Document:

EXHIBIT
10.3

 

SUBORDINATION AND INTERCREDITOR AGREEMENT

 

THIS SUBORDINATION AND INTERCREDITOR
AGREEMENT, dated as of July 1, 2003, is by and between PETER L. HAUSER, a
resident of the State of Minnesota, and his successors heirs and permitted
assigns (the “Junior Creditor”), and PKM PROPERTIES, LLC, a Minnesota
limited liability company, and its endorsees, successors and assigns (the “Senior
Creditor”).

 

RECITALS:

 

A. 
Medical CV, Inc., a Minnesota corporation (the “Borrower”) is or
may hereafter become indebted to the Junior Creditor pursuant to that certain
Subordinated Note, dated as of July 1, 2003, given by Borrower in favor of the
Junior Creditor in the original principal amount of $1,000,000 (the “Subordinated
Note”).

 

B. 
The Borrower is now, or may hereafter be, indebted to the Senior
Creditor as a result of the advance of monies and other extensions of credit by
the Senior Creditor to the Borrower under: (i) a Discretionary Credit Agreement
dated as of January 17, 2003 (as the same may have been or may be amended,
restated or otherwise modified from time to time hereafter, the “January
Credit Agreement”), (ii) a Building Lease dated April 4, 2003 (as the same
may be amended, restated or otherwise modified from time to time hereafter, the
“Lease”) and (iii) a Discretionary Credit Agreement dated as of July 1,
2003 (as the same may be amended, restated or otherwise modified from time to
time hereafter, the “May Credit Agreement”), each between the Borrower
and the Senior Creditor and under other agreements or arrangements for the
extension of financial accommodations now, heretofore or hereafter in effect.

 

C. 
The Junior Creditor acknowledges that the loan or advance of monies or
other extensions of any financial accommodation or credit to the Borrower by
the Senior Creditor is of value to the Junior Creditor.

 

AGREEMENTS:

 

NOW, THEREFORE, for good and valuable
consideration, receipt of which is acknowledged by the Junior Creditor, and in
order to induce the Senior Creditor to make loans or extend credit or any other
financial accommodation to or for the benefit of the Borrower, or to grant such
renewals or extensions thereof as the Senior Creditor may deem advisable, and
to better secure the Senior Creditor in respect of the foregoing, the Junior
Creditor agrees as follows:

 

Section 1. 
Definitions, Rules of Construction.

 

(a) 
For purpose of this Agreement, the following terms shall have the
following meanings:

 

1

 

“Bankruptcy Code” shall mean 11 U.S.C.
§ 101 et seq., as amended from time to time.

 

“Borrower” shall have the meaning
given to that term in Recital A above, and shall include and any
successor (including a debtor-in-possession under the Bankruptcy Code),
assignee, receiver, trustee or estate thereof.

 

“Default” shall mean any event which
with the giving of notice or lapse of time, or both, would become an Event of
Default.

 

“Event of Default” shall mean (i) any
Event of Default (as therein defined) or breach under the January Credit
Agreement or the May Credit Agreement, (ii) any failure of the Borrower to pay
when due (whether at the date scheduled therefor or earlier upon acceleration),
or when demanded (with respect to any obligation payable on demand), any item
constituting Senior Debt, or (iii) 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 the Senior Creditor
or any subsequent holder of Senior Debt to cause, any item of Senior Debt to
become due prior to its stated maturity, to realize upon any collateral given
as security therefor; provided, however that Event of Default shall not in
any event include any default occurring solely as a result of a payment default
under the May Discretionary Credit Note.

 

“Junior Creditor” shall mean Peter L.
Hauser, and his successors, heirs and assigns.

 

“May Discretionary Credit Note” means
that May Discretionary Credit Note dated as of the date of this Agreement,
given by Borrower to Senior Creditor in the original principal amount of
$1,000,000, as it may be amended, modified, supplemented, restated or replaced
from time to time.

 

“May Security Agreement” means that
certain May Security Agreement dated as of the date of this Agreement, between
Borrower, as debtor, and Junior Creditor and Senior Creditor, individually and
collectively, and their successors and assigns as secured party, as it may be
amended, modified, supplemented, restated or replaced from time to time.

 

“Permitted Payments” shall have the
meaning given in Section 3 below.

 

“Person” shall mean an individual,
corporation, association, partnership, limited partnership, trust,
organization, individual or government or any governmental agency or any
political subdivision thereof.

 

“Security Interest” means any lien,
pledge, mortgage, encumbrance, charge or security interest of any kind
whatsoever, whether arising under a security instrument or as

 

2

 

a matter of law, judicial process or
otherwise, or any agreement to grant any lien, or security interest in, or to
pledge, mortgage or encumber, any assets.

 

“Senior Debt” shall mean all
liabilities and obligations of the Borrower to the Senior Creditor 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
the Senior Creditor under the January Credit Agreement, the May Credit
Agreement, the Lease, and any note or notes executed by the Borrower
thereunder, and all other obligations under any other agreement between the
Borrower and the Senior Creditor 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 the Senior Creditor, 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,
(2) for purposes hereof, Senior Debt shall include not more than the sum of
$943,666 of principal under the January Discretionary 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).

 

“Subordinated Debt” shall mean (a)
with respect to the Junior Creditor, all obligations, liabilities and
indebtedness of the Borrower to the Junior Creditor, howsoever arising or
evidenced, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising or incurred, under any written or
unwritten agreement, including, without limitation, the Subordinated Debt
Documents; and (b) with respect to the Senior Creditor, all obligations,
liabilities and indebtedness of the Borrower to the Senior Creditor arising
solely under the May Discretionary Credit Note.

 

“Subordinated Debt Collections” means
any value, property, payment, distribution, security, instrument or proceeds
thereof solely upon or solely with respect to the Subordinated Debt, including,
without limitation, Permitted Payments.

 

“Subordinated Debt Documents” shall
mean the Subordinated Note and all security agreements, guaranties and other
arrangements and agreements with or in favor of Junior Creditor executed and/or
delivered in connection with the Subordinated Debt, including, without
limitation, the Subordinated Note.

