**Exhibit 10.34**

 

**TECHNOLOGYPURCHASE AGREEMENT**

** **

**THIS AGREEMENT,** dated asof August 27, 2003, by and among MedicalCV, Inc., a Minnesota corporation(“MedicalCV”) and LightWave Ablation Systems, Inc., a North Carolinacorporation (“LightWave”), Gregory Brucker (Brucker), and Robert Svenson M.D.(“Svenson”).

 

**RECITALS**

** **

**•****                                         **LightWavehas developed technology relating to a catheter/probe (the “Product”) used forpurposes of delivering laser energy to the epicardial surface (or epicardium)of the heart for treatment of atrial fibrillation (the “Technology”), aspectsof which have been disclosed by LightWave to MedicalCV in a draft of aprovisional patent application attached hereto as Exhibit A.

 

**•****                                         **LightWavedesires to sell to MedicalCV its entire right and interest in the Technologyand in all intellectual property relating thereto relating to the treatment ofatrial fibrillation (the “Transaction”).

 

•                                          MedicalCVdesires to acquire all of LightWave’s right and interest in all tangible andintangible property relating to the Technology, including, but not limited to,all documentation, rights and patents, patent applications, improvements,designs, works of authorship, trade secrets and other intellectual propertyrelated to the Technology and any Product which utilizes the Technology, all onthe terms set forth in this Agreement.

 

•                                          To induceMedicalCV to enter into this Agreement, Brucker and Svenson agreed to be boundby certain covenants set forth herein.

 

**NOW, THEREFORE,** theparties agree as follows:

 

**SECTION 1.THE TRANSACTION**

 

1.1                                 *Definitions*.  The following terms used in this Agreementshall have the meanings set forth respectively:

 

(a)                                  “AcquiredAssets” has the meaning set forth in Section 1.2.

 

(b)                                 “Affiliate” means any person, firm or entity whichdirectly or indirectly controls, is controlled by or is under common controlwith or is an employee of a party to whom reference is made.  The term “control” shall mean the ownershipof 10% or more of the beneficial interest in the entity referred to.

 

(c)                                  “Agreement” means this limited asset purchase agreement,together with all Exhibits and Schedules attached hereto and the separatelyprepared Disclosure Schedules.

 

(d)                                 “Closing” has the meaning set forth inSection 2.1.

 

(e)                                  “Closing Date” has the meaning set forth inSection 2.1.

 

----

 

(f)                                    “Commercial Sale” means a sale of the Productto an unrelated party such as a distributor, end-user customer such as ahospital or other healthcare provider. Commercial Sale does not include the distribution of the Product as a sampleor for evaluation purposes, or for use in connection with clinical studies.

 

(g)                                 “Confidential Information” shall mean allproprietary information and materials (whether or not patentable), disclosed byany party to this Agreement to another party, irrespective of the manner inwhich such information is disclosed, in furtherance of this Agreementincluding, but not limited to, designs, inventions, the ProvisionalApplication, documentation, Know-How, methodology, techniques, equipment, data,works of authorship, specifications, sources of supply, vendors and customers,as well as the terms and existence of this Agreement (unless the terms andexistence of this Agreement shall have been publicly disclosed by MedicalCV).

 

(h)                                 “Contract” means any agreement, contract,obligation, promise, or undertaking (whether written or oral and whetherexpress or implied) that is legally binding.

 

(i)                                     “Disclosure Schedules” means those disclosureschedules, signed and delivered by LightWave to MedicalCV concurrently with theexecution and delivery of this Agreement.

 

(j)                                     “Encumbrance” means any charge, claim, right,covenant, community property interest, condition, reservation, equitableinterest, lien, mortgage, indenture, deed of trust, license, warrant, pledge,security interest, right of first refusal, or restriction of any kind,including any restriction on use, voting, transfer, receipt of income, orexercise of any other attribute of ownership.

 

(k)                                  “GovernmentalAuthority” means any federal,state, municipal, domestic, or foreign court, tribunal, or agency, department,board, instrumentality, commission, or other governmental authority.

 

(l)                                     “Indemnified Party” has the meaning set forth inSection 7.3.

 

(m)                               “Indemnifying Party” has the meaning set forth in Section 7.3.

 

(n)                                 “IntellectualProperty” as used in this agreement means any and all proprietary informationand rights and data as of the Closing Date in which LightWave has or obtains aninterest, which relates to the Technology or the Product including rights inany (i) patent, (ii) patent application, (iii) works of authorship andcopyright interests, (iv) trade secret, (v) Know-How, (vi) materials lists,(vii) designs and specifications, models, samples, prototypes, prints (viii)inventors’ notes, laboratory notebooks and records; (ix) tools, dies,murals;  (x) clinical and animal studiesrecords; (xi) vendor lists, (xii) patent files, including drafts of patentapplications (including the Provisional Application), patent counsel opinionsand correspondence and patent office correspondence, and (xiii) any otherdocumentation or proprietary information relating to the Technology.

 

(o)                                 “Know-How” as used in this Agreement shallmean all information, including methods, techniques, formulae, designs,studies, marketing methods, data, processes, prototypes, designs, orspecifications in which LightWave has or obtains an interest that relate to theTechnology, products integrating the Technology, the manufacture of productsusing the Technology and the subject matter in patents on any aspect of theTechnology developed prior to the Closing Date, either solely or jointly withothers, including employees, agents or consultants of LightWave.

 

----

 

(p)                                 “Knowledge” of (i) an Brucker means the Brucker’s actualknowledge and all knowledge that such Brucker would reasonably be expected tohave if he or she duly performed his or her duties as an officer, director,manager, consultant or employee, as the case may be, with due care and madereasonable and diligent inquiry and exercised due care with respect to thematter in question and (ii) an entity or organization shall be deemed toinclude the Knowledge of an Brucker who is performing his or her duties as anofficer, director, manager, a consultant or employee thereof.

 

(q)                                 “Liabilities” means all direct or indirect indebtedness,liabilities, claims, debts, damages, deficiencies, obligations, undertakings orresponsibilities, whether known or unknown, determined or determinable,accrued, fixed or unfixed, choate or unchoate, contingent or absolute,liquidated or unliquidated, future or otherwise, and whether due or to becomedue.

 

(r)                                    “License” means any license, permit, authorization,franchise, Order or approval, notification, or required registration with anyGovernmental Authority or other person.

 

(s)                                  “Litigation” means any action, suit, claim, demand,Order, investigation or proceeding, at law or in equity, in or before any court or any GovernmentalAuthority, pending or, to LightWave’s Knowledge, Threatened by or against oraffecting LightWave or any of the Acquired Assets.

 

(t)                                    “Loss(es)” means all claims, demands, losses, costs,judgments, awards, expenses, obligations, damages, liabilities, deficiencies,interest including, without limitation, interest, penalties, reasonableattorneys’ fees, whether or not involving a court proceeding, court costs andfees and expenses of investigation.  Theamount of a Loss shall bear interest at the rate of eight percent (8%) perannum from the date incurred until paid by offset or otherwise.  Loss shall include any demands, losses,cost, judgments, awards, expenses, obligations, damages, deficiencies,interest, reasonable attorneys fees, court costs and fees and expenses ofinvestigation incurred by MedicalCV or its Affiliates by reason of a claim thatthe Technology infringes or constitutes a misappropriation of the rights ofthird parties.

 

(u)                                 “NetSales” as used in this Agreement shall be determined by multiplying the numberof units of a particular Product sold at the applicable net selling price, onlyif such Products fall within the scope of any Valid Claim of any Patent issuedbased upon the Technology, reduced by allowances for cash discounts and othertrade and quantity discounts relating to the Product, credits for return to stockof Products, credits given under a warranty of Products, credits forreplacement of Products, customary charges for related packaging, shipping,freight and insurance, and any sales, use or excise taxes, tariffs or similargovernmental charges (except income taxes), all determined in accordance withgenerally accepted accounting principles applicable in the United States,consistently applied.  A sale of aproduct shall not constitute Net Sales if the Product is not within the scopeof a Valid Claim.

 

(v)                                 “Order” means any order, judgment, writ, injunction,award, decree, rule, charge, regulation, or similar action of any GovernmentalAuthority, instrumentality, or body of competent jurisdiction.

