Exhibit 10

 

THE OPTION REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS
NOT REQUIRED.

MEDICALCV, INC.

NON-QUALIFIED STOCK OPTION AGREEMENT

 

No. of shares subject to option:                   
-                                                                                  
Option #                    

Date of grant:                      

 

THIS OPTION AGREEMENT is entered into by and between MedicalCV, Inc., a
Minnesota corporation (the “Company”), and                                (the
“Optionee”).

 

W I T N E S S E T H:

WHEREAS, the Company has agreed to grant Optionee an option to purchase shares
of its common stock outside the Company’s stock option plans; and

 

WHEREAS, the Board of Directors of the Company (“Board”) has authorized and
approved the grant of the following option (“Option”) on the terms set forth in
this Agreement,

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto have agreed, and do hereby
agree, as follows:

 

1.             Nature of the Option.  This Option is not intended to qualify as
an Incentive Stock Option within the meaning of Section 422 of the United States
Internal Revenue Code of 1986, as amended.  This Option is not granted pursuant
to the Company’s 2001 Equity Incentive Plan.

 

2.             Grant of Option.  The Company grants to the Optionee, subject to
the terms and conditions herein set forth, the right and option to purchase from
the Company all or a part of an aggregate of              shares of Stock (the
“Shares”) at the purchase price of $             per share, such Option to be
exercised as hereinafter provided.

 

3.             Terms and Conditions.  It is understood and agreed that the
Option evidenced hereby is subject to the following terms and conditions:

 

(a)           Expiration Date.  Except as hereinafter provided, this Option
shall expire ten years after the date of grant specified above.

 

 

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(b)           Exercise of Option.  Subject to the terms of this Agreement
regarding the exercisability of this Option, this Option shall be exercisable
cumulatively, to the extent it is vested, as set forth in Schedule A.  Any
exercise shall be accompanied by a written notice to the Company specifying the
number of shares of Stock as to which the Option is being exercised.  Notation
of any partial exercise shall be made by the Company on Schedule A.  This Option
may not be exercised for a fraction of a Share, and must be exercised for no
fewer than one hundred (100) shares of Stock, or such lesser number of shares as
may be vested.  Except upon a Change of Control as defined in Section 8 of this
Agreement.

 

(c)           Payment of Purchase Price Upon Exercise.  At the time of any
exercise, the Exercise Price of the Shares as to which this Option is exercised
shall be paid in cash to the Company.

 

(d)           Nontransferability.  This Option shall not be transferable other
than by will or by the laws of descent and distribution.  During the lifetime of
the Optionee, this Option shall be exercisable only by the Optionee or by the
Optionee’s guardian or legal representative.  No transfer of this Option by the
Optionee by will or by the laws of descent and distribution shall be effective
to bind the Company unless the Company is furnished with written notice thereof
and a copy of the will and/or such other evidence as the Board may determine
necessary to establish the validity of the transfer.

 

(e)           Acceleration of Option Upon Change in Control.  In the event of a
Change in Control, as defined in Section 8, the provisions of Section 3(b) and
Schedule A hereof pertaining to vesting shall cease to apply and this Option
shall become immediately vested and fully exercisable with respect to all
Shares.  No acceleration of vesting shall occur under this Subsection 3(e) in
the event a surviving corporation or its parent assumes this Option or in the
event the surviving corporation or its parent substitutes an option agreement
with substantially the same terms as provided in this Agreement.  Nothing in
this Subsection 3(e) shall limit the Committee’s authority to cancel this Option
in accordance with Section 5.

 

(f)            Subject to Lock Up.  Optionee understands that the Company at a
future date may file a registration or offering statement (the “Registration
Statement”) with the Securities and Exchange Commission to facilitate an
underwritten public offering of its securities.  The Optionee agrees, for the
benefit of the Company, that should such an underwritten public offering be made
and should the managing underwriter of such offering require, the undersigned
will not, without the prior written consent of the Company and such underwriter,
during the Lock Up Period as defined herein: sell, transfer or otherwise dispose
of, or agree to sell, transfer or otherwise dispose of this Option or any of the
Shares acquired upon exercise of this Option during the Lock Up Period; or sell
or grant, or agree to sell or grant, options, rights or warrants with respect to
any of the Shares acquired upon exercise of this Option.  The foregoing does not
prohibit gifts to donees or transfers by will or the laws of descent to heirs or
beneficiaries provided that such donees, heirs and beneficiaries shall be bound
by the restrictions set forth herein.  The term “Lock Up Period” shall mean the
lesser of (x) 180 days or (y) the period during which Company officers and
directors are restricted by the managing underwriter from effecting any sales or
transfers of the Shares.  The Lock Up Period shall commence on the effective
date of the Registration Statement.

 

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(g)           Not An Employment Contract.  The Option will not confer on the
Optionee any right with respect to employment or continuance of service with the
Company or any Subsidiary, nor will it interfere in any way with any right the
Company or any Subsidiary would otherwise have to terminate or modify the terms
of Optionee’s service at any time.

