**EXHIBIT 10**

**MINNETRONIX®Thinking Medical Systems**

**MINNETRONIX, INC.-MEDICALCV, INC.PRODUCTION SERVICES AGREEMENT**

1635 ENERGY PARK DRIVE

ST. PAUL, MN 55108

PH: 651.917.4060

FAX: 651.917.4066

WWW.MINNETRONIX.COM

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**PRODUCTIONSERVICES AGREEMENT**

This productionservices agreement (this “Agreement”) is dated as of December 6, 2006(“Effective Date”), and is between MEDICALCV, INC. (“Buyer”), and MINNETRONIX,INC., a Minnesota corporation (“Seller”).

WHEREAS, Seller is in the business of contract designand manufacturing of electronic, software, and mechanical assemblies and hasthe capability to manufacture Buyer’s product(s) described in exhibits (“Exhibits”)attached hereto (“Product” or “Products”) as well as to provide design,engineering, sustaining, manufacturing, test, and support services related tosuch Products (“Services”); and

WHEREAS, Buyer is in the business of manufacturing,distributing and selling medical devices and wishes to enter into arelationship during which Seller will provide Products and Services to Buyer;and

WHEREAS, Buyer and Seller desire to establish theterms of sale for all Products and Services now or hereafter purchased by Buyerfrom Seller during the term of this Agreement.

NOW, THEREFORE, Buyer, and Seller hereby agree asfollows:

**ARTICLE 1AGREEMENT SCOPE**

1.1           Application of Agreement.Buyer and Seller agree that all sales of Products and Services from Seller toBuyer made during the term of this Agreement shall be subject to the terms ofthis Agreement and that this Agreement supersedes any prior understandings,agreements, or representations by or between the parties, written or oral,which may have related to the subject matter hereof, unless otherwise agreed toin writing and signed by both parties as an amendment (“Amendment”) to thisAgreement.

1.2           Products and Services. EachProduct and additional required terms specific to the Product shall be definedin an Exhibit. Such Exhibits shall contain a description of a certain Product orProducts being ordered, additional terms of sale and purchase, and unit pricingthat shall apply to the Products specified in the Exhibits (“Price”). Theparties may, from time to time, add new products by executing supplementaryExhibits. Services included in the Price shall be specified in the Exhibits.

1.3           Specifications. Completespecifications required to inspect, manufacture, test, and ship the Productsand the Components (as defined in Section 4.1) in a manner acceptable to Buyer,including part numbers, revisions, bills of material and any otherspecifications applicable to Products ordered pursuant to this Agreement (“Specifications”)will be supplied by Buyer or Buyer’s agent and agreed upon in writing bySeller, or will be otherwise established and accepted by Buyer and Seller viaSeller’s Engineering Change Order (“ECO”) process. Neither Seller nor theProduct shall be expected or required to perform outside of the Specifications.

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1.4           Engineering Change Orders.Prior to Seller’s production release of any “major revision” to a Productassembly or sub-assembly (i.e., any change that may affect the form, fit orfunction of the Product), Seller will request Buyer’s consent to such majorrevision by issuing an ECO to Buyer. Buyer must approve such ECO beforeMinnetronix may release such major revision to production. Buyer’s execution ofan ECO shall be deemed to constitute Buyer’s approval of the production releaseof the revision subject to such ECO, together with all Components andSpecifications that are incorporated into the assembly or sub-assembly that isthe subject of such ECO. Seller will provide all documentation reasonablyrequested by Buyer in connection with its review of any ECO presented bySeller.

1.5           Inconsistencies in Documents.In the event of any inconsistency or conflict between any of the documentsdescribed above and/or Purchase Orders (as defined below in Section 3.1) issuedpursuant to this Agreement, the following order of priority, listed here fromthe highest priority (a) to the lowest priority (f), in interpretation shallapply:

(a)                                  Amendmentsor other modifications made to this Agreement.

(b)                                 Exhibitsto this Agreement.

(c)                                  ProductSpecifications agreed to via Seller’s ECO process.

(d)                                 ProductSpecifications provided to and agreed upon by Seller with the Purchase Order.

(e)                                  PurchaseOrder (exclusive of any terms and conditions).

(f)                                    ThisAgreement.

**ARTICLE 2TERM AND TERMINATION**

2.1           Term. This Agreement shallcommence upon the Effective Date and shall continue for a period of two yearsthereafter, and shall automatically renew for additional periods of one yearunless it is terminated as provided herein.

2.2           Termination for Cause. In theevent of a breach of a material term of this Agreement by either party, theother party may, upon not less than sixty (60) days prior written notice to theparty in breach, terminate this Agreement unless the breach is cured prior tothe end of the notice period. A breach of a material term shall include,without limitation, the following:

(a)                                  Componentsand/or Products delivered to Buyer by Seller do not conform to the applicableSpecification at the time of such delivery, and Seller does not operate in goodfaith to reasonably cure such non-conformance;

(b)                                 Buyerfails to make payment to Seller for Products on a timely basis;

(c)                                  Buyerfails to accept delivery of Products according to the agreed upon deliveryschedule; or

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(d)                                 Sellerfails to make deliveries of Products within fifteen (15) days of delivery datedue to reasons within Seller’s sole control.

Notwithstanding the foregoing, if Seller or Buyerceases to conduct its operations in the normal course of business (including aninability to meet its obligations as they mature), or if any proceeding underthe bankruptcy or insolvency laws are brought by or against Seller or Buyer orif a receiver is appointed to or applied for by Seller or Buyer, the otherparty may terminate this Agreement and/or any Purchase Orders upon such eventwithout liability, except for deliveries previously made or for Productsordered and covered by this Agreement which are completed or in process at thetime of termination and subsequently delivered in accordance with the terms ofthis Agreement.

2.3           Buyer’s Termination forConvenience. Buyer may upon twelve (12) months written notice to Sellerterminate this Agreement for Buyer’s convenience; provided that suchtermination shall not affect any outstanding Purchase Orders. The Agreementshall be non-cancelable by Buyer for convenience for a period of 24 monthsafter the Effective Date, and in no event may Buyer deliver written notice oftermination for convenience prior to the first anniversary of the EffectiveDate. Notwithstanding the foregoing, nothing in this Agreement shall be deemedto require Buyer to purchase Products exclusively from Seller.

2.4           Seller’s Termination forConvenience. Seller may discontinue supply of any Product under thisAgreement by giving Buyer twelve (12) months prior written notice; providedthat such termination shall not affect any outstanding Purchase Orders; andprovided further, that Buyer shall have the option to purchase up to a “lifetime”supply of the Product at the then-current Product revision level for deliverywithin such twelve (12) month period. The Agreement shall be non-cancelable bySeller for convenience for a period of 24 months after the Effective Date, andin no event may Seller deliver written notice of termination for convenienceprior to the first anniversary of the Effective Date. Notwithstanding theforegoing, nothing in this Agreement shall be deemed to require Seller tomanufacture Products for Buyer except to the extent Seller has accepted aPurchase Order for Products placed by Buyer hereunder.

2.5           Effect of Termination. Allprovisions of this Agreement which, by their terms or intent, are designed tosurvive the expiration or termination of this Agreement, shall so survive theexpiration and/or termination of this Agreement, including, without limitation,Sections 9.1 - 9.4, 10.1 - 10.4, 11.10 and 11.15. A party’s right to terminatethis Agreement shall be without prejudice to any other remedies available tosuch party at law or in equity. In the event of notification of termination ofthe Agreement, Buyer’s and Seller’s obligations under this Agreement shall continuewithout interruption through the date of termination.