 

(w)                               “Patent”as used in this Agreement shall mean any issued U.S. patent claiming theTechnology or any invention or method described or identified as a part of theIntellectual Property.

 

(x)                                   “Product”means the catheter/probe invention described in the Provisional Application,including any disposable or nondisposable accessories thereto, and any otherapparatus incorporating one or more aspects of the Technology.

 

----

 

(y)                                 “ProvisionalApplication” means the draft of a U.S. Provisional Application prepared anddelivered by LightWave to MedicalCV and attached hereto as Exhibit A.

 

(z)                                   “RestrictedBusiness” means directly or indirectly engaging in the development,manufacturing and sale of devices or methods for the treatment of atrialfibrillation through the delivery of laser energy to affect or create lesionsto the epicardial surface of the heart; provided, however, that the restrictedactivity shall not include:  (i)engaging in the practice of medicine, including the treatment of atrialfibrillation by any means and consultation in connection therewith, or otherprofessional activities of physicians such as participation in clinical trials;or (ii) consultation with or employment by an organization or entity thatengages in the Restricted Business, provided that the subject of suchconsultation or work does not involve the development, manufacture and sale ofdevices or methods for the treatment of atrial fibrillation through thedelivery of laser energy to affect or create lesions to the epicardial surfaceof the heart.

 

(aa)                            “Taxes” means taxes (except income taxes), tariffs, duties and similargovernmental charges paid or payable by MedicalCV or any licensee upon the saleor transfer of the Product, and includes any sales, use or other tax orgovernmental charge imposed by reason of the transfer of the Technology byLightWave to MedicalCV.

 

(bb)                          “Technology” means the Intellectual Property and all other proprietaryinformation developed or owned by LightWave that relates to the Product (acatheter/probe containing elements of an optical fiber, coolant passages withor without electrodes for measuring electrical potentials of the heart for thepurpose of delivering laser energy to the epicardial surface of the heart fortreatment of a condition described as atrial fibrillation).

 

(cc)                            “Transaction Document”  means, as to any party hereto, any and all agreements,certificates and other instruments expressly contemplated in this Agreement orany Exhibit or Disclosure Schedule to be executed or delivered by or onbehalf of such party at or in connection with the Closing hereunder.

 

(dd)                          “ValidClaim” as used in this Agreement shall mean any claim in an unexpired utilityPatent which has not otherwise been held unenforceable, unpatentable or invalidby a court of competent jurisdiction or the U.S. Patent and Trademark office,in an action or proceeding brought or initiated by a party other than MedicalCVor an affiliate thereof, and such holding is unappealable or unappealed withinthe time allowed for appeal, and which Patent has not been admitted to beinvalid or unenforceable through reissue proceedings or disclaimer.

 

1.2                                 *Purchaseand Sale of Acquired Assets*.  Subject to the terms and conditions of thisAgreement, LightWave agrees to sell, and MedicalCV agrees to purchase atClosing, all of LightWave’s right, title and interests in the Technology(collectively, the “Acquired Assets”):

 

1.3                                 *Excluded Assets*. Except for the Acquired Assets, all other assets of LightWave areexcluded from this Agreement.

 

1.4                                 *Considerationand Payment Terms*. The consideration to be paid by MedicalCV to LightWave will consist of(a) a standstill payment of 15,000 shares of common stock (receipt of which ishereby acknowledged), (b) cash payments totaling $550,000 (in U.S. Dollars) atClosing or upon reaching the milestones, as described below, (c) the issuanceof warrants to purchase common stock of MedicalCV per milestones describedbelow, and (d) earn-out payments based upon net sales of the Product.

 

----

 

(a)                                  *Standstill Payment*.  MedicalCV has issued LightWave 15,000 sharesof MedicalCV common stock upon the signing of a letter of intent datedApril 22, 2003 with respect to the Transaction.

 

(b)                                 *Milestone Payments*.  MedicalCV will pay to LightWave theaggregate sum of $550,000 as follows:

 

(1)                                  $10,000at the Closing of the Transaction;

 

(2)                                  $15,000upon the earlier of MedicalCV receiving the CE Mark for the Product, oreighteen (18) months following the Closing Date;

 

(3)                                  $15,000upon the earlier of MedicalCV’s completion of a 510(k) filing with the U.S.Food and Drug Administration, or twenty (20) months following the Closing Date;

 

(4)                                  $125,000within forty-five days (45) following the first Commercial Sale in the U.S. orEurope to two or more parties, at least one of which is an unrelated party; and

 

(5)                                  $385,000within forty-five (45) days following MedicalCV achieving $1,500,000 incumulative gross product sales of disposables.

 

(c)                                  *Milestone Warrants*.  MedicalCV will issue seven-year warrants(“Warrants”) to purchase its common stock, exercisable at an exercise price pershare of the average closing price of such stock for the five (5) trading daysprior to the day of execution of this Agreement.  If there is no trading during such five-day period, then theexercise price will be the average of the high bid and low asked of prices ofthe stock during for such period.  Thewarrants shall be in the form of Exhibit A attached to this Agreement.  These Warrants will be issued in accordancewith the following schedule:

 

(1)                                  Warrantsto purchase 25,000 shares upon the Closing;

 

(2)                                  Warrantsto purchase 25,000 shares upon receiving a utility U.S. patent covering theProduct;

 

(3)                                  Warrantsto purchase 25,000 shares upon receiving FDA release of the Product forCommercial Sale; and

 

(4)                                  Warrantsto purchase 25,000 shares upon first Commercial Sale.

 

(d)                                 *Earn-Out*.  Within sixty (60) days following each fiscalquarter of MedicalCV after the first Commercial Sale, MedicalCV will payLightWave earn-out payments (the “Earn-Out”) equal to six (6) percent of NetSales of the Product sold or transferred to an unaffiliated third party, incountries in which MedicalCV obtains patent protection for the Product (where,in each case, the use of such Product in the United States would infringe aValid Patent issued to MedicalCV) and four (4) percent of net sales in areaswhere there is no Patent protection for the Product.

 

(1)                                  If theCompany reasonably determines that it is required to license or acquire othertechnology to be able to practice the Patent or manufacture, license or sellthe Product without infringement of rights of others, then the Earn-Out will bereduced to the extent of payments made to third parties as royalties, licensefees or other amounts, including amounts paid in settlement of

 

----

 

claims of infringement by MedicalCVor its Affiliates, licensees or customers. Under no circumstance, however, will the Earn-Out be reduced by morethan 2 percentage points as a result of such reductions.

 

(2)                                  Earn-Outpayments shall be paid for a period of ten (10) years following the firstCommercial Sale, unless MedicalCV terminates its obligations under thisAgreement pursuant to Section 9.5.

 

(3)                                  Commencingwith the second year following the first Commercial Sale, MedicalCV shall,subject to Section 9.5, pay to LightWave the following Earn-Out payments(“Minimum Annual Earn-Out Payments”):

 
| **Year Following  Commercialization** |   | **Minimum Annual Earn-Out Payment** |   |
|---------------------------------------|--------|-------------------------------------|--------|
| 2                                     |   |                                | $      | 50,000 |   |
| 3                                     |   |                                | $      | 75,000 |   |
| 4                                     |   |                                | $      | 100,000 |   |
| 5                                     |   |                                | $      | 200,000 |   |
| 6                                     |   |                                | $      | 300,000 |   |
| 7                                     |   |                                | $      | 350,000 |   |
| 8                                     |   |                                | $      | 350,000 |   |
| 9                                     |   |                                | $      | 400,000 |   |
| 10                                    |   |                                | $      | 500,000 |   |

 

1.5                                 *Reporting*.  Within sixty (60) days after the end of eachfiscal quarter of MedicalCV, MedicalCV shall provide to LightWave a reportsetting forth in reasonable detail the basis for determining the amount ofEarn-Out payments due to LightWave for the preceding fiscal quarter.  The report shall include, at a minimum, thefollowing information with respect to the applicable fiscal quarter:

 

(a)                                  Net Salesof the Product by MedicalCV, its Affiliates and licensees;

 

(b)                                 The totalquantities of the Product sold or otherwise transferred by MedicalCV or any ofits Affiliates;

 

(c)                                  Theaverage gross price invoiced by MedicalCV or any of its Affiliates orlicensees; and

 

(d)                                 The totalEarn-Out payments accrued for such fiscal quarterly period.

