MEDICALCV INC
EX-10.5
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>6
<FILENAME>a04-14038_1ex10d5.htm
<DESCRIPTION>EX-10.5
<TEXT>
<html>

<head>





</head>

<body lang="EN-US" link="blue" vlink="purple">

<div style="font-family:Times New Roman;">

<p align="right" style="margin:0in 0in .0001pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">EXHIBIT 10.5</font></b></p>

<p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;page-break-after:auto;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">WAIVER AGREEMENT</font></b></p>

<p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">DATE:</font></b><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160; </font>October
29, 2004</p>

<p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="45%" valign="top" style="padding:0in 0in 0in 0in;width:45.84%;">
  <p align="left" style="margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">PARTIES:</font></b></p>
  </td>
  <td width="54%" valign="top" style="padding:0in 0in 0in 0in;width:54.16%;">
  <p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="45%" valign="top" style="padding:0in 0in 0in 0in;width:45.84%;">
  <p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="54%" valign="top" style="padding:0in 0in 0in 0in;width:54.16%;">
  <p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="45%" valign="top" style="padding:0in 0in 0in 0in;width:45.84%;">
  <p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">MEDICALCV, INC.,</font></p>
  </td>
  <td width="54%" valign="top" style="padding:0in 0in 0in 0in;width:54.16%;">
  <p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="45%" valign="top" style="padding:0in 0in 0in 0in;width:45.84%;">
  <p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">a Minnesota corporation</font></p>
  </td>
  <td width="54%" valign="top" style="padding:0in 0in 0in 0in;width:54.16%;">
  <p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(the &#147;<b><u><font style="font-weight:bold;">Borrower</font></u></b>&#148;)</font></p>
  </td>
 </tr>
 <tr>
  <td width="45%" valign="top" style="padding:0in 0in 0in 0in;width:45.84%;">
  <p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="54%" valign="top" style="padding:0in 0in 0in 0in;width:54.16%;">
  <p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="45%" valign="top" style="padding:0in 0in 0in 0in;width:45.84%;">
  <p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">PKM PROPERTIES, LLC,</font></p>
  </td>
  <td width="54%" valign="top" style="padding:0in 0in 0in 0in;width:54.16%;">
  <p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="45%" valign="top" style="padding:0in 0in 0in 0in;width:45.84%;">
  <p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">a Minnesota limited liability company</font></p>
  </td>
  <td width="54%" valign="top" style="padding:0in 0in 0in 0in;width:54.16%;">
  <p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(the &#147;<b><u><font style="font-weight:bold;">Lender</font></u></b>&#148;).</font></p>
  </td>
 </tr>
</table>

<p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">RECITALS</font></b>:</p>

<p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Paul
K. Miller (&#147;Miller&#148;) is a director and shareholder of the Borrower and is a
member and manager of, and has a material financial interest in, the Lender.</p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">B.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>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 &#147;<b><u><font style="font-weight:bold;">January Discretionary
Credit Agreement</font></u></b>&#148;), 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 &#147;<b><u><font style="font-weight:bold;">May Discretionary Credit Agreement</font></u></b>&#148;),
a $500,000 discretionary credit facility under a November 11, 2003 Discretionary
Credit Agreement (the &#147;November 2003 Credit Agreement&#148;), and a $250,000
discretionary credit facility under an April 16, 2004 April 2004 Discretionary
Credit Agreement (the &#147;<b><u><font style="font-weight:bold;">April Discretionary Credit
Agreement</font></u></b>&#148; and together with the January Discretionary Credit
Agreement and the May Discretionary Credit Agreement, the &#147;Credit Agreements&#148;).</p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">C.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>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.</p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">D.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Borrower&#146;s noncompliance constitutes a default under the Credit
Agreements.&#160; 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 &#147;<b><u><font style="font-weight:bold;">Existing Defaults</font></u></b>&#148;).</p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">E.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Borrower has requested the Lender to waive the Existing Defaults.</p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">F.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Capitalized
terms not otherwise defined in this Agreement shall have the meanings given
such terms in the Credit Agreements.</p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;page-break-after:auto;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">AGREEMENTS:</font></b></p>

<p style="font-size:10.0pt;font-weight:bold;margin:0in 0in .0001pt;page-break-after:auto;text-align:center;">&nbsp;</p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">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:</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Waiver</u>.&#160; 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 </p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

</div>
<!-- SEQ.=1,FOLIO='1',FILE='C:\JMS\avelayu\04-14038-1\task237312\14038-1-kk.htm',USER='sdevarajan',CD='Nov 23 14:51 2004' -->


<br clear="all" style="page-break-before:always;">


<div style="font-family:Times New Roman;">

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">the Borrower&#146;s failure to
comply with any other covenants or agreements contained in the Credit
Agreements, as amended.&#160; 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.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Conditions
Precedent</u>.&#160; The effectiveness of this
Agreement, including the waiver furnished herein, is subject to the Lender&#146;s
receipt, in form satisfactory to the Lender and its counsel, of all of the
documents in connection with the October 2004 Credit Agreement.</p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Release</u>.&#160; 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&#146; 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.&#160;
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.</p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Estoppel</u>.&#160; 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&#146; 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.</p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Representation
and Warranty</u>.&#160; 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.</p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Binding
Nature of Loan Documents</u>.&#160; 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.&#160; The Borrower hereby reaffirms
and restates the Borrower&#146;s duties, obligations and liability under the Credit
Agreements and each Loan Document.</p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Counterparts</u>.&#160; 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.&#160;
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.</p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">[<i><font style="font-style:italic;">Signatures on the
Following Page</font></i>]</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>