 

“Subordinated Note” shall have the
meaning given to that term in Recital A above, and shall include
any amendments, modifications or restatements thereto or thereof (but nothing
in this definition shall be deemed to waive the provisions of Section 10
below requiring the Senior Creditor’s prior written consent to any change in
the Subordinated Note).

 

3

 

(b) 
In this Agreement, in the computation of a period of time from a
specified date to a later specified date, unless otherwise stated the word
“from” means “from and including” and the word “to” or “until” each means “to
but excluding.”

 

(c)  Other terms may be defined in other parts of this Agreement.  All references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments
thereto or changes therein entered into in accordance with their respective terms,
and all references to Persons shall be deemed to include their permitted
successors and assigns.  Unless the
context in which used herein otherwise clearly requires, “or” has the inclusive
meaning represented by the phrase “and/or.” 
All incorporations by reference of covenants, terms, definitions or
other provisions from other agreements are incorporated into this Agreement as
if such provisions were fully set forth herein, and include all necessary
information and related provisions from such other agreements, and all such
covenants, terms, definitions or other provisions from other agreements
incorporated into this Agreement by reference shall survive any termination of
such other agreements until the Senior Debt has been indefeasibly paid in full
and all financing arrangements between the Borrower and the Senior Creditor
shall have been terminated.

 

Section 2. 
Standby; Subordination.  The payment and performance of the
Subordinated Debt is hereby subordinated to the payment and performance in full
of the Senior Debt, and, except as set forth in Section 3 below, neither
the Junior Creditor nor the Senior Creditor will ask, demand, sue for, take or
receive from the Borrower or any other Person liable for all or any part of the
Senior Debt, by setoff or in any other manner, the whole or any part of the
Subordinated Debt, or any monies which may now or hereafter be owing in respect
of the Subordinated Debt (whether such amounts represent principal or interest,
or obligations which are due or not due, direct or indirect, absolute or
contingent), including, without limitation, taking any additional security for
any of the foregoing, or the taking of any negotiable instrument therefor,
unless and until all of the Senior Debt shall have been indefeasibly paid and
satisfied in full and all financing arrangements with respect to Senior Debt
between the Borrower and Senior Creditor have been terminated.  The Junior Creditor warrants and represents
that his Subordinated Debt is secured solely pursuant to the May Security
Agreement and agrees that (a) the Junior Creditor hereafter will not accept any
additional security therefor from the Borrower, or from any third Person for
the benefit of the Borrower; and (b) (i) all Security Interests of the Junior
Creditor and the Senior Creditor in any assets of the Borrower or any assets
securing the Senior Debt shall and hereby are subordinated to the rights and
interests of the Senior Creditor, if any, in those assets to secure Senior
Debt, (ii) the Junior Creditor shall have no right to possession of any such
assets or to foreclose upon any such assets, whether by judicial action or
otherwise, unless and until all the Senior Debt shall have been indefeasibly
paid and satisfied in full and all financing arrangements between the Borrower
and Senior Creditor with respect to Senior Debt have been terminated, and (iii)
at the request of the Senior Creditor, the Junior Creditor shall authorize,
execute or deliver to the Senior Creditor such termination statements and
releases as the Senior Creditor shall reasonably request to release the Junior
Creditor’s Security Interest in or against such property.  Neither the Junior Creditor or the Senior
Creditor, prior to the indefeasible payment in full and discharge of the Senior
Debt and the termination of all financing arrangements between the Borrower and
the Senior Creditor with respect to Senior

 

4

 

Debt, shall have any right to
enforce any claim with respect to the Subordinated Debt, or to take any action
against the Borrower or the property of the Borrower or of any other Person
liable for all or any part of the Senior Debt for the benefit of the Borrower
to collect any Subordinated Debt.  The
Junior Creditor acknowledges and agrees that, to the extent the terms and
provisions of this Agreement are inconsistent with any agreement or
understanding between the Junior Creditor and the Borrower, such agreement or
understanding shall be subject to this Agreement.

 

Section 3. 
Permitted Payments.  Notwithstanding the provisions of Section
2 above, until the Senior Creditor gives the Junior Creditor written notice
(in the manner set forth below) of the occurrence of an Event of Default or a
Default, and provided that:

 

(i)                                         there
shall not then exist any breach of this Agreement by the Junior Creditor which
has not been waived, in writing, by the Senior Creditor,

 

(ii)                                      at
the time of the payment described below no Event of Default exists and is
continuing,

 

(iii)                                   the
payment described below, if made, would not give rise to the occurrence of any
Event of Default,

 

(iv)                                  none
of the events described in Section 5 has occurred, and

 

(v)                                     all
obligations then due and payable under the Lease (without acceleration) shall
have been paid to Senior Creditor in full,

 

Borrower may pay to the Junior Creditor and the Senior Creditor, and
the Junior Creditor and the Senior Creditor may accept from Borrower, interest
and principal payments, when due (without acceleration) and prepayments as
provided in Section 20(a) of this Agreement with respect to (y) with respect to
Junior Creditor, the Subordinated Note, and (z) with respect to Senior
Creditor, the May Discretionary Credit Note (“Permitted Payments”).

 

Section 4. 
Subordinated Debt Owed Only to the Junior Creditor.  The Junior Creditor warrants and represents
that the Junior Creditor has not previously assigned any interest in the
Subordinated Debt, that no other Person owns an interest in the Subordinated
Debt (whether as joint holders of Subordinated Debt, participants or otherwise)
and that the entire Subordinated Debt is owing only to the Junior
Creditor.  The Junior Creditor further
covenants that the entire Subordinated Debt shall continue to be owing only to
the Junior Creditor unless it is assigned with the prior written consent of the
Senior Creditor to a Person who agrees with the Senior Creditor to be bound by
the subordination provisions set forth herein.

