Inspections**.

 

A.                                   Seller’s Documents.  Concurrentlywith Seller’s acceptance and delivery of this Agreement to Purchaser, Sellershall deliver to Purchaser, complete and accurate copies of any contracts,leases, licenses or other agreements pertaining to the Premises, including anyamendments thereof, and copies of all permits, plats, authorizations, notices,consents, approvals, plans, specifications, surveys, engineering studies,analysis, soil test borings, environmental studies and other documentationpertaining to the physical condition, development and operation of the Premisesand any other information reasonably requested by Purchaser (whether preparedby Seller, Seller’s agents or independent contractors, any governmentalauthority or agency, federal, state or local, or any other third party), to theextent that Seller has the same in its possession or has a right of possessionthereto (“Seller’s Documents”).

 

B.                                     Environmental Assessment. Seller shall, at its sole cost, obtain and deliver to Purchaser anupdate of the Phase I Environmental Assessment (“Phase I”)of the Premisesprepared by Pinnacle Engineering, Inc. and dated September 27, 1999, whichupdate is issued in the name of Seller, Purchaser, Associated Bank and TCFNational Bank (“Updated Phase I”).

 

C.                                     Appraisals.  Seller shall, at its solecost, provide Purchaser with an update of the existing appraisal of thePremises conducted by Jabs, Gehrig & Company and dated August 29, 2002(“Seller’s Appraisal”).  Seller’sAppraisal shall be for the benefit of Seller, Purchaser and Associated Banksuch that they can each rely on the Seller’s Appraisal.  Purchaser shall, at its sole cost, obtain anappraisal of the Premises taking into consideration the financial terms of thelease from Purchaser to Seller (“Purchaser’s Appraisal”).

 

D.                                    Purchaser’s Inspections. Purchaser, its counsel, accountants, agents and other representatives,shall upon at least twenty-four (24) hours prior notice to Seller have full andcontinuing access to the Premises, as well as to all other papers and documentsof Seller as they relate to the title, physical condition, development andoperation of the Premises, which inspections will be conducted in a manner notdisruptive to the operation or security of the Premises.  Purchaser and its agents and representativesshall also have the right to enter upon the Premises at any time after theexecution and delivery hereof for any purpose whatsoever, including inspecting,surveying, engineering, test boring, performance of environmental tests andsuch other work as Purchaser shall consider appropriate and shall have thefurther right to make such inquiries of governmental agencies and utilitycompanies, etc., and to make such feasibility studies and analyses as itconsiders appropriate (collectively the “Inspections”). Purchaser shallindemnify and hold harmless Seller from and against any liabilities, losses,liens, expenses, suits and fees or damages to persons or property arising outof the activities of Purchaser, its agents or contractors on the Premises.

 

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5.                                       **Control of Premises; Condemnation**.

 

A.                                   Control of Premises. Until the closing, except for Purchaser’s indemnification obligationsset forth in Section 4.D. above, Seller shall have the full responsibility andthe entire liability for any and all damages or injury of any kind whatsoeverto the Premises, the Improvements thereon, and all persons, whether employeesor otherwise, and all property from and connected to the Premises.  Seller agrees to keep the Premises continuallyinsured during the term of this Agreement under a policies of (i) commercialgeneral liability insurance with policy limits of not less than $1,000,000 perincident, and (ii) fire, hazard and all risk property insurance in amount equalto one hundred percent (100%) of the replacement value of theImprovements.  Until the closing, Sellershall have the full responsibility for the continued operation, maintenance andrepair of the Premises, provided, however, Seller shall not (i) enter into anynew leases or any amendments, modifications, extensions or renewals of existingleases except a sublease with Huntter Medical, or (ii) approve of anyassignment or sublease of an existing lease, without the prior written consentof the Purchaser, which may be withheld in Purchaser’s reasonable discretion.

 

B.                                     Condemnation.  If,prior to the closing, the Premises shall be the subject of an action in eminentdomain or a proposed taking by a governmental authority, whether temporary orpermanent, Purchaser, at its sole discretion, shall have the right to terminatethis Agreement upon notice to Seller without liability on its part by sonotifying Seller and the Earnest Money (with interest) shall be refunded toPurchaser.  If Purchaser does notexercise its right of termination, (i) any and all proceeds arising out of anysuch eminent domain or taking shall be held in trust by Seller for the benefitof Purchaser and paid to Purchaser at closing or if the eminent domain actionhas not concluded as of the Closing Date, Seller shall assign any quick takepayments to Purchaser, assign any rights of Seller in the eminent domain actionand any award therein to Purchaser and Purchaser shall take title subject tothe eminent domain action; and (ii) if the condemning authority has acquiredtitle as of the Closing Date, the “Premises” shall thereafter be defined tomean the Premises less the portion taken by eminent domain orcondemnation.  In no event shall thePurchase Price be changed.