 

1.6                                 *Audit Rights*.  MedicalCV shall maintain accurate recordsand books of accounts efficient to substantiate the quantities of Productsold.  Upon reasonable notice toMedicalCV, LightWave shall have the right to conduct an audit, but not morethan once per calendar year, either itself or through an independent accountingfirm, of the quantities of the Product sold, and to examine the records andbooks of account of MedicalCV in connection therewith.  LightWave shall bear the full cost andexpense of such audit, unless a discrepancy in excess of five (5) percent infavor of LightWave is discovered, in which event MedicalCV shall bear the fullcost and expense of such audit.

 

1.7                                 *No Assumption ofLiabilities*.  MedicalCV does not andwill not assume, and does not agree to pay or discharge any liabilities,obligations or undertakings of LightWave of any kind or nature whatsoever.

 

----

 

1.8                                 *Allocationof Purchase Price*. The Purchase Price shallbe allocated among the Acquired Assets in accordance with Schedule 1.6(Allocation of Purchase Price).  Theparties will follow and use such allocation for tax purposes, including withoutlimitation, the filing of all Tax Returns or other related reports required tobe filed with any Governmental Authority.

 

1.9                                 *Taxes*. Any Taxes, which may be payable in connection with the sale and transferof the Acquired Assets shall be paid by LightWave.

 

1.10                           *Employees*. Except as set forth in this Agreement, MedicalCV has not agreed toengage any employee, contractor or consultant to LightWave.  LightWave will be responsible for satisfyingany and all claims of its employees as to compensation, accrued benefits,worker compensation claims, termination and severance benefits and anywithdrawal liability and vested rights under any employee benefit plans existingor arising as of or following the Closing Date, and in no event shall MedicalCVhave any liability or responsibility in respect thereof.

 

1.11                           *Offset of Liabilities*.  In the event MedicalCV is or becomes liablefor any expense, liability, cost or obligation (other than payment of thepurchase consideration set forth in Section 1.3 hereof), or MedicalCV isentitled to a payment or reimbursement from LightWave pursuant toSection 7, or as a result of an award by a court or arbitrator in favor ofMedicalCV (collectively, each included within the definition of Loss in 1.1(u)herein), MedicalCV may, in addition to rights of indemnification providedhereunder, be entitled to offset any such Loss against amounts due LightWave byreason of this Agreement, or which MedicalCV elects to pay pursuant toSection 9.5.

 

1.12                           *Bulk Transfer Laws*.  To the extent required under applicable law,LightWave will comply with and be responsible for the obligations of MedicalCVand LightWave under the provisions of all applicable bulk transfer laws of alljurisdictions pertaining to the transactions contemplated by this Agreement,including, without limitation, the bulk transfer laws of the State of NorthCarolina.  LightWave agrees to indemnifyand hold harmless MedicalCV and its Affiliates from and against any lossarising out of LightWave’s noncompliance with any bulk transfer laws of anyjurisdiction in connection with the transactions contemplated by thisAgreement.

 

1.13                           *FurtherAssurances*. LightWave, Brucker and Svenson shall from time to time after theClosing, without further consideration, execute and deliver such instruments oftransfer, conveyance and assignment (in addition to those delivered pursuant toSection 2.2), and shall take such other action, as MedicalCV mayreasonably request to more effectively transfer, convey and assign to and vestin MedicalCV, and to put MedicalCV in actual possession and control of, theAcquired Assets.

 

**SECTION 2.THE CLOSING**

 

2.1                                 *Time; Place and Date*. The closing of the transactions contemplated under this Agreement (the“Closing”) shall occur at the offices of MedicalCV’s counsel, Briggs andMorgan, P.A., 2200 IDS Center, 80 South Eighth Street, Minneapolis, Minnesota55402, at 10:00 a.m. on August     , 2003, unless adifferent date, time or place is mutually agreed upon by the parties (such dateand time of the Closing referred to as the “Closing Date”).  All actions to be taken at the Closing ashereinafter set forth, and all documents and instruments executed anddelivered, and all payments made with respect thereto, shall be considered tohave been taken, delivered or made simultaneously, and no such action ordelivery or payment shall be considered as complete until all actions requiredto be taken in connection with the Closing have been completed.

 

----

 

2.2                                 *Instrumentsof Transfer*. At the Closing, LightWave shall deliver to MedicalCV such instruments oftransfer, assignment and conveyance, including (without limitation) bills ofsale, transferring all interests and title in and to the Acquired Assets toMedicalCV, as may reasonably be requested by MedicalCV.  Such instruments shall include all documentsrequired from persons who may be deemed inventors of the Technology and alldocuments necessary or desirable for the filing of patent application.  Such instruments shall be reasonablysatisfactory in form and substance to MedicalCV and its legal counsel and shallvest in MedicalCV ownership of all the Acquired Assets, free and clear of allEncumbrances.

 

**SECTION 3.REPRESENTATIONS AND WARRANTIES OF LIGHTWAVE**

 

LightWave represents and warrants toMedicalCV that thestatements contained in this Section 3 are true and complete as of thedate of this Agreement and will be correct and complete as of the Closing Date(as though made then and as though the Closing Date were substituted for thedate of this Agreement throughout this Section 3).

 

3.1                                 *Organization and Qualification*.  LightWave is a corporation duly organized,validly existing and in good standing under the laws of the State of NorthCarolina with full corporate power and authority to execute, deliver and fullyperform its obligations under this Agreement.

 

3.2                                 *Authority of LightWave*. The execution, delivery, and performance by LightWave of this Agreementand the Transaction Documents to which it is a party have been duly authorizedby all necessary corporate action required on LightWave’s part.  Nofurther corporate authorization or any other authorization, consent or approvalby any Governmental Authority or by any other person is necessary with respectto the execution, delivery, and performance of this Agreement and theTransaction Documents by LightWave.

 

3.3                                 *Enforceability*. This Agreement and all Transaction Documents are valid, binding andenforceable in accordance with their terms upon LightWave, subject tolimitations that may result from bankruptcy, insolvency, reorganization,moratorium or similar laws relating to creditor’s rights and limitations on theremedy of specific performance and other forms of equitable relief.

 

3.4                                 *Noncontravention*.  Neither the execution and the delivery of thisAgreement, nor the consummation of the transactions contemplated hereby will(i) violate, conflict with, or result in a breach or default under anyprovision of the articles of incorporation or bylaws of LightWave, (ii) violateany constitution, statute, regulation, rule, Order, or other restriction of anyGovernmental Authority to which LightWave is subject or (iv) conflictwith, result in a breach of, constitute a default under, result in theacceleration of, create in any party the right to accelerate, terminate,modify, or cancel, or require or receive any notice under any materialagreement, contract, lease, license, instrument, or other arrangement to whichLightWave is a party or by which it is bound or to which any of LightWave’sassets is subject.  LightWave does notneed to give any notice to, make any filing with, or obtain any authorization,consent, or approval of any Governmental Authority in order for the parties toconsummate the transactions contemplated by this Agreement.

 

3.5                                 *Ownershipof Acquired Assets*. All Acquired Assets are owned by LightWave, free and clear of allEncumbrances.

 

3.6                                 *IntellectualProperty*.  LightWave has conducted a reasonableinvestigation concerning the Intellectual Property and represents and warrantsthat:

 

----

 

(a)                                  To the best of its knowledge, no otherparties have any rights to the Technology or Intellectual Property of LightWavedescribed in this Agreement and to be conveyed to MedicalCV pursuant hereto;that LightWave has taken all proper and adequate steps to ensure the continuedproprietary nature of all Intellectual Property related to the Technology andnothing has transpired that would compromise or call into question the proprietarynature of the Intellectual Property; that LightWave has the full right, powerand authority to enter into this Agreement and, to the best of its knowledge,has the right to convey such Intellectual Property to MedicalCV; and LightWaverepresents and warrants that LightWave has the full right, power and authorityto perform the services required hereunder.

