EXHIBIT
10.1


 


DISCRETIONARY CREDIT AGREEMENT


 


 


THIS DISCRETIONARY CREDIT AGREEMENT, dated as
of January 17, 2003, is by and between MEDICALCV, INC., a Minnesota corporation
(the “Borrower”), and PKM PROPERTIES, LLC, a Minnesota limited liability
company (the “Lender”).


 


RECITALS:


 


1.     Paul
K. Miller (“Miller”) is a director and shareholder of the Borrower and
is the sole member of the Lender.


 


2.     Miller
has previously advanced $443,666 (the “Initial Advances”) to the
Borrower which the Borrower has used as working capital to continue operating
as a going concern.


 


3.     Miller
has assigned his lender’s interest in the Initial Advances to the Lender.


 


4.     The
Initial Advances are payable on demand and Lender has demanded that the Initial
Advances be repaid in full immediately.


 


5.     The
Borrower cannot immediately repay the Initial Advances and has requested that
the Lender extend repayment of the Initial Advances.


 


6.     The
Lender has agreed to extend the repayment of the Initial Advances under the
terms and conditions of this Agreement.


 


7.     In
addition to the Initial Advances, the Borrower has requested that the Lender
make an additional $500,000 available to the Borrower to comprise a $943,666
discretionary credit facility under this Agreement.


 


8.     The
Borrower will use the proceeds of additional advances, if any, under the
Discretionary Facility (defined below) as working capital to continue operating
as a going concern.


 


9.     Miller
is negotiating with TCF National Bank and other banks for a loan of up to
$3,000,000 the express purpose of which would be to finance loans he may make
to the Company hereunder or under other credit facilities (the “TCF Loan”).


 


10.   If
and when Miller obtains the TCF Loan, the Discretionary Facility will
automatically convert to a committed facility, all upon the terms and
conditions of this Agreement.


 


11.   On
November 23, 1999 Associated Bank Minnesota, National association (successor
via merger to Associated Bank Minnesota, a Minnesota banking corporation, f/k/a
Riverside Bank, “Associated Bank”) made a loan to the Borrower in the
original principal amount of $2,500,000 evidenced by that certain Business Loan
Agreement between Borrower and Associated Bank dated November 23, 1999 (as it
may have been or may be amended, modified, supplemented, restated or replaced
from time to time, the “Associated Loan Agreement”).


 


 


 

















 


12.   The
Lender is negotiating with Associated Bank to purchase (the “Associated Loan
Purchase”) the Associated Loan Agreement and each note, security agreement,
mortgage, guaranty, pledge agreement or other instrument, document, or
agreement related to the Associated Loan Agreement (as any of the foregoing may
have been or may be amended, modified, supplemented, restated or replaced from
time to time, including without limitation in connection with the Associated
Loan Purchase, collectively, the “Associated Loan Documents”).


 


AGREEMENTS:


 


IN CONSIDERATION of the foregoing premises,
and the mutual covenants set forth herein, the parties agree as follows:


 


ARTICLE 1  DEFINITIONS AND
ACCOUNTING TERMS


 


Section 1.1            Defined
Terms.  In addition
to the terms defined elsewhere in this Agreement, the following terms shall
have the meanings set out respectively after each (and such meanings shall be
equally applicable to both the singular and plural form of the terms defined,
as the context may require):


 


Act of Bankruptcy:  With respect to any Person, if (i) the
Person shall (1) be or become insolvent, or (2) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or the like of the Person or of all or a substantial part of the
Person’s property, or (3) commence a voluntary case under any bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation
or similar proceeding under the laws of any jurisdiction, or (4) file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding up or composition or adjustment of debts,
or (5) admit in writing its inability to pay its debts as they mature, or (6)
make an assignment for the benefit of its creditors; or (ii) a proceeding or
case shall be commenced, without the application or consent of the Person, in
any court of competent jurisdiction, seeking (1) the liquidation,
reorganization, dissolution, winding up or the composition or adjustment of
debts of the Person, (2) the appointment of a trustee, receiver, custodian or
liquidator or the like of the Person or of all or any substantial part of the Person’s
property, or (3) similar relief in respect of the Person under any law relating
to bankruptcy, insolvency, reorganization, winding up or composition or
adjustment of debts.


 


Adverse Event:  The occurrence of any event that could have
a material adverse effect on the business, operations, property, assets or
condition (financial or otherwise) of the Borrower or on the ability of the
Borrower or any other party obligated thereunder to perform its obligations
under the Loan Documents.


 


Affiliate:  Any Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, the Borrower or any of its Subsidiaries, or (ii) five
percent (5%) or more of the equity interest of which is held beneficially or of
record by the Borrower or any of its Subsidiaries.  Control for purposes of this definition means the possession,
directly or indirectly, of the power to cause the direction of management and
policies of a Person, whether through the ownership of voting securities or
otherwise.


 


Agreement:  This Discretionary Credit Agreement, as it
may be amended, modified, supplemented, restated or replaced from time to time.


 


Business Day:  Any day (other than a Saturday, Sunday or
legal holiday in the State of Minnesota) on which state banks are permitted to
be open in Minneapolis, Minnesota.


 


 


 

















 


Capitalized Lease:  Any lease which is or should be capitalized
on the books of the lessee in accordance with GAAP.


 


Code:  The Internal Revenue Code of 1986, as
amended, or any successor statute, together with regulations thereunder.


 


Collateral:  The collateral as defined in Section 5.1.


 


Default:  Any event which, with the giving of notice
to the Borrower or lapse of time, or both, would constitute an Event of
Default.


 


Discretionary Credit
Expiration Date:   The date
that first occurs: (i) April 17, 2003, or (ii) the date on which the
Discretionary Facility is terminated pursuant to Section 10.2.


 


Discretionary Facility:  The discretionary credit facility under
which the Lender may make loans, in the Lender’s sole and absolute discretion,
to the Borrower in accordance with Article 2 and the Discretionary Note
up to an aggregate principal amount at any one time outstanding not to exceed
$943,666.


 


Discretionary Loans:  Any loans made by the Lender to the
Borrower, in the Lender’s sole and absolute discretion, under the Discretionary
Facility, including, without limitation, the Initial Advances.


 


Discretionary Note:  That certain Discretionary Credit Discretionary
Note dated the date hereof executed by the Borrower and made payable to the
order of the Lender in the original principal amount of $943,666, as it may be
amended, modified, supplemented, restated or replaced from time to time.


 


Environmental Indemnity
Agreement:  That
certain Environmental Indemnity Agreement dated the date hereof given by the
Borrower in favor of the Lender as it may be amended, modified, supplemented,
restated or replaced from time to time.