 

C.                                     Casualty.  If, prior to the closing, thePremises or the Improvements are damaged or destroyed, Purchaser, at its solediscretion, shall have the right to terminate this Agreement upon notice toSeller without liability on its part by so notifying Seller and the EarnestMoney (with interest) shall be refunded to Purchaser.  If the Premises or Improvements are not materially damaged ordestroyed or Purchaser does not exercise its right of termination, Seller shallproceed forthwith to repair the damage to the Premises and Improvements and anyand all proceeds arising out of such damage or destruction, if the same beinsured, shall be held in trust by Seller for the benefit of such repair.

 

6.                                       **Representations, Warranties and Covenants of Seller**.  Inorder to induce Purchaser to enter into this Agreement and purchase thePremises, Seller hereby represents, warrants and covenants to Purchaser:

 

A.                                   Each of the persons executing this Agreementon behalf of Seller does hereby represent and warrant that (i) Seller is a dulyorganized and validly existing corporation, as the case may be, under the lawsof the State of Minnesota, (ii) Seller is qualified to do business in thestate in which the Premises are located, (iii) the Seller has full rightand authority to enter into this Agreement, (iv) each person signing onbehalf of the Seller is authorized to

 

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do so, (v) the execution and delivery of this Agreement by Sellerwill not constitute a default under any indenture, agreement, contract,mortgage or other instrument to which Seller is a party, (vi) Seller isnot a “foreign person” as that term is defined under Internal Revenue CodeSection 1445(F)(3), and (vii) the sale of the Premises is not subject toany withholding requirements imposed by the Internal Revenue Code, including,without limitation, Section 1445(F)(3).

 

B.                                     No action in condemnation, eminent domain orpublic taking proceedings have been commenced or to the best of Seller’sknowledge without investigation pending against the Premises.

 

C.                                     To the best of Seller’s knowledge withoutinvestigation, no ordinance or hearing is now before any local governmentalbody which either contemplates or authorizes any levy of special assessmentsagainst the Premises.

 

D.                                    There is no actual or to the best of Seller’sknowledge without investigation threatened, action, litigation, oradministrative proceeding by any organization, person, individual orgovernmental agency (including governmental actions under condemnationauthority or similar proceedings) affecting the Premises.

 

E.                                      Seller owns fee simple title interest to thePremises.

 

F.                                      To the best of Seller’s knowledge, there areno delinquent taxes against the Premises. There are no “Green Acres” taxes against the Premises.  Seller has not appealed any taxes orassessments payable against the Premises and has made no commitments oragreements with any taxing authorities pertaining to the payment of taxes andassessments against the Premises or the assessed value of the Premises.

 

G.                                     All labor or material which have beenfurnished to the Premises have been fully paid for or will be fully paid forprior to the closing date so that no valid lien for labor or materials renderedcan be asserted against the Premises.

 

H.                                    Seller has not received notice of any order,suit, judgment or other proceedings relating to fire, building, zoning, airpollution or health violations that have not been corrected.  Seller has received no written request fromany fire insurance underwriter or governmental authority for any alterations orany additions to the Premises.

 

I.                                         There are no management, maintenance orservice contracts, leases, licenses, purchase agreements, purchase options,rights of first refusal, or other unrecorded agreements affecting the Premises,except the lease between Seller and Huntter Medical which will be converted bySeller into a sublease on or before closing. Seller agrees not to enter into any new, or modify any existing, writtenor oral service contracts, leases, licenses or other recorded or unrecordedagreements affecting the Premises hereafter without Purchaser’s prior writtenconsent which may be withheld in Purchaser’s reasonable discretion, except forthe Huntter Medical sublease.

 

J.                                        To the best knowledge of Seller withoutinvestigation and subject to whatever may be disclosed in the Phase I, UpdatedPhase I, or any other document delivered by Seller to Purchaser (“EnvironmentalDocuments”), there are no toxic or hazardous substances or wastes, pollutantsor contaminants (including, without limitation, asbestos, urea formaldehyde,the group of organic compounds known as polychlorinated biphenyls,

 

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petroleum products including gasoline, fuel oil, crude oil and variousconstituents of such products, and any hazardous substance as defined in theComprehensive Environmental Response, Compensation and Liability Act of 1980(“CERCLA”), 42 U.S.C. § 9601-9657, as amended) released on or illegallydisposed of, from the Premises, nor has Seller undertaken any activity on thePremises that would cause or contribute to (i) the Premises becoming atreatment facility within the meaning of the Resource Conservation and RecoveryAct of 1976 (“RCRA”), 42 U.S.C. § 6901 et. al., (ii) a release or threatenedrelease of toxic or hazardous wastes or substances, pollutants or contaminants,from the Premises within the meaning of, CERCLA, or (iii) the discharge ofpollutants or effluent into any water source or system, the dredging or fillingof any waters or the discharge into the air of any emissions, that wouldrequire a permit under the Federal Water Pollution Control Act, 33 U.S.C. §1251 et. al., or the Clean Air Act, 42 U.S.C. § 7401 et. al., or any similarstate law or local ordinance.  To thebest knowledge of Seller without investigation and subject to whatever may bedisclosed in the Environmental Documents there are no substances or conditionsreleased in or on the Premises that may support a claim or cause of actionunder RCRA, CERCLA or any other federal, state or local environmental statutes,regulations ordinances or other environmental regulatory requirements.  Seller has disclosed to Purchaser allenvironmental reports and studies with respect to the Premises which are inSeller’s possession or the possession of Seller’s agents.