 

Section 5. 
Priority.  In the event of (a) any distribution, division, or application,
partial or complete, voluntary or involuntary, by operation of law or
otherwise, of all or any part of the assets of the Borrower or the proceeds
thereof to the creditors of the Borrower or to their claims against the
Borrower, or (b) any readjustment of the debt or obligations of the Borrower,
whether by reason of liquidation, bankruptcy, arrangement, receivership,
assignment for the benefit of

 

5

 

creditors or any other action or proceeding involving the readjustment
of all or any part of the Senior Debt or Subordinated Debt, or the application
of the assets of the Borrower to the payment or liquidation thereof, or (c) the
dissolution or other winding up of the business of the Borrower, or (d) the
sale of all or substantially all of the assets of the Borrower, then,
and in any such event, the Senior Creditor shall be entitled to receive
indefeasible payment in full of all of the Senior Debt prior to the payment of
all or any part of the Subordinated Debt.

 

Section 6. 
Grant of Authority to Senior Creditor.  In order to enable the Senior Creditor to
enforce its rights hereunder in any of the actions or proceedings described in Section
5, the Senior Creditor is hereby irrevocably authorized and empowered, in
its discretion, to file and present for and on behalf of the Junior Creditor
such proofs of claims or other motions or pleadings as the Senior Creditor may
deem expedient or proper to establish the Senior Creditor’s entitlement of
payment from, or on behalf of, the Junior Creditor with respect to the
Subordinated Debt and to vote such proofs of claims in any such proceeding and
to demand, sue for, receive and collect any and all dividends or other payments
or disbursements made thereon in whatever form the same may be paid or issued
and to apply the same on account of any of the Senior Debt.  The Junior Creditor irrevocably authorizes
and empowers the Senior Creditor to demand, sue for, collect and receive each
of the payments and distributions described in Section 5 above and
give acquittance therefor and to file claims and take such other actions, in
the Senior Creditor’s own name or in the name of the Junior Creditor or
otherwise, as the Senior Creditor may deem necessary or advisable for the
enforcement of this Agreement.  To the
extent that payments of distributions are made in property other than cash, the
Junior Creditor authorizes the Senior Creditor to sell such property to such
buyers and on such terms as the Senior Creditor, in its sole discretion, shall
determine.  The Junior Creditor will
execute and deliver to the Senior Creditor such powers of attorney, assignments
and other instruments or documents, including debentures (together with such
assignments or endorsements as the Senior Creditor shall deem necessary), as
may be reasonably requested by the Senior Creditor in order to enable the
Senior Creditor to enforce any and all claims upon or with respect to any or
all of the Subordinated Debt and to collect and receive any and all payments
and distributions which may be payable or deliverable at any time upon or with
respect to the Subordinated Debt, all for the Senior Creditor’s own benefit.

 

Section 7. 
Payments Received by the Junior Creditor.   Except for Permitted Payments, if the
Junior Creditor receives any value, property, payment, distribution, security,
instrument or proceeds thereof upon or with respect to the Subordinated Debt
prior to the indefeasible payment in full of the Senior Debt and termination of
all financing arrangements between the Borrower and the Senior Creditor, the
Junior Creditor shall receive and hold the same in trust, as trustee, for the
benefit of the Senior Creditor and shall forthwith deliver the same to the
Senior Creditor in precisely the form received (except for the endorsement or
assignment by the Junior Creditor where necessary), for application on any of
the Senior Debt, due or not due and, until so delivered, the same shall be held
in trust by the Junior Creditor as the property of the Senior Creditor.  In the event of the failure of the Junior
Creditor to make any such endorsement or assignment to the Senior Creditor, the
Senior Creditor, or any of its officers or employees, is hereby irrevocably
authorized to make the same.

 

6

 

Section 8. 
Continuing Nature of Subordination.  This Agreement shall be effective and may
not be terminated or otherwise revoked by the Junior Creditor until the Senior
Debt shall have been fully paid and discharged and all financing arrangements
between the Borrower and the Senior Creditor have been terminated.  This is a continuing agreement of
subordination and the Senior Creditor may continue, at any time and without
notice to the Junior Creditor, to extend credit or other financial
accommodations and loan monies to or for the benefit of the Borrower in
reliance hereon.  No obligation of the
Junior Creditor hereunder shall be affected by the dissolution, liquidation,
death or incapacity of, or written revocation by, the Junior Creditor or any
other subordinated party, pledgor, endorser, or guarantor, if any.

 

Section 9. 
Bankruptcy Issues.  If the Borrower becomes the subject of
proceedings under the Bankruptcy Code and if the Senior Creditor desires to
permit the use of cash collateral or to provide financing to the Borrower under
either Section 363 or Section 364 of the Bankruptcy Code, the Junior Creditor
agrees that adequate notice of such financing to the Junior Creditor, if
required under applicable law, shall have been provided if the Junior Creditor
receives notice two (2) business days prior to entry of any order approving
such cash collateral usage or financing. 
Notice of a proposed financing or use of cash collateral shall be deemed
given upon the sending of such notice to the Junior Creditor in the manner
specified in Section 14, below. 
All allocations of payments between the Senior Creditor and the Junior
Creditor shall continue to be made after the filing of a petition under the
Bankruptcy Code on the basis provided in this Agreement.  In the event that the Junior Creditor at any
time acquires any security for the Subordinated Debt, the Junior Creditor
agrees not to assert any right the Junior Creditor may have to “adequate
protection” of the Junior Creditor’s interest in such security in any
Bankruptcy proceeding or to seek relief from automatic stay, without the prior
written consent of the Senior Creditor. 
The Junior Credit shall promptly deliver any form of adequate projection
it receives or the value thereof to the Senior Creditor.  The Junior Creditor waives any claim the
Junior Creditor may now or hereafter have against the Senior Creditor arising
out of the Senior Creditor’s election, in any proceeding instituted under
Chapter 11 of the Bankruptcy Code, of the application of Section 1111(b)(2) of
the Bankruptcy Code, and/or any borrowing or grant of a security interest under
Section 364 of the Bankruptcy Code by the Borrower, as debtor in possession, or
by a trustee.  To the extent that the Senior
Creditor receives payments on, or proceeds of any collateral for, the Senior
Debt which are subsequently avoided, invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any Bankruptcy law, state or federal law, common law or
equitable cause, then, to the extent of such payment or proceeds received, the
Senior Debt, or part thereof, intended to be satisfied shall be revived and
continue in full force and effect as if such payments or proceeds had not been
received by the Senior Creditor.