 


Event of Default:  Any event described in Section 10.1.


 


Federal Reserve Board:  The Board of Governors of the Federal
Reserve System or any successor thereto.


 


Financing Statements:  UCC Financing Statements naming the Borrower
as debtor and the Lender as secured party and describing the Collateral as the
property covered thereby.


 


Floating Interest Rate:  The rate of interest equal to the greater of
(i) 7% or (ii) the applicable interest rate under the TCF Loan from time to
time plus 1.0%; provided, however, that from and after the
occurrence of any Default and continuing thereafter until such Default shall be
remedied to the written satisfaction of the Lender, the Floating Interest Rate
shall, at the election of the Lender, be that rate of interest equal to
Floating Interest Rate otherwise applicable plus 2.0%.  The Floating Interest Rate shall change on
the effective date of any change in the applicable interest rate under the TCF
Loan.


 


GAAP:  Generally accepted accounting principles,
consistently applied.


 


Indebtedness:  Without duplication, all obligations,
contingent or otherwise, which in accordance with GAAP should be classified
upon the obligor’s balance sheet as liabilities, but in any event including the
following (whether or not they should be classified as liabilities upon such
balance sheet): (a) obligations secured by any mortgage, pledge, security
interest, lien, charge or other encumbrance existing 


 


 


 

















 


on property owned or
acquired subject thereto, whether or not the obligation secured thereby shall
have been assumed and whether or not the obligation secured is the obligation
of the owner or another party; (b) any obligation on account of deposits or
advances; (c) any obligation for the deferred purchase price of any property or
services; (d) any obligation as lessee under any Capitalized Lease; (e) all
guaranties, endorsements and other contingent obligations respecting
Indebtedness of others; and (f) undertakings or agreements to reimburse or
indemnify issuers of letters of credit. 
For all purposes of this Agreement (i) the Indebtedness of any Person
shall include the Indebtedness of any partnership in which such Person is a
general partner, and (ii) the Indebtedness of any Person shall include the
Indebtedness of any joint venture in which such Person is a joint venturer.  The term “Indebtedness” shall in no event
include Trade Accounts Payable.


 


Investment:  The acquisition, purchase, making or holding
of any stock or other security, any loan, advance, contribution to capital,
extension of credit (except for trade and customer accounts receivable for
inventory sold or services rendered in the ordinary course of business and
payable in accordance with customary trade terms), any acquisitions of real or
personal property (other than real and personal property acquired in the ordinary
course of business) and any purchase or commitment to purchase stock or other
debt or equity securities of or any interest in another Person or any integral
part of any business or the assets comprising such business or part thereof.


 


Lien:  Any security interest, mortgage, pledge,
lien, hypothecation, judgment lien or similar legal process, charge,
encumbrance, title retention agreement or analogous instrument or device
(including, without limitation, the interest of the lessors under Capitalized
Leases and the interest of a vendor under any conditional sale or other title
retention agreement).


 


Loan Documents:  This Agreement, the Discretionary Note, the
Security Agreement, the Financing Statements, the Mortgage, the Environmental
Indemnity Agreement, the Warrant, the Associated Loan Documents and each other
instrument, document, guaranty, security agreement, or other agreement executed
and delivered by the Borrower or any guarantor or party granting security
interests in connection with this Agreement, the Associated Loan Documents, the
Discretionary Loans, or any collateral for the Discretionary Loans.


 


Mortgage:  That certain Subordinated Mortgage, Security
Agreement and Fixture Financing Statement dated the date hereof executed by the
Borrower and delivered to the Bank, as it may be amended, modified,
supplemented, restated or replaced from time to time.


 


Obligations:  The obligation of the Borrower: (a) to pay
the principal of and interest on the Discretionary Note in accordance with the
terms hereof and thereof, and to satisfy all of the Borrower’s other
obligations to the Lender, whether hereunder, under any Loan Document, or
otherwise, whether now existing or hereafter incurred, matured or unmatured
including without limitation the obligations pursuant to letters of credit,
direct or contingent, joint or several, and including without limitation
obligations to or credit from others in which the Lender has a direct or
indirect interest (including without limitation participations), including any
extensions, modifications, renewals thereof and substitutions therefor; (b) to
repay to the Lender all amounts advanced by the Lender hereunder or otherwise
on behalf of the Borrower, including, but without limitation, advances for
principal or interest payments to prior secured parties, mortgagees or lienors,
or for taxes, levies, insurance, rent, repairs to or maintenance or storage of
any of the Collateral; and (c) to pay all of the Lender’s expenses and costs,
together with the reasonable fees and expenses of its counsel in connection
with the preparation and negotiation of this Agreement and other Loan
Documents, and any amendments thereto and the documents required hereunder or
thereunder, or any proceedings brought or threatened to enforce payment of any
of the Obligations described in clauses (a) or (b) above.


 


 


 

















 


Permitted Lien:  Any Lien of a kind specified in paragraphs
(a)-(e) of Section 9.7.


 


Person:  Any natural person, corporation,
partnership, joint venture, firm, association, trust, unincorporated
organization, government or governmental agency or political subdivision or any
other entity, whether acting in an individual, fiduciary or other capacity.


 


Security Agreement:  That certain Security Agreement dated the
date hereof executed by the Borrower and delivered to the Lender, as it may be
amended, modified, supplemented, restated or replaced from time to time.


 


Subordinated Debt:  Any Indebtedness of the Borrower, now
existing or hereafter created, incurred or arising, which is subordinated in right
of payment to the payment of the Obligations in a manner and to an extent that
the Lender has approved in writing prior to the date hereof or prior to the
creation of such Indebtedness.


 


Subsidiary:  Any Person of which or in which the Borrower
and its other Subsidiaries own directly or indirectly 50% or more of:  (a) the combined voting power of all classes
of stock having general voting power under ordinary circumstances to elect a
majority of the board of directors of such Person, if it is a corporation, (b)
the capital interest or profit interest of such Person, if it is a partnership,
joint venture or similar entity, or (c) the beneficial interest of such Person,
if it is a trust, association or other unincorporated organization.


 


Trade Accounts Payable:  The trade accounts payable of any Person
with a maturity of not greater than 90 days incurred in the ordinary course of
such Person’s business.


 


Warrant:  A Warrant to purchase 350,000 shares of the
common stock of the Borrower in form and substance acceptable to Lender.


 


Section 1.2            Accounting
Terms and Calculations.  Except as may be expressly provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder (including, without limitation, determination of
compliance with financial ratios and restrictions in Articles 8 and 9
hereof) shall be made in accordance with GAAP consistently applied.