 

Noabove ground or underground tanks are located in or about the Premises, or tothe best knowledge of Seller without investigation, have been located under, inor about the Premises and have subsequently been removed or filled, other thanas disclosed in the Environmental Documents previously delivered toPurchaser.  To the extent storage tanksexist on or under the Premises, such storage tanks have been duly registeredwith all appropriate regulatory and governmental bodies and to the best ofSeller’s knowledge without investigation otherwise are in compliance withapplicable Federal, state and local statutes, regulations, ordinances and otherregulatory requirements.

 

Subjectto whatever may be disclosed in the Environmental Documents, (i) Seller has notreceived any written notice that the Premises or Seller’s operations at thePremises do not comply with any applicable federal, state, county or localstatutes, laws, regulations, rules, ordinances, codes, standards, orders, licensesand permits of any governmental authorities relating to environmental matters(being hereinafter collectively referred to as the “Environmental Laws”),including by way of illustration and not by way of limitation, (A) the CleanAir Act, the federal Water Pollution Control Act of 1972, the ResourceConservation and Recovery Act of 1976, the Comprehensive EnvironmentalResponse, Compensation and Liability Act of 1980, the Toxic Substances ControlAct, or the Minnesota Environmental Response and Liability Act (including anyamendments or extensions thereof and any rules, regulations, standards orguidelines issued pursuant to any of said Environmental Laws), and (B) allother applicable environmental standards or requirements. (ii) there are noexisting or pending remedial actions or other work, repairs, construction orcapital expenditures with respect to the Premises in connection with theEnvironmental Laws; (iii) Seller has not released Hazardous Materials into theenvironment, or deposited, spilled, discharged, disposed of Hazardous Materialsat, on, or adjacent to the Premises; (iv) no notices of any violation of any ofthe matters referred to in the foregoing sections relating to the Premises orits use have been received by Seller and there are no writs, injunctions,decrees, orders or judgments outstanding, no lawsuits, claims, proceedings orinvestigations pending or threatened, relating to the ownership, use,maintenance or operation of the Premises.

 

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K.                                    Seller is not aware of and has not receivedany written notification from governmental authorities with respect toviolations of any law or ordinance concerning the Premises.

 

Forpurposes of the above representations limited to “Seller’s knowledge”,“Seller’s knowledge” means the knowledge of all current officers of Seller andany current employee with management responsibility for production operations.

 

Purchaser expresslyacknowledges that the Premises is being sold and accepted AS-IS, WHERE IS, andSeller makes no representations or warranties (other than those Sellerrepresentations and warranties contained in this Section 6), express orimplied with respect to the physical condition or any other aspect of thePremises, including without limitation, (1) the conformity of the Premisesto past, current or future applicable zoning or building requirements,(2) the existence of soil instability, past soil repairs, soil additionsor conditions of soil fill, or susceptibility to landslides, (3) the sufficiencyof any drainage, (4) whether the Premises is located wholly or partiallyin a flood plain or a flood hazard boundary or similar area, (5) theexistence or non-existence of underground storage tanks, (6) any othermatter affecting the stability or integrity of the land, or any buildings orimprovements situated on or as part of the Premises, (7) the availabilityof public utilities and services for the Premises, (8) the fitness orsuitability of the Premises for Purchaser’s intended use, (9) the potentialfor further development of the Premises, (10) the existence of vested landuse, zoning or building entitlements affecting the Premises, or (11) thepresence of Hazardous Substances, as hereinafter defined, in, on or about thePremises (collectively, the “Premises Conditions”).

