Exhibit 4.1


MEDICALCV, INC.


SECURED NOTE PURCHASE AGREEMENT


April 20, 2007
















TABLE OF
CONTENTS


	
  

  	
   

  	
  Page

  
	
   

  	
   

  
	
  SECTION 1. AGREEMENT TO SELL AND PURCHASE

  	
  1

  
	
   

  	
   

  
	
   

  	
  1.1  Authorization
  of Notes and Warrants

  	
  1

  
	
   

  	
   

  	
   

  
	
   

  	
  1.2  Sale and
  Purchase

  	
  1

  
	
   

  	
   

  	
   

  
	
  SECTION 2. CLOSING, DELIVERY AND PAYMENT

  	
  2

  
	
   

  	
   

  
	
   

  	
  2.1 The Closings

  	
  2

  
	
   

  	
   

  	
   

  
	
   

  	
  2.2 Closing Deliveries

  	
  2

  
	
   

  	
   

  	
   

  
	
  SECTION 3. WARRANT RIGHTS

  	
  2

  
	
   

  	
   

  
	
   

  	
  3.1 Issuance of Warrants

  	
  2

  
	
   

  	
   

  	
   

  
	
  SECTION 4. SECURITY AND EVENTS OF DEFAULT

  	
  3

  
	
   

  	
   

  
	
   

  	
  4.1 Security

  	
  3

  
	
   

  	
   

  	
   

  
	
   

  	
  4.2 Events of Default

  	
  3

  
	
   

  	
   

  	
   

  
	
   

  	
  4.3 Rights and Remedies

  	
  4

  
	
   

  	
   

  	
   

  
	
  SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE
  COMPANY

  	
  4

  
	
   

  	
   

  
	
   

  	
  5.1 Organization and Standing

  	
  4

  
	
   

  	
   

  	
   

  
	
   

  	
  5.2 Corporate Power; Authority

  	
  4

  
	
   

  	
   

  	
   

  
	
   

  	
  5.3 Subsidiaries

  	
  5

  
	
   

  	
   

  	
   

  
	
   

  	
  5.4 Capitalization

  	
  5

  
	
   

  	
   

  	
   

  
	
   

  	
  5.5 SEC Reporting

  	
  6

  
	
   

  	
   

  	
   

  
	
   

  	
  5.6 Financial Statements

  	
  6

  
	
   

  	
   

  	
   

  
	
   

  	
  5.7 Changes

  	
  6

  
	
   

  	
   

  	
   

  
	
   

  	
  5.8 Material Obligations

  	
  7

  
	
   

  	
   

  	
   

  
	
   

  	
  5.9 Intellectual Property Rights

  	
  8

  
	
   

  	
   

  	
   

  
	
   

  	
  5.10 Title to Properties and Assets

  	
  8

  
	
   

  	
   

  	
   

  
	
   

  	
  5.11 No Defaults

  	
  8

  
	
   

  	
   

  	
   

  
	
   

  	
  5.12 No Conflict

  	
  9

  
	
   

  	
   

  	
   

  
	
   

  	
  5.13 Litigation

  	
  9

  
	
   

  	
   

  	
   

  
	
   

  	
  5.14 Tax Returns and Payments

  	
  9

  
	
   

  	
   

  	
   

  
	
   

  	
  5.15 Transactions with Affiliates and Employees

  	
  9

  
	
   

  	
   

  	
   

  
	
   

  	
  5.16 Sarbanes-Oxley; Internal Accounting Controls

  	
  10

  
	
   

  	
   

  	
   

  
	
   

  	
  5.17 Environmental and Safety Laws

  	
  10

  
	
   

  	
   

  	
   

  
	
   

  	
  5.18 Condition of Collateral

  	
  11

  
	
   

  	
   

  	
   

  
	
   

  	
  5.19 Licenses

  	
  11

  
	
   

  	
   

  	
   

  
	
   

  	
  5.20 Insurance

  	
  11

  
	
   

  	
   

  	
   

  
	
   

  	
  5.21 Labor Relations

  	
  11

  
				



 



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  5.22 Consent

  	
  11

  
	
   

  	
   

  	
   

  
	
   

  	
  5.23 Offering

  	
  11

  
	
   

  	
   

  	
   

  
	
   

  	
  5.24 Brokers or Finders

  	
  12

  
	
   

  	
   

  	
   

  
	
   

  	
  5.25 Registration and Listing Requirements

  	
  12

  
	
   

  	
   

  	
   

  
	
   

  	
  5.26 Correctness of Representations

  	
  12

  
	
   

  	
   

  	
   

  
	
   

  	
  5.27 Disclosure

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE
  HOLDERS

  	
  12

  
	
   

  	
   

  
	
   

  	
  6.1 Organization; Authority

  	
  13

  
	
   

  	
   

  	
   

  
	
   

  	
  6.2 Investment Representations

  	
  13

  
	
   

  	
   

  	
   

  
	
   

  	
  6.3 Correctness of Representations

  	
  14

  
	
   

  	
   

  	
   

  
	
  SECTION 7. CONDITIONS TO CLOSING

  	
  14

  
	
   

  	
   

  
	
   

  	
  7.1 Conditions to Holders’ Obligations at the
  Closing

  	
  14

  
	
   

  	
   

  	
   

  
	
   

  	
  7.2 Conditions to Obligations of the Company

  	
  14

  
	
   

  	
   

  	
   

  
	
  SECTION 8. REGISTRATION RIGHTS

  	
  15

  
	
   

  	
   

  
	
   

  	
  8.1 Registration Rights

  	
  15

  
	
   

  	
   

  	
   

  
	
   

  	
  8.2 Registration Procedures

  	
  15

  
	
   

  	
   

  	
   

  
	
   

  	
  8.3 Discontinued Disposition

  	
  16

  
	
   

  	
   

  	
   

  
	
   

  	
  8.4 Non-Registration Event

  	
  17

  
	
   

  	
   

  	
   

  
	
   

  	
  8.5 Registration Expenses

  	
  17

  
	
   

  	
   

  	
   

  
	
   

  	
  8.6 Indemnification

  	
  17

  
	
   

  	
   

  	
   

  
	
   

  	
  8.7 Information from Holder

  	
  19

  
	
   

  	
   

  	
   

  
	
   

  	
  8.8 Rule 144 Reporting

  	
  19

  
	
   

  	
   

  	
   

  
	
  SECTION 9. MISCELLANEOUS

  	
  19

  
	
   

  	
   

  
	
   

  	
  9.1 Payment of Fees

  	
  19

  
	
   

  	
   

  	
   

  
	
   

  	
  9.2 Governing Law; Venue

  	
  20

  
	
   

  	
   

  	
   

  
	
   

  	
  9.3 Survival

  	
  20

  
	
   

  	
   

  	
   

  
	
   

  	
  9.4 Successors and Assigns

  	
  20

  
	
   

  	
   

  	
   

  
	
   

  	
  9.5 Entire Agreement

  	
  20

  
	
   

  	
   

  	
   

  
	
   

  	
  9.6 Severability

  	
  20

  
	
   

  	
   

  	
   

  
	
   

  	
  9.7 Amendment and Waiver

  	
  20

  
	
   

  	
   

  	
   

  
	
   

  	
  9.8 Delays or Omissions

  	
  21

  
	
   

  	
   

  	
   

  
	
   

  	
  9.9 Notices

  	
  21

  
	
   

  	
   

  	
   

  
	
   

  	
  9.10 Titles and Subtitles; Counterparts

  	
  21

  
	
   

  	
   

  	
   

  
	
   

  	
  9.11 Exculpation among Holders

  	
  21

  



 



 ii















SECURED NOTE PURCHASE AGREEMENT


THIS SECURED NOTE PURCHASE
AGREEMENT (the “Agreement”) is
entered into effective as of the 20th day of April, 2007 (the “Effective Date”), by
and among MedicalCV, Inc., a
Minnesota corporation (the “Company”),
and the holders listed on Schedule 1.0 hereto (each a “Holder”
and collectively the “Holders”).


RECITALS:


WHEREAS,
the Company proposes to authorize the sale and issuance of Secured Promissory
Notes in the form attached hereto as Exhibit A (each a “Note” and
collectively the “Notes”);
and


WHEREAS, the
Holders desire to purchase, severally and not jointly, the Notes and the
Company desires to issue and sell such Notes to the Holders, on the terms and
conditions set forth herein; and


WHEREAS, in connection with the sale and issuance of
the Notes, the Company also proposes to issue to the Holders thereof warrants
to purchase shares of the Company’s Common Stock, par value $0.01 per share
(each a “Warrant”
and collectively the “Warrants”).


NOW, THEREFORE, in consideration of the foregoing recitals
and the mutual promises hereinafter set forth, the parties hereto agree as
follows:


SECTION 1.         AGREEMENT TO SELL AND PURCHASE


1.1         Authorization of
Notes and Warrants


On or prior to the closing under this Agreement (the
“Closing”),
the Company shall have authorized the sale and issuance of the Notes and
Warrants to the Holders.  The Notes will
be of one series designated the “2007 Secured Notes.”


1.2         Sale and Purchase


(a)  First Closing.  Subject to the terms and conditions hereof, at the first closing (the “First Closing”), the Company agrees to issue and sell to
each Holder, severally and not jointly, and each such Holder agrees to purchase
from the Company, severally and not jointly, a Note in the principal amount set
forth opposite each Holder’s name on Schedule 1.0 (for each Holder, the “Principal
Amount”).


(b) 
Subsequent Closings.  Following the First Closing, the Company may
close on the sale of additional Notes (a “Subsequent Closing”) as follows:


(i)  Additional Note Purchase Option.  Within 45 days after the First Closing, those
Holders identified on Schedule 1.0 that are affiliates of Whitebox Advisors,
LLC (the “Whitebox
Entities”) will have the right, but not the obligation, to
purchase from the Company and the Company will have the obligation to sell to
the Whitebox Entities one or more additional Notes having an aggregate
principal amount up to $2,000,000.


(ii)  Amendment of Schedule 1.0.  Schedule 1.0 shall be amended to reflect any
such sale 



 1
 









pursuant to this Section 1.2.


(c) 
Restrictive Covenant.  The Company covenants and agrees with the
Holders that it will not issue more than an aggregate of $12,500,000 principal
amount of 2007 Secured Notes, which shall include the stated Principal Amount
of all Notes issued to the Whitebox Entities pursuant to this Agreement, and
provided that such Notes may not be issued on terms and conditions more
favorable than set forth in this Agreement. 
The Company further agrees to provide the Whitebox Entities with a
minimum of two (2) business days prior written notice of any such issuance of
2007 Secured Notes.


SECTION 2.         CLOSING, DELIVERY AND PAYMENT


2.1         The Closings


The First Closing shall take place at
10:00 a.m. local time on the date hereof, at the offices of
Fulbright & Jaworski L.L.P. in Minneapolis, Minnesota, or at such
other time or place as the Company and the Holders may mutually agree.  Any Subsequent Closing shall be held at such
time and place as the parties shall mutually agree.


2.2         Closing Deliveries


At each Closing, subject to the terms and conditions
hereof, the Company and the Holders, as applicable, shall execute this
Agreement and the Company shall deliver to each Holder a Note in the form of Exhibit
A attached hereto against delivery to the Company by such Holder of the
stated principal amount of such Holder’s Note, payable to the Company by wire
transfer of immediately available funds to the bank account designated in wire
transfer instructions provided by the Company. 
At that time, the parties shall also execute (i) the Security Agreement
and the related UCC Financing Statement in the forms attached hereto as Exhibit
C (the “Security
Documents”); and (ii) the Closing Warrant described in Section
3.1(a) below. Collectively with this Agreement, the Security Documents, Notes,
and Warrants, together with the exhibits, Schedules (as defined below), and all
other documents required to be delivered in connection herewith and therewith,
shall be referred to collectively as the “Transaction Agreements.”


SECTION 3.          WARRANT RIGHTS


3.1         Issuance of
Warrants


(a)  At each Closing, the Company will issue to
the each Holder purchasing Notes in such Closing a warrant in the form attached
hereto as Exhibit B1 entitling the Holder to purchase such number of shares of
the Company’s Common Stock that is equal to the quotient obtained by dividing
(i) 60% of the stated Principal Amount of such Holder’s Note by (ii) $4.00 (the
“Closing Warrants”).


(b)  During the initial twelve (12)
months following the Effective Date, interest on the Notes will accrue and be
added to the Principal Amount of the Notes. 
Within thirty (30) days following the end of such 12-month period, the
Company shall issue to each Holder a warrant in the form attached hereto as
Exhibit B2 entitling such Holder to purchase such number of shares of the
Company’s Common Stock that is equal to the quotient obtained by dividing (i)
60% of the accrued interest on such Holder’s Note for the initial 12-month
period by (ii) $4.00 (the “Initial
Interest Warrant”).


(c)  Following the initial 12-month period, the
Company will have the option to (i) pay the accrued interest on the Notes
quarterly in arrears or (ii) allow the interest for such quarter to continue 



 2
 









to
accrue and be added to the Principal Amount of the Note.  Any payment of accrued interest must be made
to the Holders on or before the 15th day following
the end of such quarter.  If the Company
elects to have the quarterly interest added to the Principal Amount of the
Notes, then the Company shall issue to each Holder, within thirty (30) days
following the end of such quarter, a warrant in the form attached hereto as
Exhibit B2 entitling such Holder to purchase such number of shares of the
Company’s Common Stock that is equal to the quotient obtained by dividing (i)
60% of the accrued interest on such Holder’s Note for the quarter by (ii) $4.00
(the “Quarterly Interest
Warrants”).  In each
instance, the option elected by the Company under this Section 3.1(c) shall
apply equally to all the Notes outstanding at the time of such election.