**ARTICLE 3ORDERS, DELIVERY, AND ACCEPTANCE**

3.1           Purchase Orders. Buyer willorder Products by issuing Seller properly authorized written, emailed, orfacsimile documents specifying, and/or attaching items including: Products,Components, description, applicable part numbers, quantity, revision, deliveryschedule, destination, shipping method, Specifications, special acceptancecriteria (if any), unit price, and total authorized cost of the order (“PurchaseOrder”). The parties shall agree in writing on the

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Purchase Order, and the Specifications containedthereon, in accordance with Section 1.3, prior to the commencement of any workrelated to such Purchase Orders. Provided that such Purchase Order andSpecifications are acceptable to Seller, Seller shall manufacture for Buyer,assemblies and subassemblies, as identified in Purchase Orders. Commencement ofwork related to this Agreement or related to Purchase Orders is done so underthe terms of this Agreement. Any additional or different terms from Buyer senttogether with Purchase Orders or otherwise sent to Seller or from Seller toBuyer shall be excluded unless signed by both parties as an Amendment or anExhibit to this Agreement.

3.2           Packaging. Seller shallprepare and pack Products in accordance with Buyer’s Specifications and incompliance with all applicable legal requirements for such Products. Costs forpreparation, and Product packaging are included in the Price unless notspecified as part of the Product part number ordered by Buyer. Costs forcrating, palletizing, and/or bulk packaging are not included in the Price.

3.3           Shipping. Shipping terms areFOB Seller’s facility.  Seller shallselect freight carrier of its choosing unless otherwise specified by Buyer.

3.4           Delivery. The Purchase Ordershall specify requested delivery dates. Seller shall use its commerciallyreasonable efforts to ship products with appropriate lead-time such thatProducts arrive at Buyer’s dock on or before the requested dates.

3.5           Acceptance. The acceptancecriteria for the Product shall be “conformance to the Specifications at thetime of delivery”. In the event that there are additional acceptance criteriaby Buyer, they must be specified on the Purchase Order at the time of theinitial order in accordance with Section 3.1. Buyer may reject anynonconforming delivery within a reasonable time following delivery, with Sellerto bear the costs arising from such rejection to the extent required underapplicable law.

**ARTICLE 4COMPONENTS AND CONFIGURATION MANAGEMENT**

4.1           Configuration Control. Sellerwill maintain source control on all parts, materials, subassemblies, andcomponents used in connection with the manufacture of Products (“Components”),unless otherwise specified. Buyer will have access to bill of material (“BOW)data, inventory status, and production status as reasonably requested.

4.2           Product Revisions. Seller usesa product revision format that indicates different levels of product release.All revisions have a format of [major revision]-[minor revision]. Majorrevisions (i.e., changes that may affect the form, fit or function of theProduct) are less than “1” (*e.g.*, .01, .02,..5, etc.) prior to production release and are “001” or greater (*e.g.*, 001, 002, etc.) after production release. Minorrevisions start with alpha characters beginning at “a” after each majorrevision change and are incremented for each minor revision change (*e.g.*, a, b, c, etc.). All Products provided at a revisionless than 001-a (*e.g.*, .01-a, .01-b, .5-a, etc.)shall be considered prototypes or pre-production units (“Engineering Units”).All Products provided at a revision level of 001-a or higher (*e.g.*, 001-a, 001-b, 002-a, etc.) shall be consideredproduction units (“Production Units”).

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4.3           Component Scheduling. Sellershall maintain scheduling control over Components ordering and their deliveryscheduling according to Seller’s production scheduling processes. Seller willissue purchase orders, or otherwise place orders, for all Components to supportBuyer’s Purchase Orders throughout the term of the Agreement. Seller willcommit to longer-term buys on an exception basis as reasonably requested byBuyer provided that all such requests are issued in writing to Seller by Buyer.

4.4           Components and other PartsPurchases. Seller agrees to sell sub-assemblies, Components, and otherparts, from its inventory to Buyer, upon Buyer’s reasonable request. Sellerwill quote a price, including any minimum quantity, to Buyer for suchComponents upon request by Buyer. All such sales are subject to the terms ofthis Agreement.        .

4.5           Product Orders. Forecasts andSchedule Changes.

(a)           Buyer will provide Purchase Order(s)representing a firm commitment for Products to be delivered as specified on thePurchase Order. In addition, Buyer shall provide forecasts to Seller, whichreflect Buyer’s estimate of its Product(s) volume requirements over a 12-monthperiod.

(b)           Seller will make reasonable effortsto accommodate Purchase Order change requests, which may include requests tochange order quantities and delivery dates, subject to Component availabilityand capacity at Seller’s sole discretion. Aggressive schedule increases will beaccommodated to the best of Seller’s ability according to the terms of thisAgreement. Purchase Orders may be used to make best effort purchasingdecisions. Excess or scrap Components that occur as a result of Seller’s besteffort purchasing decisions are Buyer’s responsibility in the event of an ordercancellation, Product change undertaken in accordance with Section 1.4, orproduction delay to the extent caused or requested by Buyer.

**ARTICLE 5QUALITY SYSTEMS, REGULATORY, AND AGENCIES**

5.1           Quality Systems Requirements.Seller will establish and maintain formal quality systems and processes thatare compliant with the FDA’s Quality System Regulation (“QSR”) and ISO 13485.Such systems and processes will be provided and maintained by Seller. Any andall special quality system requirements for the Products shall be provided byor agreed to by Buyer via Specifications for the Product or as subsequentlychanged via Seller’s Engineering Change Order process, in writing, at the timeof Purchase Order. Seller will inform Buyer and obtain prior approval for anychanges to be made that can affect the quality of the Products.

5.2           Buyer Audit Rights. Selleragrees that Buyer or any of its duly authorized representatives shall haveaccess to and the right to reasonably perform routine audits on any pertinentdesign, manufacturing, or quality systems or processes, and associateddocumentation provided that Buyer shall provide Seller with 5 working daysprior written notification. Such audits shall occur at most once every 12-monthperiod and require 2 business days or less to complete; provided, however, thatthis limitation shall not apply in the event of an audit or inspection requiredby the FDA or any other governmental or regulatory agency. Buyer and Sellershall incur all of its’ own costs in connection with routine audits.

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5.3           Quality System Records. Sellershall keep records including Device Master Records on the Products inaccordance with the QSR and ISO 13485 standards for the period specified in theExhibits.

5.4           Traceability. Seller willprovide lot or serial traceability to selected Components for Product as agreedto by Buyer and Seller in accordance with Section 5.1.

5.5           Corrective and Preventive Action.A corrective and preventive action system will be managed and maintained bySeller as necessary to meet the requirements of the QSR and ISO 13485 orotherwise as a Seller of Products to Buyer in accordance with Section 5.1.

5.6           Regulatory Responsibility.Buyer shall be responsible for all FDA and other applicable international (*e.g.*, MDD, CMDCAS, etc.) regulatory reporting andregistration, regulatory submissions, Product performance monitoring, complainthandling, and field service with respect to the Products.  Buyer shall promptly notify Seller of anycustomer complaints related to the work performed by Seller. Seller agrees tocooperate, support and investigate such matters as requested by Buyer. Sellershall be responsible for maintaining FDA registration for the facility thatmanufactures the Products.

5.7           Agencies. If Buyer seeksregulatory or safety agency approval for its Product, into which Seller’sProduct is incorporated, Seller agrees to cooperate and fully support Buyer asrequested. Seller will cooperate with agency inspections (*e.g.*,UL, CSA, etc.) relating specifically to the Products.