 

EXCEPT AS PROVIDED IN THISSECTION 6, PURCHASER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY ANDALL ACTUAL OR POTENTIAL RIGHTS PURCHASER MIGHT HAVE REGARDING ANY FORM OFWARRANTY, EXPRESS OR IMPLIED OR ARISING BY OPERATION OF LAW, INCLUDING, BUT INNO WAY LIMITED TO, ANY WARRANTY OF CONDITION, HABITABILITY, MERCHANTABILITY ORFITNESS FOR A PARTICULAR PURPOSE RELATING TO THE PREMISES, ITS IMPROVEMENTS ORTHE PREMISES CONDITIONS.  Purchaser’swaiver is absolute, complete, total and unlimited in every way and except formisrepresentations made in this agreement Purchaser hereby completely,irrevocably and unconditionally releases and forever discharges Seller of andfrom any and all claims and demands whatsoever in law or equity, whether suchclaims are presently known or unknown, direct or indirect, fixed or contingent,which the Purchaser has had, now has, may in the future have, or may claim tohave against Seller, caused by or arising out of the Premises, its improvements,the Premises Conditions or any other aspect of the Premises, whether suchclaims or demands may be based on any statute, code, regulation, rule or commonlaw, whether federal, state or local.

 

Similarly, Purchaseracknowledges and agrees that any reports, studies, plans, drawings or otherwritten materials which are made available by Seller or its agents to Purchaser(“Information”) shall be delivered on an AS-IS WHERE-IS basis, without anyrepresentation or warranty by Seller as to the thoroughness, truth,completeness, sufficiency or accuracy of the data or information containedtherein.

 

The representations andwarranties set forth in this Section 6 shall be continuing and shall be trueand correct on and as of the Closing Date with the same force and effect as ifmade at that time and all such representations, warranties and covenants shallsurvive closing and shall not merge into Seller’s deed being delivered atclosing for a period of five years following closing.  As if the fifth anniversary of the Closing Purchaser shall bedeemed to have waived any claims against

 

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Seller on the basis ofmisrepresentations except for written claims delivered to Seller prior to thefirst anniversary of the closing, time being of the essence.

 

7.                                       **Contingencies**.  The closing of thetransaction contemplated by this Agreement and all the obligations of Purchaserunder this Agreement are subject to fulfillment, on or****before the Closing Date, ofthe following conditions precedent:

 

A.                                   Purchaser shall have determined that thephysical status or condition of the Premises, including without limitation,environmental, geotechnical (soil), wetland, floodplain, drainage andavailability of adequate access and utilities, shall be satisfactory toPurchaser in its sole discretion.

 

B.                                     Purchaser, in its sole and absolutediscretion, shall have determined that the Premises are acceptable to Purchaserin all respects, including without limitation, economic feasibility, marketfeasibility, and availability of utilities and access.

 

C.                                     Purchaser shall have determined that itsappraisals are satisfactory to Purchaser, in its sole discretion.

 

D.                                    Purchaser shall have determined that theUpdated Phase I is satisfactory to Purchaser, in its sole discretion.

 

E.                                      Purchaser shall have reached agreement withAssociated Bank for the assumption by Purchaser of Seller’s existing Note andMortgage in the amount of $2,500,000, upon terms and conditions satisfactory toPurchaser, in its discretion.

 

F.                                      Purchaser shall have reached agreement withAssociated Bank or some other lender to loan Paul Miller and/or Purchaser$1,000,000 upon terms and conditions satisfactory to Purchaser.

 

G.                                     Seller shall have amended the Energy Notewith terms satisfactory to Purchaser, Purchaser shall be permitted to assumethe Energy Note on terms satisfactory to Purchaser and Seller shall haveprovided Estoppel Certificates from Dakota Electric Association upon terms andconditions satisfactory to Purchaser.

 

H.                                    Seller shall not be in default under thisAgreement or the Discretionary Line of Credit Agreement between Purchaser andSeller as of the Closing Date.

 

I.                                         Seller shall have converted the lease toHunter Medical to a sublease between Seller and Huntter Medical, which shall besubordinate to a lease between Seller and Purchaser for the Premises.

 

J.                                        Seller shall have delivered Briggs andMorgan, P.A.’s opinion (“Briggs Opinion”) to Purchaser, Paul Miller and Titleupon terms and conditions satisfactory to Purchaser, Paul Miller and Title.

 

K.                                    Title shall have issued the MBCA Endorsement.

 

L.                                      Seller shall have executed and delivered theLease to Purchaser.

 

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Purchaser shall provideSeller written notice on or prior to the Closing Date of any condition whichhas not been satisfied.  In such eventat the option of Purchaser set forth in such notice either (i) this Agreementshall be terminated and neither party shall have further obligation to theother except that the Purchaser shall tender a quit claim deed to Seller andSeller shall authorize release of the Earnest Money to Purchaser, or Purchasershall provide Seller additional time in which Seller may satisfy suchconditions.

 

Notwithstanding anythingcontained herein to the contrary, it shall be a condition of Purchaser’sobligation to close this transaction that (i) the representations andwarranties made by Seller in Section 6 shall be correct as of the Closing Datewith the same force and effect as if such representations were made at suchtime, and (ii) the status and marketability of title shall have beenestablished to Purchaser’s satisfaction in accordance with this Agreement.