SECTION 4.         SECURITY AND EVENTS OF DEFAULT


4.1         Security


In accordance with the terms and conditions set forth in the Security
Agreement attached hereto as Exhibit C (the “Security Agreement”),
the Notes and payment of all principal, interest and other sums thereunder,
shall be secured by a first priority security interest.  The security interest granted pursuant to
this Agreement and the Security Agreement, shall be in all of the Company’s
right, title and interest in and to all of the Company’s assets, as more
particularly described in the Security Agreement, whether now owned or
hereafter acquired while any of the Notes are outstanding (the “Collateral”).


The Collateral shall include (i) all substitutes and replacements for
and proceeds of any and all of the Collateral, and in the case of all tangible
Collateral, all accessions, accessories, attachments, parts, equipment and
repairs now or hereafter attached or affixed to or use in connection with any
such goods and (ii) all warehouse receipts, bills of lading and other documents
of title now or hereafter covering such goods. receipts, bills of lading and
other documents of title now or hereafter covering such goods.


4.2         Events of Default


Each of the following will constitute an “Event of Default”
under the Notes:


(a)           Failure of the Company to pay the
principal or interest on any of the Notes when due and continuation of such
failure for a period of five (5) days following written notice from any of the
Holders;


(b)           Failure of the Company to perform or
observe any material covenant or agreement as required by the Transaction
Agreements and continuation of such failure for a period of ten (10) days
following written notice from any of the Holders;


(c)           If any of the representations and
warranties of the Company made in this Agreement are proven not to have been
true and correct in any material respect as of the date of this Agreement;


(d)           The Company shall (i) apply for
or consent to the appointment of a receiver, trustee, liquidator or custodian
of itself or of all or a substantial part of its property, (ii) be unable,
or admit in writing its inability, to pay its debts generally as they mature,
(iii) make a general assignment for the benefit of its or any of its
creditors, (iv) be dissolved or liquidated in full or in part,
(v) commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
consent to any such relief or to the appointment of or taking possession of its
property by any official in an 



 3
 









involuntary
case or other proceeding commenced against it or (vi) take any action for
the purpose of effecting any of the foregoing; or


(e)           Proceedings for the appointment of a
receiver, trustee, liquidator or custodian of the Company or of all or a
substantial part of the property thereof, or an involuntary case or other
proceedings seeking liquidation, reorganization or other relief with respect to
the Company or its debts under any bankruptcy, insolvency or other similar law
or hereafter in effect shall be commenced and an order for relief entered or
such proceeding shall not be dismissed or discharged within thirty (30) days of
commencement.


4.3         Rights and Remedies



If any Event of Default occurs, subject to the terms and conditions of
the Security Agreement, any or all of the Holders may exercise any or all of
the following rights and remedies, which shall be cumulative:


(a)           Declare
such Holder’s Note and all accrued but unpaid interest thereon to be
immediately due and payable, and upon such declaration such Note and interest
thereon shall immediately be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are expressly waived; and


(b)           Exercise
any and all other rights and remedies available to such Holder under the Note,
the Security Agreement, and otherwise available to the Holder at law and in
equity.


SECTION 5.         REPRESENTATIONS AND WARRANTIES OF THE COMPANY


Except as set forth on the schedules delivered
separately to the Holders in connection with this Agreement (the “Schedules”), the
Company represents and warrants to each Holder as of the Closing Date as
follows:


5.1          Organization and Standing


The Company is a corporation duly organized and existing under, and by
virtue of, the laws of the State of Minnesota and is in good standing under
such laws.  The Company has the requisite
corporate power and authority to own and operate the Company’s properties and
assets, and to carry on the Company’s business as presently conducted.  The Company is presently qualified to do
business as a foreign corporation in each jurisdiction where the failure to be
so qualified would have a Material Adverse Effect. No proceeding has been instituted
in any jurisdiction revoking, limiting or curtailing, or seeking to revoke,
limit or curtail, such power and authority or qualification.  “Material Adverse Effect” shall mean any
event, happening, occurrence or development that, individually or in the
aggregate, whether or not arising in the ordinary course of business, could
reasonably be expected to have a material adverse effect on the Company’s
business, operations, properties, prospects, assets, liabilities or condition
(financial or otherwise).


5.2          Corporate Power; Authority


The Company has all requisite legal and corporate power and authority
to execute and deliver the Transaction Agreements, to sell and issue the Notes
and Warrants in accordance with this Agreement, to issue shares of Common Stock
issuable upon exercise of the Warrants ( the “Warrant Shares”), and to carry
out and perform the Company’s obligations under the terms of the Transaction
Agreements.  Each 



 4
 









Transaction
Agreement to which it is a party has been duly executed by the Company, and
when delivered by the Company in accordance with the terms hereof, will
constitute the valid and legally binding obligation of the Company, enforceable
against it in accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may
be limited by applicable law.


5.3          Subsidiaries


The Company does not own or control, directly or indirectly, any
interest in any corporation, partnership, limited liability company,
association or other business entity.


5.4          Capitalization


(a)           The authorized and issued capital stock of the Company, immediately
prior to the First Closing, is set forth in the attached Schedule 5.4(a).  All issued and outstanding shares of the
Company’s capital stock (i) have been duly authorized and validly issued, (ii)
are fully paid and nonassessable and (iii) were issued in compliance with all
applicable state and federal laws concerning the issuance of securities.


(b)           Schedule
5.4(b) sets forth all of the
Company’s capital stock that, as of the date of the First Closing, has been
reserved for issuance pursuant to any agreement, option plan or otherwise,
which, when issued, will have been duly authorized, validly issued, fully paid
and nonassessable, and will be issued in compliance with all applicable state
and federal laws concerning the issuance of securities.


(c)           The
Warrant Shares issuable upon exercise of the Warrants have been duly and
validly reserved and, when issued in compliance with the provisions of this
Agreement, the Warrant, and applicable law, will be validly issued, fully paid,
and non-assessable.  The Warrant Shares
will be free of any liens or encumbrances, other than any liens or encumbrances
created by or imposed upon a Holder with respect to such Holder’s Warrant
Shares; provided, however, that the Warrant Shares are subject to transfer
restrictions under state and/or federal securities laws and as set forth in the
Transaction Agreements.  Except as set
forth on Schedule 5.4(c), the Warrants and Warrant Shares are not
subject to any preemptive rights or first refusal rights.   Except
as set forth on Schedule 5.4(c), neither the offer nor issuance of the
Warrants or the Warrant Shares constitutes an event under any anti-dilution
provisions of any securities issued or issuable by the Company which will
either increase the number of shares issuable pursuant to such provisions or
decrease the consideration per share to be received by the Company pursuant to
such provisions.


(d)           Except
as set forth on Schedule 5.4(d), there are no outstanding agreements or
preemptive or similar rights affecting the Company’s capital stock and no
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, or agreements or understandings with respect to the
sale or issuance of any shares of capital stock of the Company.


(e)           Except
as set forth on Schedule 5.4(e), there are no shareholder agreements,
voting agreements, proxy rights or other similar agreements with respect to the
Company’s capital stock to which the Company is a party or, to the Company’s
knowledge, between or among any of the Company’s shareholders.



 5
 









5.5          SEC Reporting


The Company has timely filed all reports, forms, statements, schedules,
exhibits and other documents, and any amendments thereto, as required to be
filed by it under the Securities Act of 1933, as amended (the “Securities Act”) and
the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
including pursuant to Section 13(a) or 15(d) thereof, for the 12 months
preceding the date of this Agreement (collectively, together with any and all
documents incorporated by reference therein, the “SEC Filings”), or has requested and
obtained a valid extension of such time of filing and subsequently filed any
such SEC Filing prior to the expiration of such extension.  As of their
respective filing dates, the SEC Filings complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations promulgated by the Securities and Exchange Commission (the “Commission”)
thereunder, as applicable, and none of the SEC Filings contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.


5.6          Financial Statements


(a)           The
Company’s: (i) Annual Report on Form 10-KSB for the year ended April
30, 2006; and (ii) Quarterly Reports on Form 10-QSB for the quarters ended July
31, 2006, October 31, 2006 and January 31, 2007 (with January 31, 2007 being
referred to herein as (the “Balance Sheet Date”) (collectively, the “Financial Statements”), present fairly the financial position of the Company as of such
dates and the results of operations for the periods covered thereby (subject,
in the case of the interim financial statements, to year-end audit adjustments)
and have been prepared in accordance with generally accepted accounting
principles consistently applied (“GAAP”),
except as may be otherwise specified in such Financial Statements or the notes
thereto.  Specifically, but not by way of
limitation, (x) the balance sheets or notes thereto disclose all of the debts,
liabilities and obligations of any nature of the Company properly accrued  at each of the Annual and Quarterly Report
dates and at the Balance Sheet Date which, individually or in the aggregate,
are material and which in accordance with GAAP would be required to be
disclosed in such balance sheets, and the omission of which would, in the
aggregate, have a Material Adverse Effect on the Company; (y) except as set
forth on Schedule 5.6(a), the Company does not have any off-balance
sheet arrangements or transactions; and (z) the Financial Statements include
appropriate reserves for all taxes and other liabilities accrued at such date
but not yet payable.


5.7          Changes.


Except as set forth on Schedule 5.7 or disclosed in an
appropriate SEC Filing, since the Balance Sheet Date, the Company has not:


(a)           suffered
any change in  the Company’s assets,
liabilities, financial condition, or operating results, except for changes in
the ordinary course of business, none of which individually or in the aggregate,
have had or are likely to result in a Material Adverse Effect;


(b)           suffered
any damage, destruction, or loss (whether or not covered by insurance) that, in
any case or in the aggregate, have had a Material Adverse Effect;


(c)           agreed
to waive or actually waived any valuable right or any material debt owed to the
Company;



 6
 









(d)           suffered
any change or amendment to any agreement by which the Company or any of the
Company’s assets or properties are bound or subject, except to the extent that
any such change or amendment has not had, or will not likely have, a Material
Adverse Effect;


(e)           made
any loans to the Company’s employees, officers or directors, or to any members
of their respective immediate families, other than travel advances and other
advances made in the ordinary course of the Company’s business;


(f)            received
any Company officer’s resignation or terminated any Company officer;


(g)           made
any material change in any compensation arrangement or agreement with any
employee;


(h)           made
any declaration or payment of any dividend or other distribution;


(i)            received
notice or become aware that the Company has lost a customer or that any Company
customer has canceled a material order, which loss or cancellation would
constitute a Material Adverse Effect; or


(j)            suffered
any change or amendment to any agreement relating to a change in the contingent
obligations of the Company;


(k)           received
notice of any labor organization activity related to the Company;


(l)            incurred
any debt obligation or liability, including any debts assumed or guaranteed by
the Company, except those for immaterial amounts and for current liabilities
incurred in the ordinary course of business;


(m)          made
any sale, assignment or transfer of any patents, trademarks, copyrights, trade
secrets or other intangible assets;


(n)           issued
or sold any shares of capital stock or other securities or granted any options,
warrants or other purchase rights with respect thereto other than as
contemplated by this Agreement;


(o)           suffered
any other event or condition of any character that has had, or could be
reasonably expected to have, a Material Adverse Effect; or


(p)           made
any arrangement or commitment by the Company to do any of the acts described in
paragraphs (a) through (o) above.


5.8          Material Obligations


The Company has no liabilities or obligations (whether absolute,
accrued, contingent or otherwise), except for such liabilities or obligations
specifically reflected in balance sheets or notes thereto in the Financial
Statements and current liabilities incurred in the ordinary course of business
since the Balance Sheet Date, which are not, either in any individual case or
in the aggregate, material to the Company.



 7
 









5.9          Intellectual Property Rights.


(a)           The
Company owns or possesses sufficient legal rights to all patents, patent
rights, patent applications, trademarks, trademark applications, service marks,
trade names, copyrights, trade secrets, inventions, know-how, information,
processes, licenses and other similar proprietary rights necessary or material
for use in connection with its business as described in its SEC Filings (the “Intellectual
Property Rights”) and
which the failure to so possess could have a Material Adverse Effect.  Except as disclosed in the Company’s SEC
Filings, the Company has no knowledge nor has it received notice that the
conduct of the Company’s business as presently conducted materially conflicts
with or infringes upon the Intellectual Property Rights of any other person or
entity.  The Company is not obligated to
make any payments by way of royalties, fees, or otherwise to any owner of,
licensor of, or claimant to any Intellectual Property Rights with respect to
the use of such Intellectual Property Rights in connection with the conduct of
the Company’s business as presently conducted. 
Except as disclosed in the Company’s SEC Filings, there are no material
agreements, understandings, instruments, contracts, judgments, orders, or
decrees to which the Company is a party or by which the Company is bound that
involve indemnification by the Company with respect to infringement of
Intellectual Property Rights (other than indemnification obligations arising
from purchase or sale of goods and services or license and other agreements
entered into in the ordinary course of business).


(b)           With
respect to the Company’s Intellectual Property Rights, each Company employee
having access to or knowledge of the Company Intellectual Property Rights has
executed a confidentiality, non-competition and invention assignment agreement,
substantially in the form(s) made available to the Holders (each, a “Confidentiality
Agreement”).  No employee has excluded from such employee’s
Confidentiality Agreement any works or inventions that were made by such
employee before such person’s employment or engagement with the Company and
that are also relevant to the Company’s business as currently conducted or as
proposed to be conducted.  Each Company
consultant who has had access to the Company’s Intellectual Property Rights has
entered into an agreement containing appropriate confidentiality,
non-competition and invention assignment provisions.