 


Section 1.3            Other
Definitional Terms.  The
words “hereof,” “herein” and “hereunder” and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. 
References to Sections, Exhibits, Schedules and like references are to
this Agreement unless otherwise expressly provided.


 


ARTICLE 2  TERMS OF LENDING


 


Section 2.1


 


(a)   Discretionary Facility.  The Borrower has requested that the Lender make loans to the
Borrower from time to time under the Discretionary Facility.  EXCEPT AS
PROVIDED, IN SECTION 2.1(b) BELOW,  THE LENDER HAS NOT COMMITTED TO PROVIDE
ANY SUCH LOANS AND MAY, IN ITS SOLE AND ABSOLUTE DISCRETION, DECIDE NOT TO MAKE
ANY SUCH LOANS.  If the
Lender, in its discretion, agrees to make any such loans, such loans shall
(a) not exceed an aggregate principal amount of the Discretionary
Facility, (b) be made in accordance with the terms of this Agreement, and
(c) be made on or before the Discretionary Credit Expiration Date.  EXCEPT AS
PROVIDED, IN SECTION 2.1(b) BELOW, THE BORROWER ACKNOWLEDGES AND AGREES
THAT THE LENDER IS NOT OBLIGATED TO MAKE ANY ADVANCES


 


 


 

















 


HEREUNDER, WHETHER OR NOT A DEFAULT OR AN EVENT OF
DEFAULT HAS OCCURRED.


 


(b)   Commitment.  Notwithstanding anything in this Agreement
that provides that Discretionary Loans will only be made in the Lender’s
discretion, if and when Miller receives all of the proceeds under
the TCF Loan, the Lender will make one final loan to the Borrower under the
Discretionary Facility so long as such loan shall (a) together with all
other Discretionary Loans, not exceed an aggregate principal amount of the
Discretionary Facility, (b) be made in accordance with the terms of this
Agreement, and (c) be made on or before the Discretionary Credit
Expiration Date.


 


Section 2.2            Borrowing
Procedures.  Each time
the Borrower desires to obtain a loan under the Discretionary Facility pursuant
to Section 2.1, such request shall be in writing (which may be by
telecopy) or by telephone, and must be given so as to be received by the Lender
not later than 11:00 a.m., Minneapolis time, on the date of the requested
advance.  Each request for a
Discretionary Loan shall specify (i) the borrowing date (which shall be a
Business Day), and (ii) the amount of such Loan.  Any request for a Discretionary Loan shall be deemed to be a
representation that no event has occurred and is continuing, or will result
from such Discretionary Loan, which constitutes a Default or an Event of
Default, and that the Borrower’s representations and warranties contained in Article 7
are true and correct as of the date of the Discretionary Loan as though made on
and as of such date.  If the Lender
approves a requested Discretionary Loan in its sole discretion, the Lender
shall make the amount of the requested advance available to the Borrower at the
Lender’s principal office in Edina, Minnesota, in immediately available funds
not later than 5:00 p.m., Minneapolis time, within 3 Business Days of the date
requested.  The Borrower shall be
obligated to repay all advances the Lender reasonably determines were requested
on behalf of the Borrower notwithstanding the fact that the person requesting
the same was not in fact authorized to do so.


 


Section 2.3            The
Discretionary Note.  The
obligation of the Borrower to repay any and all loans made under Section 2.1
shall be evidenced by the Discretionary Note of the Borrower, in form and
substance acceptable to the Lender.  The
Lender shall enter in its records the amount of each advance under, and the
payments made on, the Discretionary Facility, and such records shall be deemed
conclusive evidence of the subject matter thereof, absent manifest error.


 


ARTICLE 3 
INTEREST AND COSTS


 


Section 3.1            Interest on Discretionary Loan.  The unpaid principal amount of the
Discretionary Facility shall bear interest at the Floating Interest Rate.


 


Section 3.2            Computation.  Interest on the Discretionary Note shall be
computed on the basis of actual days elapsed and a year of 360 days.


 


Section 3.3            Payment
Dates.  Interest
accruing on the Discretionary Note shall be due and payable as specified in such
Discretionary Note.


 


Section 3.4            Warrant.  As further consideration for the financing
provided by Lender hereunder, the Borrower will issue the Warrant to Lender.


 


ARTICLE 4  PAYMENTS AND
PREPAYMENTS


 


Section 4.1            Repayment.  Principal of the Discretionary Facility
shall be due and payable as specified in the Discretionary Note.


 


 


 

















 


Section 4.2            Optional
Prepayments.  The
Borrower may prepay the Discretionary Loan, in whole or in part, at any time
without premium or penalty.  Any such
prepayment must be accompanied by accrued and unpaid interest on the amount
prepaid.


 


Section 4.3            Accelerated
Payments.  Upon the
occurrence of an Event of Default and the acceleration of the Discretionary
Note, pursuant to and as permitted by Section 10.2, the Discretionary
Note and all other Obligations, shall be immediately due and payable as
provided in Section 10.2 and in the Discretionary Note.


 


Section 4.4            Payments.  Payments and prepayments of principal of,
and interest on, the Discretionary Note and all fees, expenses and other
obligations under the Loan Documents shall be made without set-off or
counterclaim in immediately available funds not later than 2:00 p.m.,
Minneapolis time, on the dates due at the main office of the Lender in
Minneapolis, Minnesota.  Funds received
on any day after such time shall be deemed to have been received on the next
Business Day.  Whenever any payment to
be made hereunder or on the Discretionary Note shall be stated to be due on a
day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of any interest or fees.


 


ARTICLE 5  COLLATERAL SECURITY


 


Section 5.1  Composition
of the Collateral.  The
property in which a security interest is, or is intended to be, granted
pursuant to this Agreement, the Security Agreement, the Mortgage or any other
Loan Document and the provisions of Section 5.2 is herein collectively
called the “Collateral.”  The
Collateral, together with all the Borrower’s other property of any kind held by
the Lender, shall stand as one general, continuing collateral security for all
of the Obligations, and may be retained by the Lender until all Obligations
have been satisfied in full, and the Discretionary Facility has terminated.


 


Section 5.2            Rights
in Property Held by the Lender.  As security for the prompt satisfaction of all Obligations, the
Borrower hereby assigns, transfers and sets over to the Lender all of its
right, title and interest in and to, and grants to the Lender a lien on and a
security interest in, any amounts which may be owing from time to time by the
Lender to the Borrower in any capacity, including, but without limitation, any
balance or share belonging to the Borrower of any deposit or other account with
the Lender, which lien and security interest shall be independent of any right
of setoff which the Lender may have.