 

8.                                       **Closing Date**.  Subject to the fulfillment orwaiver of the conditions hereof, and provided that all of the covenants,representations and warranties of Seller are true and correct on the ClosingDate as though made on such date, the closing of the purchase and sale shalltake place no later than April 15, 2003 (the “Closing Date”).  The closing shall take place at the officesof Purchaser’s attorney or at such other place as Seller and Purchaser maymutually determine.  Possession of thePremises shall be delivered to Purchaser on the Closing Date subject toPermitted Encumbrances.

 

9.                                       **Seller’s Obligations At Closing**.  Ator prior to the Closing Date, Seller shall:

 

A.                                   Deliver to Purchaser Seller’s duly recordableWarranty Deed (the “Deed”) to the Premises (in a form reasonably satisfactoryto Purchaser) conveying to Purchaser Marketable Fee Simple Title to thePremises and all rights appurtenant thereto.

 

B.                                     Deliver to Purchaser the Bill of Saleconveying marketable title to the Personal Property.

 

C.                                     Cause to be furnished and delivered toPurchaser the ALTA (Form 10/17/92) Owner’s Title Insurance Policy in conformitywith the requirements of this Agreement, or a “marked-up” Commitment in formacceptable to Purchaser including the MBCA Endorsement and the non-imputationendorsement.

 

D.                                    Deliver to Purchaser the Briggs Opinion.

 

E.                                      Deliver to Purchaser Title’s standardaffidavit of Seller confirming that Seller is not a “foreign corporation”within the meaning of Section 1445 of the Internal Revenue Code.

 

F.                                      Deliver to Purchaser Title’s standardaffidavit of Seller in form and content sufficient to allow Title to delete thestandard exceptions contained in Purchaser’s Owners Title Insurance Policyrelative to (i) parties in possession, (ii) liens for labor, materials, orservices, and (iii) unrecorded easements or other instruments.

 

G.                                     Deliver to Purchaser a certificate at closingconfirming that the representations and warranties set forth in Section 6 ofthis Agreement are true and correct as of the Closing Date as though made as ofsuch date.

 

H.                                    Deliver the amendment, assumption, andestoppel certificate documents relating to the Energy Note.

 

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I.                                         Deliver the assumption documents for theMortgage Note.

 

J.                                        Deliver a Lease of the Premises executed bySeller as tenant in the form of Exhibit D attached hereto.

 

K.                                    Deliver an opinion of counsel in the form ofExhibit E.

 

L.                                      Deliver to Purchaser an Assignment of theTower Lease in form acceptable to Purchaser and executed by Seller.

 

M.                                 Deliver to Purchaser such other documents asmay be reasonably required by this Agreement (including, without limitation,authorizing resolutions of Seller), all in a form reasonably satisfactory toPurchaser, Seller and Title.

 

10.                                 **Delivery ofPurchase Price; Obligations At Closing**.  At closing, subject to theterms, conditions, and provisions hereof and the performance by Seller of itsobligations as set forth herein, Purchaser shall:

 

A.                                   Deliver the Earnest Money to Seller (exceptany interest accrued thereon) and credited against the Purchase Price, andPurchaser deliver the balance of the Purchase Price to Seller pursuant toSection 2 above.

 

B.                                     Execute and deliver the Lease.

 

C.                                     Execute the assumption documents for theMortgage Note, including without limitation, a release of the liability ofSeller.

 

D.                                    Execute the assumption documents for theEnergy Note.

 

11.                                 **ClosingCosts**.  The following costs and expenses shall bepaid as follows in connection with the closing:

 

A.                                   Seller shall:

 

1.                                       Pay the cost to prepare and deliver toPurchaser the Commitment, the cost of the Survey; the cost of Seller’sAppraisal; the cost of the Updated Phase I; all fees to record all of thedocuments necessary to permit Seller to convey Marketable Fee Simple Title tothe Premises to Purchaser (other than the fee to record the Deed); the cost ofany endorsements necessary to convey Marketable Fee Simple Title to Purchaserincluding without limitation the MBCA Endorsement and the non-imputationendorsement; and one-half (1/2) of the closing fee and/or escrow fee charged byTitle in connection with the issuance of the Owners Title Insurance Policy toPurchaser, the escrow of Earnest Money, or the closing of this transaction.

 

2.                                       Pay any state deed tax imposed on theconveyance.

 

3.                                       Pay any deferred or delinquent real estatetaxes or utilities and Seller’s pro-rata share of those costs and expenses setforth in Section 12 below.

 

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4.                                       Attorneys’ fees and costs of Seller’sattorneys.

 

B.                                     Purchaser shall pay the following costs inconnection with the closing:

 

1.                                       The filing fee necessary to record the Deed.

 

2.                                       The premium for the Owners Title InsurancePolicy to be delivered to Purchaser in conformance with the requirements ofSection 3 of this Agreement; the premium for any extended coverage title insuranceendorsement requested by Purchaser.