5.8           Inquiries. If any governmentalagency contacts Buyer or Seller to inquire about or investigate any Productmanufactured by Seller, Buyer or Seller shall use its best efforts to givenotice thereof to the other party within 24 hours of receipt of such contact.

**ARTICLE 6RETURNED PRODUCT AND REPAIRS**

6.1           Returned Product. All Productsthat Buyer deems to be non-conforming shall be returned to Seller afteracquiring and including a Seller’s Return Material Authorization (RMA) numberand paperwork indicating the details of the unit being returned with a serialor lot number and a description of the problem. An RMA number is available onrequest from the Minnetronix Quality Department.

(a)           Shipping.  Buyer shall pay for freight for Productreturn to Seller and Seller shall pay for freight for Product shipment back toBuyer. Seller shall use a shipping method of the same or better expediency tothat which Buyer returned Product to Seller.

(b)           Decontamination.  Buyer agrees to supply Seller with aCertificate of Decontamination along with all returned Product certifying thatit is free of all toxic and biohazard materials. If no such certificate isprovided, Seller will perform decontamination services as needed.

6.2           Repairs. In-warranty repairsshall be performed in accordance with Section 10.4. Seller agrees to performout-of warranty depot repair; upgrade, and troubleshooting services as

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requested by Buyer. All repairs, troubleshooting,field upgrades, and field service work performed by Buyer will be at Buyer’ssole expense, unless Buyer is entitled to recover such expenses from Sellerunder Section 10.2.

**ARTICLE 7DESIGN, PROCUREMENT, ASSEMBLY, AND TEST RESPONSIBILITY**

7.1           Design Responsibility; Disclaimers.Buyer shall be solely responsible for the design of the Products and for theirsafety and efficacy for the indications and intended uses. Buyer shall bear anyfinancial or other responsibility for Product deficiencies discovered by Buyeror Seller. It is Buyer’s sole responsibility to review, validate, and approvethe Product design, any Engineering Units Seller provides, and to ensure thatany resulting product is tested, manufactured, packaged, labeled (includingadequate warnings), sold and/or used in a safe, careful, and effective manner.Buyer is also responsible for obtaining and maintaining any necessaryapprovals, including FDA, UL, CE, CSA, or FCC approvals, if required. Any andall Engineering Units that Seller delivers are provided “as is”. AnyEngineering Units provided by Seller may not meet regulatory standards formedical equipment or software and are not intended for human use unlessspecifically manufactured for that purpose and expressly indicated as such bySeller to Buyer. Every design necessarily involves individualized professionaljudgments, the results of which cannot be guaranteed. Notwithstanding theforegoing, nothing in this Section 7.1 is intended to limit, and in no eventshall this Section 7.1 be deemed to modify, the express obligations of Sellerset forth in Sections 10.2 and 10.4.

7.2           Procurement, Assembly and Test Responsibility.Seller’s procurement, assembly and test responsibility is limited to providinga Product that is “built to print” according to written Specifications providedto Seller by Buyer (and agreed upon by Seller) or as otherwise agreed to byBuyer via Seller’s Engineering Change Order process. Seller agrees to performadditional Services as may be needed from time to time as requested by Buyer.

7.3           Product Changes, Support andSustaining Engineering. As requested by Buyer, Seller agrees to provide technicalsupport and sustaining engineering services required to develop, design,engineer, test, support, and implement Product or process changes.

**ARTICLE 8PAYMENT AND OTHER CONSIDERATION**

8.1           Invoices; Payment Terms.

(a)           Seller shall issue invoices to Buyeras Products are shipped from Seller’s plant for the price of shipped units andshipping costs, with a credit of any applicable prepayment, downpayment,deposit or allowance for Buyer-supplied products as established in Exhibits orAmendments. For Services performed, Seller shall issue invoices to Buyer onceper month.

(b)           Buyer shall deliver payment in fullto Seller within thirty (30) calendar days after the later of (i) the invoicedate, or (ii) the shipment date. A late fee will be assessed to any overdueinvoices. Such late fee shall be the lesser of (a) 1.5%/month, or portionthereof, or (b) the maximum amount permitted by law. In the event that paymentis not made within 60 days

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after invoice date, Seller may cease all efforts onthe Products and refer the account to a collection agency at its solediscretion. Buyer shall be responsible for any and all collections andattorneys’ fees incurred relating to .Seller’s collection of funds owed byBuyer to Seller.

8.2           Out-of-pocket Expenses. Buyershall pay Seller for all reasonable out-of-pocket expenses that Seller incursin relation to the Services provided hereunder; provided that out-of-pocketexpenses in excess of $2,500 in the aggregate during any 12-month periodhereunder shall be approved in advance by Buyer. Reasonable out-of-pocketexpenses, shall include, but not be limited to, out-of-town air and groundtravel, food, and lodging where applicable, and videoconference, internetmeetings, hosted conference calls, supplier non-recurring charges, fees orsurcharges, or other miscellaneous third party costs resulting from Seller’sperformance under this Agreement. Mileage reimbursement for personal vehicleuse shall be at the current IRS rate per mile where Seller travels out-of-townby personal or company vehicle in relation to the Services provided hereunder.

8.3           Expedite Costs. Seller shallbe responsible for Seller’s or Seller’s suppliers’ expedite costs incurred inorder to meet the standard delivery schedule unless such expedite costs becomenecessary due to or are requested by Buyer. Any reasonable expedite costsincurred by Seller due to or requested by Buyer shall be recharged to Buyer.

8.4           Overtime Costs. Seller shallbe responsible for Seller’s overtime costs incurred in order to meet the standarddelivery schedule unless such overtime costs become necessary due to or arerequested by Buyer. Any reasonable overtime costs incurred by Seller due to orrequested by Buyer shall be recharged to Buyer.

8.5           Production Delays. Unlessotherwise specified in an applicable Exhibit, in the event of production delaysrequested or caused by Buyer in excess of 30 days, Buyer shall purchase fromSeller all Committed Inventory (as defined in Section 8.6(a) below) held atSeller during the delay period and pay a 1.25%/month Storage Fee (as defined inSection 8.6(b) below) with respect to each month, or any portion thereof, ofthe delay period until delivery of all Products or Committed Inventory fromSeller to Buyer is made. The fee calculation shall be made by multiplying 1.25%by the average monthly value of the Committed Inventory held by Seller duringthe period to which the fee applies.

8.6           Fee Definitions.

(a)           Committed Inventory. “CommittedInventory” includes Component’s in Seller’s inventory, together with Componentssubject to purchase orders or other written commitments from Seller to Seller’ssuppliers, that are purchased by or otherwise committed to by Seller as aresult of Purchase Orders, including Components actually received by Seller orincluded on non-cancelable, non-returnable or limited change purchase ordersfrom Seller to Seller’s suppliers for Components that will be received bySeller during the delay period.

(b)           Storage Fee. In the event of aproduction delay per Section 8.5, Seller’s “Storage Fee” covers Seller’s costsfor the storage, maintenance, warranty, material handling, shrinkage, cyclecounting, storage space, floor space and other overhead associated with theinventory as well as supplier management, discrepant material handling, purchasingefforts, reporting,

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tracking, and rescheduling associated with storing andmanaging inventory during a delay in production.

(c)           G&A Fee. This fee coversSeller’s costs for general and administrative efforts associated with variousbusiness issues including, but not limited to, purchasing, inspecting,providing warranty, inventorying, invoicing, storing, receiving, space,capitalizing, managing, and other overhead issues associated with the businessrelating to the items or issues to which the fee is applicable. This fee shallonly be applied to costs incurred by Seller that are owed by Seller to thirdparties and are not included in the Price, but are otherwise covered by thisAgreement and are being recharged to Buyer including, but not limited to, costsassociated with Sections 8.2 - 8.4, and 8.8. The standard G&A fee shall be25% of the amount to which to fee is applied.