 

(b)                                 The trade secrets included in theIntellectual Property and Know-How are the property of LightWave.

 

(c)                                  The Intellectual Property Rights are owned byLightWave free and clear of any Encumbrance;

 

(d)                                 To the best of its knowledge, products madewithin the scope of claims of the Provisional Application can be manufactured,sold and used in the United States without infringing upon any valid US Patent,but no representation, warranty or guaranty is made that any US Patent willissue for any invention disclosed as a part of the Intellectual Property,including the Provisional Application; and

 

(e)                                  All former and current employees of, andconsultants to, LightWave have executed written Contracts with LightWave thatassign to LightWave all rights to any inventions, improvements, discoveries, orinformation relating to LightWave’s Business, and no employee or consultantLightWave has entered into any Contract that restricts or limits in any way thescope or type of work in which the employee may be engaged or requires theemployee to transfer, assign, or disclose information concerning his work toanyone other than LightWave.  Theinventors of Technology are Brucker and Svenson.

 

(f)                                    Patents.

 

Disclosure Schedule 3.6 (Intellectual Property) contains acomplete and accurate list and summary description of patent application draftsand disclosures.  LightWave is the ownerof all right, title, and interest in the Provisional Application and inventiondisclosed therein.

 

(g)                                 Copyrights.

 

(1)                                  Disclosure Schedule 3.6 (IntellectualProperty) contains a complete and accurate list and summary description of allworks of authorship (“Works”). LightWave is the owner of all right, title, and interest in and to eachof the Works.  At Closing, LightWavewill cause each Works to be free and clear of all liens, security interests,charges, encumbrances, equities, and other adverse claims.

 

(2)                                  To the best of its knowledge, none of thesubject matter of any of the Works infringes or is alleged to infringe anycopyright of any third party or is a derivative work based on the work of athird party.

 

(h)                                 Trade Secrets.

 

----

 

(1)                                  With respect to each Trade Secret, thedocumentation relating to such Trade Secret is current, accurate, andsufficient in detail and content to identify and explain it and to allow itsfull and proper use without reliance on the knowledge or memory of anyindividual.

 

(2)                                  LightWave has taken all reasonable precautionsto protect the secrecy, confidentiality, and value of its Trade Secrets.

 

(3)                                  LightWave has good title and ownership orright to use the Trade Secrets.  TheTrade Secrets are not part of the public knowledge or literature, and, toLightWave’s Knowledge, have not been used, divulged (other than to LightWave’semployees), or appropriated either for the benefit of any person or to thedetriment of LightWave.  No Trade Secretis subject to any adverse claim or has been challenged or Threatened in anyway.

 

3.7                                 *OtherContracts*. Disclosure Schedule 3.7 (Other Contracts) lists all of thefollowing Contracts relating to the Product or the Intellectual Property:

 

(a)                                  Allpartnership, joint venture agreements, licenses and all other agreementsinvolving the sharing of profits or revenues from the sale of the Product;

 

(b)                                 Any agreement of LightWave concerningconfidentiality or noncompetition;

 

(c)                                  Any agreement involving LightWave and itsAffiliates; and

 

if requested by MedicalCV, LightWave will deliver to MedicalCV acorrect and complete copy of any of the Other Contracts listed on DisclosureSchedule 3.7 (as amended to date).

 

3.8                                 *Litigation*. There is no Litigation pending or threatened against LightWave or any ofthe Acquired Assets.  Except as describedon Disclosure Schedule 3.8, LightWave is not subject to, and the AcquiredAssets are not affected by, any continuing Order, nor is LightWave in defaultwith respect to any Order.

 

3.9                                 *Compliancewith Laws***.** LightWave has been operating its business in compliance with allfederal, state, municipal and other statutes, rules, ordinances and regulationsapplicable to the operation of its business and the Acquired Assets (includingwithout limitation all environmental protection and occupational safety and healthrules, regulations and laws).

 

3.10                           *Finders*. LightWave is not a party to or in any way obligated under any contractor other agreement, and there are no outstanding claims against it, for thepayment of any broker’s or finder’s fee in connection with the origin,negotiation, execution or performance of this Agreement.

 

3.11                           *FullDisclosure*. The representations and warranties made under this Section 3 or inany Disclosure Schedules or certificates furnished to MedicalCV pursuant heretodo not and will not contain any untrue statement of a fact or omit to state afact required to be stated herein or therein or necessary to make therepresentations or warranties herein or therein, in light of the circumstancesin which they are made, not misleading.

 

----

 

**SECTION 4.REPRESENTATIONS AND WARRANTIES OF MEDICALCV**

 

MedicalCV represents and warrants toLightWave that thestatements contained in this Section 4 are correct and complete as of thedate of this Agreement and will be correct and complete as of the Closing Date(as though made then and as though the Closing Date were substituted for thedate of this Agreement throughout this Section 4).

 

4.1                                 *Organization and Qualification*. MedicalCV is acorporation duly organized, validly existing and in good standing under thelaws of the State of Minnesota with full corporate power and authority toexecute, deliver and fully perform its obligations under this Agreement.

 

4.2                                 *Authority of MedicalCV*. The execution, delivery, and performance by MedicalCV of this Agreementand the Transaction Documents to which it is a party have been duly authorizedby all necessary corporate action required on MedicalCV’s part.  Nofurther corporate authorization or other authorization, consent or approval byany Governmental Authority or by any other person is necessary with respect tothe execution, delivery, and performance of this Agreement and the TransactionDocuments by MedicalCV.

 

4.3                                 *Enforceability*. This Agreement and all Transaction Documents are valid, binding andenforceable in accordance with their terms upon MedicalCV, subject tolimitations that may result from bankruptcy, insolvency, reorganization,moratorium or similar laws relating to creditor’s rights and limitations on theremedy of specific performance and other forms of equitable relief.

 

4.4                                 *Noncontravention***.**  Neither the execution and the delivery of thisAgreement, nor the consummation of the transactions contemplated hereby will(i) violate, conflict with, or result in a breach or default under anyprovision of the articles of incorporation or bylaws of MedicalCV, (ii) violateany constitution, statute, regulation, rule, Order, or other restriction of anyGovernmental Authority to which MedicalCV is subject or (iii) conflictwith, result in a breach of, constitute a default under, result in theacceleration of, create in any party the right to accelerate, terminate,modify, or cancel, or require or receive any notice under any materialagreement, contract, lease, license, instrument, or other arrangement to whichMedicalCV is a party or by which it is bound or to which any of its assets aresubject.  MedicalCV does not need togive any notice to, make any filing with, or obtain any authorization, consent,or approval of any Governmental Authority in order for the parties toconsummate the transactions contemplated by this Agreement.

 

4.5                                 *Finders*. MedicalCV is not a party to or in any way obligated under any contractor other agreement, and there are no outstanding claims against it, for thepayment of any broker’s or finder’s fee in connection with the origin,negotiation, execution, or performance of this Agreement.

 

4.6                                 *Financial Statements andCondition*.  MedicalCV’s unauditedfinancial statements, dated as of April 30, 2003, as heretofore furnishedto LightWave, fairly present the financial condition of MedicalCV.  MedicalCV has filed all forms, reports anddocuments required to be filed by it with the SEC since November 21, 2001and has heretofore made available to the Lender, in the form filed with the SEC(excluding any exhibits thereto), (i) its Annual Report on Form 10-KSB for thefiscal year ended April 30, 2002, and (ii) all other forms, reports,registration statements and other documents filed by MedicalCV with the SECsince November 21, 2001 (the forms, reports, registration statements andother documents referred to in clauses (i) and (ii) above being referred toherein, collectively, as the “MedicalCV SEC Reports”).  Since April 30, 2003, except as set forthin the MedicalCV SEC Reports, there has been no material adverse change in thefinancial condition or assets of MedicalCV. To the best of Borrower’s knowledge, MedicalCV SEC Reports (i) wereprepared substantially in accordance with the requirements of the SecuritiesAct of 1933, as amended (the “Securities Act”) and the Securities Exchange Actof 1934, as amended, as the case may be, and the rules and regulationsthereunder and (ii) did not at the time they were filed, contain any untruestatement of a material fact or omit to state a

 

----

 

material fact required to be statedtherein or necessary in order to make the statements made therein, in the lightof the circumstances under which they were or are made, not misleading.  LightWave acknowledges or represents that:

 

(a)                                  It has received and reviewed MedicalCV SECReports;

 

(b)                                 It is able to bear the economic risk of thetransaction described in this Agreement;

 

(c)                                  It understands the risk of investment in MedicalCV;

 

(d)                                 It has been given access to full and completeinformation regarding MedicalCV,including the opportunity to meet with officers, ask questions of and receiveanswers from such officers, and review such documents as it may have requested,and has utilized such access to his satisfaction for the purpose of obtaininginformation in addition to, or verifying information included in, MedicalCV SEC Reports and other information disclosedby MedicalCV orally or in writing.