 

3.                                       The cost of Purchaser’s Appraisal.

 

4.                                       One-half (1/2) of the closing fee and/orescrow fee charged by Title in connection with the issuance of the Owners TitleInsurance Policy to Purchaser, the escrow of Earnest Money, or the closing ofthis transaction.

 

5.                                       All costs associated with assumption of theMortgage Note and any loan used by Purchaser to finance the purchase of thePremises.

 

6.                                       Attorneys’ fees and costs of Purchaser’sattorneys.

 

C.                                     The terms of this Section 11 shall survivethe closing of the transaction contemplated herein.

 

12.                                 **Prorations**.  Thefollowing prorations shall be made as of the Closing Date:

 

A.                                   Real estate taxes (including any outstandingspecial assessments and/or installments of special assessments certified to thereal estate taxes for payment) allocable to the Premises that are due andpayable in the year of closing shall be prorated between Seller and Purchaserto the Closing Date.  Seller shall payall such real estate taxes due and payable in years prior to the year ofclosing.  Purchaser shall assumeresponsibility for the payment of all such taxes due and payable in yearssubsequent to the year of closing.

 

B.                                     The terms of this Section 12 shall survivethe closing of the transaction contemplated herein.

 

13.                                 **Brokerage**. Seller and Purchaser represent and warrant to each other that they havenot engaged the services of any broker in connection with the sale and purchasecontemplated by this Agreement.  Eachparty hereby agrees to indemnify, defend and hold harmless the other party forany claim (including reasonable expenses incurred in defending such claim) madeby a broker, sales agent or similar party claiming to be entitled to acommission in connection with this transaction by reason of the acts of theindemnifying party.  The terms of thisSection 13 shall survive the closing of the transaction contemplated herein.

 

14.                                 **Remedies**.

 

A.                                   Seller Default.  IfSeller defaults in the performance of this Agreement, then Title shall promptlyrefund the Earnest Money (and all interest) to Purchaser and Purchaser’s soleremedies shall be to elect to either (i) cancel this Agreement by writtennotice to Seller, in

 

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which event Seller shall promptly authorize Title Company to reimbursePurchaser its Earnest Money in consideration of a quit claim deed to thePremises executed by Purchaser, or (ii) if Purchaser does not cancel thisAgreement, Seller acknowledges the Premises are unique and that money damagesto Purchaser in the event of default by Seller are inadequate and Purchasershall have the right to apply for and to receive from a court of competentjurisdiction equitable relief by way of specific performance to enforceperformance of the terms of this Agreement, plus reimbursement for costs,including reasonable attorneys’ fees, incurred in the securing of such reliefprovided under section 16J herein.

 

B.                                     Purchaser Default.  IfPurchaser defaults in the performance of this Agreement, Seller’s sole remediesshall be to either (i) cancel this Agreement by delivering written notice ofsuch default to Purchaser (“Seller’s Default Notice”), in which event Purchasershall have the opportunity to cure such default within thirty (30) days afterreceipt of Seller’s Default Notice, and if Purchaser fails to timely cure suchdefault after receipt of Seller’s Default Notice, then this Agreement shall bedeemed canceled without further action between the parties and Purchaser shallauthorize Title to deliver the Earnest Money to Seller as liquidated damages,it being the understanding and agreement of the parties that it would beimpractical or extremely difficult to determine the actual damages to Seller inthe event of Purchaser’s default, and that the Earnest Money is a reasonableestimate of the damages which Seller would incur as a result of Purchaser’sdefault hereunder, or (ii) commence a legal action for specific performance andupon obtaining such a final order, Title shall be authorized to deliver theEarnest Money to Seller as partial payment of the purchase price, and Sellershall be entitled to reimbursement of costs, including reasonable attorney feesincurred in the securing of such relief as provided under section 16J herein.

 

15.                                 **Escrow**. Title is authorized and agrees by acceptance thereof to promptly depositthe Earnest Money as provided herein and to hold same in escrow and to disbursethe same in accordance with the terms and conditions of this Agreement.  The sole duties of Title regarding theEarnest Money shall be those described herein, and Title shall be under noobligation to determine whether the other parties hereto are complying with anyrequirements of law or the terms and conditions of any other agreements amongsaid parties.  Title may conclusivelyrely upon and shall be protected in acting upon any written notice, consent,order or other document believed by it to be genuine and to have been signed orpresented by the proper party or parties to this Agreement.  Title shall have no duty or liability toverify any such written notice, consent, order or other document, and its soleresponsibility shall be to act as expressly set forth in this Agreement.  Title shall be under no obligation toinstitute or defend any action, suit or proceeding in connection with thisAgreement.  If Purchaser and Sellerexecute any separate escrow instructions or an escrow agreement with Title,then in the event of a conflict between the terms of such escrow instructionsor escrow agreement and the terms of this Agreement, the terms of thisAgreement shall control, Title shall also execute this Agreement solely for thepurpose of acknowledging its agreement with and understanding of the terms ofthis Section 15 and the other provisions of this Agreement relative to receipt,escrow, investment and disbursement of the Earnest Money. Failure of Title toexecute this Agreement shall not affect the validity of this Agreement asbetween Seller and Purchaser.