8.7           Cancellation of Purchase Orders inWhole or in Part. In the event that Buyer wishes to cancel a Purchase Orderor terminates the Agreement as per Sections 2.2 or 2.3, or Seller terminatesthis Agreement pursuant to Section. 2.2, the following terms shall apply toCommitted Inventory purchased or committed to as a result of the Purchase Order(as described above in Section 4.5) from Buyer:

(a)           Seller will make reasonable goodfaith efforts to return unneeded Components to. its suppliers; and

(b)           Buyer will be responsible for thefollowing costs arising from Buyer’s Purchase Order and subsequentcancellation:

(i)            Seller’s actual costs associatedwith non-returnable or non-cancelable Committed Inventory including CommittedInventory that has been rendered non-returnable due to work performed inaccordance with this Agreement and associated Purchase Orders;

(ii)           Seller’s actual costs associated withreturnable or cancelable Committed Inventory; and

(iii)          Seller’s cancellation fee of twenty(20) percent of the remaining Purchase Order value at the time of cancellationat Seller’s sole discretion; provided, however, that this cancellation fee willnot be required to be paid by Buyer if Buyer terminates the Agreement pursuantto Section 2.2.

Upon payment by Buyer of the amounts set forth inSection 8.7(b) above, Buyer shall own all such Committed Inventory, and Sellershall deliver such Committed Inventory to Buyer in accordance with Section 3.3above.

Seller’s “actual costs” include labor, overhead andother out-of-pocket expenses incurred in the purchasing, receiving, inspecting,testing, assembling, storing, counting, shipping, handling, canceling,returning, or otherwise managing or processing the Components and theirsuppliers.

8.8           Other costs. Other costs maybe incurred for Products or additional Services provided by Seller in supportof Buyer’s Products as requested by Buyer. Such costs may include, but are notlimited to, Services requested by Buyer as per Sections 4.5(b), 5.6, 5.7,

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6.1(b), 6.2, 7.2, 7.3, and 9.3. Costs shall be chargedto Buyer based on materials costs; third party costs, or at the then-currentrates of Seller’s personnel.

8.9           Pricing Review.  Buyer and Seller agree to evaluate and/oradjust the Unit pricing stated in Exhibits no more often than once every sixmonths at the request of Buyer or Seller.

**ARTICLE 9INTELLECTUAL PROPERTY RIGHTS**

9.1           Confidential Information.Confidential Information (“Confidential Information”) includes all informationfurnished to the receiving party relating to the business conducted or to beconducted by the disclosing party, including, but not limited to, informationon markets, customers, products, software, source code, inventions, procedures,designs, financial status, plans, organization and general business strategy.Confidential Information includes information furnished in written orelectronic format as well as any information that may be derived from review ofProduct samples, software or other assets. Confidential Information includesinformation disclosed before, on or after the date of this Agreement.

(a)           All Confidential Information shallremain the property of the disclosing party;

(b)           Each party shall keep ConfidentialInformation received from the other party in confidence and trust and shall notuse it for any purpose other than for the purposes of this Agreement; and

(c)           Neither party shall discloseConfidential Information of the other party to any third party without theprior express written consent of the other party regarding such intendeddisclosure.

Upon termination of this Agreement, either party mayrequest the other party to return the Confidential Information that the otherparty has in its possession or control provided, however, that neither partywill be obligated to deliver or destroy any Confidential Information that is inelectronic format; rather, the parties will be permitted to retain such ConfidentialInformation subject to the ongoing confidentiality terms and conditions of thisAgreement.

9.2           Exclusions. Notwithstandingany other provision of this Agreement, information shall not be deemedConfidential Information hereunder if it:

(a)           is or becomes publicly known throughno act or omission of the party receiving the information;

(b)           is information that the receivingparty can demonstrate was in the receiving party’s possession before disclosureby the disclosing party and was not acquired, directly or indirectly, from thedisclosing party;

(c)           is obtained from a third partywithout obligation to the disclosing party and with a legal right to transmitthe information; or

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(d)           is required to be disclosed pursuantto law; provided, that the receiving party shall give prompt and prior writtennotice thereof to the disclosing party, and, that the receiving party shallgive reasonable cooperation to the disclosing party to limit any public releaseof such information to the extent provided by law.

9.3           Technical Data and IntellectualProperty Ownership.

(a)           Each party shall retain any and allright, title and interest to any algorithms, know-how, ideas, designs,techniques, processes, concepts and the like (collectively, “Materials”) thatsuch party possessed prior to entering into this Agreement. Buyer and Selleracknowledge that certain Materials may be used in the design, development andmanufacture of the Products pursuant to this Agreement. For all Materialsdeveloped by Seller for Buyer and for the Products as a result of thisAgreement for which full consideration has been made (“Developed Materials”),and to the extent that Seller can transfer such ownership, Buyer shall own allrights (including all intellectual property rights) in and to such DevelopedMaterials. Developed Materials that Buyer reasonably considers to be a tradesecret of, or otherwise patentable by, Buyer, shall be referred to herein as “BuyerMaterials.” Buyer hereby grants to Seller a non-exclusive, perpetual,fully-paid up, royalty free, worldwide, irrevocable right and license, with theright to grant sublicenses, to all Developed Materials that are not BuyerMaterials, to make, have made, use, reproduce, modify, make derivative works,make improvements, publicly display, distribute, sell (either directly orindirectly), and offer to sell (either directly or indirectly), lease, import,practice and otherwise transfer or dispose of such item as part of or inconnection with such Developed Materials that are not Buyer Materials. Buyermust notify Seller in writing of all Developed Materials that it reasonablyconsiders to be Buyer Materials within 60 days after Buyer first receiveswritten notice of the same hereunder, and any such notice received by Sellerafter the applicable 60 day time period shall be void. In the event that Selleror a third party makes use of any such Developed Materials after the 60-dayperiod, but prior to receipt of a notice from Buyer provided for above, anysuch Developed Materials that would have been Buyer Materials if proper noticehad been given shall be deemed to be Developed Materials (and not BuyerMaterials) and shall be subject to the license rights granted to Seller pursuantto the terms of this Section 9.3. Whenever requested to do so by Buyer, Sellershall execute any and all applications, assignments, oaths or other instrumentsand give testimony which Buyer shall deem necessary to apply for and obtainletters of patent of the United States or of any foreign country or to protectotherwise Buyer’s interest therein. Copyrightable materials that Sellerdevelops in connection with this Agreement for which full consideration hasbeen made shall be the property of Buyer and shall be deemed “works for hire”under the Copyright Act. Seller further agrees that Seller’s obligation toexecute or cause to be executed, when it is in Seller’s power to do so, anyapplications, assignments, oaths or other instruments contemplated hereundershall continue after the termination. of this Agreement.

(b)           Seller agrees that if Buyer is unablebecause of Seller’s unavailability or unwillingness after 10 business daysprior written notice, or dissolution, to secure Seller’s signature, which will notbe unreasonably withheld, to apply for or to pursue any application for anyUnited States or foreign patents or copyright registrations covering theDeveloped Materials assigned to Buyer above, then Seller hereby irrevocablydesignates and appoints Buyer and its duly authorized officers and agents asSeller’s agent and attorney in fact, to act for and in Seller’s behalf andstead to execute and file any such applications and to do all other lawfullypermitted

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acts to further the prosecution and issuance ofpatents and copyright registrations thereon with the same legal force andeffect as if executed by Seller, this power and agency being coupled with aninterest and being irrevocable.