 

Section 10. 
Instrument Legend; No Amendments to Subordinated Instruments.  Besides the Subordinated Note, the Junior
Creditor will not agree to create any additional Indebtedness (as defined in
the Credit Agreement) owing from the Borrower to the Junior Creditor, without
sending a true and correct copy of all Subordinated Debt Documents evidencing
such Indebtedness to the Senior Creditor contemporaneously with the creation of
such Indebtedness.  Every instrument
evidencing Subordinated Debt (including, without limitation, the Subordinated
Note) shall be inscribed with a legend conspicuously indicating that payment
thereof is subordinated to the claims of the Senior Creditor pursuant to the
terms of this

 

7

 

Agreement.  Upon request after
the occurrence of an Event of Default, the original of every instrument
evidencing Subordinated Debt (including, without limitation, the Subordinated
Note) shall be promptly delivered to the Senior Creditor.  The Junior Creditor will not agree to any
amendment, restatement or other modification of any instrument evidencing
Subordinated Debt (including, without limitation, the Subordinated Note),
without the prior written consent of the Senior Creditor.

 

Section 11. 
Waivers.  The Senior Debt shall be deemed to have been made or incurred in
reliance upon this Agreement.  The
Junior Creditor expressly waives all notice of the acceptance by the Senior
Creditor of the subordination and other provisions of this Agreement and all
other notices not specifically required pursuant to the terms of this Agreement
whatsoever, and the Junior Creditor expressly waives reliance by the Senior
Creditor upon the subordination and other agreements as herein provided.  The Junior Creditor agrees that the Senior
Creditor has made no warranties or representations with respect to the due
execution, legality, validity, completeness or enforceability of the Credit
Agreement, or the collectability of the Senior Debt, and that the Senior
Creditor shall be entitled to manage and supervise its loans and other
financial accommodations to the Borrower without regard to the existence of any
rights that the Junior Creditor may now or hereafter have in or to any of the
assets of the Borrower.  The Junior
Creditor agrees that the Senior Creditor shall have no liability to the Junior
Creditor for, and waives any claim which the Junior Creditor may now or
hereafter have against, the Senior Creditor arising out of any and all actions
which the Senior Creditor in good faith takes or omits to take (including,
without limitation, actions with respect to any security for the Senior Debt,
actions with respect to the occurrence of an Event of Default, actions with
respect to the foreclosure upon, sale, release, or depreciation of, or failure
to realize upon, any security for the Senior Debt and actions with respect to
the collection of any claim for all or any part of the Senior Debt from any
guarantor or other party) with respect to 
or any other agreement related to any Senior Debt or to the collection
of the Senior Debt or the valuation, use, protection or release of any security
for the Senior Debt.

 

Section 12. 
Senior Creditor’s Waivers.  No waiver shall be deemed to be made by the
Senior Creditor of any of its rights hereunder unless the same shall be in
writing signed on behalf of the Senior Creditor, and each waiver, if any, shall
be a waiver only with respect to the specific instance involved and shall in no
way impair the rights of the Senior Creditor or the obligations of the Junior
Creditor to the Senior Creditor in any other respect at any other time.

 

Section 13. 
Financial Condition of Borrower; Other Actions by the Senior Creditor.  The Junior Creditor hereby assumes
responsibility for keeping informed of the financial condition of the Borrower,
any and all endorsers and any and all guarantors of the Subordinated Debt and
of all other circumstances bearing upon the risk of nonpayment of the Senior
Debt and/or the Subordinated Debt that diligent inquiry would reveal.  The Junior Creditor hereby agrees that the
Senior Creditor shall have no duty to advise the Junior Creditor of information
known to the Senior Creditor regarding such condition or any such
circumstances.  In the event the Senior
Creditor, in its sole discretion, undertakes, at any time or from time to time,
to provide any such information to the Junior Creditor, the Senior Creditor
shall be under no obligation (i) to provide any such information to the Junior
Creditor on any subsequent occasion, (ii) to undertake any investigation not a
part of its regular business routine, or (iii) to disclose any

 

8

 

information which, pursuant to its usual practices, the Senior Creditor
wishes to maintain confidential.  The
Junior Creditor hereby agrees that all payments received by the Senior Creditor
may be applied, in whole or in part, to any of the Senior Debt, as the Senior
Creditor, in its sole discretion, deems appropriate and assents to any
extension or postponement of the time of payment of the Senior Debt or to any
other indulgence with respect thereto, to any substitution, exchange or release
of collateral which may at any time secure the Senior Debt and to the addition
or release of any other Person primarily or secondarily liable therefor.

 

Section 14. 
Notices.  All communications and notices provided under this Agreement to
any party shall be given in writing by manual delivery, facsimile transmission,
overnight courier or United States first class mail to such party’s address
shown on the signature page hereof, or to any party at such other address as
may be designated by such party in a notice to the other parties.  All periods of notice shall be measured from
the date of delivery thereof if manually delivered, from the date of sending if
sent by facsimile transmission, from the first business day after the date of
sending if sent by overnight courier, or from four days after the date of
mailing if mailed.

 

Section
15.  Governing Law and Construction.
 THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY
OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF.

 

Section
16.  Consent to Jurisdiction.  AT THE OPTION OF THE SENIOR CREDITOR, THIS AGREEMENT
MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN
HENNEPIN COUNTY, MINNESOTA; AND THE JUNIOR CREDITOR CONSENTS TO THE
JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN
SUCH FORUMS IS NOT CONVENIENT.  IN THE
EVENT THE JUNIOR CREDITOR COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE
UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP
CREATED BY THIS AGREEMENT, THE SENIOR CREDITOR AT ITS OPTION SHALL BE ENTITLED
TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED,
OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH
CASE DISMISSED WITHOUT PREJUDICE.

 

Section
17.  Waiver of Jury Trial.  THE JUNIOR CREDITOR, AND THE SENIOR CREDITOR BY
ACCEPTANCE HEREOF, IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR
UNDER ANY AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY CREDIT
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

 

9

 

Section 18. 
Severability.  Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.

 

Section 19. 
Miscellaneous.