<div align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

</div>
<!-- SEQ.=1,FOLIO='2',FILE='C:\JMS\avelayu\04-14038-1\task237312\14038-1-kk.htm',USER='sdevarajan',CD='Nov 23 14:51 2004' -->


<br clear="all" style="page-break-before:always;">


<div style="font-family:Times New Roman;">

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">THE PARTIES
have executed this Waiver Agreement as of the day and year first above written.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="49%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">MEDICALCV,
  INC.</font></p>
  </td>
  <td width="0%" style="border:none;font-size:1.0pt;padding:0in 0in 0in 0in;"><p style="margin:0in 0in .0001pt;">&nbsp;</p></td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="49%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="0%" style="border:none;font-size:10.0pt;padding:0in 0in 0in 0in;"><p style="margin:0in 0in .0001pt;">&nbsp;</p></td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="49%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="0%" style="border:none;font-size:10.0pt;padding:0in 0in 0in 0in;"><p style="margin:0in 0in .0001pt;">&nbsp;</p></td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
  </td>
  <td width="31%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:31.58%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;&nbsp;/s/ John H. Jungbauer</font></p>
  </td>
  <td width="15%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:15.2%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="0%" style="border:none;font-size:1.0pt;padding:0in 0in 0in 0in;"><p style="margin:0in 0in .0001pt;">&nbsp;</p></td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="49%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name: John
  H. Jungbauer</font></p>
  </td>
  <td width="0%" style="border:none;font-size:1.0pt;padding:0in 0in 0in 0in;"><p style="margin:0in 0in .0001pt;">&nbsp;</p></td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="49%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title: Chief
  Financial Officer</font></p>
  </td>
  <td width="0%" style="border:none;font-size:1.0pt;padding:0in 0in 0in 0in;"><p style="margin:0in 0in .0001pt;">&nbsp;</p></td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="49%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="0%" style="border:none;font-size:10.0pt;padding:0in 0in 0in 0in;"><p style="margin:0in 0in .0001pt;">&nbsp;</p></td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="49%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">PKM
  PROPERTIES, LLC</font></p>
  </td>
  <td width="0%" style="border:none;font-size:1.0pt;padding:0in 0in 0in 0in;"><p style="margin:0in 0in .0001pt;">&nbsp;</p></td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="49%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="0%" style="border:none;font-size:10.0pt;padding:0in 0in 0in 0in;"><p style="margin:0in 0in .0001pt;">&nbsp;</p></td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="49%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="0%" style="border:none;font-size:10.0pt;padding:0in 0in 0in 0in;"><p style="margin:0in 0in .0001pt;">&nbsp;</p></td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
  </td>
  <td width="31%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:31.72%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;&nbsp;/s/ Paul K. Miller</font></p>
  </td>
  <td width="15%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:15.36%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="49%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name: Paul
  K. Miller</font></p>
  </td>
  <td width="0%" style="border:none;font-size:1.0pt;padding:0in 0in 0in 0in;"><p style="margin:0in 0in .0001pt;">&nbsp;</p></td>
 </tr>
 <tr>
  <td width="49%" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="49%" colspan="4" valign="top" style="padding:0in 0in 0in 0in;width:49.84%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title: Chief
  Executive Officer</font></p>
  </td>
  <td width="0%" style="border:none;font-size:1.0pt;padding:0in 0in 0in 0in;"><p style="margin:0in 0in .0001pt;">&nbsp;</p></td>
 </tr>
 <tr height="0">
  <td width="373" style="border:none;"></td>
  <td width="23" style="border:none;"></td>
  <td width="236" style="border:none;"></td>
  <td width="1" style="border:none;"></td>
  <td width="113" style="border:none;"></td>
  <td width="2" style="border:none;"></td>
 </tr>
</table>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

</div>
<!-- SEQ.=1,FOLIO='3',FILE='C:\JMS\avelayu\04-14038-1\task237312\14038-1-kk.htm',USER='sdevarajan',CD='Nov 23 14:51 2004' -->


<br clear="all" style="page-break-before:always;">


<div style="font-family:Times New Roman;">

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;page-break-after:auto;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Exhibit A</font></b></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;page-break-after:auto;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Existing Defaults</font></b></p>

<p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(1)</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
following payments under November 2003 Credit Agreement were not made when due:</p>

<p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>interest
payment due on 11-30-03 was paid on 12-31-03;</p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>interest
payment due on 3-31-04 was paid on 4-29-04.</p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(2)</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
following payments under January 2003 Discretionary Credit Agreement were not
made when due:</p>

<p align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>interest
payment due on 6-30-03 was paid on 7-13-03;</p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>interest
payment due on 7-31-03 paid on 8-26-03.</p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(3)</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>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.</p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></p>

<div align="left" style="margin:0in 0in .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

</div>
<!-- SEQ.=1,FOLIO='4',FILE='C:\JMS\avelayu\04-14038-1\task237312\14038-1-kk.htm',USER='sdevarajan',CD='Nov 23 14:51 2004' -->


</body>

</html>

</TEXT>
</DOCUMENT>