 

16.                                 **Miscellaneous**.  Thefollowing general provisions govern this Agreement.

 

A.                                   No Waivers.  The waiver by either partyhereto of any condition or the breach of any term, covenant or condition hereincontained shall not be deemed to be a waiver of any

 

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other condition or of any subsequent breach of the same or of any otherterm, covenant or condition herein contained. Purchaser, in its sole discretion may waive any right conferred uponPurchaser by this Agreement; provided that such waiver shall only be made byPurchaser giving Seller written notice specifically describing the rightwaived.

 

B.                                     Time of Essence. Time is of the essence of this Agreement.

 

C.                                     Governing Law. This Agreement is made and executed under and in all respects to begoverned and construed by the laws of the State of Minnesota and the partieshereto hereby agree and consent and submit themselves to any court of competentjurisdiction situated in the State of Minnesota.

 

D.                                    Notices.  All notices and demands givenor required to be given by any party hereto to any other party shall be deemedto have been properly given if and when delivered in person, the next businessday after being sent by reputable overnight commercial courier (e.g. UPS. orFederal Express), sent by facsimile (with verification of receipt) or three (3)business days after having been deposited in any U.S. Postal Service and sentby registered or certified mail, postage prepaid, addressed as follows (or sentto such other address as any party shall specify to the other party pursuant tothe provisions of this Section):

 
| **TO SELLER****:**                   | **TO PURCHASER****:**         |
|--------------------------------------|-------------------------------|
|                                 |                          |
| MedicalCV, Inc.                      | PKM Properties, LLC           |
| ATTN:  Jules Fisher             | ATTN:  Paul Miller       |
| 9725 South Robert Trail              | c/o Gracon Contracting,  Inc. |
| Inver Grove Heights,  MN  55077 | 606 24th Avenue  South        |
| PHONE:  651-234-6699            | Suite B12                     |
| FAX:  651-234-6669              | Minneapolis, MN 55454         |
|                                 | PHONE:  612-305-4850     |
| With a copy to:                      | FAX:  612-305-4813       |
|                                 |                          |
| James R. Steilen                     | With a copy to:               |
| Briggs and Morgan, P.A.              |                          |
| 2400 IDS Center                      | Charles Diessner              |
| 80 South Eighth Street               | Fredrikson & Byron,  P.A. |
| Minneapolis, MN 55402                | 4000 Pillsbury Center         |
| PHONE:  612-334-8678            | 200 South Sixth Street        |
| FAX:  612-334-8650              | Minneapolis, MN  55402   |
|                                 | PHONE:  612-492-7060     |
|                                 | FAX:  612-492-7077       |

 

In the event either partydelivers a notice by facsimile, as set forth above, such party agrees todeposit the originals of the notice in a post office, branch post office, ormail depository maintained by the U.S. Postal Service, postage prepaid andaddressed as set forth above.  Such depositin the U.S. Mail shall not affect the deemed delivery of the notice byfacsimile, provided that the procedures set forth above are fully compliedwith.

 

Any party, by notice givenas aforesaid, may change the address to which subsequent notices are to be sentto such party.

 

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E.                                      Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of thesuccessors and assigns of each of the parties hereto.  This Agreement may be assigned or transferred by Purchaser at anytime without consent of Seller, including, without limitation, to a lender ofPurchaser, provided the assignee agrees to be bound by the terms of thisAgreement.  Upon such assignment,Purchaser shall have no further or other obligations under this Agreement.

 

F.                                      Invalidity.  If for any reason any term orprovision of this Agreement shall be declared void and unenforceable by anycourt of law or equity it shall only affect such particular term or provisionof this Agreement and the balance of this Agreement shall remain in full forceand effect and shall be binding upon the parties hereto.

 

G.                                     Complete Agreement.  Allunderstandings and agreements heretofore had between the parties are mergedinto this Agreement which alone fully and completely expresses theiragreement.  This Agreement may bechanged only in writing signed by both of the parties hereto and shall apply toand bind the successors and assigns of each of the parties hereto and shall notmerge with the Deed delivered to Purchaser at closing.

 

H.                                    Counterparts. This Agreement may be executed in one or more counterparts each of whichwhen so executed and delivered shall be an original, but together shallconstitute one and the same instrument.