 

(h)           No Rights as Shareholder.  The Optionee shall have no rights as a
shareholder of the Company with respect to any Shares prior to the date of
issuance to the Optionee of a certificate for such Shares.

 

(i)            Compliance with Law and Regulations.  This Option and the
obligation of the Company to sell and deliver Shares hereunder shall be subject
to all applicable laws, rules and regulations (including, but not limited to,
federal securities laws) and to such approvals by any government or regulatory
agency as may be required.  This Option shall not be exercisable, and the
Company shall not be required to issue or deliver any certificates for Shares of
Stock prior to the completion of any registration or qualification of such
Shares under any federal or state law, or any rule or regulation of any
government body which the Company shall, in its sole discretion, determine to be
necessary or advisable.  Moreover, this Option may not be exercised if its
exercise or the receipt of Shares of Stock pursuant thereto would be contrary to
applicable law.

 

(j)            Withholding.  All deliveries and distributions under this
Agreement are subject to withholding of all applicable taxes.  At the election
of the Optionee, and subject to such rules and limitations as may be established
by the Committee from time to time, such withholding obligations may be
satisfied through the surrender of shares of Stock which the Optionee already
owns, or to which the Optionee is otherwise entitled hereunder.

 

(k)           Adjustments.  Subject to any required action by the shareholders
of the Company, the number of shares of common stock covered by the Option, as
well as the price per share of common stock covered by the Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of common stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the common stock, or any other
increase or decrease in the number of issued shares of outstanding common stock
effected without receipt of consideration by the Company.  No other issuance by
the Company of shares of stock or any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of common stock
subject to the Option.

 

4.             Death of Optionee.  Upon the death of Optionee prior to the
expiration of the Option, the following provisions shall apply:

 

(a)           If the Optionee is at the time of his death engaged by the Company
or a Subsidiary and has been in continuous service (as determined by the
Committee in its sole discretion) since the Date of Grant of the Option, then
the Option may be exercised by the Optionee’s estate or by a person who acquired
the right to exercise the Option by will or the laws of descent and
distribution, for one (1) year following the date of the Optionee’s death or
until the expiration date of the Option, whichever date is earlier, but only to
the extent the Optionee was vested in and entitled to exercise the Option at the
time of death.

 

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(b)           If the Optionee dies within three (3) months after termination of
Optionee’s service with the Company or a Subsidiary the Option may be exercised
for nine (9) months following the date of Optionee’s death or the expiration
date of the Option, whichever date is earlier, by the Optionee’s estate or by a
person who acquires the right to exercise the Option by will or the laws of
descent or distribution, but only to the extent the Optionee was vested in and
entitled to exercise the Option at the time of termination.

 

5.             Termination of Relationship for Misconduct.  If the Board or the
Committee reasonably believes that the Optionee has committed an act of
misconduct or breached Optionee’s letter agreement with the Company, it may
suspend the Optionee’s right to exercise this option pending a determination by
the Board or the Committee.  If the Board or the Committee determines that the
Optionee has committed an act of misconduct or breached Optionee’s letter
agreement with the Company, neither the Optionee nor the Optionee’s estate shall
be entitled to exercise any option whatsoever.  For purposes of this Section 5,
an act of misconduct shall include embezzlement, fraud, dishonesty, nonpayment
of an obligation owed to the Company, breach of fiduciary duty or deliberate
disregard of the Company’s rules resulting in loss, damage or injury to the
Company, or if the Optionee makes an unauthorized disclosure of any Company
trade secret or confidential information, engages in any conduct constituting
unfair competition with respect to the Company, or induces any party to breach a
contract with the Company,   In making such determination, the Board or the
Committee shall act fairly and shall give the Optionee an opportunity to appear
and present evidence on the Optionee’s behalf at a hearing before the Board or
the Committee.

 

6.             Restrictions on Transfer.

 

(a)           Securities Law Restrictions.  Regardless of whether the offering
and sale of common stock under this Agreement have been registered under the
Securities Act of 1933 (the “Act”) or have been registered or qualified under
the securities laws of any state, the Company at its discretion may impose
restrictions upon the sale, pledge or other transfer of such common stock
(including the placement of appropriate legends on stock certificates or the
imposition of stop-transfer instructions) if, in the judgment of the Company,
such restrictions are necessary or desirable in order to achieve compliance with
the Act, the securities laws of any state or any other law.

 

(b)           Investment Intent at Grant.  Optionee represents and agrees that
the Shares to be acquired upon exercising this Agreement will be acquired for
investment, and not with a view to the sale or distribution thereof.

 

(c)           Investment Intent at Exercise.  In the event that common stock
issued under this Agreement is not registered under the Act but an exemption is
available which requires an investment representation or other representation,
Optionee shall represent and agree at the time of exercise that the common stock
being acquired upon exercising the Option is being acquired for investment, and
not with a view to the sale or distribution thereof, and shall make such other
representations as are deemed necessary or appropriate by the Company and its
counsel.

 

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(d)           Legends.  All certificates evidencing Shares issued under this
Agreement in an unregistered transaction shall bear the following legend (and
such other restrictive legends as are required or deemed advisable under the
provisions of any applicable law):

 

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS
NOT REQUIRED.”