5.10        Title to Properties and Assets


The Company has good and marketable title to all of the Company’s
properties and assets, and the Company has good title to all of the Company’s
leasehold interests, in each case subject to no material mortgage, pledge,
lien, lease, or encumbrance, except for (a) liens for current taxes not
yet due and payable, (b) liens imposed by law and incurred in the ordinary
course of business for obligations not past due, (c) liens in respect of
pledges or deposits under workers’ compensation laws or similar legislation,
and (d) possible minor liens, encumbrances, and title defects that do not
in any case have a Material Adverse Effect on the value of the property subject
thereto or have a Material Adverse Effect on the Company’s operations and that
have not arisen other than in the ordinary course of the Company’s business.


5.11        No Defaults


The Company is not in violation of its Articles of Incorporation or
Bylaws, each amended as to date.  The
Company is not (i) in default under or in violation of any other agreement or
instrument to which it is a party or by which it or any of its properties are
bound or affected, which default or violation would have a Material Adverse
Effect on the Company, (ii) in default with respect to any order of any court,
arbitrator or governmental body or subject to or party to any order of any
court or governmental authority arising out of any action, suit or proceeding
under any statute or other law respecting antitrust, monopoly, restraint of
trade, unfair competition or similar matters, or (iii) in violation of any
statute, rule or regulation of any governmental authority which violation would
have a Material Adverse Effect on the Company.



 8
 









5.12        No Conflict


The execution, delivery and performance of the Transaction Agreements
by the Company, the issuance and sale of the Notes, Warrants and Warrant
Shares, if issued, and the consummation by the Company of the other
transactions contemplated hereby and thereby do not and will not (i) conflict
with or violate any provision of the Company’s articles of incorporation,
bylaws or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any lien upon any of
the properties or assets of the Company or any Subsidiary, or give to others
any rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit facility, debt
or other instrument (evidencing a Company debt or otherwise) or other
understanding to which the Company is a party or by which any property or asset
of the Company is bound or affected, or (iii) conflict with or result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company
is subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company is bound or affected; except in the
case of each of clauses (ii) and (iii), such as could not have or reasonably be
expected to result in a Material Adverse Effect.


5.13        Litigation


Except as disclosed in the Company’s SEC Filings, there is no action,
suit, proceeding or investigation pending or currently threatened in writing
against the Company that questions the Company’s Intellectual Property Rights,
any Material Contracts or the right of the Company to enter into any of such
contracts, or to consummate the transactions contemplated by the Transaction
Agreements, or which could be expected to result, either individually or in the
aggregate, in any Material Adverse Effect or any change in the current equity
ownership of the Company, nor is the Company aware that there is any basis for
any of the foregoing.  The foregoing
includes, without limitation, actions pending or threatened, either verbally or
in writing, involving the prior employment of any of the Company’s employees,
their use in connection with the Company’s business of any information or
techniques allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers.  The Company is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. 
There is no material action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.


5.14        Tax Returns and Payments


The Company has filed with appropriate federal, state, and local
governmental agencies all tax returns that the Company is required to
file.  All taxes shown to be due and
payable on such returns, any assessments imposed, and all other taxes due and
payable by the Company have been paid or will be paid before the time they
become delinquent.  The Company has not
been advised in writing or otherwise become aware (a) that any of the Company’s
tax returns have been or are being audited as of the Effective Date or
(b) of any deficiency in assessment or proposed judgment with respect to
the Company’s federal, state, or local taxes.


5.15        Transactions with Affiliates and Employees


Except as disclosed in the Company’s SEC Filings, none of its officers
or directors and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction 



 9
 









with
the Company (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $60,000
other than (i) for payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and (iii) for
other employee benefits, including stock option agreements under any stock
option plan or equity incentive plan of the Company.


5.16        Sarbanes-Oxley; Internal Accounting Controls


The Company is in material compliance with all provisions of the
Sarbanes-Oxley Act of 2002 and any rules or regulations promulgated thereunder
by the Commission that are applicable to it as of the Effective Date.  The
Company maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.  The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
for the Company and designed such disclosure controls and procedures to ensure
that information required to be disclosed by the Company in the reports it
files or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Commission’s rules and
forms.  The Company’s certifying officers have evaluated the effectiveness
of the Company’s disclosure controls and procedures as of the end of the period
covered by the Company’s most recently filed periodic report under the Exchange
Act (such date, the “Evaluation
Date”) and concluded that such controls were ineffective as of
the Evaluation Date.   The Company presented in its most recently filed
periodic report under the Exchange Act such conclusion of the certifying
officers about the effectiveness of the disclosure controls and procedures
based on their evaluations as of the Evaluation Date.  Since the
Evaluation Date, there have been no changes in the Company’s internal control
over financial reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting, and no significant deficiencies or
material weakness in internal controls over financial reporting, other than as
disclosed in the Company’s SEC Filings, have been identified.


5.17        Environmental and Safety Laws


The Company is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety, and
no expenditures are or are reasonably anticipated to be required in order to
comply with any such existing statute, law or regulation.  During the period that the Company has owned
or leased its properties and facilities, (i) there have been no disposals,
releases or threatened releases of Hazardous Materials (as defined below) by
the Company on, from or under such properties or facilities, and
(ii) other than normal office products and cleaning supplies, it has not
used, generated, manufactured or stored on, under or about such properties or
facilities or transported to or from such properties or facilities any
Hazardous Materials.  For purposes of
this Section, the terms “disposal,” “release” and “threatened release” shall
have the definitions assigned thereto by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601, et seq. as amended (“CERCLA”).  For the purposes of this Section, “Hazardous Materials”
shall mean any hazardous or toxic substance, material or waste, which is
regulated under, or defined as a “hazardous substance,” “pollutant,” “contaminant,”  “toxic 
chemical,”  “hazardous  material,” “toxic substance” or



 10
 









“hazardous
chemical” under (1) CERCLA; (2) the Emergency Planning and Community
Right-to-Know Act, 42 U.S.C. Section 11001, et
seq.; (3) the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq.; (4) the
Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq.; (5) the Occupational Safety and Health Act of
1970, 29 U.S.C. Section 651, et seq.; (6) regulations
promulgated under any of the above statutes; or (7) any applicable state
or local statute, ordinance, rule or regulation that has a scope or purpose
similar to those statutes identified above.


5.18        Condition of Collateral


The Collateral has been kept in reasonable condition and repair in the
ordinary course of business, and is reasonably fit and suitable for the
purposes for which they it is being used and, to the extent applicable, is
believed by the Company to conform in all material respects with applicable
ordinances, regulations and laws.


5.19        Licenses


The Company possesses from the appropriate regulatory agency,
commission, board, government body and authority, whether state, local, federal
or foreign, all licenses, permits, certifications, authorizations, approvals,
franchises and rights which (i) are necessary for it to engage in the
business currently conducted by it, and (ii) if not possessed by the
Company, would have a Material Adverse Effect. 
A list of all material licenses, permits, approvals and similar rights
currently in effect is set forth on Schedule 5.19.


5.20        Insurance


The Company has in full force and effect fire and casualty insurance
policies and insurance against other hazards, risks, and liabilities to persons
and property to the extent and in the manner customary for similarly situated
companies in similar businesses, and such insurance policies have been issued
by financially sound, duly licensed and reputable insurers.


5.21        Labor Relations


No material labor dispute exists or, to the knowledge of the Company,
is imminent with respect to any of the employees of the Company which could
reasonably be expected to result in a Material Adverse Effect.


5.22        Consent


Other than the declaration of effectiveness by the Commission of any
Registration Statement required to be filed pursuant to this Agreement, no
consent, approval, authorization or order of any court, governmental agency or
body or arbitrator having jurisdiction over the Company, or any of its
affiliates, the NASD, the OTC Bulletin Board or the Company’s shareholders is
required for execution of the Transaction Agreements, including, without
limitation the issuance and sale of the Notes, Warrants and Warrant Shares and the
performance of the Company’s obligations under the Transaction Agreements.  The Company has obtained all required waivers
of preemption rights in connection with the issuance of the Notes and Warrants.


5.23        Offering


Subject in part to the accuracy of the Holders’ representations and
warranties in Section 6, the offer, sale, and issuance of the Notes and
Warrants in compliance with the terms of this Agreement 



 11
 









constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act and all applicable state securities laws.  Neither the Company nor any agent on its
behalf has solicited or will solicit any offers to sell or has offered to sell
or will offer to sell all or any part of the Notes or Warrants to any person or
persons so as to bring the sale of such Notes and Warrants by the Company
within the registration provisions of the Securities Act or any applicable
state securities laws.


5.24        Brokers or Finders


With the exception of Craig-Hallum Capital Group LLC, the Company has
not engaged any brokers, finders, or agents. 
The Holders have not incurred, and will not incur, directly or
indirectly, as a result of any action taken by the Company, any liability for
brokerage or finders’ fees or agents’ commissions or any similar charges in
connection with the Transaction Agreements.


5.25        Registration and Listing Requirements


The Company’s Common Stock is registered pursuant to Section 12(b) or
12(g) of the Exchange Act and quoted on the OTC Bulletin Board under the symbol
“MCVI.OB.”  The Company has taken no
action designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act nor has
the Company received any notification that the Commission is contemplating
terminating such registration, nor has the Company received any oral or written
notice that its Common Stock will cease to be quoted on the OTC Bulletin
Board.  The Company is not aware of any
event or circumstance that will or may cause the Company Common Stock to cease
to be quoted on the OTC Bulletin Board.


5.26        Correctness of Representations


The Company represents that the foregoing representations and
warranties are true and correct as of the date hereof, and, unless the Company
otherwise notifies the Holders in writing prior to the Effective Date, shall be
true and correct as of the Effective Date.


5.27        Disclosure


The Company has made available to the Holders all the information that
the Holders have requested in connection with their decisions as to whether to
purchase the Notes and Warrants pursuant to this Agreement.  Neither the Transaction Agreements nor any
other exhibits, schedules, documents or certificates delivered in connection
with the Transaction Agreements, which shall include the Company’s SEC Filings,
when taken as a whole, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading in light of the circumstances under which they
were made.


SECTION 6.         REPRESENTATIONS AND WARRANTIES OF THE HOLDERS


Each Holder, severally and not jointly, hereby
represents and warrants to the Company as of the date hereof and as of each
Closing Date with respect to each purchase of Notes by such Holder as follows
(such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):



 12















6.1          Organization; Authority


Holder is an entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization
with full right, corporate or partnership power and authority to enter into and
to consummate the transactions contemplated by the Transaction Agreements and
otherwise to carry out its obligations hereunder and thereunder.  The
execution, delivery and performance by Holder of the transactions contemplated
by the Transaction Agreements have been duly authorized by all necessary
corporate or similar action on the part of such Holder.  Each Transaction
Agreement to which it is a party has been duly executed by Holder, and when
delivered by Holder in accordance with the terms hereof, will constitute the
valid and legally binding obligation of the Holder, enforceable against it in
accordance with its terms, except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’
rights generally, (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited by
applicable law.


6.2          Investment Representations


(a)            Information about the Company.  The Holder has had access to and has been
furnished with information relating to the business, operations and financial
condition of the Company as well as this Agreement and the transactions
contemplated hereby, and has had an adequate opportunity to ask such questions
of, and receive answers from, the Company or an agent or representative of the
Company, regarding the Company and its business to the extent deemed necessary
by the Holder in order to form a decision concerning an investment in the
Company.


(b)           Holder
Bears Economic Risk.  Holder has substantial experience in
evaluating and investing in highly speculative securities and as such is
capable of evaluating the merits and risks of its investment in the
Company.  Holder understands that the
Company has no present intention of registering the Notes, Warrants or any of
the Warrant Shares, excepts as provided in Section 8 of this Agreement.  Holder also understands that there is no
assurance that any exemption from registration under the Securities Act will be
available and that, even if available, such exemption may not allow Holder to
transfer all or any portion of the Notes, Warrants or the Warrant Shares under
the circumstances, in the amounts or at the times Holder might propose.


(c)           Acquisition
for Own Account.  Holder is acquiring the Notes and Warrants,
and will acquire the Warrant Shares, for Holder’s own account for investment
only, and not with a view towards their public distribution.


(d)           Holder
Can Protect Its Interest.  Holder represents that by
reason of its, or of its management’s, business or financial experience, Holder
has the capacity to protect its own interests in connection with the transactions
contemplated in this Agreement and the Security Documents.  Further, Holder is aware of no publication of
any advertisement in connection with the transactions contemplated in the
Agreement.


(e)           Accredited
Holder.  Holder represents that it is an accredited
Holder within the meaning of Regulation D of the Securities Act.


(f)            Residence.  Each
Holder is a bona fide resident of, or entity duly formed pursuant to the laws
of, and is domiciled in, the state or country set forth in his, her or its
address as provided below.



 13
 









6.3          Correctness of Representations


Holder represents that the foregoing representations and warranties are
true and correct as of the date hereof, and, unless Holder otherwise notifies
the Company in writing prior to the Effective Date, shall be true and correct
as of the Effective Date.


SECTION
7.         CONDITIONS TO CLOSING


7.1          Conditions to Holders’ Obligations at the Closing


Holders’ obligations under this Agreement are
subject to the satisfaction, at or prior to the respective Closing, of the
following conditions:


(a)           Representations
and Warranties True; Performance of Obligations.  The
representations and warranties made by the Company in Section 5 shall be true
and correct in all material respects as of the Effective Date, and the Company
shall have performed all obligations and conditions herein required to be
performed or observed by it on or prior to such Closing.


(b)           Consents,
Permits, and Waivers.  The Company shall have obtained any and all
consents, permits and waivers necessary or appropriate for consummation of the
transactions contemplated by the Transaction Agreements (except for such as may
be properly obtained subsequent to the Closing).


(c)           Corporate
Documents.  The Company shall have delivered to Holders
or their counsel copies of all corporate documents of the Company as Holders
shall reasonably request.


(d)           Proceedings
and Documents.  All corporate and other proceedings in
connection with the transactions contemplated at the Closing hereby and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Holders and their counsel, and the
Holders and their counsel shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably request.