 

I.                                         Calculation of Time Periods. Unless otherwise specifically provided herein, in computing any periodof time described in this Agreement, the day of the act or event after whichthe designated period of time begins to run is not to be included and the lastday of the period so computed is to be included, unless such last day is aSaturday, Sunday or legal holiday under the laws of the State of Minnesota, inwhich event the period shall run until the end of the next day which is neithera Saturday, Sunday or legal holiday. The final day of such period shall be deemed to end at 5:00 p.m.,Minnesota time.

 

J.                                        Attorneys’ Fees.  Ifany dispute arises between the parties regarding this Agreement or the subjectmatter thereof, the prevailing party in any court action, administrativeproceeding or alternative dispute resolution commenced or maintained to resolvesuch dispute, shall be entitled to an award of reasonable attorneys’ fees,disbursements and court costs in addition to any other remedy to which theparties are entitled.

 

K.                                    Survival.  All of the warranties,covenants, and representations made herein by either Seller or Purchaser shallsurvive closing and the delivery of the Deed to Purchaser, or the earliertermination of this Agreement.

 

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**IN WITNESS WHEREOF,** the parties hereto have executed thisAgreement as of the day and year first above written.

 

 
| **SELLER:  MedicalCV,  Inc.** | **PURCHASER:  PKM  Properties, LLC** |
|------------------------------------|-------------------------------------------|
|                               |                                      |
| BY:                                | /s/ Blair P. Mowery                       |   | BY: | /s/ Paul K. Miller |   |
|                               |                                      |
| ITS:                               | President/CEO                             |   | ITS: | Chief Manager |   |

 

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**ACCEPTANCE BY TITLE**

 

The undersigned, beingreferred to as Title in the above Agreement, hereby acknowledges and acceptsthe terms of this Agreement as its escrow instructions and agrees to act inaccordance herewith.

 

Acknowledged and agreed tothis           day of                               ,2003.

 
|   | **Old  Republic National Title Insurance Company** |
|--------|----------------------------------------------------|
|   |                                               |
|   |                                               |
|   | By:                                                |   |   |
|   |                                               |   |   |
|   |                                               | Its: |   |   |
|        |                                                    |  |  |  |

 

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**EXHIBIT A**

 

**LEGAL DESCRIPTION OFPREMISES**

 

That part of the West Half (W1/2) of theSouthwest Quarter (SW 1⁄4) of Section Nineteen (19), Township Twenty-seven (27),Range Twenty-two (22), Dakota County, Minnesota lying Northerly of the Northerlyright-of-way line of Minnesota State Trunk Highway No. 3 and Westerly of theWesterly right-of-way line of the Chicago, Milwaukee, St. Paul and PacificRailroad Company:

 

EXCEPT that part thereof included within theNorth 417.42 feet of the East 417.42 feet of the Northwest Quarter (NW 1⁄4) ofthe Southwest Quarter (SW 1⁄4) of Section Nineteen (19), Township Twenty-seven(27), Range Twenty-two (22), Dakota County, Minnesota, as measured along theNorth and East lines thereof, and

 

EXCEPT that part described as follows:Commencing at the Northwest corner of said West Half (W 1⁄2) of the SouthwestQuarter (SW 1⁄4); thence South 0 degrees 01 minutes 18 seconds East (assumedbearing) a distance of 700 feet along the West line of said West Half (W1⁄2) ofthe Southwest Quarter (SW 1⁄4) to the point of beginning of the parcel to bedescribed; thence North 89 degrees 58 minutes 42 seconds East a distance of 500feet; thence South 0 degrees 01 minutes 18 seconds East a distance of 343.44feet, more or less, to the Northerly right-of-way line of State Trunk HighwayNo. 3; thence Southwesterly along said right-of-way line 604.14 feet, more orless, to its intersection with the West line of said West Half (W 1⁄2) of theSouthwest Quarter (SW 1⁄4); thence Northerly along said West line 666.87 feet,more or less, to the point of beginning, according to the Government Surveythereof, located in Dakota County, Minnesota.

 

A-1

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**EXHIBIT C**

 

**SURVEY CERTIFICATION**

 

To PKM Properties LLC, AssociatedBank, Dakota County Abstract & Title and Old Republic National TitleInsurance Company:

 

This is to certify that thismap or plat and the survey on which it is based were made in accordance with“Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys,”jointly established and adopted by ALTA, ACSM and NSPS in 1999, and includesItems 1, 2, 3,  4, 6, 7(a), 8, 9, 10,11(a), 13 and 14 of Table A thereof. Purchase to the Accuracy Standards as adopted by ALTA, NSPS, and ACSMand in effect on the date of this certification, undersigned further certifiesthat [surveyor to complete with the appropriate phrase].  The Premises and easement descriptions weretaken from Old Republic National Title Insurance Company Commitment to InsureApplication No.             dated                       .

 

 
|   |                   |
|--------|------------------------|
|   | , Land Surveyor        |
|   | Minnesota  License No. |
|   |                   |
|   | Dated:                 |   |

 

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