 


Section 5.3            Priority
of Liens.  The liens
as provided for under this Agreement, the Security Agreement and the other Loan
Documents shall be first and prior liens subject only to Permitted Liens.  The lien as provide for under the Mortgage
shall have the priority specified in the Mortgage.


 


Section 5.4            Financing
Statements.  The
Borrower will authorize, execute and deliver such security agreements,
assignments, and UCC financing statements (including amendments thereto and
continuation statements thereof) in form satisfactory to the Lender as the
Lender may specify and will pay or reimburse the Lender for all costs of filing
or recording the same in such public offices as the Lender may designate, and
take such other steps as the Lender shall direct, including the noting of the
Lender’s lien on the chattel paper or any vehicle certificates of title, in
order to perfect the Lender’s interest in the Collateral.


 


ARTICLE 6  CONDITIONS PRECEDENT


 


Section 6.1            Conditions
of Initial Loan.  The
obligation of the Lender to make the Discretionary Loan described in Section
2.1(b) hereunder shall be subject to the satisfaction of the 


 


 


 

















 


conditions precedent, in
addition to the applicable conditions precedent set forth in Section 6.2 below,
that the Lender shall have received all of the following, in form and substance
satisfactory to the Lender, each duly executed and certified or dated the date
hereof or such other date as is satisfactory to the Lender.  If the Lender decides to make any other loan
under the Discretionary Facility in the Lender’s discretion, the Borrower shall
deliver to the Lender (prior to the Lender making any Discretionary Loan in addition
to the Initial Advances) all of the following, in form and substance
satisfactory to the Lender, each duly executed and certified or dated the date
hereof or such other date as is satisfactory to the Lender.


 


(a)           The Discretionary Note, duly executed by the Borrower.


 


(b)           The Security Agreement, duly executed by the Borrower.


 


(c)           The Financing Statements, duly authorized by the Borrower.


 


(d)           The Mortgage, duly executed by the Borrower.


 


(e)           The Environmental Indemnity Agreement, duly executed by the
Borrower.


 


(f)            A Secretary’s Certificate certifying: (1) a copy of the
Articles of Incorporation of the Borrower with all amendments thereto,           (2) a copy of the Bylaws of the
Borrower with all amendments thereto, (3) a copy of the corporate resolutions of
the Borrower authorizing the execution, delivery and performance of the Loan
Documents, and (4) the names, titles, and signatures of the officers of the
Borrower authorized to execute the Loan Documents and to request advances
hereunder.


 


(g)           Copies of the policies of insurance or other evidence
acceptable to the Lender in its absolute discretion showing that the insurance
required by the Security Agreement, the Mortgage and the other Loan Documents
is in full force and effect.


 


(h)           Such collateral audits, equipment appraisals and lien
searches as the Lender may request, each in form and substance, and conducted
by auditors/appraisers/search services acceptable to the Lender in its sole
discretion.


 


(i)            Such other documents or instruments as the Lender may
request to consummate the transaction contemplated hereby.


 


Section 6.2            Conditions
Precedent to all Loans.  The obligation of the Lender to make the Discretionary Loan
described in Section 2.1(b) hereunder, and if the Lender decides to make any
other loan under the Discretionary Facility in the Lender’s discretion, each
such loan shall be subject to the satisfaction of the following conditions
precedent (and any request for a Discretionary Loan shall be deemed a written
certification that such conditions precedent have been satisfied):


 


(a)           Before and after giving effect to such Discretionary Loan,
the representations and warranties contained in Article 7 shall be true
and correct, as though made on the date of such Discretionary Loan; and


 


(b)           Before and after giving effect to such Discretionary Loan,
no Default or Event of Default shall have occurred and be continuing.


 


 


 

















 


ARTICLE 7  REPRESENTATIONS AND
WARRANTIES


 


To induce the Lender to enter into this
Agreement, and to consider making Discretionary Loans hereunder, the Borrower
represents and warrants to the Lender:


 


Section 7.1            Organization,
Standing, Etc.  The
Borrower is a corporation duly incorporated and validly existing and in good
standing under the laws of the State of Minnesota, and has all requisite
corporate power and authority to carry on its businesses as now conducted, to
enter into the Loan Documents and to perform its obligations under the Loan
Documents.  The Borrower is duly
qualified and in good standing as a foreign corporation in each jurisdiction in
which the character of the properties owned, leased or operated by it or the
business conducted by it makes such qualification necessary, and where the
failure to so qualify could result in an Adverse Event.


 


Section 7.2            Authorization
and Validity.  The
execution, delivery and performance by the Borrower of the Loan Documents have
been duly authorized by all necessary corporate action by the Borrower, and the
Loan Documents constitute the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms,
subject to limitations as to enforceability which might result from bankruptcy,
insolvency, moratorium and other similar laws affecting creditors’ rights
generally and subject to limitations on the availability of equitable remedies.


 


Section 7.3            No
Conflict; No Default.  The
execution, delivery and performance by the Borrower of the Loan Documents will
not (a) violate any provision of any law, statute, rule or regulation (including,
without limitation, Minnesota Statute Section 302A.673) or any order, writ,
judgment, injunction, decree, determination or award of any court, governmental
agency or arbitrator presently in effect having applicability to the Borrower,
(b) violate or contravene any provisions of the Articles of Incorporation or
Bylaws of the Borrower, or (c) result in a breach of or constitute a default
under any indenture, loan or credit agreement or any other agreement, lease or
instrument to which the Borrower is a party or by which it or any of its
properties may be bound or result in the creation of any Lien on any asset of
the Borrower, other than Liens in favor of the Lender and Permitted Liens. The
Borrower is not in default under or in violation of any such law, statute, rule
or regulation, order, writ, judgment, injunction, decree, determination or
award or any such indenture, loan or credit agreement or other agreement, lease
or instrument in any case in which the consequences of such default or
violation could constitute an Adverse Event.


 


Section 7.4            Government
Consent.  No order,
consent, approval, license, authorization or validation of, or filing,
recording or registration with, or exemption by, any governmental or public
body or authority is required on the part of the Borrower to authorize, or is
required in connection with the execution, delivery and performance of, or the
legality, validity, binding effect or enforceability of, the Loan Documents.


 


Section 7.5            Financial
Statements and Condition.  The Borrower’s financial statements, as heretofore furnished to
the Lender, have been prepared in accordance with GAAP on a consistent basis
and fairly present the financial condition of the Borrower as at such dates
specified therein and the results of its operations and changes in financial
position for the respective periods then ended.  As of the dates of such financial statements, the Borrower has
not had any material obligation, contingent liability, liability for taxes or
long-term lease obligation which is not reflected in such financial statements
or in the notes thereto.


