Document:

EXHIBIT 10.4

 

AMENDMENT NO. 3 TO

FIRST AMENDED AND RESTATED

SUBORDINATION AND INTERCREDITOR AGREEMENT

 

THIS AMENDMENT NO. 3 TO FIRST AMENDED AND
RESTATED SUBORDINATION AND INTERCREDITOR AGREEMENT, dated as of October 29,
2004, is by and between PETER L. HAUSER, a resident of the State of Minnesota,
and his successors heirs and permitted assigns (“Hauser”) and PKM
PROPERTIES, LLC, a Minnesota limited liability company, and its endorsees,
successors and assigns (“PKM”).

 

RECITALS:

 

(i)            Hauser,
PKM and Draft Co. are parties to that certain First Amended and Restated
Subordination and Intercreditor Agreement dated as of November 24, 2003;
Amendment No. 1 to First Amended and Restated Subordination and Intercreditor
Agreement dated as of January 29, 2004; and Amendment No. 2 to Amended and
Restated Subordination and Intercreditor Agreement dated April 16, 2004
(collectively, the “Amended Agreement”); and

 

(ii)           Medical
CV, Inc., a Minnesota corporation (the “Borrower”), is, or may hereafter
become, indebted to PKM as a result of the advance of monies and other
extensions of credit by PKM to the Borrower under a credit agreement dated as
of October 29, 2004 (as the same may have been or may be amended, restated or
otherwise modified from time to time hereafter, the “October 2004 Credit
Agreement”); and

 

(iii)          Hauser
and PKM have agreed to amend the Amended Agreement as provided herein, and on
the terms and conditions of this Agreement; and

 

(iv)          Borrower
agrees to accept and acknowledge the terms and conditions of this Agreement and
agrees to be bound by and comply with the provisions hereof.

 

AGREEMENTS:

 

NOW, THEREFORE, for good and valuable
consideration, receipt of which is acknowledged by the parties, the parties
agree as follows:

 

Section 1.              Definitions,
Rules of Construction.

 

(a)           Except
as otherwise defined in this Agreement, all capitalized terms used herein shall
have the definitions and be subject to the rules of construction provided in
the Amended Agreement.

 

(b)           The
following definition contained in Section 1(a) of the Amended Agreement is
hereby amended in its entirety to read as follows:

 

“Senior Debt” shall mean all
liabilities and obligations of the Borrower to PKM howsoever created, arising
or evidenced, whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising or incurred, including, without
limitation, all of the Borrower’s obligations to PKM under the January Credit
Agreement, the May Credit Agreement, the November Credit Agreement, the Lease,
the April 2004 Discretionary Credit Agreement, and the October 2004 Credit
Agreement, and any note or notes executed by the Borrower thereunder, and all
other obligations 

 

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under any other agreement
between the Borrower and PKM now or hereafter in effect, and also including,
without limitation, any and all interest accruing on any of the Senior Debt
after the commencement of any proceedings referred to in Section 5 below,
notwithstanding any provision or rule of law which might restrict the rights of
PKM, as against the Borrower or anyone else, to collect such interest;
provided, however, that (1) Senior Debt shall not include any obligations
arising solely under the May Discretionary Credit Note, the November Discretionary
Credit Note, or any other instrument given by the Borrower in favor of PKM
after the date hereof to the extent it is not an amendment, modification,
supplement, restatement or replacement of another instrument evidencing then
currently existing Senior Debt, (2) for purposes hereof, Senior Debt shall
include no more than $943,666 of principal under the January Discretionary
Credit Agreement, no more than $250,000 of principal under the April 2004
Discretionary Credit Agreement, and no more than $500,000 under the October
2004 Credit Agreement, and (3) in order to be considered Senior Debt hereunder
as of any particular time, obligations with respect to the Lease must be due
and payable at such time (without acceleration).

 

Section 3.              Effect
of Amendment.

 

Except as provided in this Agreement, the
Amended Agreement shall remain in full force and effect.

 

IN WITNESS WHEREOF, this Amendment No. 3 to
First Amended and Restated Subordination and Intercreditor Agreement has been
signed as of the date first set forth above.