 

(e)                                  Neither the Warrants nor common stock ofMedicalCV issuable upon exercise of the thereof (“Shares”) have been registeredunder the Securities Act or state securities laws; and

 

(f)                                    The Warrants and Shares are being acquiredfor its own account and for investment and without the intention of resellingor redistributing the same, and that if LightWave should determine to disposeor transfer the Warrants or Shares, it will not do so without (1) obtaining anopinion of counsel satisfactory to MedicalCV that such proposed disposition or transfer may lawfully be madewithout registration under the Act, or (2) such registrations are in effect.

 

**SECTION 5.PRE-CLOSING COVENANTS**

 

5.1                                 *Covenantsof LightWave Pending Closing*.  LightWave covenants with MedicalCV that:

 

(a)                                  *Conduct of Business.*  Fromthe date of this Agreement to the Closing Date, LightWave shall maintain andcarry on its business in the ordinary and normal manner consistent with pastpractices.

 

(b)                                 *Access to Information andLightWave’s Employees, Agents and Consultants.*  Prior to Closing, LightWave will give toMedicalCV, its counsel, accountants and other representatives, full and freeaccess to all of the properties, books, contracts, commitments, records,employees and consultants of LightWave so that MedicalCV may have fullopportunity to make such investigation as it shall desire regarding theAcquired Assets.

 

(c)                                  *Consentsand Approvals.*  LightWave will use itsbest efforts to obtain the necessary consents and approvals of other personswhich may be required to be obtained on their part to consummate thetransactions contemplated by this Agreement.

 

(d)                                 *Bulk TransferLaws.*** **To the extentrequired under applicable law, LightWave will comply with and be responsiblefor all obligations of LightWave and LightWave under the provisions of allapplicable bulk transfer laws of all jurisdictions pertaining to the transactions

 

----

 

contemplated by this Agreement, including, without limitation, the bulktransfer laws of the State of North Carolina.

 

(e)                                  *Exclusivity.*  LightWave agrees that it shall not enterinto any agreements or commitments, or initiate, solicit or encourage anyoffers, proposals or expressions of interest, or otherwise hold any discussionswith any investment bankers or finders, with respect to the possible sale orother disposition of the Technology, other than with MedicalCV.

 

(f)                                    *No Public Announcement*.  LightWave shall not make any publicannouncement or release of information relative to this Agreement or theTransaction, including the existence thereof, unless a public announcementthereof has first been made by MedicalCV or MedicalCV has consented in writingto such announcement or release.

 

5.2                                 *Covenantsof MedicalCV Pending Closing*.  MedicalCV covenants with LightWave that:

 

(a)                                  *Consentsand Approvals.*  MedicalCV will use itsbest efforts to obtain the necessary consents and approvals of other personswhich may be required to be obtained on its part to consummate the transactionscontemplated in this Agreement.

 

**SECTION 6.CONDITIONS TO OBLIGATIONS TO CLOSE**

 

6.1                                 *Conditionsto Obligation of MedicalCV*.  The obligations of MedicalCV under thisAgreement shall be subject to the following conditions, any of which may beexpressly waived by MedicalCV in writing:

 

(a)                                  *Representationsand Warranties True; Covenants Performed.* MedicalCV shall not have discovered any material error, misstatement oromission in the representations and warranties made by LightWave inSection 3; LightWave shall have performed and complied with all agreementsand conditions required by this Agreement to be performed or complied with bythem at or prior to the Closing.

 

(b)                                 *Pre-AcquisitionReview.*  MedicalCV and itsrepresentatives shall have completed and be satisfied with its apre-acquisition review of the financial information, books and records, andproperties and assets of the Business and shall have discovered no change in theAcquired Assets business or prospects of the Affiliates which could, in thesole determination of MedicalCV, have an adverse effect on the value toMedicalCV of the Acquired Assets being acquired hereunder.

 

(c)                                  *Noncompetition andConsulting Agreements.*  Brucker and Svenson shall have entered into the TechnologyAssignment Agreement in the form of Exhibit C and the Proprietary Informationand Inventions Agreement in the form of Exhibit D.  Svenson shall have entered into the Technical AssistanceAgreement in the form of Exhibit E. Brucker shall have entered into the Technical Assistance Agreement inthe Form of Exhibit F.

 

(d)                                 *NoLoss or Damage.*  Prior to the Closingthere shall not have occurred any loss or damage to any substantial portion ofthe Acquired Assets.

 

----

 

(e)                                  *Deliveryof Technology.*  LightWave shall havedelivered to MedicalCV the Acquired Assets and all documents and instrumentsrequired to assign and transfer to MedicalCV the Acquired Assets.

 

6.2                                 *Conditionsto Obligations of LightWave***.**  The obligations of LightWave under thisAgreement shall be subject to the following conditions, any of which may beexpressly waived by LightWave in writing:

 

(a)                                  *Representationsand Warranties True; Covenants Performed.* LightWave shall not have discovered any material error, misstatement oromission in the representations and warranties made by MedicalCV inSection 4, MedicalCV shall have performed and complied with all agreementsand conditions required by this Agreement to be performed or complied with byit at or prior to the Closing.

 

(b)                                 *Payment of PurchasePrice.*  LightWave shall havereceived payment of the Purchase Price due at Closing in accordance withSection 1.3.

 

6.3                                 *Mutual Conditions*. Unless waived in writingby both of the parties hereto, each and every obligation of MedicalCV, on theone hand, and LightWave, on the other hand, to be performed at or upon theClosing shall be subject to the satisfaction at or prior thereto of each andall of the following conditions precedent:

 

(a)                                  There being no (i) proceedings whichhave been brought, asserted, commenced or threatened against MedicalCV orLightWave by any person involving or affecting in any way MedicalCV’s orLightWave’s consummation of the transactions contemplated hereby, or (ii) applicablelaws restraining or enjoining, or which may reasonably be expected to nullifyor render ineffective, this Agreement or the consummation of the transactionscontemplated hereby or which otherwise could reasonably be expected to have amaterial adverse effect on the Acquired Assets or the operations of LightWave.

 

(b)                                 MedicalCVand LightWave shall have received evidence, in form and substance reasonablysatisfactory to LightWave and MedicalCV, that all consents, waivers, releases,authorizations, approvals, licenses, certificates, and permits to complete theTransaction.

 

**SECTION 7.INDEMNIFICATION**

 

7.1                                 *Indemnificationby LightWave*. LightWave agrees to indemnify and hold harmless MedicalCV, itsAffiliates and its successors and assigns from and against any and all Losseswhich are caused by or arise out of (i) any breach or default in theperformance by LightWave of any covenant or agreement of LightWave contained inthis Agreement, (ii) any breach of a warranty or inaccurate or erroneousrepresentation made by LightWave in this Agreement, any Exhibit or DisclosureSchedule, certificate or other instrument delivered by or on behalf ofLightWave pursuant hereto; (iii) any Loss arising from the operations, businessor actions of LightWave prior to the Closing; and (iv) any breach by LightWaveof a post-closing covenant.

 

7.2                                 *Indemnificationby MedicalCV*. MedicalCV agrees to indemnify and hold harmless LightWave, and itsAffiliates, successors and assigns from and against any Losses which are causedby or arise out of (i) any breach or default in the performance by MedicalCV ofany covenant or agreement of

 

----

 

MedicalCV contained in thisAgreement (ii) any breach of a warranty or inaccurate or erroneousrepresentation made by MedicalCV in this Agreement, any Exhibit or in anyDisclosure Schedule, certificate or other instrument delivered by or on behalfof MedicalCV pursuant hereto.