(e)           Payment
of Fees.  All fees required to be paid at the Closing
under Section 9.1 shall have been paid.


(f)            Compliance
Certificate.  The Company will have delivered to counsel
for each Holder a certificate, executed on the Company’s behalf by the Company’s
Chief Executive Officer, in substantially the form attached as Exhibit D,
certifying the satisfaction of the closing conditions listed in this
Section 7.1.


(g)           Legal Opinion.  The
Holders will have received from the Company’s legal counsel a legal opinion,
dated as of the Effective Date, in substantially the form attached as Exhibit E.


(h)           Secretary’s Certificate.  The Company will have delivered to
counsel for each Holder a certificate, executed on the Company’s behalf by the
Company’s Secretary, in substantially the form attached as Exhibit F.


7.2          Conditions to Obligations of the Company


The Company’s obligations under this Agreement are
subject to the satisfaction, on or prior to the respective Closing, of the
following conditions:



 14
 









(a)           Representations
and Warranties True; Performance of Obligations.  The
representations and warranties made by Holders in Section 6 shall be true and
correct in all material respects as of the Effective Date, and the Holders
shall have performed and complied with all agreements and conditions herein
required to be performed or complied with by Holders.


SECTION
8.         REGISTRATION RIGHTS


8.1          Registration Rights 


The
Company agrees to prepare and file with the Commission, no later than fifteen
(15) days following the date on which the Company’s Annual Report on Form
10-KSB is due for the fiscal year ending April 30, 2007 (the “Filing Date”), a
registration statement on Form SB-2, Form S-3
or such other form of registration statement as may be required by
the Securities Act or as may be deemed appropriate by the Company (the “Registration Statement”)
to enable the resale of the Warrant Shares underlying the Closing Warrants (the
“Registrable Securities”)
by the Holders from time to time on the OTC Bulletin Board or in
privately-negotiated transactions.  The
term “Registrable Securities” does not include the Warrant Shares underlying
the Initial Interest Warrants or any Quarterly Interest Warrants issued to the
Holders.


8.2          Registration Procedures


The Company will keep each Holder advised in writing as to the status
of the Registration Statement as set forth herein.  At the Company’s expense, the Company will:


(a)         use commercially reasonable efforts to cause
the Registration Statement to be declared effective by the Commission within
forty-five (45) days of the Filing Date (in the case of no review of the
Registration Statement by the Commission) or ninety (90) days of the Filing
Date (in the case of a review of the Registration Statement by the Commission)
(as applicable, the “Required
Effective Date”);


(b)         promptly and without delay prepare and file
with the Commission, and concurrently provide copies to the Holder, such
amendments and supplements to the Registration Statement and the prospectus
used in connection therewith as may be necessary to keep the Registration
Statement current, effective and free from any material misstatement or
omission to state a material fact for a period not exceeding, with respect to
each Holder’s Registrable Securities, the earlier of the (i) second anniversary
of the effective date of the Registration Statement, (ii) the date on which the
Holder may sell all Registrable Securities then held by the Holder without
restriction by the volume limitations of Rule 144(e) of the Securities Act, or
(iii) such time as all Registrable Securities have been sold pursuant to a
Registration Statement;


(c)         furnish such number of prospectuses and
other documents incident to such prospectus, including any prospectus amendment
or prospectus supplement, as a Holder from time to time may reasonably request;


(d)         use commercially reasonable efforts to
register and qualify the Registrable Securities under such other securities or
blue sky laws of such jurisdictions as will be reasonably requested by the Holders;
provided, that the Company will not be required, in connection with any such
registration and qualification or as a condition to any such registration and
qualification, to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions;



 15
 









(e)         notify each Holder of Registrable Securities
covered by such Registration Statement at any time when a prospectus relating
to such Registration Statement is required to be delivered under the Securities
Act of the occurrence of any event as a result of which the prospectus included
in such Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing;


(f)         notify each Holder, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission suspending the effectiveness of such Registration Statement
or the initiation or threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance of any stop order or to
obtain its withdrawal if such stop order should be issued;


(g)        at the request of any such Holder, furnish:
(i) at the sole expense of the Company, an opinion dated as of the
effective date of the Registration Statement the counsel representing the
Company for the purposes of such registration, addressed to the underwriters, if
any, and to the Holder or Holders making such request, covering such matters as
such underwriters and Holder or Holders may reasonably request; and
(ii) letters dated as of the effective date of the Registration Statement
and as of the closing date, from the independent certified public accountants
of the Company, addressed to the underwriters, if any, and to the Holder or
Holders making such request, covering such matters as such underwriters and
Holder or Holders may reasonably request;


(h)        if requested by the Holders, cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing the Registrable Securities to be delivered to a
transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by this Agreement, of all restrictive legends,
and to enable such Registrable Securities to be in such denominations and
registered in such names as any such Holders may request; and


(i)            at any time after the Registrable Securities are covered
by an effective Registration Statement, the Company may deliver to the Holders
of such Registrable Securities a certificate (the “Suspension Certificate”) approved by
the Chief Executive Officer of the Company and signed by an officer of the
Company stating that the effectiveness of and sales of Registrable Securities
under the Registration Statement would:


(A) 
materially interfere with any transaction that would require the Company
to prepare financial statements under the Securities Act that the Company would
otherwise not be required to prepare in order to comply with its obligations
under the Exchange Act, or


(B) 
require public disclosure of any transaction of the type discussed in
Section 8.2(i)(A) prior to the time such disclosure might otherwise be
required;


Beginning five (5) Business Days after the receipt of a Suspension
Certificate by Holders of Registrable Securities, the Company may, in its
discretion, require such Holders of Registrable Securities to refrain from
selling or otherwise transferring or disposing of any Registrable Securities or
other Company securities then held by such Holders for a specified period of
time that is customary under the circumstances (not to exceed 30 days
during any 12-month period).  The Company
may impose stop transfer instructions to enforce any required agreement of the
Holders under this Section 8.2(i).


8.3          Discontinued Disposition


Each Holder agrees that, upon receipt of a notice from the Company
of the occurrence of any 



 16
 









event
of the kind described in Section 8.2(e) or Section 8.2(f), such Holder
will forthwith discontinue disposition of such Registrable Securities
under the Registration Statement until such Holder’s receipt of the copies
of the supplemented Prospectus and/or amended Registration Statement or until
it is advised in writing (the “Advice”) by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement.  The Company will use commercially
reasonable efforts to ensure that the use of the Prospectus may be resumed
as promptly as it practicable.


8.4          Non-Registration Event


The Company acknowledges and agrees that the Holders
will suffer material damages if the Registration Statement is not declared
effective by the Commission by the Required Effective Date and maintained in
the manner and within the time periods contemplated by Section 8.2 hereof, and
it would not be feasible to ascertain the extent of such damages with
precision.  Accordingly, if the
Registration Statement is not declared effective by the Commission on or prior
to the Required Effective Date (the “Non-Registration Event”), then, for so long
as the Non-Registration Event shall continue, the Company shall pay to each
Holder as liquidated damages for each month during the pendency of such
Non-Registration Event an amount equal to one (1%) percent per month (pro rated
for any portion thereof) of the aggregate value of the Warrant Shares
underlying the Holder’s Closing Warrants then held by such Holder (which shall
be measured at $4.00 per share); provided, however, that no amount in
liquidated damages shall be paid to any Holder pursuant to this Section 8.4 for
the Company’s failure to register the Warrant Shares if such failure is as a
result of an interpretation by the Commission that Securities Act Rule 415
prohibits such registration. Payments to be made pursuant to this Section 8.4
shall be due and payable to the Holders in immediately available funds within
ten (10) business days after receipt of written demand from a Holder.


8.5          Registration Expenses


The Company will be responsible for all expenses incurred by it in
connection with the preparation and filing of the Registration Statement,
regardless of whether any Registrable Securities are sold pursuant to such
Registration Statement.  All selling
expenses incurred by any Holder in connection with the Registration Statement
or the Registrable Securities, including broker or similar commissions, will be
borne by such Holder.


8.6          Indemnification


(a)           Indemnification
by Company.  The Company will indemnify each Holder, and
each Holder’s officers, directors, members, governors, employees, partners,
legal counsel, and accountants, and each person controlling such Holder within
the meaning of Section 15 of the Securities Act with respect to any
registration, qualification, or compliance effected pursuant to this
Section 8, and each underwriter, if any, and each person who controls,
within the meaning of Section 15 of the Securities Act, any underwriter,
against all expenses, claims, losses, damages, and liabilities (or actions,
proceedings, or settlements in respect of such expenses, claims, losses,
damages, and liabilities) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any prospectus,
offering circular, or other document (including any related registration
statement, notification, or similar document) incident to any such
registration, qualification, or compliance, or based on any omission (or
alleged omission) to state in such document a material fact required to be
stated in such document or necessary to make the statements in such document
not misleading, or any violation by the Company of the Securities Act and any
applicable state securities laws or any rule or regulation under the Securities
Act or state securities laws applicable to the Company and relating to action
or inaction 



 17
 









required of the Company in
connection with any such registration, qualification, or compliance, and will
reimburse each such Holder, and each of such Holder’s officers, directors,
partners, legal counsel, and accountants, and each person controlling such
Holder, and each such underwriter, and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such claim, loss,
damage, liability, or action; provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability, or
expense arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by such Holder or underwriter
and stated to be specifically for use in such document.  The Parties expressly agree and acknowledge
that the indemnity agreement contained in this Section 8.6(a) will not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the Company’s consent (which
consent will not be unreasonably withheld, delayed or conditioned).


(b)           Indemnification
by Holder.  Each Holder will, if Registrable Securities
held by such Holder are included in the securities as to which such
registration, qualification, or compliance is being effected, indemnify the
Company, and each of the Company’s directors, officers, legal counsel, and
accountants, and each underwriter, if any, of the Company’s securities covered
by such a registration statement, and each person who controls the Company or
such underwriter within the meaning of Section 15 of the Securities Act,
and each other such Holder, and each of their respective officers, directors,
and partners, and each person controlling such Holder or other Company
stockholder, against all claims, losses, damages, and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular, or other document, or any omission
(or alleged omission) to state in such document a material fact required to be
stated in such document or necessary to make the statements in such document
not misleading, and will reimburse the Company, and such Holders, and
directors, officers, legal counsel, and accountants, and underwriters, and
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability, or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering
circular, or other document in reliance upon and in conformity with written
information furnished to the Company by such Holder and stated to be
specifically for use in such document; provided that such Holder’s obligations
under this Section 8.6(b) will not apply to amounts paid in settlement of
any such claims, losses, damages, or liabilities (or actions in respect of such
claims, losses, damages, or liabilities) if such settlement is effected without
such Holder’s consent (which consent will not be unreasonably withheld, delayed
or conditioned); and provided further that in no event will any indemnity under
this Section 8.6(b) exceed the net proceeds.  For purposes of this Section 8.6(b) and
Section 8.6(d), the term “net proceeds,” with respect to any particular
Holder, means the proceeds from the offering received by such Holder after
deducting underwriters’ commissions, discounts, and expenses attributable to
the Registrable Securities sold by such Holder.


(c)           Indemnification
Procedures.  Each party entitled to indemnification under
this Section 8.6 (the “Indemnified Party”) will give
notice to the party required to provide indemnification (the “Indemnifying Party”)
promptly after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and will permit the Indemnifying Party to assume
the defense of such claim or any litigation resulting from such claim; provided
that counsel for the Indemnifying Party who will conduct the defense of such
claim or any litigation resulting from such claim, will be approved by the
Indemnified Party (whose approval will not be unreasonably withheld), and the
Indemnified Party may participate in such defense at such Indemnified Party’s
expense.  Notwithstanding the foregoing,
any Indemnified Party’s failure to give notice as provided in this
Section 8.6(c) will not relieve the Indemnifying Party of the Indemnifying
Party’s obligations under this Section 8.6 to the extent such failure is
not prejudicial.  No Indemnifying Party,
in the defense of any such claim or litigation, will, 



 18
 









except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term of such judgment or such
settlement the claimant’s or plaintiff’s release of such Indemnified Party from
all liability in respect to such claim or litigation.  Each Indemnified Party will furnish such
information regarding such Indemnified Party or the claim in question as an Indemnifying
Party may reasonably request in writing and as will be reasonably required in
connection with defense of such claim and litigation resulting from such claim.


(d)           Indemnification
Unavailability.  If the indemnification provided for in this
Section 8.6 is held by a court of competent jurisdiction to be unavailable
to an Indemnified Party with respect to any loss, liability, claim, damage, or
expense referred to in this Section 8.6, then the Indemnifying Party,
instead of indemnifying such Indemnified Party under Section 8.6(a) or
Section 8.6(b), will contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party, on the one hand, and of the Indemnified Party, on the other
hand, in connection with the statements or omissions that resulted in such
loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations; provided, however, that in no event will any
contribution by a Holder under this Section 8.6(d) exceed the net proceeds
(as defined in Section 8.6(b)).  The
relative fault of the Indemnifying Party and of the Indemnified Party will be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the Parties’ relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.


8.7          Information from Holder


Each Holder will furnish to the Company such information regarding such
Holder and the distribution proposed by such Holder as the Company may
reasonably request in writing and as will be reasonably required in connection
with any registration, qualification, or compliance referred to in this
Section 8.


8.8          Rule 144 Reporting


With a view to making available the benefits of certain Commission
rules and regulations that may permit the sale of the Warrant Shares underlying
the Initial Interest Warrant and the Quarterly Interest Warrant, if exercised
(the “Restricted
Securities”), to the public without registration, the Company
agrees to:


(a)           file with the Commission in a timely manner
all reports and other documents required of the Company under the Securities
Act and the Exchange Act; and


(b)           so long as a Holder owns any Restricted
Securities, furnish to the Holder, promptly upon the Holder’s written request,
a written statement by the Company as to the Company’s compliance with the
reporting requirements of Rule 144 and the Exchange Act.