(c)           Buyer and Seller further acknowledgethat certain Materials:

(i)            created by or for Seller prior toits beginning work for Buyer pursuant to this Agreement (“Preexisting Materials”),

(ii)           created by or for Seller in separateefforts at its own expense, even to the extent that such work is delivered orused in the performance of this Agreement (“Ancillary Materials”),

(iii)          generally known or available to thoseskilled in the art, or

(iv)          owned by third parties and licensed toSeller, collectively, shall be excluded from Developed Materials.

(d)           To the extent that Seller is legallyable to do so and insofar as Buyer has made full consideration for workperformed under this Agreement to Seller, Seller hereby grants to Buyer anon-exclusive, perpetual, irrevocable, worldwide, royalty-free license to allPreexisting Materials that may be included in the Products, in order for Buyerto use, import, sell and have sold the Products. Subject to the foregoing,Buyer shall own all rights (including all intellectual property rights) in andto the Products, and all related design information and documentation. Inaddition, Seller shall provide prior written notice to Buyer beforeincorporating any Ancillary Materials into the Product.

(e)           Nothing in this Agreement prevents orprohibits Buyer from having the Product manufactured by a third party at anytime. In no event shall Seller be required to license to Buyer or such thirdparties, however, or otherwise authorize such parties to use Seller’sproprietary electronic quality systems, assembly and manufacturing processes (*e.g.*, standard operating procedures, or SOPs), and similarproprietary Materials, it being agreed and acknowledged by the parties that, asof the date of this Agreement, there are no such Materials proprietary toSeller that would be required for Buyer or any third party to manufacture,test, inspect and/or package the Products in accordance with theSpecifications.

9.4           Seller’s Inability to Deliver.In the event that Seller can no longer provide the Products to Buyer due toSeller’s bankruptcy, insolvency, or Seller otherwise ceasing to conduct itsoperations, Seller shall provide Buyer with non-exclusive, perpetual,irrevocable, worldwide, royalty-free license rights to any intellectualproperty owned by Seller necessary for the production of the Products. Sellershall provide to Buyer all information, designs, and documentation required toproduce the Products, including, but not limited to, design, assembly, test,and manufacturing documentation, test equipment, electronic files, softwaresource code and executables, programming equipment, and any other Componentsrequired to produce the Products. These Components shall be provided by Sellerto Buyer in a timely manner and at a reasonable cost.

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**ARTICLE 10INDEMNITIES, LIMITATION OF DAMAGES, AND WARRANTIES**

10.1         Buyer’s Indemnification. Buyershall indemnify, defend, and hold harmless Seller and its officers, directors,employees, agents, successors and assigns from and against any and all losses,claims, actions, costs, liabilities, expenses, fines, damages, and other reliefor penalties it or they may suffer (including, but not limited to, reasonableattorneys’ fees and expenses) as a result .of any claims, demands, actions orother proceedings made or instituted by any third party against any of them andto the extent resulting from:

(a)           any breach or default in theperformance by Buyer of any covenant or agreement of Buyer contained in thisAgreement or any Exhibit hereto,

(b)           any act or omission of Buyer or itsemployees or agents that constitutes negligence, willful misconduct or actualfraud,

(c)           illness, injury or death to anyperson relating to or arising out of Buyer’s performance of this Agreement,

(d)           damage to any real or tangiblepersonal property relating to or arising out of Buyer’s performance of thisAgreement,

(e)           the provision, sale, use or otherexploitation of the Products or any part thereof, or any products thatincorporate the Products, which infringes or violates any patent, copyright,trademark, tradename, trade secret or any other proprietary right of any thirdparty,

(f)            the testing, possession, provision,sale, use, operation or other exploitation of a Product or the testing,possession, provision, sale, use, operation or other exploitation of any ofBuyer’s products using or containing a Product or any other claims whatsoeverby whomsoever relating to or arising out of the Product or Buyer’s productsthat incorporate any aspect of the Services provided or Products soldhereunder, and

(g)           any and all actions, suits,proceedings, claims, demands, judgments, costs and expenses (includingreasonable legal and accounting fees) incident to any of the foregoing,

provided that, Buyer’s obligation to indemnify Sellerhereunder shall apply only if:

(a)           Seller gives Buyer prompt noticeafter learning of any such claims or actions,

(b)           Buyer shall have exclusive controlover the defense and settlement of any such claim or actions,

(c)           Seller shall not settle or compromiseany such claims or actions without Buyer’s prior written approval, and

(d)           Seller shall cooperate with Buyer ina defense and settlement of any claim, at Buyer’s expense, provided that Buyershall not be liable hereunder for any settlement or compromise negotiated bySeller unless Buyer agrees in writing to be so bound. If Seller

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provides notice of a claim in accordance with (a)above and is not notified within ten (10) days thereafter that Buyer intends todefend the claim, Seller shall be entitled to defend such claim, and settle orcompromise such claim, subject to the indemnification provided for herein.

The foregoing indemnity shall not apply to the extentthat such claims or actions for damages or other relief arise from thenegligent acts or omissions, willful misconduct, breach of any terms orprovisions of this Agreement by, or other unlawful conduct of, Seller or any ofSeller’s employees or agents.

10.2         Seller’s Indemnification. Sellershall indemnify, defend, and hold harmless Buyer and its officers, directors,employees, agents, successors and assigns from and against any and all losses,claims, actions, costs, liabilities, expenses, fines, damages, and other reliefor penalties it or they may suffer (including, but not limited to, reasonableattorneys’ fees and expenses) as a result of any claims, demands, actions orother proceedings made or instituted by any third party against any of them andto the extent resulting from:

(a)           any breach or default in theperformance by Seller of any covenant or agreement of Seller contained in thisAgreement or any Exhibit hereto,

(b)           any act or omission of Seller or itsemployees or agents that constitutes negligence, willful misconduct or actualfraud,

(c)           illness, injury or death to anyperson relating to or arising out of Seller’s performance of this Agreementexcept as to any such illness, injury or death arising out of or relating toBuyer’s testing, possession, provision, sale, use, operation or otherexploitation of the Products,

(d)           damage to any real or tangiblepersonal property relating to or arising out of Seller’s performance of this Agreementexcept as to any such damage arising out of or relating to Buyer’s testing,possession, provision, sale, use, operation or other exploitation of theProducts, and

(e)           any and all actions, suits,proceedings, claims, demands, judgments, costs and expenses (includingreasonable legal and accounting fees) incident to any of the foregoing,provided that, Seller’s obligation to indemnify Buyer hereunder shall applyonly if:

(f)            Buyer gives Seller prompt noticeafter learning of any such claims or actions,

(g)           Seller shall have exclusive controlover the defense and settlement of any such claim or actions,

(h)           Buyer shall not settle or compromiseany such claims or actions without Seller’s prior written approval, and

(i)            Buyer shall cooperate with Seller ina defense and settlement of any claim, at Seller’s expense, provided thatSeller shall not be liable hereunder for any settlement or compromisenegotiated by Buyer unless Seller agrees in writing to be so bound. If Buyerprovides notice of a claim in accordance with (a) above and is not notifiedwithin ten (10) days

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thereafter that Seller intends to defend the claim,Buyer shall be entitled to defend such claim, and settle or compromise suchclaim, subject to the indemnification provided for herein.

The foregoing indemnity shall not apply to the extentthat such claims or actions for damages or other relief arise from thenegligent acts or omissions, willful misconduct, breach of any terms orprovisions of this Agreement by, or other unlawful conduct of, Buyer or any ofBuyer’s employees or agents.