 


Section 7.6            Litigation.  There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any of its properties before


 


 


 

















 


any court or arbitrator, or
any governmental department, board, agency or other instrumentality which, if
determined adversely to the Borrower, could constitute an Adverse Event.


 


Section 7.7            Contingent
Payments or Liabilities.  Except as disclosed in the financial statements described in Section
7.5, the Borrower does not have any contingent payments or liabilities
which are material to the Borrower.


 


Section 7.8            Compliance.  The Borrower is in material compliance with
all statutes and governmental rules and regulations applicable to it.


 


Section 7.9            Environmental,
Health and Safety Laws.  There does not exist any violation by the Borrower of any
applicable federal, state or local law, rule or regulation or order of any
government, governmental department, board, agency or other instrumentality
relating to environmental, pollution, health or safety matters which will or
threatens to impose a material liability on the Borrower or which would require
a material expenditure by the Borrower to cure.  The Borrower has not received any notice to the effect that any
part of its operations or properties is not in material compliance with any
such law, rule, regulation or order or notice that it or its property is the
subject of any governmental investigation evaluating whether any remedial
action is needed to respond to any release of any toxic or hazardous waste or
substance into the environment, the consequences of which non-compliance or
remedial action could constitute an Adverse Event.


 


Section 7.10         Ownership
of Property: Liens.  The
Borrower has good and marketable title to its real properties and good and
sufficient title to its other properties, including all properties and assets
referred to as owned by the Borrower in the financial statements of the
Borrower referred to in Section 7.5 (other than property disposed of
since the date of such financial statement in the ordinary course of
business).  None of the properties,
revenues or assets of the Borrower is subject to a Lien, except for Permitted
Liens.


 


Section 7.11         Taxes.  The Borrower has filed all federal, state
and local tax returns required to be filed and has paid or made provision for
the payment of all taxes due and payable pursuant to such returns and pursuant
to any assessments made against it or any of its property and all other taxes,
fees and other charges imposed on it or any of its property by any governmental
authority (other than taxes, fees or charges the amount or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in accordance with GAAP have been provided on the
books of the Borrower).  No tax Liens
have been filed and no material claims are being asserted with respect to any
such taxes, fees or charges.  The
charges, accruals and reserves on the books of the Borrower in respect of taxes
and other governmental charges are adequate.


 


Section 7.12         Licenses
and Infringement.  The
Borrower possesses adequate licenses, permits, franchises, patents, copyrights,
trademarks and trade names, or rights thereto, to conduct its business
substantially as now conducted and as presently proposed to be conducted.  There does not exist and there is no reason
to anticipate that there may exist, any liability to the Borrower with respect
to any claim of infringement regarding any franchise, patent, copyright,
trademark or trade name possessed or used by the Borrower.


 


Section 7.13         Subsidiaries.  The Borrower does not have any Subsidiaries.


 


Section 7.14         Partnerships
and Joint Ventures.  The
Borrower is not a partner (limited or general) in any partnerships and the
Borrower is not a joint venturer in any joint ventures.


 


 


 

















 


Section
7.15         Minnesota Business
Corporation Act.  If and to
the extent that Minnesota Statute § 302A.673 (the “Minnesota Business
Corporation Act”) applies to the execution, delivery and performance by the
Borrower of the Loan Documents, such execution, delivery and performance by the
Borrower of the Loan Documents would be permitted under the Minnesota Business
Corporation Act because the date of the execution of this Agreement is
subsequent to the expiration of the period of four years following Miller’s
“share acquisition date” (as that term is defined in the Minnesota Business
Corporations Act under Minnesota Statute §302A.011, Subd. 51.).


 


Section 7.16         Completeness
of Disclosures.  No
representation or warranty by the Borrower contained herein or in any other
Loan Document, or in any certificate or other document furnished heretofore or
concurrently with the signing of this Agreement or any other Loan Document by
the Borrower to the Lender in connection with the transactions contemplated
hereunder or under any other Loan Document, contains any untrue statement of a
material fact or omits to state a material fact which would prevent or
materially inhibit the Borrower from performing this Agreement or any other
Loan Document according to its terms.


 


Section 7.17         Survival
of Representations.  All
of the representations and warranties set forth in the immediately preceding
subsections shall survive until all the Obligations shall have been satisfied
in full, and the Discretionary Facility has been terminated.


 


Each of the foregoing
warranties and representations shall be deemed to be repeated and reaffirmed on
and as of the date any Discretionary Loan is made hereunder by the Lender to
the Borrower pursuant to Article 2.


 


ARTICLE 8 
AFFIRMATIVE COVENANTS


 


From the date of this Agreement and
thereafter until the Discretionary Facility is terminated or expires and the
Obligations have been paid in full, unless the Lender shall otherwise expressly
consent in writing, the Borrower will do all of the following:


 


Section 8.1            Financial
Statements and Reports.  Furnish to the Lender:


 


(a)           As soon as available and in any event within 120 days
after the end of each fiscal year of the Borrower, the audited financial
statements of the Borrower prepared in conformity with GAAP, consisting of at
least statements of income, cash flow and stockholders’ equity for such year,
and a balance sheet as at the end of such year, all in reasonable detail and
certified without qualification by independent certified public accountants of
recognized standing selected by the Borrower and acceptable to the Lender.


 


(b)           As soon as available and in any event within 30 days after
the end of each month, a copy of the company-prepared financial statements of
the Borrower prepared in the same manner as the financial statements referred
to in Section 8.1(a), signed by the Chief Financial Officer of the Borrower,
consisting of at least a statement of income for such month, and a balance
sheet of the Borrower as at the end of such month.


 


(c)            promptly after the sending or filing thereof, copies of
all regular and periodic financial reports which the Borrower shall file with
the Securities and Exchange Commission or any national securities exchange.


 


(d)           From time to time, such other information regarding the
business, operation and financial condition of the Borrower as the Lender may
reasonably request.


 


 


 

















 


Section 8.2            Corporate
Existence.  Maintain
its corporate existence in good standing under the laws of its jurisdiction of
incorporation and its qualification to transact business in each jurisdiction
in which the character of the properties owned, leased or operated by it or the
business conducted by it makes such qualification necessary.