 

7.3                                 *ThirdParty Claims*. Upon receipt by a partyeligible for indemnification hereunder (“Indemnified Party”) of notice of anyaction, proceeding, claim or potential claim (“Claim”) which could give rise toa right to indemnification pursuant to this Section 7, the IndemnifiedParty shall give the other party responsible for such indemnification(“Indemnifying Party”) prompt written notice describing the circumstancesrelating to the Claim in reasonable detail (“Claims Notice”); provided, thatthe failure to provide such Claims Notice will not relieve the IndemnifyingParty of its obligations hereunder unless it is actually and materiallyprejudiced by such failure.  TheIndemnifying Party shall have the right, at its option, to compromise ordefend, at its own expense and by its own counsel, any such matter involvingthe asserted liability of the Indemnified Party; provided, that any suchcompromise (i) shall include as an unconditional term thereof the giving by theclaimant or the plaintiff to the Indemnified Party of a release from allliability in respect of such claim and (ii) shall not result in the impositionon the Indemnified Party of any remedy other than monetary damages.  If any Indemnifying Party shall undertake tocompromise or defend any such asserted liability, it shall promptly notify theIndemnified Party of its intention to do so, and the Indemnified Party agreesto cooperate fully with the Indemnifying Party and its counsel in thecompromise of, or defense against, any such asserted liability.  In any event, the Indemnified Party shallhave the right, at its own expense, to participate in the defense of suchasserted liability.  The IndemnifiedParty shall have the right to control the defense or settlement of that portionof any claim which seeks an Order against the Indemnified Party which couldmaterially interfere with the business, operations, assets or financial conditionof the Indemnified Party; provided, that in connection with the defense orsettlement of the portion of such claim which seeks equitable relief, theIndemnified Party shall cooperate with the Indemnifying Party and use itsreasonable best efforts to limit the liability of the Indemnifying Party forthe damages portion of such claim. Under no circumstances shall the Indemnified Party or the IndemnifyingParty compromise any such asserted liability without the written consent of theother which consent shall not be unreasonably withheld, unless the IndemnifyingParty shall have failed or refused to undertake the defense or compromise ofany such asserted liability after a reasonable period of time has elapsedfollowing the Indemnifying Party’s receipt of the Claims Notice in accordancewith this Section 7.3.

 

7.4                                 *Withholdingof Payment*.  Upon the occurrence of a Claim and thegiving of a Claim Notice to LightWave, MedicalCV may withhold, or set-offagainst, any consideration to which LightWave may be entitled under thisAgreement until such Claim is resolved. The withholding of any such amount by MedicalCV in good faith, whetheror not ultimately determined to be justified, will not constitute a breach ofthis Agreement or be a basis for damages in favor of LightWave.

 

7.5                                 *No Election*. Neither the exercise of rights to indemnification or to withhold orset-off amounts due LightWave by MedicalCV, nor its failure to exercise suchrights, will constitute an election of remedies or limit MedicalCV in anymanner in the enforcement of any other remedies to which it may be entitled;and all remedies of MedicalCV shall be cumulative.

 

**SECTION 8.TERMINATION**

 

8.1                                 *Effortsto Satisfy Conditions*.  LightWave agrees to use all reasonablecommercial efforts to bring about the satisfaction of the conditions specifiedSection 6.1, and MedicalCV agrees to use reasonable commercial efforts tobring about the satisfaction of the conditions specified in Section 6.2.

 

----

 

8.2                                 *Termination*. This Agreement may be terminated prior to Closing by:

 

(a)                                  Themutual written consent of LightWave and MedicalCV;

 

(b)                                 MedicalCV,if a material default shall be made by LightWave in the observance or in thedue and timely performance by any of LightWave’s covenants herein contained, orif there shall have been a material breach or misrepresentation by LightWave ofany of its warranties and representations herein contained, or if theconditions of this Agreement to be complied with or performed by LightWave ator before the Closing shall not have been complied with or performed at thetime required for such compliance or performance and such noncompliance ornonperformance shall not have been expressly waived by MedicalCV in writing;

 

(c)                                  LightWave,if a material default shall be made by MedicalCV in the observance or in thedue and timely performance by MedicalCV of any of its covenants hereincontained, or if there shall have been a material breach or misrepresentationby MedicalCV of any of its warranties and representations herein contained, orif the conditions of this Agreement to be complied with or performed byMedicalCV at or before the Closing shall not have been complied with orperformed at the time required for such compliance or performance and suchnoncompliance or nonperformance shall not have been expressly waived byLightWave in writing; or

 

(d)                                 EitherLightWave or MedicalCV, if the Closing has not occurred by September 30,2003, provided that the failure of the Closing to occur by such date is not dueto the breach or default of a material representation or covenant hereincontained by the party seeking to terminate this Agreement.

 

8.3                                 *LiabilityUpon Termination*. If this Agreement is terminated under Sections 8.2 (a) or (d), then noparty shall have any liability to any other party hereunder.  If this Agreement is terminated underSections 8.2(b) or (c), then (i) the party so terminating this Agreement shallnot have any liability to any other party hereto, provided the terminating partyhas not breached any representation or warranty or failed to comply with any ofits covenants in this Agreement, and (ii) such termination shall not prejudicethe rights and remedies of the terminating party against any other party whichhas breached any of its representations, warranties or covenants herein priorto such termination.

 

**SECTION 9.POST-CLOSING COVENANTS**

 

9.1                                 *LightWaveTechnical Assistance*.

 

(a)                                  For a period of one-hundred and twenty (120)days following the Closing Date, LightWave will, without charge, providereasonable technical support to MedicalCV in connection with any and allaspects of the development, manufacture and Marketing of the Product, as wellas in connection with any regulatory filings which MedicalCV may pursue.  LightWave’s technical support, consultationand assistance shall be provided primarily by Brucker.  If required during such period, Svenson alsoagrees to provide such assistance. MedicalCV will pay all direct out-of-pocket expenses (other thansalaries, fees or benefits) incurred by LightWave, as set forth in budgetsapproved in writing by MedicalCV.  Suchexpenses may include reasonable travel (economy class), food, groundtransportation and lodging expenses, but shall not include any amountsattributable to LightWave’s normal recurring general and administrativeexpenses.

 

----

 

(b)                                 Following the execution of this Agreement andfor a period of three (3) years following the Closing Date, LightWave willcause Brucker and Svenson to provide reasonable consultation and assistance toMedicalCV and its agents in connection with the evaluation and preparation ofpatent applications for inventions disclosed in or arising out of theIntellectual Property and evaluation and preparation of responses to patentoffice communications relating to the same and, to the extent LightWaveemployees shall be deemed to have inventorship or ownership in any inventionsdisclosed or claimed in such patent applications, they shall execute anddeliver such documents and instruments as shall be necessary or desirable, inthe opinion of MedicalCV’s patent counsel, to effect the filing of such patentapplications and the recordation of the appropriate inventorship and ownership.

 

9.2                                 *LightWaveNoncompetition*.** **LightWave, Brucker and Svensonacknowledge that as an inducement to MedicalCV to enter into this Agreement,that for a period of five (5) years after the Closing Date, LightWave andBrucker will not, directly or indirectly, engage or invest in, own, manage,operate, finance, control or participate in the ownership, management, operationor control of, or in any manner be connected with, any business that engages inthe Restricted Business, anywhere in the world; provided, however, thatLightWave, Brucker or Svenson may purchase or otherwise acquire up to (but notmore than) one percent of any class of securities of any enterprise (butwithout otherwise participating in the activities of such enterprise) if suchsecurities are listed on any national stock exchange or the Nasdaq stock marketor have been registered under Section 12(g) of the Securities Exchange Actof 1934.  LightWave, Brucker and Svensonagree that this covenant is reasonable with respect to its duration,geographical area and scope.  No activitiesengaged in at the request of MedicalCV or its Affiliates, successors or assignsshall be deemed to violate this covenant.