 

(a) This Agreement and the terms, covenants
and conditions hereof shall inure to the benefit of the Senior Creditor and its
successors and assigns.  Nothing
contained in this Agreement, expressed or implied, is intended to confer upon
any Person other than the parties hereto and thereto any rights, remedies,
obligations or liabilities hereunder or thereunder.

 

(b) This Agreement sets forth the entire
understanding of the parties hereto relating to the subject matter hereof, and
all prior understandings and negotiations, written or oral, are merged into and
superseded by this Agreement.  Any
modification, amendment or waiver of this Agreement or any provision herein
shall be binding upon the Senior Creditor only if contained in a writing signed
by or on behalf of the Senior Creditor. 
No failure on the part of the Senior Creditor to exercise and no delay
in exercising any power or right hereunder, 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 provided are
cumulative and not exclusive of any remedies provided by law.

 

(c) The Junior Creditor hereby acknowledges
that (i) it has been advised by counsel to the extent Junior Creditor believes
necessary in the negotiation, execution and delivery of this Agreement, (ii)
the Senior Creditor has no fiduciary relationship to the Junior Creditor, and
(iii) no joint venture exists between the Junior Creditor and the Senior
Creditor.

 

(d) All covenants, agreements,
representations and warranties made in this Agreement and in any certificates
or other papers delivered by or on behalf of the Junior Creditor pursuant
hereto shall be deemed to have been relied upon by the Senior Creditor and
shall survive the execution and delivery of this Agreement, and shall continue
in full force and effect so long as any Senior Debt remains outstanding and
unpaid or any financing arrangement between the Borrower and the Senior
Creditor remains in effect.  All
statements of fact relating to the Junior Creditor contained in any certificate
or other paper delivered to the Senior Creditor at any time after the date
hereof by or on behalf of the Junior Creditor pursuant hereto or in connection
with the transactions contemplated hereby shall constitute representations and
warranties by the undersigned hereunder.

 

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

 

10

 

Section 20. 
Intercreditor Agreements.

 

(a) If the Borrower raises proceeds through the issuance of any capital
stock or other equity interest of the Borrower or other interest convertible
into an equity interest in the Borrower, then the Borrower shall pay to the
Senior Creditor and the Junior Creditor, when and as received by the Borrower
and as a mandatory pro tanto prepayment of all obligations owing to the Senior
Creditor and all obligations owing to the Junior Creditor, a sum equal to one
hundred percent (100%) of the net proceeds to the Borrower of the issuance of
such equity, payable: (i) until the Senior Debt is satisfied in full, one
hundred percent (100%) to the Senior Creditor and zero percent (0%) to the
Junior Creditor; and (ii) after the Senior Debt is satisfied in full, (x) fifty
percent (50%) to the Senior Creditor and fifty percent (50%) to the Junior
Creditor for so long as both are owed any obligations by the Borrower, or (y)
if all obligations to either the Junior Creditor or the Senior Creditor are
satisfied, then one hundred percent (100%) to either the Junior Creditor or the
Senior Creditor, whichever party has remaining obligations owed to them, as the
case may be; provided, however, that this mandatory prepayment obligation shall
not apply with respect to the first $50,000 in net proceeds received by the
Borrower from the exercise of any options or warrants which have been issued
and are effective as of July 1, 2003.

 

(b) All Subordinated Debt Collections received by the Senior Creditor
or the Junior Creditor (whether before or after the satisfaction in full of the
Senior Debt) shall be held by the Senior Creditor and the Junior Creditor in
trust, as trustee, for the benefit of the other and shall be divided and
applied to the Subordinated Debt as follows: (i) first, to the payment of all
collection expenses, including reasonable attorneys fees; and (ii) second,
fifty percent (50%) to the Junior Creditor and fifty percent (50%) to the
Senior Creditor for so long as both are owed obligations by the Borrower, and
(iii) third, if all obligations to either the Junior Creditor or the Senior
Creditor are satisfied, then one hundred percent (100%) to either the Junior
Creditor or the Senior Creditor, whichever party has remaining obligations owed
to them by the Borrower, as the case may be.

 

(c) In the event any
Subordinated Debt Collections amount is subsequently recovered from Senior
Creditor or from Junior Creditor by the Borrower or the Borrower as a
debtor-in-possession, or by any trustee or receiver under any applicable
bankruptcy or insolvency law, such amount shall be reimbursed by Junior
Creditor and Senior Creditor according to the provisions of subsection (b)
immediately above.

 

(d) After the satisfaction in full of the Senior Debt, all decisions
with respect to any and all action and with respect to the pursuit of any and
all rights and remedies available to Senior Creditor and the Junior Creditor
under the May Security Agreement or applicable law shall be made jointly by
Senior Creditor and Junior Creditor.

 

11

 

(e) Senior Creditor and Junior Creditor shall keep and maintain at all
times, all proper books of account, files and records, reflecting the
Subordinated Debt, which records shall be available for review by the other
party upon reasonable written notice.

 

(The signature page follows.)

 

12

 

IN WITNESS
WHEREOF, this Subordination and Intercreditor Agreement has been signed as of
the date first set forth above.

 

	
   

  	
  /s/ Peter L.
  Hauser

  	
   

  
	
   

  	
  PETER L. HAUSER

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for
  Notice:

  	
   

  
	
   

  	
  16913 Kings
  Court

  	
   

  
	
   

  	
  Lakeville,
  MN  55044

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PKM
  PROPERTIES, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Paul Miller

  	
   

  
	
   

  	
  Name:   Paul
  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

  	
   

  
				

 

 

ACCEPTANCE AND ACKNOWLEDGMENT

 

The Borrower named above hereby accepts, and
acknowledges receipt of a copy of, the foregoing Subordination and Intercreditor
Agreement and agrees that (a) it will not pay any of the “Subordinated Debt”
(as defined in the foregoing Agreement) or grant any security therefor, except
as the foregoing Agreement provides, and (b) it is bound by and will comply
with the mandatory prepayment provisions with respect to the Senior Debt and
the Subordinated Debt as provided in Section 20(a) of the foregoing Agreement.