 


Section 8.3            Insurance.  Maintain with financially sound and
reputable insurance companies such insurance in such amounts and against such
risks as is reasonably requested by the Lender or as may be required by law or
as may be customary in the case of reputable corporations engaged in the same
or similar business and similarly situated, including, without limitation,
property, hazard, fire, wind, hail, theft, collapse, comprehensive general
public liability, and business interruption insurance, and worker’s
compensation or similar insurance.  The
Borrower shall furnish to the Lender full information and written evidence as
to the insurance maintained by the Borrower. 
All policies shall contain the insurer’s promise not to cancel the
policy without 30 days prior written notice to the Lender at its address set
forth below.  All policies shall name
the Lender as an additional insured or loss payee, as appropriate, as its interests
may appear.


 


Section 8.4            Payment
of Taxes and Claims.  File
all tax returns and reports which are required by law to be filed by it and pay
before they become delinquent all taxes, assessments and governmental charges
and levies imposed upon it or its property and all claims or demands of any
kind (including, without limitation, those of suppliers, mechanics, carriers,
warehouses, landlords and other like Persons) which, if unpaid, might result in
the creation of a Lien upon its property; provided that the foregoing
items need not be paid if they are being contested in good faith by appropriate
proceedings, and as long as the Borrower’s title to its property is not
materially adversely affected, its use of such property in the ordinary course
of its business is not materially interfered with and adequate reserves with
respect thereto have been set aside on the Borrower’s books in accordance with
GAAP.


 


Section 8.5            Inspection;
Collateral Audits. 
Permit any Person designated by the Lender to visit and inspect any of
its properties, corporate books and financial records, to examine and to make
copies of its books of accounts and other financial records, to discuss the
affairs, finances and accounts of the Borrower with, and to be advised as to
the same by, its officers, and to conduct such collateral audits and
appraisals, at such times and intervals as the Lender may designate.  The expenses of the Lender for such visits,
inspections, examinations and audits shall be at the expense of the Borrower.


 


Section 8.6            Books
and Records.  Keep
adequate and proper records and books of account in which full and correct
entries will be made of its dealings, business and affairs.


 


Section 8.7            Compliance.  Comply with the requirements of all
applicable state and federal laws, and of all rules, regulations, orders,
writs, judgments, injunctions, decrees or awards to which it may be subject.


 


Section 8.8            Environmental
Matters.  Observe and
comply with all laws, rules, regulations and orders of any government or
government agency relating to health, safety, pollution, hazardous materials or
other environmental matters to the extent non-compliance could result in a
material liability or otherwise constitute an Adverse Event.


 


Section 8.9            Notice
of Litigation.  Promptly provide
written notice to the Lender of all litigation, arbitration or mediation
proceedings, and of all proceedings by or before any court or governmental or
regulatory agency affecting the Borrower, describing the nature thereof and the
steps being taken with respect to such proceeding.


 


 


 

















 


Section 8.10         Notice
of Default.  Promptly
provide written notice to the Lender of any Default or Event of Default,
describing the nature thereof and what action the Borrower proposes to take
with respect thereto.


 


ARTICLE 9  NEGATIVE COVENANTS


 


From the date of this Agreement and
thereafter until the Discretionary Facility is terminated or expires and the
Obligations have been paid in full, unless the Lender shall otherwise expressly
consent in writing, the Borrower will not do any of the following:


 


Section 9.1            Merger.  Merge or consolidate or enter into any
analogous reorganization or transaction with any Person.


 


Section 9.2            Sale
of Assets.  Sell,
transfer, assign, lease or otherwise convey all or any substantial part of its
assets (whether in one transaction or in a series of transactions) to any
Person other than in the ordinary course of business.


 


Section 9.3            Subsidiaries,
Partnerships, Joint Ventures.  Do any of the following: (a) form or acquire any corporation or
limited liability company which would thereby become a Subsidiary; or (b) form
or enter into any partnership as a limited or general partner or into any joint
venture.


 


Section 9.4            Restricted
Payments.  Either: (a)
purchase or redeem or otherwise acquire for value any shares of the Borrower’s
stock, declare or pay any dividends or distributions thereon, make any
distribution on, or payment on account of the purchase, redemption, defeasance
or other acquisition or retirement for value of, any shares of the Borrower’s
stock or set aside any funds for any such purpose; or (b) directly or
indirectly make any payment on, or redeem, repurchase, defease, or make any
sinking fund payment on account of, or any other provision for, or otherwise
pay, acquire or retire for value, any Indebtedness of the Borrower that is
subordinated in right of payment to the Discretionary Loans (whether pursuant
to its terms or by operation of law).


 


Section 9.5            Investments.  Acquire for value, make, have or hold any Investments, except:


(a)           Investments
outstanding on the date hereof and listed on Schedule 9.5;


 


(b)           direct obligations of the United States of America;


 


(c)           extensions of credit in the nature of accounts receivable
or notes receivable arising from the sale of goods and services in the ordinary
course of business; and


(d)           commercial paper issued by U.S. corporations rated “A-1”
by Standard & Poor Corporation or “P-1” by Moody’s Investors Service or
certificates of deposit or bankers’ acceptances having a maturity of one year
or less issued by members of the Federal Reserve System having deposits in
excess of $100,000,000 (which certificates of deposit or bankers’ acceptances
are fully insured by the Federal Deposit Insurance Corporation).


 


Section 9.6            Indebtedness.  Create, incur, issue, assume or suffer to
exist any Indebtedness, except:


 


(a)           the Obligations;


 


(b)           Indebtedness outstanding on the date hereof secured by
Permitted Liens, together with any extension, renewal or replacement thereof
(so long as such Indebtedness is not increased


 


 


 

















 


above
the amount outstanding immediately prior to giving effect to any such
extension, renewal or replacement); and


 


(c)           any Subordinated Debt.


 


Section 9.7            Liens.  Create, incur, assume or suffer to exist any
Lien with respect to any property, revenues or assets now owned or hereafter
arising or acquired, except:


 


(a)           Liens existing on the date of this Agreement and disclosed
on Schedule 9.7;


 


(b)           Deposits or pledges to secure payment of workers’
compensation, unemployment insurance, old age pensions or other social security
obligations, in the ordinary course of the Borrower’s business;


 


(c)           Liens for taxes, fees, assessments and governmental
charges not delinquent or to the extent that payments therefor shall not at the
time be required to be made in accordance with the provisions of Section 8.4;


 


(d)           Liens of carriers, warehousemen, mechanics and
materialmen, and other like Liens arising in the ordinary course of business,
for sums not due or to the extent that payment therefor shall not at the time
be required to be made in accordance with the provisions of Section 8.4;
and


 


(e)           Purchase money liens or security interests or Capitalized
Leases upon or in property acquired after the date hereof by Borrower, provided
that: (i) no such lien or security interest extends or shall extend to
or cover any property of Borrower other than the property then being acquired;
and (ii) the aggregate principal amount of the Indebtedness secured by any such
lien or security interest shall not exceed the cost of such property so
acquired in connection therewith.