SECTION
9.         MISCELLANEOUS


9.1          Payment of Fees


The Company shall pay to the Whitebox Entities all
reasonable expenses, including the fees of its legal counsel, incurred by the
Whitebox Entities and their advisor, Whitebox Advisors, LLC, in 



 19
 









connection with entry into this Agreement and the other Transaction
Agreements including but not limited to any and all fees and expenses related
to due diligence or other matters relating to or arising out of any of the
foregoing.


9.2          Governing Law; Venue


This Agreement shall be governed by the laws of the
State of Minnesota without regard to the conflicts of law principles of any
jurisdiction.  With respect to any
disputes arising out of or related to this Agreement or to any other
Transaction Agreement, the parties consent to the exclusive jurisdiction of,
and venue in, the state courts in Hennepin County, Minnesota (or, in the event
of exclusive federal jurisdiction, the federal courts of the District of
Minnesota).


9.3          Survival


The representations, warranties, covenants and
agreements made herein shall survive the closing of the transactions
contemplated hereby.  All statements as
to factual matters contained in any certificate or other instrument delivered
by or on behalf of the Company pursuant hereto in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the Company hereunder solely as of the date of such certificate
or instrument.


9.4          Successors and Assigns


This Agreement, and any and all rights, duties, and
obligations under this Agreement, will not be assigned, transferred, delegated,
or sublicensed by any party without the other party’s prior written
consent.  Any attempt by any party
without such prior written consent to assign, transfer, delegate, or sublicense
any rights, duties, or obligations that arise under this Agreement will be
void.  Subject to the foregoing and
except as otherwise provided in this Agreement, the provisions of this
Agreement will inure to the benefit of, and be binding upon, the parties’
respective successors, assigns, heirs, executors, and administrators.


9.5          Entire Agreement 


The Transaction Agreements and all the other
documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.


9.6          Severability


In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.


9.7          Amendment and Waiver


This Agreement may be amended or modified only upon
the written consent of the Company and the Holders holding a
majority-in-interest of the Principal Amount of the Notes.



 20
 









9.8          Delays or Omissions 


It is agreed that no delay or omission to exercise
any right, power or remedy accruing to any party, upon any breach, default or
noncompliance by another party under any of the Transaction Agreements shall
impair any such right, power or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of or in any similar breach, default or noncompliance thereafter
occurring.  It is further agreed that any
waiver, permit, consent or approval of any kind or character on any Holder’s
part of any breach, default or noncompliance under any of the Transaction
Agreements or any waiver on such party’s part of any provisions or conditions
of any of the Transaction Agreements must be in writing and shall be effective
only to the extent specifically set forth in such writing.  All remedies under the Transaction Agreements
or as otherwise afforded to any party shall be cumulative and not alternative.


9.9          Notices


All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified; (ii) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient, if not, then
on the next business day; (iii) three (3) business days after having been
sent by registered or certified mail, return receipt requested, postage
prepaid; or (iv) one (1) day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of
receipt.  All communications shall be
sent to the Company at its address on the first page hereof and to the Holders
at their respective addresses set forth on the signature page hereof or at such
other address as the Company or an Holder may designate by ten (10) days
advance written notice to the other parties hereto.


9.10        Titles and Subtitles; Counterparts


The titles of the sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.  This
Agreement may be delivered via facsimile and may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.


9.11        Exculpation among Holders 


Each Holder acknowledges that it is not relying upon
any representation or warranty of any person, firm, or corporation, other than
the Company, in making its investment or decision to invest in the Company.  Each Holder agrees that none of the other
Holders or the respective controlling persons, officers, directors, partners,
agents, or employees of any other Holder shall be liable for any action
heretofore or hereafter taken or omitted to be taken by any of them in
connection with the transactions contemplated hereby.


IN WITNESS WHEREOF, the undersigned have hereunto affixed their
signatures.


MEDICALCV, INC.


 


 


	
  

  	
  By

  	
  /s/ Marc P. Flores

  
	
   

  	
   

  	
  Marc P. Flores

  
	
   

  	
   

  	
  Its President
  and Chief Executive Officer

  



 


[Separate Holder Signature Pages Follow]



 21














HOLDERS:


WHITEBOX
READY LTD.


a British Virgin Islands
limited company


	
  By:

  	
  /s/ Jonathan D. Wood

  	
   

  
	
   

  	
  Jonathan D. Wood

  	
   

  
	
   

  	
  Chief Financial Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  3033 Excelsior Boulevard

  	
   

  
	
   

  	
  Suite 300

  	
   

  
	
   

  	
  Minneapolis, MN  55416

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tax I.D./Social Security
  No.

  	
   

  
				



 


SIGNATURE PAGE TO SECURED NOTE
PURCHASE AGREEMENT











SCHEDULE 1.0


LIST OF HOLDERS




	
  Holder

  	
   

  	
  Note Amount

  	
   

  
	
  Whitebox Ready Ltd.

  	
   

  	
  $

  	
  8,000,000

  	
   

  
					






 











MedicalCV, Inc.


Schedule 5.4(a) — Authorized and
Issued Capital Stock


As of April 15, 2007


 


	
   

  	
   

  	
  Authorized

  	
   

  	
  Issued and

  Outstanding

  	
   

  	
  Available for

  Issuance

  	
   

  
	
  5% Series A Redeemable
  Convertible Preferred Stock;

  $0.01 par value; stated value $10,000 per share 

  	
   

  	
  1,900 

  	
   

  	
  0 

  	
   

  	
  1,900 

  	
   

  
	
  Preferred Stock; $0.01
  par value

  	
   

  	
  998,100

  	
   

  	
  0

  	
   

  	
  998,100

  	
   

  
	
  Common Stock; $0.01 par
  value

  	
   

  	
  24,000,000

  	
   

  	
  9,837,224

  	
   

  	
  14,162,776

  	
   

  
	
  Capital Stock

  	
   

  	
  25,000,000

  	
   

  	
  9,837,224

  	
   

  	
  15,162,776

  	
   

  



 











MedicalCV, Inc.


Schedule 5.4(b) — Capital Stock Reserved
for Issuance


As of April 15, 2007


 


	
   

  	
   

  	
  Capital Stock

  Reserved

  for Issuance

  	
   

  
	
  1992 Stock Option Plan

  	
   

  	
  50,000

  	
   

  
	
  1993 Director Stock
  Option Plan

  	
   

  	
  30,000

  	
   

  
	
  1997 Stock Option Plan

  	
   

  	
  50,000

  	
   

  
	
  2001 Equity Incentive
  Plan

  	
   

  	
  600,000

  	
   

  
	
  2005 Director Stock
  Option Plan

  	
   

  	
  100,000

  	
   

  
	
  Capital stock reserved
  for stock options issued outside of shareholder approved plans

  	
   

  	
  513,715

  	
   

  
	
  Capital stock reserved
  for warrants

  	
   

  	
  1,293,638

  	
   

  
	
  Capital Stock Reserved for
  Issuance

  	
   

  	
  2,637,353

  	
   

  



 















MedicalCV, Inc.


Schedule 5.4(c) — Securities Issued
or Issuable with Anti-Dilution Provisions Potentially Impacted by Issuance of
Warrants in this Transaction, including participation rights


As of April 15, 2007


 


	
  Dated

  Issued

  	
   

  	
  Expiration

  Date

  	
   

  	
  Pre-Event #

  of Shares

  	
   

  	
  Pre-Event

  Exercise

  Price

  	
   

  	
  Pre-Event

  Extended

  Value

  	
   

  	
  Post-Event

  # of Shares

  	
   

  	
  Post-Event

  Exercise

  Price

  	
   

  	
  Post-Event

  Extended

  Value

  	
   

  	
  Holder Name

  	
   

  	
  Warrant

  Type

  	
   

  	
  Anti-Dilution

  Type

  	
   

  	
  Anti-Dilution

  Expiration

  	
   

  	
  Right of

  Participation

  	
   

  
	
  2/3/2004

  	
   

  	
  2/3/2014

  	
   

  	
  143,260

  	
   

  	
  $

  	
  4.62

  	
   

  	
  661,861

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  PKM Properties, LLC

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  2/3/2004

  	
   

  	
  2/3/2014

  	
   

  	
  58,874

  	
   

  	
  $

  	
  4.62

  	
   

  	
  271,998

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  Peter L. Hauser

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  5/21/2004

  	
   

  	
  5/21/2009

  	
   

  	
  8,243

  	
   

  	
  $

  	
  4.62

  	
   

  	
  38,084

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  Nicholas P. Hauser

  	
   

  	
  Unit

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  5/21/2004

  	
   

  	
  5/21/2009

  	
   

  	
  15,666

  	
   

  	
  $

  	
  4.62

  	
   

  	
  72,375

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  John C. Feltl

  	
   

  	
  Unit

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  5/21/2004

  	
   

  	
  5/21/2009

  	
   

  	
  6,837

  	
   

  	
  $

  	
  4.62

  	
   

  	
  31,589

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  Mary Joanne Feltl

  	
   

  	
  Unit

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  5/21/2004

  	
   

  	
  5/21/2009

  	
   

  	
  805

  	
   

  	
  $

  	
  4.62

  	
   

  	
  3,718

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  Alan Frailich

  	
   

  	
  Unit

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  5/21/2004

  	
   

  	
  5/21/2009

  	
   

  	
  2,164

  	
   

  	
  $

  	
  4.62

  	
   

  	
  9,997

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  John Ryden

  	
   

  	
  Unit

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  5/21/2004

  	
   

  	
  5/21/2009

  	
   

  	
  786

  	
   

  	
  $

  	
  4.62

  	
   

  	
  3,633

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  Berthel Fisher & Co.
  Financial Services, Inc.

  	
   

  	
  Unit

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  5/21/2004

  	
   

  	
  5/21/2009

  	
   

  	
  786

  	
   

  	
  $

  	
  4.62

  	
   

  	
  3,633

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  Neil Engquist

  	
   

  	
  Unit

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  5/21/2004

  	
   

  	
  5/21/2009

  	
   

  	
  637

  	
   

  	
  $

  	
  4.62

  	
   

  	
  2,942

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  Okoboji Financial
  Services

  	
   

  	
  Unit

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  5/21/2004

  	
   

  	
  5/21/2009

  	
   

  	
  2,735

  	
   

  	
  $

  	
  4.62

  	
   

  	
  12,634

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  David Lantz

  	
   

  	
  Unit

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  5/21/2004

  	
   

  	
  5/21/2009

  	
   

  	
  127

  	
   

  	
  $

  	
  4.62

  	
   

  	
  588

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  G. Douglas Pritchard

  	
   

  	
  Unit

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  5/21/2004

  	
   

  	
  5/21/2009

  	
   

  	
  3,500

  	
   

  	
  $

  	
  4.62

  	
   

  	
  16,168

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  A. Gordon Schierman

  	
   

  	
  Unit

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  5/21/2004

  	
   

  	
  5/21/2009

  	
   

  	
  2,699

  	
   

  	
  $

  	
  4.62

  	
   

  	
  12,469

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  Donald Steinkamp

  	
   

  	
  Unit

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  5/21/2004

  	
   

  	
  5/21/2009

  	
   

  	
  636

  	
   

  	
  $

  	
  4.62

  	
   

  	
  2,938

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  William Freerks

  	
   

  	
  Unit

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  5/21/2004

  	
   

  	
  5/21/2009

  	
   

  	
  1,333

  	
   

  	
  $

  	
  4.62

  	
   

  	
  6,157

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  Chip A. Rice

  	
   

  	
  Unit

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  5/21/2004

  	
   

  	
  5/21/2009

  	
   

  	
  2,068

  	
   

  	
  $

  	
  4.62

  	
   

  	
  9,555

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  Nicholas H. Shermeta

  	
   

  	
  Unit

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  11/13/2003

  	
   

  	
  11/13/2013

  	
   

  	
  29,278

  	
   

  	
  $

  	
  4.44

  	
   

  	
  129,994

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  PKM Properties, LLC

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  10/13/2006

  	
   

  	
  10/13/2011

  	
   

  	
  75,000

  	
   

  	
  $

  	
  4.37

  	
   

  	
  327,375

  	
   

  	
  75,000

  	
   

  	
  $

  	
  4.00

  	
   

  	
  300,000

  	
   

  	
  Potomac Capital Partners
  LP

  	
   

  	
  Regular

  	
   

  	
  Full
  Ratchet

  	
   

  	
  7/13/2007

  	
   

  	
  Yes

  	
   

  
	
  10/13/2006

  	
   

  	
  10/13/2011

  	
   

  	
  50,000

  	
   

  	
  $

  	
  4.37

  	
   

  	
  218,250

  	
   

  	
  50,000

  	
   

  	
  $

  	
  4.00

  	
   

  	
  200,000

  	
   

  	
  Potomac Capital
  International Ltd

  	
   

  	
  Regular

  	
   

  	
  Full
  Ratchet

  	
   

  	
  7/13/2007

  	
   

  	
  Yes

  	
   

  
	
  10/13/2006

  	
   

  	
  10/13/2011

  	
   

  	
  53,571

  	
   

  	
  $

  	
  4.37

  	
   

  	
  233,837

  	
   

  	
  53,571

  	
   

  	
  $

  	
  4.00

  	
   

  	
  214,284

  	
   

  	
  Pleiades Investment
  Partners - R LP

  	
   

  	
  Regular

  	
   

  	
  Full
  Ratchet

  	
   

  	
  7/13/2007

  	
   

  	
  Yes

  	
   

  
	
  11/17/2004

  	
   

  	
  11/17/2014

  	
   

  	
  11,494

  	
   

  	
  $

  	
  4.35

  	
   

  	
  49,999

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  PKM Properties, LLC

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  11/24/2003

  	
   

  	
  11/24/2013

  	
   

  	
  3,059

  	
   

  	
  $

  	
  4.25

  	
   

  	
  13,001

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  Richard H. Nicholson

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  11/24/2003

  	
   

  	
  11/24/2013

  	
   

  	
  3,059

  	
   

  	
  $

  	
  4.25

  	
   

  	
  13,001

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  CPL Investments

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  11/24/2003

  	
   

  	
  11/24/2013

  	
   

  	
  9,176

  	
   

  	
  $

  	
  4.25

  	
   

  	
  38,998

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  Nicholson Boys LP

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  11/24/2003

  	
   

  	
  11/24/2013

  	
   

  	
  6,117

  	
   

  	
  $

  	
  4.25

  	
   

  	
  25,997

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  Raft Co.

