Exhibit 10.16


 


MEDICALCV,
INC.


 


NON-QUALIFIED
STOCK OPTION AGREEMENT


PURSUANT
TO 2001 EQUITY INCENTIVE PLAN


 


	
  No. of shares
  subject to option: 149,850

  	
   

  	
  Option No.:
  F-032

  
	
  Date of grant: November 18,
  2004

  	
   

  	
   

  



 


THIS OPTION AGREEMENT is entered into by and between
MedicalCV, Inc., a Minnesota corporation (the “Company”), and Lawrence L.
Horsch (the “Optionee”) pursuant to the Company’s 2001 Equity Incentive Plan,
as amended to date (the “Plan”).  Unless
otherwise defined herein, certain capitalized terms shall have the meaning set
forth in the Plan.


 


W I T N E S S E T H:


 


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.


 


2.                                       Grant of Option.  Pursuant to the provisions of the
Plan, the Company grants to the Optionee, subject to the terms and conditions
of the Plan and 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 149,850
(one hundred forty-nine thousand, eight hundred fifty) shares of Stock (the “Shares”)
at the purchase price of $1.67 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.  This Option shall expire ten
years after the date of grant specified above. 
Notwithstanding the foregoing, if the Optionee’s employment or relationship
with the Company or Related Company is terminated by reason of death,
Disability or Retirement, this Option shall expire on the one-year anniversary
of the termination date.  If the Optionee’s
employment or relationship with the Company or Related Company is terminated by
reasons for other than death, Disability or Retirement, this Option shall,
subject to Section 4 of the Plan, expire on the three-month anniversary of
the termination date.  Except as
otherwise provided by the Board, an Optionee shall be considered to have a “Disability”
if the Optionee is unable, by reason of a medically determinable physical or
mental impairment, to substantially perform the principal duties of employment
with the Company, which condition, in the opinion of a physician selected by
the Board, is expected to have a duration of not less than 120 days.


 


(b)                                 Exercise
of Option.  Subject to the Plan and
the other 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 Exhibit 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 I hereto. 
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.


 


(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, unless, in accordance
with the provisions of Section 4.2(c) of the Plan, the Board shall permit
or require payment of the purchase price in another manner set forth in the
Plan.


 


(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 1.3 of the Plan,
the provisions of Section 3(b) and Exhibit A hereof pertaining to vesting
shall cease to apply and this Option shall become immediately vested and fully
exercisable with respect to all Shares; provided, however, that the provisions
of this Subsection 3(e) shall not apply unless the Optionee has been
employed by the Company for a period equal to or exceeding one calendar
year.  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 9 of the Plan.


 


(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.


 


(g)                                 Not
An Employment Contract.  The Option
will not confer on the Participant any right with respect to continuance of
employment or other service with the Company or any Subsidiary, nor will it
interfere in any way with any right the Company or any Subsidiary would


 


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otherwise have to terminate or modify the terms of
such Participant’s employment or other 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 Participant, 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 Participant already owns, or to which
the Participant is otherwise entitled under the Plan.


 


4.                                       Termination of Employment. Upon the termination of the employment of
Optionee prior to the expiration of the Option, the following provisions shall
apply:


 


(a)                                  Upon
the Involuntary Termination of Optionee’s employment or the voluntary
termination or resignation of Optionee’s employment, the Optionee may exercise
the Option to the extent the Optionee was vested in and entitled to exercise
the Option at the date of such employment termination for a period of three (3)
months after the date of such employment termination, or until the term of the
Option has expired, whichever date is earlier. 
To the extent the Optionee was not entitled to exercise this Option at
the date of such employment termination, or if Optionee does not exercise this
Option within the time specified herein, this Option shall terminate.


 


(b)                                 If
the employment of an Optionee is terminated by the Company for cause, then the
Board or the Committee shall have the right to cancel any Options granted to
the Optionee under the Plan.


 


5.                                       Death, Disability or Retirement of Optionee.  Upon the
death, Disability or Retirement, as defined herein, of Optionee prior to the
expiration of the Option, the following provisions shall apply:


 


(a)                                  If
the Optionee is at the time of his or her Disability employed by the Company or
a Subsidiary and has been in continuous employment (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 for one (1) year following the date
of such Disability 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 his or her Disability.  For purposes of this Section 5, the term
“Disability”


 


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shall mean that the Optionee is unable, by reason of a
medically determinable physical or mental impairment, to substantially perform
the principal duties of employment with the Company, which condition, in the
opinion of a physician selected by the Board, is expected to have a duration of
not less than 120 days, unless the Optionee is employed by the Company, a
Parent, a Subsidiary or an Affiliate, pursuant to an employment agreement which
contains a definition of “Disability,” in which case such definition shall
control.  The Committee, in its sole
discretion, shall determine whether an Optionee has a Disability and the date
of such Disability.


 


(b)                                 If
the Optionee is at the time of his or her death employed by the Company or a
Subsidiary and has been in continuous employment (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.