10.3         Limitation of Damages. Neitherparty shall be liable to the other party for lost revenues, lost profits orother incidental, indirect, special, consequential, or exemplary damages inconnection with this Agreement or performance hereunder, whether or not a partyhas been advised by the other party of the probability of such damage or loss,whether such damage or loss arises in contract, tort, including negligence,strict liability or otherwise. Buyer is obligated to train and instruct itsemployees and any potential users of the Products with regard to their safe andproper use. Buyer’s sole remedy under this Agreement for any Products that failto conform to the applicable Specifications or otherwise for Seller’s breach ofthis Agreement shall be the repair or replacement of the Products or a refundof the amount actually paid to Seller by Buyer for the Product(s).

10.4         Warranties.

(a)           Seller warrants to Buyer that eachProduction Unit, for a period to be specified in the Exhibit(s), shall: (i)conform in all material respects to all of the Product Specifications; and (ii)be free from all defects in materials and workmanship. The foregoing warrantiesdo not apply to any third party software or any other third party Componentsthat are embedded or incorporated into the Products, provided that Seller shallassign to Buyer any warranties received from such third parties to the extentthat Seller is permitted to make such assignments. During this period and onlyduring this period, Seller’s responsibility shall include and be limited to thelabor costs for work performed by Seller at Seller’s facility, componentreplacement, and domestic ground shipment of Products from Seller’s facility.In all cases, costs not related to warranty repair or replacement shall beborne by Buyer.

(b)           EXCEPT AS EXPRESSLY SET FORTH IN THISAGREEMENT (INCLUDING ANY EXHIBITS), SELLER MAKES NO WARRANTIES, EXPRESS ORIMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITYAND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE PRODUCTS.

**ARTICLE 11MISCELLANEOUS**

11.1         Amendment. No amendment ormodification of this Agreement shall be binding upon Buyer or Seller unless setforth in a written instrument signed by Buyer and Seller.

11.2         Changes. Any change in the (a)Product technical requirements and descriptions, Specifications, statement ofwork, drawings or designs; (b) shipment or packing methods; (c) place ofdelivery; (d) amount of Buyer-furnished Components or property; or (e) Productproduction methods and processes which may affect form, fit, function,interchangeability,

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reliability, or safety of the Products, shall requirethe prior mutual, written consent of. Buyer and Seller, which consent shall notbe unreasonably withheld. If any such changes cause an increase or decrease inthe cost of or the time required for performance of this Agreement, anequitable adjustment in the Prices and schedules of this Agreement shall bemade to reflect such increase or decrease and this Agreement shall be modifiedin writing accordingly.

11.3         Insurance.

(a)           Seller’s Insurance.  Seller agrees to obtain and maintain thefollowing minimum insurance coverages and limits:
| (i)    |   | Worker’s Compensation:      |   | Statutory limits in each state in which Seller is  required to provide Worker’s Compensation coverage |
|--------|--------|----------------------------------|--------|------------------------------------------------------------------------------------------------------------|
|   |   |                             |   |                                                                                                       |
| (ii)   |   | Employer’s Liability:       |   | $100,000                                                                                                   |
|   |   |                             |   |                                                                                                       |
| (iii)  |   | Comprehensive General Liability: |   | $2,000,000 per occurrence excluding completed  products and completed operations                           |

 

Seller is responsible for any theft, loss, or damageto Buyer-owned property for which Seller is legally liable.

(b)           Buyer’s Insurance.  Buyer agrees to obtain and maintain thefollowing minimum insurance coverages and limits:
| (i)    |   | Worker’s Compensation:      |   | Statutory limits in each state in which Buyer is  required to provide Worker’s Compensation coverage |
|--------|--------|----------------------------------|--------|-----------------------------------------------------------------------------------------------------------|
|   |   |                             |   |                                                                                                      |
| (ii)   |   | Employer’s Liability:       |   | $100,000                                                                                                  |
|   |   |                             |   |                                                                                                      |
| (iii)  |   | Comprehensive General Liability: |   | $2,000,000 per occurrence including completed  products and completed operations                          |
|   |   |                             |   |                                                                                                      |
| (iv)   |   | Product Liability Insurance:     |   | Appropriate and adequate for Products naming Seller  as Additional Insured on a primary basis             |

 

Buyer shall provide Seller with a copy of Buyer’scertificate of insurance indicating that Seller is named as an AdditionalInsured on a primary basis. Buyer assumes responsibility, except as specifiedabove, for any theft, loss, or damage, including ordinary wear and tear, toBuyer-owned property regardless of location, upon its delivery to Seller or itsmanufacture or acquisition by Seller on Buyer’s behalf. This includes, but isnot limited to, equipment, materials, parts, assemblies, work in process,finished goods, returned goods, data, documentation, tooling, and any otherproperty of Buyer.

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11.4         Subcontract Management.  Seller is responsible for the management ofits subcontractors, suppliers, and/or vendors at its sole discretion.

11.5         Personnel Assignment.  Seller reserves the right to assign, orreassign personnel at its sole discretion.

11.6         Location of Work.  All work will principally be performed atSeller’s facility.

11.7         Public Announcement.  Except as otherwise required by applicablelaw or stock exchange rule, each of Seller and Buyer will not, and will notpermit any of its respective affiliates, representatives or advisors to, issueor cause the publication of any press release or make any other publicannouncement with respect to this Agreement or its business relationship withthe other party without the consent of the other party, except that Sellershall be permitted to add Buyer to its customer list and related marketingmaterials without having to obtain Buyer’s consent once Buyer has publicly disclosedthis Agreement or its relationship with Seller.

11.8         Assignment.  A party’s rights under this Agreement may notbe assigned or transferred in whole or in part by operation of law or otherwisewithout the other party’s prior express written consent, which shall not beunreasonably withheld, conditioned, or delayed. Any attempted assignment of anyrights, duties or obligations hereunder without such consent shall be void.This Agreement shall be enforceable by, inure to the benefit of, and shall be bindingupon the successors and assigns of the parties hereto.

11.9         Force Majeure.  If performance of this Agreement, or of anyobligation hereunder, is prevented, restricted or interfered with by any act orcondition beyond the reasonable control of the party affected thereby,including without limitation, fire or other casualty or accident; strikes orlabor disputes; war, terrorist attacks or other violence; any law, order,proclamation, regulation, ordinance, demand or requirement of any governmentalor intergovernmental agency or body, the party so affected shall be excusedfrom such performance to the extent of such prevention, restriction orinterference. If such force majeure prevents or delays the performance ofSeller hereunder, Buyer-arid Seller shall extend the Agreement for a period oftime equal to the period of force majeure suffered by Seller. Notwithstandingthe foregoing, if the force majeure event continues to prevent, restrict orinterfere with performance of Buyer’s or Seller’s obligations hereunder formore than 60 days, either party may terminate this Agreement, in whole or inpart (including any Exhibit or Purchase Order), by written notice, as of a datespecified by such party.

11.10       Arbitration and Dispute Resolution.  The parties shall use all reasonable effortsand negotiate in good faith to resolve any dispute, controversy, or claimarising out of or in connection with this Agreement. If the parties are unable,notwithstanding such good faith negotiation, to settle the matter in controversy,the parties shall submit such unresolved disputes to binding arbitration inaccordance with the then current commercial arbitration rules of theInternational Institute for Conflict Prevention and Resolution (CPR). Theparties agree that any arbitration will take place in St. Paul, Minnesota. Theprevailing party in any such arbitration or in any judicial enforcement thereofshall be entitled to its reasonable attorneys’ fees and arbitration costs inaddition to any other amount of recovery ordered by such arbitrator or court.