 


Section 9.8            Transactions
with Affiliates.  Enter into
or be a party to any transaction or arrangement, including, without limitation,
the purchase, sale, lease or exchange of property or the rendering of any
service, with any Affiliate, except in the ordinary course of and pursuant to
the reasonable requirements of the Borrower’s business and upon fair and
reasonable terms no less favorable to the Borrower than would be obtained in a
comparable arm’s-length transaction with a Person not an Affiliate.


 


ARTICLE 10  EVENTS OF DEFAULT
AND REMEDIES


 


Section 10.1         Events of Default.  The occurrence of any one or more of the following events shall
constitute an Event of Default:


 


(a)           The Borrower shall fail to make when due, whether by
acceleration or otherwise, any payment of the Obligations; or


 


(b)           Any representation or warranty made by the Borrower in the
Loan Documents or in any certificate, statement, report or other writing
furnished by the Borrower to the Lender pursuant to the Loan Documents or any
other instrument, document or agreement shall prove to have been false or
misleading in any material respect on the date as of which the facts set forth
are stated or certified or deemed to have been stated or certified; or


 


 


 

















 


(c)           The Borrower shall fail to comply with any other
agreement, covenant, condition, provision or term contained in the Loan
Documents or any other document, instrument or agreement between Borrower and
Lender; or


 


(d)           An Act of Bankruptcy shall occur with respect to the
Borrower; or


 


(e)           The maturity of any Indebtedness (other than Indebtedness
under this Agreement and whether owed to the Lender or to others) shall be
accelerated, or the Borrower shall fail to pay any such Indebtedness when due
or, in the case of such Indebtedness payable on demand, when demanded, or any
event shall occur or condition shall exist and shall continue for more than the
period of grace, if any, applicable thereto and shall have the effect of causing
or permitting (any required notice having been given and grace period having
expired) the holder of any such Indebtedness or any trustee or other Person
acting on behalf of such holder to cause, such Indebtedness to become due prior
to its stated maturity or to realize upon any collateral given as security
therefor.


 


Section 10.2         Remedies.  If (a) any Event of Default described in Section
10.1(d) shall occur, the Discretionary Facility (including, without
limitation, any obligation of the Lender to make any Discretionary Loan under
Section 2.1(b)) shall automatically terminate and the outstanding unpaid
principal balance of the Discretionary Note, the accrued interest thereon and
all other Obligations shall automatically become immediately due and payable;
or (b) any other Event of Default shall occur and be continuing, then the
Lender may take any or all of the following actions: (i) declare the
Discretionary Facility (including, without limitation, any obligation of the
Lender to make any Discretionary Loan under Section 2.1(b)) to be terminated,
whereupon the Discretionary Facility (including, without limitation, any
obligation of the Lender to make any Discretionary Loan under Section 2.1(b))
shall terminate, and (ii) declare the outstanding unpaid principal balance of
the Discretionary Note, the accrued and unpaid interest thereon and all other
Obligations to be forthwith due and payable, whereupon the Discretionary Note,
all accrued and unpaid interest thereon and all such other Obligations shall
immediately become due and payable, in each case without further demand or
notice of any kind, all of which are hereby expressly waived, anything in this
Agreement or in the Discretionary Note to the contrary notwithstanding.  In addition, upon any Event of Default, the
Lender may exercise all rights and remedies under any other instrument,
document or agreement between the Borrower and the Lender, and enforce all
rights and remedies under any applicable law, including without limitation the
rights and remedies available upon default to a secured party under the Uniform
Commercial Code as adopted in the State of Minnesota, including, without
limitation, the right to take possession of the Collateral, or any evidence
thereof, proceeding without judicial process or by judicial process (without a
prior hearing or notice thereof, which the Borrower hereby expressly waives)
and the right to sell, lease or otherwise dispose of any or all of the
Collateral, and, in connection therewith, the Borrower will on demand assemble
the Collateral and make it available to the Lender at a place to be designated
by the Lender which is reasonably convenient to both parties.


 


Section 10.3         Offset.  In addition to the remedies set forth in Section
10.2, the Lender or any other holder of the Discretionary Note may offset
any and all obligations of the Lender or such other holder of the Discretionary
Note, against the Indebtedness then owed by the Borrower to the Lender.  Nothing in this Agreement shall be deemed a
waiver or prohibition of the Lender’s rights offset or counterclaim, which
right the Borrower hereby grants to the Lender.


 


ARTICLE 11  MISCELLANEOUS


 


Section 11.1         Waiver
and Amendment.  No failure
on the part of the Lender or the holder of the Discretionary Note to exercise
and no delay in exercising any power or right hereunder or under any 


 


 


 

















 


other Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
power or right preclude any other or further exercise thereof or the exercise
of any other power or right.  The
remedies herein and in any other instrument, document or agreement delivered or
to be delivered to the Lender hereunder or in connection herewith are
cumulative and not exclusive of any remedies provided by law.  No notice to or demand on the Borrower not
required hereunder or under the Discretionary Note shall in any event entitle
the Borrower to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the right of the Lender or the holder
of the Discretionary Note to any other or further action in any circumstances
without notice or demand.  No amendment,
modification or waiver of any provision of this Agreement or consent to any
departure by the Borrower therefrom shall be effective unless the same shall be
in writing and signed by the Lender, and then such amendment, modifications,
waiver or consent shall be effective only in the specific instances and for the
specific purpose for which given.