 

(The signature page follows.)

 

2

 

	
   

  	
    /s/
  Peter L. Hauser

  	
   

  
	
   

  	
  PETER L. HAUSER

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  
	
   

  	
  16913 Kings Court

  
	
   

  	
  Lakeville, MN 55044

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PKM PROPERTIES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Paul K. Miller

  	
   

  
	
   

  	
  Name: Paul K. Miller

  
	
   

  	
  Its: Chief Manager

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  
	
   

  	
  PKM Properties, LLC

  
	
   

  	
  c/o Gracon Contracting, Inc.

  
	
   

  	
  606 24th Avenue South, Suite B12

  
	
   

  	
  Minneapolis, MN 55454

  
	
   

  	
  Attention: Paul K. Miller

  
					

 

3

 

ACCEPTANCE AND
ACKNOWLEDGMENT

 

Borrower hereby accepts and acknowledges
receipt of a copy of, the foregoing Amendment No. 3 to First Amended and
Restated Subordination and Intercreditor Agreement and agrees to be bound by
and comply with the provisions thereof, and reaffirms its Acceptance and
Acknowledgement of the terms and conditions of the First Amended and Restated
Subordination and Intercreditor Agreement.

 

	
   

  	
  MEDICALCV, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/

  	
  John H.
  Jungbauer

  	
   

  
	
   

  	
  Name: 

  	
  John H. Jungbauer

  
	
   

  	
  Its:

  	
  Chief Financial Officer

  

 

4EXHIBIT 10.5

 

WAIVER AGREEMENT

 

DATE:    October
29, 2004

 

	
  PARTIES:

  	
   

  
	
   

  	
   

  
	
  MEDICALCV, INC.,

  	
   

  
	
  a Minnesota corporation

  	
  (the “Borrower”)

  
	
   

  	
   

  
	
  PKM PROPERTIES, LLC,

  	
   

  
	
  a Minnesota limited liability company

  	
  (the “Lender”).

  

 

RECITALS:

 

A.            Paul
K. Miller (“Miller”) is a director and shareholder of the Borrower and is a
member and manager of, and has a material financial interest in, the Lender.

 

B.            The
Lender has previously made available to the Borrower a $943,666 discretionary
credit facility under a Discretionary Credit Agreement dated January 17, 2003
as it may have been or may be amended, modified, supplemented, restated or
replaced from time to time (the “January Discretionary
Credit Agreement”), a $1,000,000 discretionary credit facility
under a May Discretionary Credit Agreement dated July 1, 2003 as it may have
been or may be amended, modified, supplemented, restated or replaced from time
to time (the “May Discretionary Credit Agreement”),
a $500,000 discretionary credit facility under a November 11, 2003 Discretionary
Credit Agreement (the “November 2003 Credit Agreement”), and a $250,000
discretionary credit facility under an April 16, 2004 April 2004 Discretionary
Credit Agreement (the “April Discretionary Credit
Agreement” and together with the January Discretionary Credit
Agreement and the May Discretionary Credit Agreement, the “Credit Agreements”).

 

C.            The
Borrower is not in compliance with the Credit Agreements with respect to
periods prior to the date hereof as set forth on Exhibit A hereto.

 

D.            The
Borrower’s noncompliance constitutes a default under the Credit
Agreements.  All applicable cure periods,
if any, available to cure such defaults have passed, and such defaults are each
separate Events of Default under the Credit Agreements (the “Existing Defaults”).

 

E.             The
Borrower has requested the Lender to waive the Existing Defaults.

 

F.             Capitalized
terms not otherwise defined in this Agreement shall have the meanings given
such terms in the Credit Agreements.

 

AGREEMENTS:

 

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

 

1.             Waiver.  The Lender agrees to waive the Existing
Defaults, provided that this waiver shall not apply to any other Defaults or
Events of Default now existing or hereafter arising by reason of 

 

1

 

the Borrower’s failure to
comply with any other covenants or agreements contained in the Credit
Agreements, as amended.  This Agreement
is not intended to operate as, and shall not be construed as, a waiver of any
Event of Default (other than the Existing Defaults) whether known to the Lender
or unknown, as to which all rights and remedies of the Lender shall remain
reserved.