 

	
   

  	
  MEDICAL CV, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Jules L. Fisher

  	
   

  
	
   

  	
  Name:   Jules
  L. Fisher

  
	
   

  	
  Its: 
  Chief Financial Officer

  

 

13EXHIBIT 10.4

 

MAY SECURITY AGREEMENT

 

 

	
  DATE:

  	
   

  	
  July 1, 2003

  
	
   

  	
   

  	
   

  
	
  PARTIES:

  	
   

  	
  PKM
  Properties, LLC

  
	
   

  	
   

  	
  c/o Gracon Contracting, Inc.

  
	
   

  	
   

  	
  606 24th Avenue South, Suite B12

  
	
   

  	
   

  	
  Minneapolis, MN 55454

  
	
   

  	
   

  	
  Attention:  Paul K. Miller

  	
  (“PKM Properties”)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Peter L.
  Hauser

  
	
   

  	
   

  	
  16913 Kings
  Court

  
	
   

  	
   

  	
  Lakeville,
  MN  55044

  	
  (“Hauser”)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (Hauser and
  PKM Properties, individually and collectively, and their respective
  successors and assigns, will be referred to in this May Security Agreement as
  the “Secured Party”)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MedicalCV,
  Inc.

  
	
   

  	
   

  	
  9725 South Robert Trail

  
	
   

  	
   

  	
  Inver Grove
  Heights, MN  55077

  
	
   

  	
   

  	
  Organizational
  Identification Number:  7J-436

  	
  (“Debtor”)

  
					

 

AGREEMENTS:

 

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

 

1.             Grant
of Security Interest and Collateral.  In order to secure payment and performance
of each and every debt, liability and obligation of every type and description
which Debtor may now or at any time hereafter owe to Secured Party whether such
debt, liability or obligation now exists or is hereafter created or incurred,
whether it arises under or is evidenced by this May Security Agreement or any
other present or future instrument or agreement or by operation of law, and
whether it is or may be direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole, joint,
several or joint and several (all such debts, liabilities and obligations and
any amendments, extensions, renewals or replacements thereof are herein
collectively referred to as the “Obligations”), Debtor hereby grants
Secured Party a security interest (the “Security Interest”) in all of
Debtor’s property (the “Collateral”), including without limitation the
following:

 

1

 

(a)           Inventory and
Goods:  All inventory of Debtor,
whether now owned or hereafter acquired and wherever located and other tangible
personal property held for sale or lease or furnished or to be furnished under
contracts of service or consumed in Debtor’s business, and all goods of Debtor,
whether now owned or hereafter acquired and wherever located, including without
limitation all computer programs embedded in goods;

 

(b)           Equipment:  All equipment of Debtor, whether now owned
or hereafter acquired and wherever located, including but not limited to all
present and future equipment, machinery, tools, motor vehicles, trade fixtures,
furniture, furnishings, office and recordkeeping equipment and all goods for
use in Debtor’s business, together with all parts, equipment and attachments
relating to any of the foregoing;

 

(c)           Accounts,
Contract Rights and Other Rights to Payment:  Each and every right of Debtor to the payment of money, whether
such right to payment now exists or hereafter arises, whether such right to
payment arises out of a sale, lease, license, assignment or other disposition
of goods or other property by Debtor, out of a rendering of services by Debtor,
out of a loan by Debtor, out of the overpayment of taxes or other liabilities
of Debtor, or otherwise arises under any contract or agreement, whether such
right to payment is or is not already earned by performance, and howsoever such
right to payment may be evidenced, together with all other rights and interests
(including all liens and security interests) which Debtor may at any time have
by law or agreement against any account debtor or other obligor obligated to
make any such payment or against any of the property of such account debtor or
other obligor; all including but not limited to all present and future debt
instruments, chattel papers, accounts, license fees, contract rights, loans and
obligations receivable and tax refunds;

 

(d)           Instruments:  All instruments, chattel paper, letters of
credit or other documents of Debtor, whether now owned or hereafter acquired,
including but not limited to promissory notes, drafts, bills of exchange and
trade acceptances; all rights and interests of Debtor, whether now existing or
hereafter created or arising, under leases, licenses or other contracts;

 

(e)           Deposit Accounts
and Investment Property:  All right,
title and interest of Debtor in all deposit and investment accounts maintained
with any bank, savings and loan association, broker, brokerage, or any other
financial institution, together with all monies and other property deposited or
held therein, including, without limitation, any checking account, savings
account, escrow account, savings certificate and margin account, and all
securities, whether certificated or uncertificated, security entitlements,
securities accounts, commodity contracts, and commodity accounts; and

 

(f)            General
Intangibles:  All general
intangibles of Debtor, whether now owned or hereafter acquired, including, but
not limited to, applications for patents, patents, copyrights, trademarks,
trade secrets, good will, tradenames, customer lists, permits and franchises,
software, and the right to use Debtor’s name, and any and all

 

2

 

membership
interests, governance rights, and financial rights in each and every limited
liability company, and all payment intangibles;

 

together with all substitutions and replacements for and products of
any of the foregoing property and proceeds of any and all of the foregoing
property and, in the case of all tangible Collateral, together with
(i) all accessories, attachments, parts, equipment, accessions and repairs
now or hereafter attached or affixed to or used in connection with any such
goods, (ii) all warehouse receipts, bills of lading and other documents of
title now or hereafter covering such goods, and (iii) all books and
records of Debtor.

 

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

 

(a)           Debtor is a
corporation duly organized, validly existing and in good standing under the
laws of the state of Minnesota.  This
May Security Agreement has been duly and validly authorized by all necessary
corporate action.  Debtor has full power
and authority to execute this Agreement, to perform Debtor’s obligations
hereunder and to subject the Collateral to the Security Interest.  Debtor’s organizational identification
number is the number shown at the beginning of this Agreement.

 

(b)           The Collateral will
be used primarily for business purposes.

 

(c)           Debtor’s chief place
of business is located at the address shown at the beginning of this
Agreement.  Debtor’s records concerning
its accounts and contract rights are kept at such address.  The Collateral is located at the address
shown at the beginning of this Agreement. 
Debtor will give at least 30 days’ advance written notice to Secured
Party of any change in Debtor’s jurisdiction of organization or chief place of
business and any change in or addition of any Collateral location.