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  11/24/2003

  	
   

  	
  11/24/2013

  	
   

  	
  9,176

  	
   

  	
  $

  	
  4.25

  	
   

  	
  38,998

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  TBD

  	
   

  	
  Draft Co.

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  4/4/2003

  	
   

  	
  4/4/2013

  	
   

  	
  60,932

  	
   

  	
  $

  	
  3.59

  	
   

  	
  218,746

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  PKM Properties, LLC

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  7/1/2003

  	
   

  	
  7/1/2013

  	
   

  	
  62,429

  	
   

  	
  $

  	
  3.59

  	
   

  	
  224,120

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  PKM Properties, LLC

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  7/1/2003

  	
   

  	
  7/1/2013

  	
   

  	
  74,164

  	
   

  	
  $

  	
  3.59

  	
   

  	
  266,249

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  Peter L. Hauser

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  8/20/2003

  	
   

  	
  8/20/2013

  	
   

  	
  11,734

  	
   

  	
  $

  	
  3.59

  	
   

  	
  42,125

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  PKM Properties, LLC

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  1/17/2003

  	
   

  	
  1/17/2013

  	
   

  	
  59,600

  	
   

  	
  $

  	
  3.50

  	
   

  	
  208,600

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  PKM Properties, LLC

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  3/3/2005

  	
   

  	
  3/3/2015

  	
   

  	
  72,734

  	
   

  	
  $

  	
  3.40

  	
   

  	
  247,296

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  PKM Properties, LLC

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  3/3/2005

  	
   

  	
  3/3/2015

  	
   

  	
  2,166

  	
   

  	
  $

  	
  3.40

  	
   

  	
  7,364

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  Robert G. Allison IRA

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  3/3/2005

  	
   

  	
  3/3/2015

  	
   

  	
  2,746

  	
   

  	
  $

  	
  3.40

  	
   

  	
  9,336

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  Bradley A. Erickson IRA

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  3/3/2005

  	
   

  	
  3/3/2015

  	
   

  	
  5,067

  	
   

  	
  $

  	
  3.40

  	
   

  	
  17,228

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  Dennis D. Gonyea

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  3/3/2005

  	
   

  	
  3/3/2015

  	
   

  	
  2,166

  	
   

  	
  $

  	
  3.40

  	
   

  	
  7,364

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  John T. Potter

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  3/3/2005

  	
   

  	
  3/3/2015

  	
   

  	
  2,166

  	
   

  	
  $

  	
  3.40

  	
   

  	
  7,364

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  Brust Limited
  Partnership

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  3/3/2005

  	
   

  	
  3/3/2015

  	
   

  	
  1,005

  	
   

  	
  $

  	
  3.40

  	
   

  	
  3,417

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  Alan R. Reckner

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  3/3/2005

  	
   

  	
  3/3/2015

  	
   

  	
  2,746

  	
   

  	
  $

  	
  3.40

  	
   

  	
  9,336

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  Carolyn Salon

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  3/3/2005

  	
   

  	
  3/3/2015

  	
   

  	
  2,166

  	
   

  	
  $

  	
  3.40

  	
   

  	
  7,364

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  Joel Salon

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  3/3/2005

  	
   

  	
  3/3/2015

  	
   

  	
  17,329

  	
   

  	
  $

  	
  3.40

  	
   

  	
  58,919

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  Robert Furst Pension
  Plan & Trust

  	
   

  	
  Regular

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  4/1/2005

  	
   

  	
  4/1/2010

  	
   

  	
  10,996

  	
   

  	
  $

  	
  3.25

  	
   

  	
  35,737

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  Gary Kohler

  	
   

  	
  Regular

  	
   

  	
  Full
  Ratchet

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
  4/1/2005

  	
   

  	
  4/1/2010

  	
   

  	
  30,000

  	
   

  	
  $

  	
  3.25

  	
   

  	
  97,500

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  ASA Opportunity Fund LP

  	
   

  	
  Regular

  	
   

  	
  Full
  Ratchet

  	
   

  	
  Life

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  921,232

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Wtg.
  Avg.

  	
   

  	
  701,665

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Full
  Ractchet

  	
   

  	
  219,567

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  921,232

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 











MedicalCV, Inc.


Schedule 5.4(d) — Oustanding
Agreements for the Issuance of Capital Stock


As of April 15, 2007


 


	
   

  	
   

  	
  Outstanding

  Agreements for

  the Issuance of

  Common Stock

  	
   

  	
  Available for

  Future Issuance

  	
   

  
	
  1992 Stock Option Plan

  	
   

  	
  1,175

  	
   

  	
  0

  	
   

  
	
  1993 Director Stock
  Option Plan

  	
   

  	
  4,200

  	
   

  	
  0

  	
   

  
	
  1997 Stock Option Plan

  	
   

  	
  36,156

  	
   

  	
  13,844

  	
   

  
	
  2001 Equity Incentive
  Plan

  	
   

  	
  276,363

  	
   

  	
  322,637

  	
   

  
	
  2005 Director Stock
  Option Plan

  	
   

  	
  63,846

  	
   

  	
  36,154

  	
   

  
	
  Options outside of
  approved plans

  	
   

  	
  513,715

  	
   

  	
   

  	
   

  
	
  Common Shares
  Issuable under Stock Options

  	
   

  	
  895,455

  	
   

  	
  372,635

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Warrants

  	
   

  	
  1,195,594

  	
   

  	
   

  	
   

  
	
  Unit Warrants

  	
   

  	
  49,022

  	
   

  	
   

  	
   

  
	
  Embedded Warrants

  	
   

  	
  49,022

  	
   

  	
   

  	
   

  
	
  Common Shares
  Issuable under Warrants

  	
   

  	
  1,293,638

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AGREEMENTS OUTSTANDING FOR
  ISSUANCE OF COMMON STOCK

  	
   

  	
  2,189,093

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AVAILABLE AND OUTSTANDING AGREEMENTS FOR
  ISSUANCE OF COMMON STOCK

  	
   

  	
   

  	
   

  	
  2,561,728

  	
   

  



 











MedicalCV, Inc.


Schedule 5.4(e) — Shareholder Agreements,
Voting Agreements, Proxy Rights, etc.


As of April 15, 2007


 


None











MedicalCV, Inc.


Schedule 5.6(a) — Off-Balance Sheet
Arrangements or Transactions


As of April 15, 2007


 


	
   

  	
   

  	
  Remaining

  Amount

  Payable

  	
   

  
	
  Operating Lease

  	
   

  	
  17,511

  	
   

  
	
  LightWave
  Royalty - minimum annual payments

  	
   

  	
  2,325,000

  	
   

  
	
  LightWave
  Royalty - milestone after $1.5M cumulative sales

  	
   

  	
  385,000

  	
   

  
	
  Total
  Off-Balance Sheet Obligations

  	
   

  	
  2,727,511

  	
   

  



 











MedicalCV, Inc.


Schedule 5.7 — Changes since Balance Sheet Date of
January, 31, 2007


As of April 15, 2007


 


(n)         Granted an option on
March 30, 2007 to purchase 1,000 shares of common stock to an employee;  Issued warrants on March 14, 2007 for the
purchase of 5,000 shares of common stock to LightWave Ablation Systems for
milestone achievements.











MedicalCV, Inc.


Schedule 5.19 — Material Licenses,
Permits, Approvals


As of April 15, 2007


 


	
   

  	
   

  	
  US FDA 510(K)

  	
   

  
	
   

  	
   

  	
  Device Classification Name

  	
   

  	
  510(K) Number

  	
   

  	
  Decision Date

  	
   

  
	
  SOLARTM Surgical
  Ablation System

  	
   

  	
  Laser
  Instrument,

  Surgical, Powered

  	
   

  	
  K061489

  	
   

  	
  3-16-07

  	
   

  
	
  ATRILAZETM
  Surgical Ablation System

  	
   

  	
  Laser
  Instrument,

  Surgical, Powered

  	
   

  	
  K060680

  	
   

  	
  4-11-06

  	
   

  
	
  ATRILAZETM
  Malleable S-2 Disposable Probe

  	
   

  	
  Laser
  Instrument,

  Surgical, Powered

  	
   

  	
  K052495

  	
   

  	
  10-11-05

  	
   

  
	
  ATRILAZETM Soft Tissue
  Ablation System

  	
   

  	
  Laser Instrument,

  Surgical, Powered

  	
   

  	
  K040744

  	
   

  	
  11-30-04

  	
   

  



 
















EXHIBIT
A


THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS.  IT MAY
NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SUCH ACT OR STATE LAWS, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION THEREUNDER IS NOT
REQUIRED.


SECURED
PROMISSORY NOTE


	
  $

  	
   

  	
   

  	
  April 20, 2007

  
	
   

  	
  2007
  Secured Notes Series

  



 


FOR VALUE
RECEIVED, the
undersigned, MedicalCV, Inc., a Minnesota corporation (the “Borrower”), with its
principal executive office at 9725 South Robert Trail, Inver Grove Heights, Minnesota
55077, hereby promises to pay to the order of                                      
(the “Holder”),
or its assigns, the principal sum of $                                 ,
or such greater or lesser amount as shall then equal the outstanding principal
amount hereof (the “Principal Amount”), together
with interest from the date of this Secured Promissory Note (this “Note”)
on the outstanding principal balance at an annual rate equal to 11% per annum. All
payments of principal and interest shall be made in immediately available funds
in lawful money of the United States.


This Note is one of multiple
notes in the 2007 Secured Notes Series (collectively, the “Notes”) referred to
in that certain Secured Note Purchase Agreement dated April 20, 2007 by and
among the Company, the Holder and certain other holders (the “Note Purchase
Agreement”).  The
Notes are secured by a first priority security interest in and to the Company’s
assets, as set forth in that certain Security Agreement April 20, 2007 by and
among the Company, the Holder and certain other holders (the “Security Agreement”).  Capitalized
terms not otherwise defined in this Note have the meanings placed on them in
the Note Purchase Agreement and/or the Security Agreement.


1.             Payment
of Principal and Interest


(a)   The entire unpaid principal
balance, together with any accrued but unpaid interest and other unpaid charges
or fees hereunder, shall be due and payable on the date that is thirty-six (36)
months following the Effective Date of the Note Purchase Agreement (the “Maturity Date”).


(b)   During the initial twelve
(12) month period following the Effective Date, interest on the Note will
accrue and be added to the Principal Amount of the Note.  Within thirty (30) days following the end of such
12-month period, the Company shall issue to the Holder a five-year Warrant, in
substantially the form attached to the Note Purchase Agreement as Exhibit B2,
which shall entitle the Holder to purchase such number of shares of the Company’s
Common Stock that is equal to the quotient obtained by dividing (i) 60% of the
accrued interest for the initial 12-month period by (ii) $4.00.


(c)   Following the initial
12-month period, the Company will have the right to (i) pay the accrued
interest on the Note quarterly in arrears or (ii) allow the interest for such
quarter continue to accrue and be added to the Principal Amount of the
Note.  Any payment of accrued interest
must be made to the Holder on or before the 15th day following the end of such quarter.  If the Company elects to have the quarterly
interest added to the Principal Amount of the Note, then the Company shall
issue to the Holder, within thirty (30) days following the end of such quarter,
a five-year Warrant, in substantially the 













form attached to the Note Purchase Agreement as
Exhibit B2, entitling the Holder to purchase such number of shares of the
Company’s Common Stock that is equal to the quotient obtained by dividing (i)
60% of the accrued interest for the quarter by (ii) $4.00.


(d)   The Borrower shall have the
right to prepay this Note, in part or in whole, at any time during the term of
this Note, subject to a premium payment (the “Premium Payment”) payable to the
Holder as follows:


(i)   8% of the Principal Amount if
prepayment is made within the first 12-month period following the Effective
Date;


(ii)  6% of the Principal Amount if
prepayment is made within the second 12-month period following the Effective
Date; and


(iii) 3% of the Principal Amount if prepayment is made within the third
12-month period following the Effective Date.


The
Prepayment Premium shall be paid to the Holder in immediately available funds
simultaneously with the Prepayment.  If
the Borrower elects to prepay less than the whole Principal Amount then
outstanding, then the Prepayment Premium shall apply only to such portion of
the Principal Amount that is being prepaid at that time.  The Prepayment Premium shall not apply if the
prepayment of the Note is a result of a change of control of the Company.


(e)   Notwithstanding anything
herein to the contrary, if any payment of Principal Amount or interest (or,
pursuant to Section 1(b) or (c) above, a Warrant issuance) becomes due on a
Saturday, a Sunday or a day on which banks in the State of Minnesota are
authorized or required by law to close, the due date thereof shall be extended
to the immediately succeeding day which is not a Saturday, a Sunday or a day on
which the banks in the State of Minnesota are closed, and any applicable interest
thereon shall accrue during the period of such extension at the rate provided
for herein.