(e)           Removal of Legends.  If, in the opinion of the Company and its
counsel, any legend placed on a stock certificate representing Shares issued
under this Agreement is no longer required, the holder of such certificate shall
be entitled to exchange such certificate for a certificate representing the same
number of shares of common stock but without such legend.

(f)            Administration.  Any determination by the Company and its counsel
in connection with any of the matters set forth in this section shall be
conclusive and binding on Optionee and all other persons.

7.             Heirs and Successors.  This Agreement shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon
any person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company’s assets and business.  If
any rights exercisable by the Optionee or benefits deliverable to the Optionee
under this Agreement have not been exercised or delivered, respectively, at the
time of the Optionee’s death, such rights shall be exercisable by his Designated
Beneficiary.  The “Designated Beneficiary” shall be the beneficiary or
beneficiaries designated by the Optionee in a writing filed with the Committee
in such form and at such time as the Committee shall require.  If a deceased
Optionee fails to designate a beneficiary, or if the Designated Beneficiary does
not survive the Optionee, any rights that would have been exercisable by the
Optionee and any benefits distributable to the Optionee shall be exercised by or
distributed to the legal representative of the estate of the Optionee.  If a
deceased Optionee designates a beneficiary and the Designated Beneficiary
survives the Optionee but dies before the Designated Beneficiary’s exercise of
all rights under this Agreement or before the complete distribution of benefits
to the Designated Beneficiary under this Agreement, then any rights that would
have been exercisable by the Designated Beneficiary shall be exercised by the
legal representative of the estate of the Designated Beneficiary, and any
benefits distributable to the Designated Beneficiary shall be distributed to the
legal representative of the estate of the Designated Beneficiary.

8.             Change in Control.  The term “Change in Control” shall mean:

(a)           the acquisition by any person or group deemed a person under
Sections 3(a)(9) and 13(d)(3) of the Exchange Act (other than the Company and
its subsidiaries as determined immediately prior to that date) of beneficial
ownership, directly or indirectly (with beneficial ownership determined as
provided in Rule 13d-3, or any successor rule, under the Exchange Act), of a
majority of the total combined voting power of all classes of Stock of the
Company

 

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having the right under ordinary circumstances to vote at an election of the
Board, if such person or group deemed a person prior to such acquisition was not
a beneficial owner of at least five percent (5%) of such total combined voting
power of the Company;

(b)           the date of approval by the stockholders of the Company of an
agreement providing for the merger or consolidation of the Company with another
corporation or other entity where (x) stockholders of the Company immediately
prior to such merger or consolidation would not beneficially own following such
merger or consolidation shares entitling such stockholders to a majority of all
votes (without consolidation of the rights of any class of stock to elect
directors by a separate class vote) to which all stockholders of the surviving
corporation would be entitled in the election of directors, or (y) where the
members of the Board, immediately prior to such merger or consolidation, would
not, immediately after such merger or consolidation, constitute a majority of
the board of directors of the surviving corporation; or

(c)           the sale of all or substantially all of the assets of the Company.

9.             Notices.  Any notice hereunder to the Company shall be addressed
to it at its principal executive offices, located at 9725 South Robert Trail,
Inver Grove Heights, Minnesota 55077, Attention: Chief Executive Officer; and
any notice hereunder to the Optionee shall be addressed to the Optionee at the
address last appearing in the Company’s records; subject to the right of either
party to designate at any time hereunder in writing some other address.

10.           Counterparts.  This Agreement may be executed in two counterparts
each of which shall constitute one and the same instrument.

11.           Governing Law.  This Agreement shall be governed by and construed
in accordance with the laws of the State of Minnesota, except to the extent
preempted by federal law, without regard to the principles of comity or the
conflicts of law provisions of any other jurisdiction.

                IN WITNESS WHEREOF, MedicalCV, Inc. has caused this Agreement to
be executed by its Chief Financial Officer and the Optionee has executed this
Agreement, both as of the day and year first above written.

 

 

OPTIONEE

 

 

MEDICALCV, INC.

 

 

 

 

 

 

 

 

By John H. Jungbauer

 

 

Its Vice President, Finance and CFO

 

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SCHEDULE A

OPTION AND VESTING DATA

 

 

Name of Optionee:

 

 

 

 

 

Number of Shares Subject to Option:

 

 

 

 

 

Date of Grant:

 

 

 

 

 

Vests in Full:

 

 

 

 

OPTION VESTING SCHEDULE

DATE

 

NO. OF SHARES
EXERCISABLE

 

 

 

 

 

 

 

 

 

 

OPTIONEE

 

 

MEDICALCV, INC.

 

 

 

 

 

 

 

 

By John H. Jungbauer

 

 

Its Vice President, Finance and CFO

 

 

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NOTATIONS AS TO PARTIAL EXERCISE

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

 

Balance of

 

 

 

 

Date of

 

Purchased

 

Shares on

 

Authorized

 

Notation

Exercise

 

Shares

 

Option

 

Signature

 

Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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