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11.11       Taxes.  Pricing stated in Exhibits shall be exclusiveof any federal, state, or local excise, sales, use or other applicable taxes(excepting income taxes of Seller). Any such costs and taxes shall be theresponsibility of Buyer.

11.12       Severability.  Should any provision of this Agreement befinally determined to contravene any applicable law or governmental regulation,such provision shall be automatically terminated and performance thereof byboth parties shall be waived to the extent of such contravention. Should suchprovision be considered by either party to be an essential element of thisAgreement, the parties hereto agree to negotiate a new, applicable provision ingood faith.

11.13       Waiver and Discharge.  The failure of any party hereto to enforce atany time any of the provisions of this Agreement shall in no way be construedto be a waiver of any such provision, nor in any way to affect the validity ofthis Agreement or any part thereof or the right of the party thereafter toenforce each and every such provision. No waiver of any breach of thisAgreement shall be held to be a waiver of any other or subsequent breach.

11.14       Notices.  Any notice given under this Agreement shallbe in writing and shall be: (1) given by confirmed facsimile transmission, (2)sent registered or certified mail, postage prepaid, return receipt requested,or (3) sent by any overnight delivery service which delivers to the noticeddestination, and provides proof of delivery to sender. All notices shall beeffective when first received at the following addresses:
| If to Buyer:                   |   | If to Seller:             |
|--------------------------------|--------|---------------------------|
|                           |   |                      |
| MedicalCV, Inc.                |   | Minnetronix, Inc.         |
| 9725 South  Robert Trail       |   | 1635 Energy Park Drive    |
| Inver Grove Heights,  MN 55077 |   | St. Paul, MN 55108        |
| Attn: Robert W.  Clapp         |   | Attn: Richard A. Nazarian |

 

11.15       Governing Law.  This Agreement shall be governed by the lawsof the State of Minnesota without regard to any choice of law provisionsthereof.

11.16       Benefit.  Nothing in this Agreement, expressed orimplied, is intended to confer on any person other than the parties to thisAgreement or their respective successors or assigns, any rights, remedies,obligations or liabilities under or by reason of this Agreement.

11.17       Injunctive Relief, Attorneys’ Fees.  Each party shall be entitled to seekinjunctive relief in any court of competent jurisdiction in addition to anyother remedy at law or in equity in the event of a breach of this Agreementwithout the necessity of proving actual damages or posting any bond. In theevent of any legal action or proceeding arising out of or resulting from thisAgreement, the prevailing party shall also be entitled to recover itsreasonable attorneys’ fees and costs thereby incurred.

11.18       Binding Agreement.  Execution of this document shall create abinding Agreement. and constitutes a commitment on the part of Buyer to pay forall Products delivered hereunder according to the purchase price or ratestructure stated in the Agreement, Exhibits, or Amendments.

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11.19       Complete Agreement.  This Agreement, together with all Exhibits,Amendments, Purchase Orders and related documents contains the completeagreement between Buyer and Seller with respect to its subject matter. Theparties agree that any design or development agreement between the partiesshall not be deemed to be a part of this Agreement.  This Agreement supersedes any and allprevious discussions, prior understandings, agreements or representations,written or oral, by or between the parties, which may have related to thesubject matter hereof.

Each party is signing this production servicesagreement on the date stated below that party’s signature.

| MINNETRONIX, INC. | MEDICALCV, INC.         |
|-------------------|-------------------------|
|              |                    |
|              |                    |
| By:               | /s/ Jonathan D.  Pearle |   | By: | /s/ Robert W. Clapp |
| Name:             | Jonathan D.  Pearle     | Name: | Robert W. Clapp |
| Title:            | CFO / COO               | Title: | Vice President, Operations |
|              |                    |
| Date:             | 12.06.2006              |   | Date: | 12.06.2006 |
|                   |                         |  |  |  |  |  |  |  |  |  |

 

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**MINNETRONIX**®Thinking Medical Systems

**MINNETRONIX, INC.-MEDICALCV, INC.PRODUCTION SERVICES AGREEMENTEXHIBIT A**

**MEDICALCV, INC.RECIPROCATOR INSTRUMENTPRODUCT ADDENDUM**

1635 ENERGY PARKDRIVE

ST.  PAUL, MN 55108

PH: 651.917.4060

FAX: 651.917.4066

WWW.MINNETRONIX.COM

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***ExhibitA to Minnetronix Production Services Agreement***

**EXHIBITA**

**MEDICALCV,INC.  RECIPROCATOR INSTRUMENTPRODUCT ADDENDUM**

This Exhibit A to the Production Services Agreement dated as ofDecember 6, 2006 (the “Agreement”), between MEDICALCV, INC.  (`Buyer”) and MINNETRONIX, INC.  (“Seller”), is dated as of December 6, 2006 (“EffectiveDate”), and is between Buyer and Seller. Capitalized terms used but not otherwise defined in this Exhibit A shallhave the meanings given to such terms in the Agreement.

**A.1.        **Product Description.  The ASBY Opportunity Reciprocator Instrument,Seller’s Part # AE-0000-74-6 (referred to in this Exhibit A as the “Product”),is a subsystem of Buyer’s SolarTM Minimally Invasive Cardiac Ablation System(the “System”).  Revision numbers for theProduct may change from time to time through Seller’s Engineering Change Order(“ECO”) system.

**A.2.        **Pricing.  The applicable price for the Product ineffect from time to time (“Price”) shall be determined in accordance with theterms and conditions set forth in the Agreement and this Exhibit A.  Each Purchase Order must specify Seller’spart and revision numbers for the Product. The Price applicable to Buyer’s initial order of six (6) units shall beas shown in the following table:
| **Order  Volume** | ** ** | **Purchase**   | ** ** | **Description**                           | ** ** | **Seller’s Part #** | ** ** | **Rev.** | ** ** | **Price/Unit  Commitment** | ** ** |
|-------------------|------------|----------------|------------|-------------------------------------------|------------|------------------------------------|------------|----------|------------|----------------------------|------------|
| First 6 units     |       | One  (1) month |       | ASBY  Opportunity Reciprocator Instrument |       | AE-0000-74-6                       |       | 001-a    |       | $                          | 25,000     | * |
|                   |            |                |            |                                           |            |                                    |            |          |            |                            |            |  |

 

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*                                         Onor before execution of this Exhibit A, Buyer shall have placed an initialPurchase Order with Seller for six (6) Production Units in accordance with theterms and conditions set forth in Seller’s Project Scope Change No. 1299 datedAugust 7, 2006 (“PSC No.  1299”).  Upon shipment of these six (6) ProductionUnits, Seller will invoice Buyer for that portion of the aggregate Price forsuch Production Units, if any, not previously paid by Buyer.

For Products to be ordered by Buyer following placement of Buyer’sinitial Purchase Order hereunder, the Price shall be determined via a Seller’sPrice quotation and corresponding placement of a Purchase Order by Buyeraccepting such Price.  The Price shall bequoted and agreed to from time to time based on a quantity and deliveryschedule as requested by Buyer and stated on Purchase Order(s) Placed byBuyer.  Subsequent to placement of suchPurchase Order(s), it is subject to change if the Agreement, Specifications,Components, Products, Services, Exhibit, order quantity or delivery period arechanged.

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**A.3.        **Downpayment.  For each Purchase Order placed by Buyerfollowing Buyer’s initial Purchase Order for six (6) Production Units, adownpayment equal to 20% of the value (i.e., Price times number of units) ofeach order of Products shall be paid by Buyer at the time of placement of aPurchase Order.  Any NRE fees must alsobe paid by Buyer at the time of placement of a Purchase Order (see Section A.15below).  An appropriate credit will begiven on each unit delivered to Buyer to account for the downpayment.  The downpayment requirement in intended toshare the materials and schedule risk that is taken on by both parties once anorder is placed for Buyer’s Product.