 

(d)           Except as otherwise
provided in that certain May Discretionary Credit Agreement, dated as of the
date hereof, as amended from time to time, between the Debtor and the Secured
Party (the “Credit Agreement”), Debtor has (or will have at the time
Debtor acquires rights in Collateral hereafter arising) and will maintain
absolute title to each item of Collateral free and clear of all security
interests, liens and encumbrances, except the Security Interest, and will
defend the Collateral against all claims or demands of all persons other than
Secured Party.

 

(e)           Except as otherwise
provided in the Credit Agreement, Debtor will not sell or otherwise transfer or
dispose of the Collateral or any interest therein.

 

(f)            Debtor will not
permit any tangible Collateral to be located in any state (and, if a county
filing is required, in any county) in which a financing statement covering such
Collateral is required to be, but has not in fact been, filed.

 

(g)           All rights to
payment and all instruments, documents, chattel papers and other agreements
constituting or evidencing Collateral are (or will be when arising or

 

3

 

issued) the
valid, genuine and legally enforceable obligation, subject to no defense,
set-off or counterclaim (other than those arising in the ordinary course of
business) of each account debtor or other obligor named therein or in Debtor’s
records pertaining thereto as being obligated to pay such obligation.  Debtor will not agree to any modification,
amendment or cancellation of any such obligation without Secured Party’s prior
written consent except discounts provided by Debtor in the ordinary course of
business, and will not subordinate any such right to payment to claims of other
creditors of such account debtor or other obligor.

 

(h)           Debtor will keep all
tangible Collateral in good repair, working order and condition, normal
depreciation excepted, and will, from time to time, replace any worn, broken or
defective parts thereof.

 

(i)            Except as otherwise
provided in the Credit Agreement, Debtor will promptly pay all taxes and other
governmental charges levied or assessed upon or against any Collateral or upon
or against the creation, perfection or continuance of the Security Interest.

 

(j)            Debtor will
promptly notify Secured Party of any material loss of or damage to any
Collateral or of any adverse change in the prospect of payment of any material
sums due on or under any instrument, chattel paper, account or contract right
constituting Collateral.

 

(k)           Debtor will if
Secured Party at any time so requests (whether the request is made before or
after the occurrence of an Event of Default), promptly deliver to Secured Party
any instrument, document or chattel paper constituting Collateral, duly
endorsed or assigned by Debtor to Secured Party.

 

(l)            Debtor will at all
times keep all tangible Collateral insured against risks of fire (including
so-called extended coverage), theft, and such other risks and in such amounts
as Secured Party may reasonably request, with any loss payable to Secured Party
to the extent of its interest.

 

(m)          If any Collateral is
covered by a certificate of title, Debtor will from time to time execute such
documents as may be required to have the Security Interest properly noted on a
certificate of title.  Debtor authorizes
Secured Party to file from time to time such financing statements against the
Collateral described as “all assets” or the like as Secured Party deems
necessary or useful to perfect the Security Interest.

 

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

 

4

 

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

 

(p)           Debtor will not use
or keep any Collateral, or permit it to be used or kept, for any unlawful
purpose or in violation of any federal, state or local law, statute or
ordinance.

 

If Debtor at any time fails to
perform or observe any agreement contained in Sections 2(h) through 2(o),
immediately upon the occurrence of such failure, without notice or lapse of
time, Secured Party may (but need not) perform or observe such agreement on
behalf and in the name, place and stead of Debtor (or, at Secured Party’s
option, in Secured Party’s own name) and may (but need not) take any and all
other actions which Secured Party may reasonably deem necessary to cure or
correct such failure (including, without limitation, the payment of taxes, the
satisfaction of security interests, liens, or encumbrances, the performance of
obligations under contracts or agreements with account debtors or other obligors,
the procurement and maintenance of insurance, the execution of financing
statements, the endorsement of instruments, and the procurement of repairs,
transportation or insurance); and, except to the extent that the effect of such
payment would be to render any loan or forbearance of money usurious or
otherwise illegal under any applicable law, Debtor shall thereupon pay Secured
Party on demand the amount of all moneys expended and all costs and expenses
(including reasonable attorneys’ fees) incurred by Secured Party in connection
with or as a result of Secured Party’s performing or observing such agreements
or taking such actions, together with interest thereon from the date expended
or incurred by Secured Party at the highest rate then applicable to any of the
Obligations.  To facilitate the
performance or observance by Secured Party of such agreements of Debtor, Debtor
hereby irrevocably appoints (which appointment is coupled with an interest)
Secured Party, or its delegate, as the attorney-in-fact of Debtor with the
right (but not the duty) from time to time to create, prepare, complete,
execute, deliver, endorse or file, in the name and on behalf of Debtor, any and
all instruments, documents, financing statements, applications for insurance
and other agreements and writings required to be obtained, executed, delivered
or endorsed by Debtor under this Section 2.

 

3.             Lock
Box; Collateral Account.  If Secured Party so requests at any time after the occurrence of
an Event of Default (as defined in Section 7 of this Agreement), Debtor will
direct each of its account debtors to make payments due under the relevant
account or chattel paper directly to a special lock box to be under the control
of Secured Party (the “Lock Box”). 
Debtor hereby authorizes and directs Secured Party to deposit into a
special collateral account to be established and maintained with Secured Party
(the “Collateral Account”) all checks, drafts, and cash payments
received in the Lock Box.  All deposits
in the Collateral Account shall constitute proceeds of Collateral and shall not
constitute payment of any Obligation. 
At its option, Secured Party shall, at any time, apply finally collected
funds on deposit in the Collateral Account to the payment of the Obligations in
such order of application as Secured Party may determine, or permit Debtor to
withdraw all or any part of the balance. 
If a Lock Box is so established, Debtor agrees that it will promptly
deliver to Secured Party, for deposit into the Lock Box, all payments

 

5

 

on accounts and chattel paper
received by it.  All such payments shall
be delivered to Secured Party in the form received (except for Debtor’s
endorsement where necessary).  Until so
deposited, all such payments on accounts and chattel paper received by Debtor
shall be held in trust by Debtor for and as the property of Secured Party and
shall not be commingled with any funds or property of Debtor.