 

9.3                                 *LightWaveNondisclosure*.  During the term of this Agreement and for aperiod of five (5) years thereafter, LightWave shall maintain all ConfidentialInformation relating to the Acquired Assets or received from MedicalCV inconfidence, and shall not disclose, divulge or otherwise communicate suchConfidential Information to others, or use it for any purpose, except pursuantto, and in order to carryout, the terms and conditions of this Agreement.  LightWave shall exercise all reasonableprecautions to prevent and restrain the unauthorized disclosure of suchConfidential Information by any director, officer, employee, consultant,subcontractor or agent of LightWave.

 

9.4                                 *Improvements*.  Fora period of five (5) years after the Closing Date, any improvements oradditional inventions relating to the Technology, or improvements to theProduct, conceived or developed, in whole or in part, by LightWave, Brucker orSvenson shall be deemed an invention or improvement owned by MedicalCV andsubject to transfer of Technology pursuant to this Agreement, and upon requestof MedicalCV, LightWave, Brucker and Svenson agree to irrevocably assign inwriting all rights in and to such inventions or improvements to MedicalCV.  LightWave, Brucker and Svenson agree todisclose to MedicalCV all such inventions and improvements relating to theTechnology, and assign such inventions or improvements to MedicalCV; provided,however, LightWave and Brucker shall not be deemed to have made representationsand warranties contained in Sections 3.5 and 3.6 with respect to suchinventions or improvements.  At the endof the five year period following the Closing Date, Brucker and Svenson shallprovide a written communication to MedicalCV summarizing any and allimprovements or additional inventions relating to the Technology, orimprovements to the Product, conceived or developed, in whole or in part, byLightWave, Brucker or Svenson.

 

9.5                                 *MedicalCVCommercialization of Product*.  MedicalCV agrees to use reasonablecommercial efforts to commercialize the Technology within a period of three (3)years following the Closing Date.

 

(a)                                  If MedicalCV shall fail to commercialize theProduct and effect a Commercial Sale of the Product in the United States orEurope within such three (3) year period, LightWave shall

 

----

 

have the right, upon written request to MedicalCV, to obtain anexclusive worldwide license to the Technology with a right to manufacture,license, use and sell the Technology; provided, however, that MedicalCV may,upon receiving such written notice from LightWave, extend such three (3) yearperiod for up to an additional twenty-four (24) months upon payment toLightWave of the additional sum of $125,000.

 

(b)                                 Notwithstanding the foregoing, if at any timeafter the Closing Date, MedicalCV determines to discontinue the development ofthe Technology or the marketing of the Product (directly or through licensees),it may do so without liability to LightWave and shall have no further obligationto pay amounts due LightWave under this Agreement, shall so notify LightWaveand LightWave may, upon written request and subject to outstanding licenses ofthe Technology, obtain from MedicalCV a license to use the IntellectualProperty or, at MedicalCV’s option, MedicalCV may assign its rights in theIntellectual Property to LightWave (subject to all license, for the Technologythen in effect).  In such event,LightWave may retain all consideration which has been paid to it through thedate of such termination.

 

(c)                                  If by reason of Net Sales levels, MedicalCVshall have failed for any year to pay, the Minimum Annual Earn-Out Payment,MedicalCV may, at its option, (1) elect to pay the difference between theEarn-Out payments made for such year and the Minimum Annual Earn-Out Paymentfor such year; or (2) grant to LightWave a nonexclusive right to theTechnology, including a nonexclusive license to manufacture and sell productscovered by any Patent owned by MedicalCV. MedicalCV shall have no other obligation or liability to LightWave byreason of the failure of MedicalCV to achieve Minimum Annual Net Sales for anyyear or by reason of its failure to pay the Minimum Annual Earn-Out Paymentbased upon such level of sales.  Thesole and exclusive remedy of LightWave in the event of such failure shall be toeither receive a payment equal to the difference of the Earn-Out Paymentactually made by MedicalCV and the Minimum Annual Earn-Out Payment for suchyear or, at MedicalCV’s election, to receive such nonexclusive rights to usethe Technology and nonexclusive licenses to MedicalCV’s Patents.

 

(d)                                 MedicalCV shall have sole discretion as tothe methods, time schedule, personnel, resources, marketing decisions andstrategies utilized in developing and commercializing the Technology, and shallhave sole discretion to determine to cease efforts to commercialize theTechnology and to cease marketing the Product, all without any liability toLightWave as a result of the exercise of such discretion.  MedicalCV shall have sole discretion as topursuit and implementation of a patent strategy, including, but not limited to,the filing of patent applications, continuations and continuations-in part, thecountries in which patent protection will be sought, and the maintenance orabandonment of patents.

 

9.6                                 *LitigationSupport*.  LightWave, Brucker and Svenson agree thatduring the later of (a) term of the Earn-Out, or (b) the life of any Patent,they will, in any action to enforce a Patent or defend any claim or suitagainst MedicalCV or its assignees or licensees alleging its infringement ofrights of third parties, provide without charge reasonable cooperation andassistance to MedicalCV or its assignees or licensees therein, includingin-person and telephonic consultation with legal counsel prosecuting ordefending such claims or suits and the giving of testimony in any deposition orproceeding.  Such cooperation andassistance shall be requested in a manner to reasonably minimize the interruptionof the employment and professional duties of Brucker and Svenson.  MedicalCV shall reimburse LightWave, Bruckerand Svenson for out-of-pocket expenses incurred by them in providing suchservices, including expenses for travel (economy class), food, groundtransportation and lodging.

 

----

 

**SECTION 10.**

 

**ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS**

 

10.1                           *Administrative*. The following administrative provisions shall apply to this Agreement:

 

(a)                                  *Construction.*  Forpurposes of construction, (1) the recitals set forth above constitute a part ofthis Agreement, (2) captions and Section headings used herein are forconvenience only and are not a part of this Agreement, and shall not be used inconstruing it, (3) references herein to a Section shall apply to theSections of this Agreement, (4) all Exhibits and Schedules attached andDisclosure Schedules**areincorporated into this Agreement by reference, (5) all references to “person”herein shall include any individual, partnership, corporation, trust,organization or other entity, unless the context requires otherwise, (6) theterms “hereof,” “herein,” “hereto,” and “hereunder” shall refer to thisAgreement, (7) all references in this Agreement to one gender shall include allgenders; any reference to the singular shall include the plural, where appropriate,and vice-versa, and (9) for ease and consistency in reference, the neutergender is primarily used throughout this Agreement.

 

(b)                                 *EntireAgreement.*  This Agreement and all ofthe Transaction Documents referred to herein constitute the entire agreement ofthe parties hereto, and supersede all prior understandings with respect to thesubject matter hereof and thereof (including, without limitation, the letter ofintent between MedicalCV and LightWave dated April 22, 2003).

 

(c)                                  *Assignment.*  This Agreement may not be assigned by anyparty hereto without the prior written consent of the other party; provided,however, that following the Closing, MedicalCV may assign its rights hereunderwithout the consent of LightWave to an Affiliate or a successor-in-interest ofMedicalCV (whether by merger, sale of assets or otherwise); provided, however,that MedicalCV shall remain liable for its obligations under the Note and thisAgreement.  Nothing in this Agreement, expressor implied, is intended to confer upon any person, other than the parties tothis Agreement and their successors and permitted assigns, any rights orremedies under or by reason of this Agreement.

 

(d)                                 *Natureof Statements.*  All statements containedin this Agreement or any Exhibit or Disclosure Schedule hereto shall bedeemed representations and warranties of the party executing or delivering thesame.

 

(e)                                  *Survival of Representations andWarranties.*  The representations and warranties of eachparty shall survive this Agreement and shall not be merged into any assignment,transfer instrument or other document.

 

(f)                                    *Expenses.*  Except as otherwise specifically statedherein, the parties shall each pay their own expenses in connection with thenegotiation, preparation and carrying out of this Agreement and theconsummation of the transactions contemplated herein.