**A.4.        **Delivery Schedule.  The delivery schedule for Product orders willbe as stated on Purchase Orders placed by Buyer, based on quantity and deliveryterms included in Seller’s Price quote, and agreed upon by Seller.

**A.5.        **System Components.  The Product includes all items included onSeller’s Part # AE-0000-74-6.  Itincludes a foot switch and a power cord, but does not include a laser interfacecable or any technical manuals or instructions for use.

**A.6.        **Testing.  The Product functional and quality controltesting to be performed to verify the Product’s conformance to theSpecifications at the time of delivery will be as per the testing andinspection procedures defined in the Device Master Record (“DMR”) or asotherwise established and agreed to by Buyer via Seller’s ECO system.

**A.7.        **Packaging.  The Product packaging will be as currentlyspecified in the DMR or otherwise established and agreed to by Buyer via Seller’sECO system.

**A.8.        **Warranty.  The warranty period shall be one (1) yearparts and labor after date of shipment of the Production Unit.  Any damage due to sources other than theProduction Unit itself, abuse, or misuse of such Production Unit after shipmentvoids Seller’s limited warranty of such Production Unit.

**A.9.        **Documentation.  Consistent with FDA Class II/MDD Class IIarequirements.

**A.10.     **Records.  Consistent with FDA Class II/MDD Class IIarequirements.  The DMR and Device HistoryRecords shall be kept by Seller for the lesser of (a) ten (10) years from thedate of manufacture for each device or (b) two (2) years after Seller’s lastproduction date of the Product.  TheDesign History File shall be kept by Seller for two (2) years after Seller’slast production date of the Product.  Inany event, the records shall be made available to Buyer upon request andoffered for transfer prior to their deletion or destruction by Seller.

**A.11.     **Seller Responsibilities.  Seller shall be responsible for the assembly,testing (including final quality assurance testing of saleable Product), andinspection of each Production Unit as defined in the DMR, and packaging andshipping to Buyer.

**A.12.     **Buyer Responsibilities.  Buyer shall be responsible for validation ofthe Product as incorporated into the System, final quality assurance testing ofa saleable System, and final labeling (e.g., instructions for use), packagingand shipping to end-users.

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**A.13.     **Product Labeling Serialization, and TraceabilityRequirements.  Serialization,traceability and labeling of each Production Unit shall be performed by Sellerin a manner consistent with FDA Class II/MDD Class IIa requirements, asspecified in the DMR or otherwise established and agreed to by Buyer via Seller’sECO system.

**A.14.     **Process FMEA/Validation.  A Process FMEA will not be required to beperformed for the Product.  No specialprocesses or qualifications are currently required under the QSR to bevalidated in order to build the Product. In the event it is later determined that any process validationactivities are required, Seller will inform Buyer of the fees associated withsuch activities prior to performing the work, the cost of which shall be borneby Buyer.

**A.15.     **NRE Fees.  Any non-recurring engineering (`NRE”) feesincurred by Seller with respect to the Products, including any requiredsupplier NRE fees, will be recharged to Buyer in accordance with Section 8.2 ofthe Agreement.

**A.16.     **Lead-Time Requirements.  Seller’s current long lead times forpurchasing Components for the Product (i.e., the lead times required to orderand receive Components at Seller’s dock, but not including Seller’s receiving,inspection and Product assembly time, which typically requires an additionaltwo to four weeks) are set forth in the following table (which lead time maychange in the future due to market conditions):
| **Seller’s  Component  Part #** | ** ** | **Component  Description**                                                                                   | ** ** | **Required Lead  Time** |
|--------------------------------------|------------|--------------------------------------------------------------------------------------------------------------|------------|-------------------------|
| AP-0000-83-8                         |       | ASBY PCB  Opportunity Retraction Mechanism Controller                                                        |       | 14 weeks                |
| AP-0000-84-5                         |       | ASBY PCB  Opportunity Hall Effect Switch                                                                     |       | 14 weeks                |
| 70-0000-04-7                         |       | POWER SUPPLY  AC/DC 264Vin +5Vout 200W +5V/15A,+24V/3A,+12V/2A, +12V/2A, universal input,  medical BF, 80-90 |       | 12 weeks                |
| 99-0000-49-8                         |       | MISC AF  11045-002 Transonic Ultrasonic Flowmeter Board Assembly                                             |       | 10 weeks                |

**A.17.     **Service/Spare PartsNeeds.  Buyer is responsible foridentifying and placing Purchase Orders for Buyer’s spares requirements at thetime of Product order.

**A.18.     **Excess/Scrap Components.  The costs of scrap and/or non-conformingmaterial incurred during normal production activities shall be borne bySeller.  The cost of scrapped and/orexcess Components up to 10% over the aggregate value of the order quantity orother pre-approved purchase quantities shall be borne by Buyer in the event ofpart obsolescence, or the end of Product life at Seller.  This is intended to cover Components that areno longer needed for the Product due to ECOs or end of Product manufacturing atSeller.  Additionally, Buyer isresponsible for excess Components that are purchased due to minimum buyquantities from the

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Product Component suppliers.  Excess parts will be transferred to Buyerupon completion of the production orders in accordance with Section 4.5 of theAgreement.

**A.19.     **Design Changes.  Seller will manage suppliers, partsspecifications, and other associated documentation for the Products in Seller’sinternal systems.  However, the Pricedoes not include the cost of future design changes to the Product.  In the event of required or requested designchanges, Seller will inform and obtain approval from Buyer for the feesassociated with such design changes prior to performing the work.

**A.20.     **Troubleshooting.  Buyer is responsible for Product defects dueto design issues.  Seller will makereasonable efforts to increase Product yields and repair Products.  Extensive troubleshooting and repair ofdesign-related issues encountered during production and testing will be atBuyer’s expense in accordance with Section 8.8 of the Agreement.

**A.21.     **Sustaining Services.  See separate Sustaining Services Agreementbetween Seller and Buyer.

**A.22.     **Service.  See separate Servicing Agreement betweenSeller and Buyer for service terms.

**A.23.     **Equipment Maintenance.  Seller will maintain equipment used in theassembly and testing of these devices as required by FDA regulations and ISO13485 standards.  This includesinspection, calibration and/or other maintenance as necessary.  Buyer-owned equipment, if any, shall becalibrated and maintained as required at Buyer’s expense in accordance withSection 8.8 of the Agreement.

**A.24.     **Test Fixtures and Equipment.  Seller will provide standard assembly andtest equipment.  Any non-standard testequipment or fixtures will be provided by or purchased by Buyer.  In addition, Buyer will provideProduct-specific test equipment, fixtures and training on such devices free ofcharge.  The parties are not aware of anynon-standard test equipment or fixtures that would be required to manufacturethe Product.

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Each party is signing this Exhibit A on the date stated below thatparty’s signature.

| MINNETRONIX, INC. | MEDICALCV, INC.         |
|-------------------|-------------------------|
|              |                    |
|              |                    |
| By:               | /s/ Jonathan D.  Pearle |   | By: | /s/ Robert W. Clapp |
| Name:             | Jonathan D.  Pearle     | Name: | Robert W. Clapp |
| Title:            | CFO / COO               | Title: | Vice President, Operations |
|              |                    |
| Date:             | 12.06.2006              |   | Date: | 12.06.2006 |
|                   |                         |  |  |  |  |  |  |  |  |  |

 

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