 

4.             Account
Verification and Collection Rights of Secured Party.  Secured Party shall have the right to verify
any accounts in the name of Debtor or in Secured Party’s own name; and Debtor,
whenever requested, shall furnish Secured Party with duplicate statements of
the accounts, which statements may be mailed or delivered by Secured Party for
that purpose.  Whether or not Secured
Party exercises its rights under Section 3 of this Agreement, Secured Party may
at any time (whether before or after the occurrence of an Event of Default)
notify any account debtor or any other person obligated to pay any amount due,
that such chattel paper, account or other right to payment has been assigned or
transferred to Secured Party for security and shall be paid directly to Secured
Party.  If Secured Party so requests at
any time (whether before or after the occurrence of an Event of Default),
Debtor will so notify such account debtors and other obligors in writing and
will indicate on all invoices to such account debtors or other obligors that
the amount due is payable directly to Secured Party.  At any time after Secured Party or Debtor gives such notice to an
account debtor or other obligor, Secured Party may (but need not), in Secured
Party’s own name or in Debtor’s name, demand, sue for, collect or receive any
money or property at any time payable or receivable on account of, or securing,
any such chattel paper, account or other right to payment, or grant any
extension to, make any compromise or settlement with or otherwise agree to
waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor.

 

5.             Assignment
of Insurance. 
Debtor hereby assigns to Secured Party, as additional security for the
payment of the Obligations, any and all moneys (including but not limited to
proceeds of insurance and refunds of unearned premiums) due or to become due
under, and all other rights of Debtor under or with respect to, any and all
policies of insurance covering the Collateral, and Debtor hereby directs the
issuer of any such policy to pay any such moneys directly to Secured
Party.  Both before and after the
occurrence of an Event of Default, Secured Party may (but need not), in Secured
Party’s own name or in Debtor’s name, execute and deliver proofs of claim,
receive all such moneys, endorse checks and other instruments representing
payment of such moneys, and adjust, litigate, compromise or release any claim
against the issuer of any such policy.

 

6.             Right
to Offset. 
Nothing in this Agreement shall be deemed a waiver or prohibition of
Secured Party’s right of banker’s lien, offset, or counterclaim, which right
Debtor hereby grants to Secured Party.

 

7.             Events
of Default. 
The occurrence of any Event of Default, as defined in Section 10.1
of the Credit Agreement, shall constitute an Event of Default hereunder.

 

8.             Remedies
Upon Event of Default.  Upon the occurrence of an Event of Default and at any time
thereafter until such Event of Default is cured to the written satisfaction of
Secured Party, Secured Party may exercise any one or more of the rights or
remedies set forth in

 

6

 

Section 10.2 of the Credit
Agreement.  All rights and remedies of
Secured Party shall be cumulative and may be exercised singularly or
concurrently, at Secured Party’s option, and the exercise or enforcement of any
one such right or remedy shall neither be a condition to nor bar the exercise
or enforcement of any other.

 

9.             Other
Personal Property.  If at the time Secured Party takes possession of any tangible
Collateral, any goods, papers or other properties of Debtor, not affixed to or
constituting a part of such Collateral, are located or to be found upon or
within such Collateral, Debtor agrees to notify Secured Party in writing of
that fact, describing the property so located or to be found, within 7 calendar
days after the date on which Secured Party took possession. Unless and until
Secured Party receives such notice from Debtor, Secured Party shall not be
responsible or liable to Debtor for any action taken or omitted by or on behalf
of Secured Party with respect to such property without actual knowledge of the
existence of any such property or without actual knowledge of the fact that it
was located or to be found upon such Collateral.

 

10.          Amendment;
Waivers. 
This Agreement can be waived, modified, amended, terminated or
discharged, and the Security Interest can be released, only explicitly in a
writing signed by Secured Party and Debtor. 
A waiver shall be effective only in the specific instance and for the
specific purpose given.  Mere delay or
failure to act shall not preclude the exercise or enforcement of any of Secured
Party’s rights or remedies.

 

11.          Notices.  All notices to be given to Debtor shall be
deemed sufficiently given if mailed by registered or certified mail, postage
prepaid, or delivered to Debtor at Debtor’s address set forth above or at the
most recent address shown on Secured Party’s records.

 

12.          Miscellaneous.  Secured Party’s duty of care with respect to
Collateral in its possession (as imposed by law) shall be deemed fulfilled if
Secured Party exercises reasonable care in physically safekeeping such
Collateral or, in the case of Collateral in the custody or possession of a
bailee or other third person, exercises reasonable care in the selection of the
bailee or other third person, and Secured Party need not otherwise preserve,
protect, insure or care for any Collateral. 
Secured Party shall not be obligated to preserve any rights Debtor may
have against prior parties, to realize on the Collateral at all or in any
particular manner or order, or to apply any cash proceeds of Collateral in any
particular order of application.  This
Agreement shall be binding upon and inure to the benefit of Debtor and Secured Party
and their respective representatives, successors and assigns and shall take
effect when signed by Debtor and delivered to Secured Party, and Debtor waives
notice of Secured Party’s acceptance hereof. 
Secured Party may execute this Agreement if appropriate for the purpose
of filing, but the failure of Secured Party to execute this Agreement shall not
affect or impair the validity or effectiveness of this Agreement.

 

(The
signature page follows.)

 

7

 

THE PARTIES
have executed this May Security Agreement the day and year first above written.

 

 

	
  Secured Party:

  	
  PKM PROPERTIES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Paul K. Miller

  	
   

  
	
   

  	
  Paul K.
  Miller,

  
	
   

  	
  its Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Peter L.
  Hauser

  	
   

  
	
   

  	
  Peter L.
  Hauser, an individual

  
	
   

  	
   

  
	
   

  	
   

  
	
  Debtor:

  	
  MEDICALCV, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Jules L. Fisher

  	
   

  
	
   

  	
  Jules L.
  Fisher

  
	
   

  	
  its Chief
  Financial Officer

  
						

 

8

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00053-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00053-of-00352.parquet"}]]