 

2.             Conditions
Precedent.  The effectiveness of this
Agreement, including the waiver furnished herein, is subject to the Lender’s
receipt, in form satisfactory to the Lender and its counsel, of all of the
documents in connection with the October 2004 Credit Agreement.

 

3.             Release.  The Borrower hereby releases, acquits, and
forever discharge the Lender and each and every past and present affiliate,
member, manager, agent, employee, representative, and attorney of the Lender
from any and all claims, causes of action, suits, debts, liens, obligations,
liabilities, demands, losses, costs and expenses (including attorneys’ fees) of
any kind, character, or nature whatsoever, known or unknown, fixed or
contingent, which any of them may have or claim to have now or which may
hereafter arise out of or be connected with any act of commission or omission
of the Lender existing or occurring prior to the date of this Agreement or any
instrument executed prior to the date of this Agreement including, without
limitation, any claims, liabilities or obligations arising with respect to the
indebtedness evidenced by the Loan Documents. 
The provisions of this Section shall survive payment of the Obligations
and shall be binding upon the Borrower and its successors and assigns and shall
inure to the benefit of the Lender and its successors and assigns.

 

4.             Estoppel.  The Borrower represents and warrants that
there are no known claims, causes of action, suits, debts, liens, obligations,
liabilities, demands, losses, costs and expenses (including attorneys’ fees) of
any kind, character or nature whatsoever, fixed or contingent, which the
Borrower may have or claim to have against the Lender, which might arise out of
or be connected with any act of commission or omission of the Lender existing
or occurring on or prior to the date of this Agreement, including, without
limitation, any claims, liabilities or obligations arising with respect to the
indebtedness evidenced by any note or with respect to any other Loan Document.

 

5.             Representation
and Warranty.  To induce the Lender
to enter into this Agreement, the Borrower represents and warrants to the
Lender that after giving effect to this Agreement, there does not exist any
Default or Event of Default, each as defined in the Credit Agreements.

 

6.             Binding
Nature of Loan Documents.  The
Borrower acknowledges and agrees that the terms, conditions and provisions of
the Credit Agreements and of each Loan Documents executed and delivered in
connection therewith are fully binding and enforceable agreements, and are not
subject to any defense, counterclaim, set off or other claim of any kind or
nature.  The Borrower hereby reaffirms
and restates the Borrower’s duties, obligations and liability under the Credit
Agreements and each Loan Document.

 

7.             Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument. 
Any executed counterpart of this Agreement delivered by facsimile or
other electronic transmission to a party hereto shall constitute an original
counterpart of this Agreement.

 

[Signatures on the
Following Page]

 

2

 

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

 

	
   

  	
  MEDICALCV,
  INC.

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
    /s/ John H. Jungbauer

  	
   

  	 

	
   

  	
  Name: John
  H. Jungbauer

  	 

	
   

  	
  Title: Chief
  Financial Officer

  	 

	
   

  	
   

  	 

	
   

  	
  PKM
  PROPERTIES, LLC

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
    /s/ Paul K. Miller

  	
   

  
	
   

  	
  Name: Paul
  K. Miller

  	 

	
   

  	
  Title: Chief
  Executive Officer

  	 

						

 

3

 

Exhibit A

Existing Defaults

 

(1)           The
following payments under November 2003 Credit Agreement were not made when due:

 

(a)           interest
payment due on 11-30-03 was paid on 12-31-03;

 

(b)           interest
payment due on 3-31-04 was paid on 4-29-04.

 

(2)           The
following payments under January 2003 Discretionary Credit Agreement were not
made when due:

 

(a)           interest
payment due on 6-30-03 was paid on 7-13-03;

 

(b)           interest
payment due on 7-31-03 paid on 8-26-03.

 

(3)           Financial
statements due Lender pursuant to various credit agreements delivered to Paul
Miller in his capacity as a director of Borrower; however, Borrower has not
provided monthly, quarterly or annual financial statements directly to Lender.

 

4

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