(f)    If the Principal Amount of
the Note is prepaid in full prior to the Maturity Date, the Company agrees to
issue to the Holder, at the time of the Prepayment, the Warrant that would
otherwise have been issuable pursuant to Section 1(b) or 1(c) for such period,
as applicable, calculated on a pro rata basis for that period.


2.             Warrant
Rights.  The Holder shall be entitled to receive Warrants
to purchase shares of the Borrower’s common stock, as set forth in the Note
Purchase Agreement and in Sections 1(b) and 1(c) of this Note (without
duplication).


3.             Rights
of Holder.  Upon an Event of Default, the rights and
remedies of the Holder are as set forth in the Note Purchase Agreement and the Security
Agreement, which, among other things, 
provide that the with respect to any action taken in connection with the
Note Purchase Agreement or the Security Agreement, the Holders of the 2007
Secured Note Series shall act in accordance with and under the directions of
the Holders holding a majority-in-interest of the outstanding Principal Amount
of the Notes, or a designee appointed by such Holders. 


4.             Security.  This
Note and the payment of all principal, interest and other sums hereunder is
secured by a security interest in the Collateral, pursuant to the Note Purchase
Agreement and the Security Agreement.


5.             Amendments.  Changes
in or additions to this Note may be made, or compliance with any term,
covenant, agreement, condition or provision set forth herein may be omitted or
waived (either generally or in a particular instance and either retroactively
or prospectively), only in writing.













6.             Waiver.  The
failure of the Holder to insist, in any one or more instances, on performance
of any of the terms, covenants and conditions hereof shall not be construed as
a waiver or relinquishment of any rights granted hereunder or of the future
performance of any such terms, covenants or conditions, but the obligation of
the Borrower with respect thereto shall continue to be in full force and
effect.


7.             Benefits;
Assignment.  The rights and benefits of the Holder
hereunder shall inure to the benefit of its successors and assigns, and Borrower
acknowledges that Holder may pledge this Note to its Holders. The Borrower may
not assign any rights or obligations hereunder without the prior written
consent of the Holder, and any such attempted assignment shall be null and void
and of no force or effect.


8.             Notices.  All notices, requests and demands to or upon the parties hereto shall
be deemed to have been given or made when deposited in the mail, certified or
registered, postage prepaid, addressed to the address of the party set forth in
the Note Purchase Agreement or such other address as any party may request by
notice given as aforesaid.


9.             Collection.  The Borrower agrees to pay any costs and expenses (including reasonable
attorneys’ fees and disbursements) incurred by the Holder in the collection of
any and all amounts due under this Note that are not paid when due and in the
enforcement of the Holder’s rights under this Note.


10.          Governing
Law.  This Note shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws
of the State of Minnesota, without giving effect to the principles of conflict
of laws thereof.


11.          Severability.  The holding of any provision of this Note to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision hereof and all other provisions hereof shall remain in full force and
effect.


IN WITNESS WHEREOF, this Secured Promissory Note has been
executed and delivered on the date first above written by the undersigned Borrower.


	
  

  	
  MEDICALCV, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Marc P. Flores

  
	
   

  	
  Its President and Chief Executive Officer

  



 


















EXHIBIT
B1


WARRANT TO BE ISSUED AT CLOSING


NEITHER THIS SECURITY NOR
THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. 
THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.


COMMON STOCK
PURCHASE WARRANT


To Purchase                     
Shares of Common Stock of


MEDICALCV, INC.


THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”)
certifies that, for value received,                     
(the “Holder”), is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter set forth, at any time
on or after the date hereof (the “Initial Exercise Date”) and on or
prior to the close of business on the fifth (5th) anniversary of the Initial Exercise
Date (the “Termination Date”) but not thereafter, to subscribe for and
purchase from MEDICALCV, INC., a Minnesota corporation (the “Company”),
up to            shares (the “Warrant
Shares”) of Common Stock, par value $0.01 per share, of the Company (the “Common
Stock”).  The purchase price of one share
of Common Stock under this Warrant shall be equal to the Exercise Price, as
defined in Section 2(b).


Section 1.               Definitions.  In addition to the terms defined elsewhere in
this Warrant, for all purposes of this Warrant, the following terms have the meanings
indicated in this Section 1.


“Business Day” means any day except Saturday, Sunday, any day
which shall be a federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or required by law
or other governmental action to close.


“Closing Date” means the Business Day when all of the
Transaction Documents have been executed and delivered by the applicable
parties thereto, and all conditions precedent to the parties’ obligations
thereunder have been satisfied or waived.













“Person” means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.


“Securities” means the Warrants and the Warrant Shares.


“Trading Day” means a day on which the Common Stock is traded on
a Trading Market.


“Trading Market” means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in question:
the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global
Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC
Bulletin Board.


“Transaction Documents” means this Warrant, the Secured Note
Purchase Agreement dated April     , 2007 by and among the
Company, the Holder and certain other holders listed on Schedule 1.0 thereto
(the “Purchase Agreement”) and any other documents or agreements executed in
connection with the transactions contemplated thereunder.


“VWAP” means, for any date, the price determined by the first of
the following clauses that applies: (a) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price of the Common
Stock for such date (or the nearest preceding date) on the Trading Market on
which the Common Stock is then listed or quoted for trading as reported by
Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. (New York City
time) to 4:02 p.m. (New York City time); (b)  if the OTC Bulletin Board is
not a Trading Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the
Common Stock is not then quoted for trading on the OTC Bulletin Board and if
prices for the Common Stock are then reported in the “Pink Sheets” published by
Pink Sheets, LLC (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (d) in all other cases, the fair market value
of a share of Common Stock as determined by an independent appraiser selected
in good faith by the investors who are signatories to the Transaction Documents
and reasonably acceptable to the Company.


Section 2.               Exercise.


a)             Exercise of Warrant.  Exercise of the purchase rights represented
by this Warrant may be made, in whole or in part, at any time or times on or
after the Initial Exercise Date and on or before the Termination Date by
delivery to the Company of a duly executed facsimile or “.pdf” copy of the
Notice of Exercise Form annexed hereto (or such other office or agency of the
Company as it may designate by notice in writing to the registered Holder at
the address of such Holder appearing on the books of the Company); and, within
3 Trading Days of the date said Notice of Exercise is delivered to the Company,
the Company shall have received payment of the aggregate Exercise Price of the
shares thereby purchased by wire transfer or cashier’s check drawn on a United
States bank, unless this Warrant is being exercised pursuant to the cashless
exercise 



 2
 









provision set forth in
Section 2(c) below.  Notwithstanding
anything herein to the contrary, the Holder shall not be required to physically
surrender this Warrant to the Company until the Holder has purchased all of the
Warrant Shares available hereunder and the Warrant has been exercised in full,
in which case, the Holder shall surrender this Warrant to the Company for cancellation
within 3 Trading Days of the date the final Notice of Exercise is delivered to
the Company.  Partial exercises of this
Warrant resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the outstanding
number of Warrant Shares purchasable hereunder in an amount equal to the
applicable number of Warrant Shares purchased. 
The Holder and the Company shall maintain records showing the number of Warrant
Shares purchased and the date of such purchases.  In the event of any dispute or discrepancy,
the records of the Company shall be controlling and determinative in the
absence of manifest error.  The Holder
and any assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares available for
purchase hereunder at any given time may be less than the amount stated on the
face hereof.


b)            Exercise Price.  The
exercise price per share of the Common Stock under this Warrant shall be $4.00,
subject to adjustment hereunder (the “Exercise Price”).


c)             Cashless Exercise.  If a Notice of Exercise Form is delivered at
a time when (i) a registration statement permitting the Holder to resell the
Warrant Shares is required to be effective but is not then effective, or (ii)
the prospectus forming a part thereof is not then available to the Holder for
the resale of the Warrant Shares, then this Warrant may also be exercised at
such time by means of a “cashless exercise” in which the Holder shall be
entitled to receive a certificate for the number of Warrant Shares equal to the
quotient obtained by dividing [(A-B) (X)] by (A), where:


(A) =                    the VWAP on
the Trading Day immediately preceding the date of such election;


(B) =                      the Exercise
Price of this Warrant, as adjusted; and


(X) =                     the number of
Warrant Shares issuable upon exercise of this Warrant in accordance with the
terms of this Warrant by means of a cash exercise rather than a cashless
exercise.


d)            Mechanics of Exercise.


i.              Authorization of Warrant Shares.  The Company covenants that all Warrant Shares
which may be issued upon the exercise of the purchase rights represented by
this Warrant will, upon exercise of the purchase rights represented by this
Warrant, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).



 3
 









ii.             Delivery of Certificates Upon
Exercise.  Certificates for shares
purchased hereunder shall be transmitted by the transfer agent of the Company
to the Holder by crediting the account of the Holder’s prime broker with the
Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”)
system if the Company is a participant in such system, and otherwise by
physical delivery to the address specified by the Holder in the Notice of
Exercise within 3 Trading Days from the delivery to the Company of the Notice
of Exercise Form, surrender of this Warrant (if required) and payment of the
aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”).  This Warrant shall be deemed to have been
exercised on the date (a) the Exercise Price is received by the Company or (b)
notification to the Company that this Warrant is being exercised pursuant to a
cashless exercise provision set forth in Section 2(c) above.  The Warrant Shares shall be deemed to have
been issued, and Holder or any other person so designated to be named therein
shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the Warrant has been exercised by payment to the
Company of the Exercise Price (or by cashless exercise, if permitted) and all
taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi)
prior to the issuance of such shares, have been paid.


iii.            Delivery of New Warrants Upon
Exercise.  If this Warrant shall have
been exercised in part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of delivery of the
certificate or certificates representing Warrant Shares, deliver to Holder a
new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant
Shares called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.


iv.            Rescission Rights.  If the Company fails to cause its transfer
agent to transmit to the Holder a certificate or certificates representing the
Warrant Shares pursuant to this Section 2(d) by the Warrant Share Delivery
Date, then the Holder will have the right to rescind such exercise.


v.             No Fractional Shares or Scrip.  No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which Holder
would otherwise be entitled to purchase upon such exercise, the Company shall
at its election, either pay a cash adjustment in respect of such final fraction
in an amount equal to such fraction multiplied by the Exercise Price or round
up to the next whole share.


vi.            Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares
shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such certificate, all of
which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event
certificates for Warrant Shares are to be issued in a name other than the name
of the Holder, this Warrant when surrendered for exercise shall be accompanied
by the Assignment Form attached 



 4
 









hereto duly executed by
the Holder; and the Company may require, as a condition thereto, the payment of
a sum sufficient to reimburse it for any transfer tax incidental thereto.


vii.           Closing of Books.  The Company will not close its shareholder
books or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.


Section 3.               Certain Adjustments.


a)             Stock Dividends and Splits.  If the Company, at any time while this
Warrant is outstanding: (A) pays a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company upon exercise of this Warrant, any other warrant or any option), (B)
subdivides outstanding shares of Common Stock into a larger number of shares,
(C) combines (including by way of reverse stock split) outstanding shares of Common
Stock into a smaller number of shares, or (D) issues by reclassification of
shares of the Common Stock any shares of capital stock of the Company, then in
each case the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event and the number of shares issuable upon exercise of
this Warrant shall be proportionately adjusted. 
Any adjustment made pursuant to this Section 3(a) shall become effective
immediately after the record date for the determination of shareholders
entitled to receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination
or re-classification.


b)            Adjustment for Issuance of Shares
of Common Stock Below Exercise Price. 
From the date hereof until 12 months after the Closing Date (the “Adjustment
Period”), the Exercise Price shall be subject to adjustment from time to
time as provided in this Section 3(b).


i.              If
during the Adjustment Period, the Company issues or sells, or in accordance
with this Section 3(b) is deemed to have issued or sold, any shares of
Common Stock (excluding Excluded Securities) for a consideration per share (the
“New Securities Issuance Price”)
less than a price (the “Applicable
Price”) equal to the Exercise Price in effect immediately prior to
such time, then immediately after such issue or sale, the Exercise Price then
in effect shall be reduced to an amount equal to the New Securities Issuance
Price.


ii.             For
purposes of determining the adjusted Exercise Price under Section 3(b) hereof, the
following will be applicable:


(A)          Issuance of Rights or Options.
If the Company in any manner grants or sells any Options and the lowest price
per share for which one share of Common Stock is issuable upon the exercise of
any such Option or upon 



 5
 









conversion, exchange or exercise of any Convertible
Securities issuable upon exercise of such Option is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the granting or sale of
such Option for such price per share. For purposes of this
Section 3(b)(ii)(A), the “lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or upon
conversion, exchange or exercise of any Convertible Securities issuable upon
exercise of such Option” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to
any one share of Common Stock upon granting or sale of the Option, upon
exercise of the Option and upon conversion, exchange or exercise of any
Convertible Security issuable upon exercise of such Option. No further
adjustment of the Exercise Price shall be made upon the actual issuance of such
Common Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon conversion,
exchange or exercise of such Convertible Securities.  “Convertible Securities” means any
evidence of indebtedness, shares or securities, in each case convertible into
or exchangable for Common Stock.  “Options”
means rights, options or warrants to subscribe for, purchase or otherwise
acquire shares of Common Stock or Convertible Securities.


(B)           Issuance of Convertible Securities.
If the Company in any manner issues or sells any Convertible Securities and the
lowest price per share for which one share of Common Stock is issuable upon
such conversion, exchange or exercise thereof is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the issuance or sale of
such Convertible Securities for such price per share. For the purposes of this
Section 3(b)(ii)(B), the “lowest price per share for which one share of Common
Stock is issuable upon such conversion, exchange or exercise” shall be equal to
the sum of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to any one share of Common Stock upon the issuance
or sale of the Convertible Security and upon the conversion, exchange or
exercise of such Convertible Security. No further adjustment of the Exercise
Price shall be made upon the actual issuance of such Common Stock upon
conversion, exchange or exercise of such Convertible Securities, and if any
such issue or sale of such Convertible Securities is made upon exercise of any
Options for which adjustment of the Exercise Price had been or are to be made
pursuant to other provisions of this Section 3(b)(ii), no further adjustment of
the Exercise Price shall be made by reason of such issue or sale.