 


Section 11.2         Expenses
and Indemnities.  Whether or
not any Discretionary Loan is made hereunder, the Borrower agrees to reimburse
the Lender upon demand for: (a) all reasonable expenses paid or incurred by
either the Lender or Miller (including filing and recording costs and fees and
expenses of legal counsel of each of Lender, Miller and Associated Bank) in
connection with the preparation, review, execution, delivery, amendment,
modification, interpretation, collection and enforcement of the Loan Documents;
and (b) all reasonable expenses paid or incurred by either the Lender or Miller
(including filing and recording costs and fees and expenses of legal counsel of
each of Lender, Miller and TCF National Bank) in connection with the
preparation, review, execution, delivery, amendment, modification,
interpretation, collection and enforcement of any document, instrument or
agreement evidencing the TCF Loan.  The
Borrower agrees to pay, and save the Lender harmless from all liability for,
any stamp or other taxes which may be payable with respect to the execution or
delivery of the Loan Documents.  The
Borrower agrees to indemnify and hold the Lender harmless from any loss or
expense which may arise or be created by the acceptance of instructions for
making Loans or disbursing the proceeds thereof.  The Borrower agrees to indemnify and hold the Lender and Miller
harmless from any obligation to pay any fees or commissions to any broker or
finder in connection with the TCF Loan or the transactions contemplated in the
Loan Documents, including, without limitation, to NDX Trading, Inc.  The Borrower shall indemnify and hold
harmless the Lender and its respective Affiliates, and each such Person’s
respective officers, directors, employees, attorneys, agents and representatives
(each, an “Indemnified Person”), from and against any and all suits,
actions, proceedings, claims, damages, losses, liabilities and expenses
(including reasonable attorneys’ fees and disbursements and other costs of
investigation or defense, including those incurred upon any appeal) that may be
instituted or asserted against or incurred by any such Indemnified Person as
the result of any representation or warranty made by the Borrower in the Loan
Documents or in any certificate, statement, report or other writing furnished
by the Borrower to the Lender or Miller pursuant to the Loan Documents or any
other instrument, document or agreement shall prove to have been false or
misleading. The obligations of the Borrower under this Section 11.2
shall survive any termination or expiration of the Discretionary Facility and
payment in full of the Obligations.


 


Section 11.3         Notices.  Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing.  All periods of notice shall be measured from the date of delivery
thereof if manually delivered, from the date of sending thereof if sent by
telegram, telex or facsimile transmission, from a first Business Day after the
date of sending if sent by overnight courier, or from four days after the date
of mailing if mailed; provided, however, that any notice to the
Lender under Article 2 hereof shall be deemed to have been given only
when received by the Lender.  If notice
to the Borrower of any intended disposition of the


 


 


 

















Collateral or any other
intended action is required by law in a particular instance, such notice shall
be deemed commercially reasonable if given at least ten calendar days prior to
the date of intended disposition or other action.


 


Section 11.4         Successors.  This Agreement shall be binding on the
Borrower and the Lender and their respective successors and assigns, and shall
inure to the benefit of the Borrower and the Lender, and the successors and
assigns of the Lender.  The Borrower
shall not assign its rights or duties hereunder without the written consent of
the Lender.


 


Section 11.5         Participations
and Information.  The Lender
may sell participation interests in any or all of the Discretionary Loans and
in all or any portion of the Discretionary Facility to any Person.  The Lender may furnish any information
concerning the Borrower in the possession the Lender from time to time to participants
and prospective participants and may furnish information in response to credit
inquiries.


 


Section 11.6         Severability.  Any provision of the Agreement which is
prohibited or unenforceable in any jurisdiction shall, in such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.


 


Section 11.7         Captions.  The captions or headings herein are for
convenience only and in no way define, limit or describe the scope or intent of
any provision of this Agreement.


 


Section 11.8         Entire
Agreement.  This
Agreement and the Discretionary Note, and the other Loan Documents, embody the
entire agreement and understanding between the Borrower and the Lender with
respect to the subject matter hereof and thereof.  This Agreement supersedes all prior agreements and understandings
relating to the subject matter hereof.


 


Section 11.9         Counterparts.  This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.


 


Section 11.10  Governing
Law.  The
validity, construction and enforceability of this Agreement and the
Discretionary Note shall be governed by the internal laws of the State of
Minnesota, without giving effect to conflict of laws principles thereof.


 


(The signature page follows.)


 


 


 

















 


THE
PARTIES HERETO have caused this Discretionary Credit Agreement to be executed
as of the date first above written.


 


	
   

  	
  MEDICALCV, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Blair P. Mowery

  
	
   

  	
  Name:

  	
  Blair P. Mowery

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  9725 South Robert Trail

  Inver Grove Heights, MN  55077

  Attention:  Chief Executive
  Officer

  Telephone:  (651) 452-3000

  Fax:  (651) 234-6669

  
	
   

  	
   

  
	
  with a copy to:

  	
  Avron L. Gordon, Esq.

  Briggs and Morgan, P.A.

  2400 IDS Center

  80 South Eighth Street

  Minneapolis, MN 55402

  Fax (612) 334-8650

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PKM PROPERTIES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul K. Miller

  
	
   

  	
  Name:

  	
  Paul K. Miller

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  c/o Gracon Contracting, Inc.

  606 24th Avenue South, Suite B12

  Minneapolis, MN 55454

  Attention:  Paul K. Miller

  Fax:  (612) 305-4813

  
	
   

  	
   

  
	
  with a copy to:

  	
  Charles F. Diessner Esq.

  Fredrikson & Byron, P.A.

  4000 Pillsbury Center

  200 South Sixth Street

  Minneapolis, MN 55402-1425

  Fax (612) 492-7077

  



 


 


 

















 


                        Schedules


 


9.5   Existing
Investments


 


None.


 


9.7   Existing
Liens


 


	
  Minnesota Secretary of State

  
	
  File No.

  	
   

  	
  Debtor

  	
   

  	
  Date

  	
   

  	
  Creditor

  	
   

  	
  Collateral

  
	
  2015773

  	
   

  	
  CV Dynamics, Inc.

  	
   

  	
  2/27/98

  	
   

  	
  LCA A Division Of 

  Associates

  	
   

  	
  Specific Leased 

  Equipment

  
	
  2030166

  	
   

  	
  CV Dynamics, Inc. 

  d/b/a Medical, Inc.

  	
   

  	
  4/20/98

  	
   

  	
  Dexxon Capital 

  Corporation

  	
   

  	
  Specific Equipment

  
	
  2128365

  	
   

  	
  C V Dynamics, Inc.

  	
   

  	
  5/4/99

  	
   

  	
  Dexxon Capital 

  Corporation

  	
   

  	
  Specific Equipment

  
	
  2184558

  	
   

  	
  CV Dynamics, Inc.

  	
   

  	
  12/13/99

  	
   

  	
  Riverside Bank

  	
   

  	
  Blanket Lien

  
	
  2197986

  	
   

  	
  CV Dynamics, Inc. 

  d/b/a Medical 

  Incorporated

  	
   

  	
  2/1/00

  	
   

  	
  Dakota Electric 

  Association

  	
   

  	
  Specific Equipment

  
	
  20024930253

  	
   

  	
  MedicalCV

  	
   

  	
  8/19/02

  	
   

  	
  Segmed, Inc.

  	
   

  	
  Security Interest in 

  Specific Intellectual 

  Property