 

(g)                                 *Notices.*  Anynotice, demand, request, waiver or other communication under this Agreementshall be in writing and shall be deemed to have been duly given (i) on the dateof delivery if delivered to the address of the party specified below (includingdelivery by courier), or (ii) on the fifth day after mailing if mailed to theparty to whom notice is to be given to the address specified below, by firstclass mail, certified or registered, return receipt requested, postage prepaid,or (iii) on the date of transmission if sent by facsimile transmission to thefacsimile number given below, and telephonic confirmation of receipt isobtained promptly after completion of transmission:

 

----

 
| If to MedicalCV:Attention:  Chief Executive Office  9725 South Robert Trail  Inver Grove Heights, MN  55077                    |   | With copy to:  Avron L. Gordon, Esq.  Briggs and Morgan, P.A.  2200 IDS Center  Minneapolis, MN 55402 |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|
| Facsimile:  (651) 234-6669                                                                                                          |   | Facsimile:                                                                                            | 612-977-8650 |
| Telephone:  (651) 234-6698                                                                                                          |   | Telephone:                                                                                            | 612-977-8455 |
|                                                                                                                                     |   |                                                                                                  |
| If to LightWave:  Attention:  Gregory Brucker  LightWave Ablation Systems, Inc.  142 Stutts Road  Mooresville, North Carolina 28117 |   |                                                                                                  |

 

Anyparty may from time to time change its address or facsimile number for thepurpose of notices to that party by a similar notice specifying a new addressor facsimile number, but no such change shall be deemed to have been givenuntil it is actually received by the party sought to be charged with its contents.

 

(h)                                 *MutualPreparation.*  Each party acknowledges that it has had theopportunity to participate in the preparation and negotiation of thisAgreement, and that, therefore, in the event of any ambiguity or controversywith respect to the meaning of any term or provision contained in thisAgreement, no presumption or inference will be drawn against either party’sinterpretation of this Agreement by reason of such party’s or its counsel’sparticipation in the preparation of this Agreement.

 

(i)                                     *Governing Law; Jurisdiction.*  ThisAgreement shall be interpreted under and governed by the internal laws of theState of Minnesota, without regard to applicable conflicts of law provisions ofany jurisdiction, and any and all proceedings pertaining to, arising under orin connection with this Agreement shall be conducted in the state or federalcourts or before, an arbitrator, located within the State of Minnesota, andeach party hereto hereby irrevocably consents to the venue and personaljurisdiction of such courts and of the/any arbitrator, as applicable, andfurther irrevocably consents to service of process for such purpose eitherwithin or outside the State of Minnesota.

 

10.2                           *Miscellaneous Provisions*.  The following other miscellaneous rules andprovisions shall apply to the interpretation and enforcement of the parties’obligations under this Agreement: (i) each partyhereto shall execute and deliver such instruments and take such other actionsas the other party may reasonably request in order to carry out the intent ofthis Agreement; (ii) this Agreement may be amended,modified, or terminated only with the written consent of all parties hereto; (iii) this Agreement shall be binding upon andinure to the benefit of the parties hereto and their respective successors,assigns, heirs and personal representatives, (iv) no waiver of a breach of any provision ofthis Agreement shall be binding unless in writing and signed by the partieshereto, and any such waiver shall not be construed to be a waiver of anysubsequent breach of the same or any other provision of this Agreement; (v) each party acknowledges that breach by it of theprovisions of this Agreement will cause the other party irreparable harm thatis not fully remedied by monetary damages and, accordingly, each party agrees(1) that the other party shall, in addition to any relief afforded by law, beentitled to injunctive relief, (2) that both damages at law and injunctiverelief shall be proper modes of relief and are not to be considered alternativeremedies, and (3) that all rights and remedies of any party shall be cumulativeand may be exercised singularly or concurrently, at such party’s option, andthe exercise or enforcement of any one such right or remedy shall neither be acondition to nor bar the exercise or enforcement of any

 

----

 

other; (vi) any term of this Agreement thatis illegal or unenforceable at law or in equity shall be deemed to be void andof no force and effect to the extent necessary to bring such term within theprovisions of any such applicable law or laws, and such terms as so modifiedand the balance of the terms of this Agreement shall be fully enforceable; and (vii) this Agreement may be executed in two or morecounterparts, each of which shall be deemed an original but all of which shallconstitute but one agreement.

 

10.3                           *Breach;Termination; Resolution of Disputes*.  In the event of a breach ofany warranty, covenant, or other provision of this Agreement, the followingnotice and cure procedures shall apply:

 

(a)                                  The Party not in breach (“NonbreachingParty”) shall give the Party in breach (the “Breaching Party”) noticedescribing the breach and specifying a reasonable period (which shall not beless than twenty (20) days) within which the Breaching Party must substantiallycommence to cure the breach.

 

(b)                                 Both MedicalCV and LightWave wish to avoiddisputes relating to or arising out of this Agreement.  In the event of any dispute or perceivedproblem, each party hereto pledges itself to give notice to the other party andto first seek an amicable resolution without resorting to arbitration.  A Breaching Party shall immediately commenceto cure the breach.  A Breaching Partyshall meet with the Nonbreaching Party to attempt to resolve any claims fordamages by the Nonbreaching Party as a result of the breach.

 

(c)                                  Failing such amicable resolution or cure of abreach, all disputes arising out of or relating to this Agreement (includingany question of fraud or questions concerning the validity or enforceability ofthis Agreement or any of the rights herein conveyed) shall, unless earlierresolved according to Section 10.3(b) hereof, be settled by arbitration tobe held at a suitable location specified by the party initiating theclaim.  Such arbitration shall beconducted in accordance with the then-existing Rules of the AmericanArbitration Association and, if applicable, the Patent Arbitration Rulesthereof (collectively the “Rules”).  Ifthe matter in dispute involves a monetary amount of less than $200,000, thedispute shall be decided by a single arbitrator.  All other disputes hereunder shall be decided by three (3)arbitrators, unless the Parties agree otherwise.  Arbitrators shall be selected in the manner prescribed by theRules.  If the dispute relates to theINTELLECTUAL PROPERTY rights, at least one (1) of such arbitrator shall be anattorney practicing in the field of intellectual property law.

 

(d)                                 In no event will the arbitrator(s) have thepower to include any element of punitive damages or incidental or consequentialdamages in the arbitration award. Judgment on the arbitration award in accordance with this Agreement maybe entered in any state or federal court of competent jurisdiction.

 

(e)                                  It is the intention of the Parties that thearbitration be speedily concluded with the hearing to take place and the awardsto be made within ninety (90) days of the filing of any demand forarbitration.  Specific performance andinjunctive relief may be ordered by the award. Costs and attorney fees shall be paid as the arbitrator’s award shallspecify.  As the sole exception toarbitration, a Party shall have the right to obtain injunctive relief only fromany court having jurisdiction so as to avoid irreparable harm or to preservesuch Party’s rights for resolution in any pending or imminent arbitrationproceedings, and the injunction may be modified or vacated as a result of thearbitration award.

 

----

 

**IN WITNESS WHEREOF**, thisAgreement has been executed and delivered as of the date first above written.

 
|   | **BUYER:**                                                       |
|--------|------------------------------------------------------------------|
|   |                                                             |
|   | MedicalCV, Inc.                                                  |
|   |                                                             |
|   |                                                             |
|   | By:                                                              | /s/ Blair P. Mowery |   |
|   |                                                             | Blair P. Mowery, President |
|   |                                                             |
|   | **SELLER:**                                                      |
|   |                                                             |
|   | LightWave Ablation Systems, Inc.                                 |
|   |                                                             |
|   |                                                             |
|   | By:                                                              | /s/ Gregory Brucker |   |
|   |                                                             | Gregory Brucker, President |
|   |                                                             |
|   | **GREGORY BRUCKER (as to Sections 1.13, 9.2,  9.4 and 9.6)**     |
|   |                                                             |
|   |                                                             |
|   | /s/ Gregory Brucker                                              |   |
|   | Gregory Brucker                                                  |
|   |                                                             |
|   | **ROBERT SVENSON M.D. (as to Sections 1.13,  9.2, 9.4 and 9.6)** |
|   |                                                             |
|   |                                                             |
|   | /s/ Robert Svenson M.D.                                          |   |
|   | Robert Svenson M.D.                                              |
|        |                                                                  |  |  |  |

 

----

 

**Schedule 3.7**

 

LightWavehas entered into confidentiality and/or non-use of information agreements withthree parties concerning possible future business relationships.  Such Agreements do not conflict with, orimpair LightWave’s obligations under, the Technology Purchase Agreement.

 

----