 


(c)                                  If
the Optionee is at the time of his or her Retirement employed by the Company or
a Subsidiary and has been in continuous employment (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 for one (1) year following the date
of the Optionee’s Retirement 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 Retirement.  For purposes of this Section 5,
Retirement of the Participant shall mean, with the approval of the [Committee],
the occurrence of the Participant’s Date of Termination on or after the date
the Participant attains age [55].


 


(d)                                 If
the Optionee dies within three (3) months after Termination of Optionee’s
employment 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.


 


6.                                       Termination of Relationship for Misconduct.  If the
Board or the Committee reasonably believes that the Optionee has committed an
act of misconduct, 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, neither the Optionee nor the Optionee’s estate shall be
entitled to exercise any option whatsoever. For purposes of this Section 6,
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.


 


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7.                                       Optionee Bound by Plan.  The
Optionee hereby acknowledges receipt of a copy of the Plan and agrees to be
bound by all the terms and provisions thereof. 
In the event of any question or inconsistency between this Agreement and
the Plan, the terms and conditions of the Plan shall govern.


 


8.                                       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 Participant or benefits deliverable to the
Participant under this Agreement have not been exercised or delivered,
respectively, at the time of the Participant’s death, such rights shall be
exercisable by the Designated Beneficiary, and such benefits shall be delivered
to the Designated Beneficiary, in accordance with the provisions of this
agreement and the Plan.  The “Designated
Beneficiary” shall be the beneficiary or beneficiaries designated by the
Participant in a writing filed with the Committee in such form and at such time
as the Committee shall require.  If a
deceased Participant fails to designate a beneficiary, or if the Designated
Beneficiary does not survive the Participant, any rights that would have been
exercisable by the Participant and any benefits distributable to the
Participant shall be exercised by or distributed to the legal representative of
the estate of the Participant.  If a deceased
Participant designates a beneficiary and the Designated Beneficiary survives
the Participant 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.


 


9.                                       Plan Governs.  Notwithstanding anything in this
Agreement to the contrary, the terms of this Agreement shall be subject to the
terms of the Plan, a copy of which may be obtained by the Participant from the
office of the Secretary of the Company; and this Agreement is subject to all
interpretations, amendments, rules and regulations promulgated by the Committee
from time to time pursuant to the Plan.


 


10.                                 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 employment records of the
Company; subject to the right of either party to designate at any time
hereunder in writing some other address.


 


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


 


12.                                 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.


 


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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.


 


	
   

  	
  MEDICALCV,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ John H. Jungbauer

  
	
   

  	
  By John H. Jungbauer

  
	
   

  	
  Its Vice President, Finance and CFO

  
	
   

  	
   

  
	
   

  	
  OPTIONEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Lawrence L. Horsch

  
	
   

  	
  Lawrence L.
  Horsch

  
	
   

  	
  1404 Hilltop Ridge

  
	
   

  	
  Houlton, WI 54082

  



 


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EXHIBIT
A


 


OPTION
AND VESTING DATA


 


	
  Name of
  Optionee:

  	
   

  	
  Lawrence L.
  Horsch

  
	
   

  	
   

  	
   

  
	
  Number of Shares
  Subject to Option:

  	
   

  	
  149,850

  
	
   

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
  November 18,
  2004

  



 


OPTION
VESTING SCHEDULE


 




	
  DATE

  	
   

  	
  NO. OF SHARES

  EXERCISABLE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 18,
  2004

  	
   

  	
  49,950

  	
   

  
	
  January 18,
  2005

  	
   

  	
  49,950

  	
   

  
	
  February 18,
  2005

  	
   

  	
  49,950

  	
   

  






 


The above vesting schedule assumes
an ongoing relationship with the Company. 
Your rights to exercise the unvested portion of your option will cease
upon termination of relationship with the Company, subject to Change in Control
provisions set forth in Section 9 of the Plan.  Reference is made to the Plan and to relevant
sections of the Agreement between you and the Company for your rights to
exercise the vested portion of your option in the event of termination of your
relationship with the Company during lifetime or upon death.  The above vesting schedule is in all
respects subject to the terms of those documents.


 


	
  OPTIONEE

  	
  MEDICALCV,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Lawrence L.
  Horsch

  	
   

  	
  /s/ John H. Jungbauer

  
	
  Lawrence L.
  Horsch

  	
  By John H. Jungbauer

  
	
  1404 Hilltop
  Ridge

  	
  Its Vice President, Finance and CFO

  
	
  Houlton, WI
  54082

  	
   

  
			



 





















 


SCHEDULE I - NOTATIONS AS TO PARTIAL EXERCISE


 


	
  Date of

  Exercise

  	
   

  	
  Number of

  Purchased

  Shares

  	
   

  	
  Balance of

  Shares on

  Option

  	
   

  	
  Authorized

  Signature

  	
   

  	
  Notation

  Date