(C)           Change in Option Price or
Conversion Rate. If the purchase or exercise price provided for in any
Options, or the additional consideration, if any, payable upon the issue,
conversion, exchange or exercise of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exchangeable or
exercisable for Common Stock changes at any time, the Exercise Price in effect
at the time of such change shall be adjusted to the Exercise Price which would
have been in effect at such time had such Options or Convertible 



 6
 









Securities provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may be, at the
time initially granted, issued or sold. For purposes of this Section
3(b)(ii)(C), if the terms of any Option or Convertible Security that was
outstanding as of the Closing Date are changed in the manner described in the
immediately preceding sentence, then such Option or Convertible Security and
the Common Stock deemed issuable upon exercise, conversion or exchange thereof
shall be deemed to have been issued as of the date of such change. No
adjustment shall be made if such adjustment would result in an increase of the
Exercise Price then in effect. 
Notwithstanding the foregoing, no adjustment shall be made to the
Exercise Price of this Warrant due to anti-dilution adjustments made to securities
outstanding as of the Closing Date as a result of the issuance of Securities
pursuant to the Transaction Documents.


(D)          Calculation of Consideration
Received. In case any Option is issued in connection with the issue or sale
of other securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such Options by
the parties thereto, the Options will be deemed to have been issued for a
consideration of $0.01. If any Common Stock, Options or Convertible Securities
are issued or sold or deemed to have been issued or sold for cash, the
consideration received therefor will be deemed to be the gross amount received
by the Company therefor. If any Common Stock, Options or Convertible Securities
are issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company will be the fair value of
such consideration, except where such consideration consists of marketable
securities, in which case the amount of consideration received by the Company
will be the arithmetic average of the closing sale prices of such securities
during the ten (10) consecutive trading days ending on the date of receipt
of such securities. The fair value of any consideration other than cash or
securities will be determined jointly by the Company and the holders of at
least a majority in interest of the Warrants then outstanding.


(E)           Exceptions to Adjustment of
Exercise Price. Notwithstanding the foregoing, no adjustment will be made
under this Section 3(b) in respect of Excluded Securities. “Excluded
Securities” means the issuance of (a) shares of Common Stock or options to
employees, officers or directors of, or consultants to, the Company pursuant to
any stock option agreement, stock option plan or equity incentive plan duly
adopted by a majority of the non-employee members of the Board of Directors of
the Company or a majority of the members of a committee of non-employee
directors  established for such purpose (for
purposes of clarity, the issuance of shares of Common Stock upon exercise of
options granted pursuant to a stock option agreement, stock option plan or
equity incentive plan subsequent to the date hereof shall also be Excluded
Securities), (b) securities upon the exercise or exchange of or conversion of (i)
any Securities issued in connection with the Purchase Agreement; (ii)
securities to a registered broker-dealer in connection with the transactions
contemplated by the Purchase Agreement; and/or (iii) other securities or rights
exercisable or exchangeable for or convertible into shares of Common Stock
which are issued and outstanding on 



 7
 









the date of the
Purchase Agreement, provided that such securities have not been amended since
the date of the Purchase Agreement (other than on a non-discretionary basis pursuant
to the pre-existing anti-dilution provisions thereof) to increase the number of
such securities or to decrease the exercise, exchange or conversion price of
any such securities, (c) securities issued pursuant to acquisitions or
strategic transactions approved by  a majority of
the disinterested directors, provided any such issuance shall only be to a
Person which is, itself or through its subsidiaries, an operating company in a
business synergistic with the business of the Company and in which the Company
receives benefits in addition to the investment of funds, but shall not include
a transaction in which the Company is issuing securities primarily for the
purpose of raising capital or to an entity whose primary business is investing
in securities, (d) shares of Common Stock or other securities issued in
connection with any stock split, stock dividend or recapitalization of the
Company (subject to Section 3(a) hereof), and (e) shares of Common Stock or
other securities issued in connection with any registered primary public
offering.


c)             Calculations.  All calculations under this Section 3 shall
be made to the nearest cent or the nearest 1/100th of a share, as the case may
be.  For purposes of this Section 3, the
number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.


d)            Voluntary Adjustment By Company.  The Company may at any time during the term
of this Warrant reduce the then current Exercise Price to any amount and for
any period of time deemed appropriate by the Board of Directors of the Company.


e)             Notice to Holders.


i.              Adjustment to Exercise Price.  Whenever the Exercise Price is adjusted
pursuant to any provision of this Section 3, the Company shall promptly mail to
each Holder a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.


ii.             Notice to Allow Exercise by Holder.  If (A) the Company shall declare a dividend
(or any other distribution in whatever form) on the Common Stock; (B) the
Company shall declare a special nonrecurring cash dividend on or a redemption
of the Common Stock; (C) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights; (D) the approval of any
shareholders of the Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the Company is a
party, any sale or transfer of all or substantially all of the assets of the
Company, of any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property; (E) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company; then, in each case, the Company shall cause to be mailed to the
Holder at its last address as it shall appear upon the Warrant Register of the 



 8
 









Company, at least 20
calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to mail such notice or any defect therein
or in the mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice. 
The Holder is entitled to exercise this Warrant during the 20-day period
commencing on the date of such notice to the effective date of the event
triggering such notice.


Section 4.               Transfer of Warrant.


a)             Transferability.  Subject to compliance with any applicable
securities laws and the conditions set forth in Section 4(d) hereof, this
Warrant and all rights hereunder (including, without limitation, any
registration rights) are transferable, in whole or in part, upon surrender of
this Warrant at the principal office of the Company or its designated agent,
together with a written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such
transfer.  Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denomination or
denominations specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled.  A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.


b)            New Warrants.  This Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or
attorney.  Subject to compliance with
Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.


c)             Warrant Register.  The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered
Holder of this Warrant as the absolute owner hereof for the purpose of any
exercise hereof or any distribution to the Holder, and for all other purposes,
absent actual notice to the contrary.



 9
 









d)            Transfer Restrictions.  If, at the time of the surrender of this
Warrant in connection with any transfer of this Warrant, the transfer of this
Warrant shall not be registered pursuant to an effective registration statement
under the Securities Act and under applicable state securities or blue sky
laws, the Company may require, as a condition of allowing such transfer (i)
that the Holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such transfer may be made without registration
under the Securities Act and under applicable state securities or blue sky
laws, (ii) that the Holder or transferee execute and deliver to the Company an
investment letter in form and substance acceptable to the Company and (iii)
that the transferee be an “accredited investor” as defined in Rule 501(a)(1),
(a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or a “qualified
institutional buyer” as defined in Rule 144A(a) under the Securities Act.


Section 5.               Miscellaneous.


a)             No Rights as Shareholder Until
Exercise.  This Warrant does not
entitle the Holder to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof as set forth in Section 2(d)(ii).


b)            Loss, Theft, Destruction or
Mutilation of Warrant.  The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.


c)             Saturdays, Sundays, Holidays,
etc.  If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.


d)            Authorized Shares.


The Company covenants
that during the period the Warrant is outstanding, it will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of the Warrant Shares upon the exercise of any purchase rights
under this Warrant.  The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant.  The Company will take all such reasonable
action as may be necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or regulation, or 



 10
 









of any requirements of the Trading Market upon which
the Common Stock may be listed.


Except and to the extent
as waived or consented to by the Holder, the Company shall not by any action,
including, without limitation, amending its articles of incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant
against impairment.  Without limiting the
generality of the foregoing, the Company will (a) not increase the par value of
any Warrant Shares above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the exercise of
this Warrant, and (c) use commercially reasonable efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.


Before taking any action
which would result in an adjustment in the number of Warrant Shares for which
this Warrant is exercisable or in the Exercise Price, the Company shall obtain
all such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction
thereof.


e)             Jurisdiction.  All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be determined in
accordance with the provisions of the Purchase Agreement.


f)             Restrictions.  The Holder acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.


g)            Nonwaiver and Expenses.  No course of dealing or any delay or failure
to exercise any right hereunder on the part of Holder shall operate as a waiver
of such right or otherwise prejudice the Company’s or the Holder’s rights,
powers or remedies, notwithstanding the fact that all rights hereunder
terminate on the Termination Date.  If
the Company or a Holder willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the Holder
or Company (as the case may be), the breaching party shall pay to the other
party such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys’ fees, including those of
appellate proceedings, incurred by the non-breaching party in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.



 11
 









h)            Notices.  Any notice, request or other document
required or permitted to be given or delivered to the Holder by the Company
shall be delivered in accordance with the notice provisions of the Purchase
Agreement.


i)              Limitation of Liability.  No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.


j)              Remedies.  Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to seek specific performance of its rights under this Warrant.  The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Warrant and hereby agrees to waive and not to
assert the defense in any action for specific performance that a remedy at law
would be adequate.


k)             Successors and Assigns.  Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of Holder.  The
provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and shall be enforceable by any such Holder
or holder of Warrant Shares.


l)              Amendment.  This Warrant may be modified or amended or
the provisions hereof waived with the written consent of the Company and the
Holder.


m)            Severability.  Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.


n)            Headings.  The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.


********************



 12
 









IN WITNESS WHEREOF, the Company has caused this
Warrant to be executed by its officer thereunto duly authorized.


	
  Dated: April
       , 2007

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MEDICALCV, INC.

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Marc P. Flores

  	
   

  
	
   

  	
   

  	
  Title:

  	
  President and Chief Executive Officer

  	
   

  
							



 



 13














NOTICE OF EXERCISE


	
  To:

  	
   

  	
   

  



 


(1)           The undersigned hereby elects to
purchase                 
Warrant Shares of the Company pursuant to the terms of the attached Warrant
(only if exercised in full), and tenders herewith payment of the exercise price
in full, together with all applicable transfer taxes, if any.


(2)           Payment shall take the form of (check
applicable box):


o
in lawful money of the United States; or


o
if permitted, the cancellation of such number of Warrant Shares as is necessary,
in accordance with the formula set forth in subsection 2(c), to exercise this
Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in subsection 2(c).


(3)           Please issue a certificate or
certificates representing said Warrant Shares in the name of the undersigned or
in such other name as is specified below:


	
  

  	
   

  	
   

  



 


The Warrant Shares shall
be delivered to the following DWAC Account Number or by physical delivery of a
certificate to:


	
  

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


(4)           Accredited Investor.  The undersigned is an “accredited investor”
as defined in Regulation D promulgated under the Securities Act of 1933, as
amended.


	
  [SIGNATURE OF HOLDER]

  	
   

  
	
   

  	
   

  
	
  Name of Investing Entity:

  	
   

  
	
  Signature of Authorized Signatory of Investing
  Entity:

  	
   

  
	
  Name of Authorized Signatory:

  	
   

  
	
  Title of Authorized Signatory:

  	
   

  
	
  Date:

  	
   

  
						












ASSIGNMENT FORM


(To assign the foregoing warrant, execute

this form and supply required information. 


Do not use this form to exercise the warrant.)


FOR VALUE RECEIVED, [       ]
all of or [               ]
shares of the foregoing Warrant and all rights evidenced thereby are hereby
assigned to


	
  

  	
    whose address is

  
	
   

  	
  .

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
  ,

  	
   

  
	
   

  	
   

  
	
   

  	
  Holder’s Signature:

  	
   

  	
   

  
	
   

  	
  Holder’s Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Signature Guaranteed:  

  	
   

  	
   

  	
   

  
										



 


NOTE:  The signature to this Assignment Form must
correspond with the name as it appears on the face of the Warrant, without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank or trust company.  Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
















EXHIBIT B2


FORM OF WARRANT TO
BE ISSUED WITH ACCRUED INTEREST


NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH
THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.


COMMON STOCK
PURCHASE WARRANT


To Purchase                     
Shares of Common Stock of


MEDICALCV, INC.


THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”)
certifies that, for value received,                           
(the “Holder”), is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter set forth, at any time
on or after the date hereof (the “Initial Exercise Date”) and on or
prior to the close of business on the fifth (5th) anniversary of the Initial Exercise
Date (the “Termination Date”) but not thereafter, to subscribe for and
purchase from MEDICALCV, INC., a Minnesota corporation (the “Company”),
up to             
shares (the “Warrant Shares”) of Common Stock, par value $0.01 per
share, of the Company (the “Common Stock”).  The purchase price of one share of Common
Stock under this Warrant shall be equal to the Exercise Price, as defined in
Section 2(b).


Section 1.               Definitions.  In addition to the terms defined elsewhere in
this Warrant, for all purposes of this Warrant, the following terms have the
meanings indicated in this Section 1.


“Business Day” means any day except Saturday, Sunday, any day
which shall be a federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or required by law
or other governmental action to close.


“Closing Date” means the Business Day when all of the
Transaction Documents have been executed and delivered by the applicable
parties thereto, and all conditions precedent to the parties’ obligations
thereunder have been satisfied or waived.













“Person” means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.


“Securities” means the Warrants and the Warrant Shares.


“Trading Day” means a day on which the Common Stock is traded on
a Trading Market.


“Trading Market” means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in question:
the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global
Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC
Bulletin Board.


“Transaction Documents” means this Warrant, the Secured Note
Purchase Agreement dated April     , 2007 by and among the
Company, the Holder and certain other holders listed on Schedule 1.0 thereto
(the “Purchase Agreement”) and any other documents or agreements executed in
connection with the transactions contemplated thereunder.


“VWAP” means, for any date, the price determined by the first of
the following clauses that applies: (a) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the Trading
Market on which the Common Stock is then listed or quoted for trading as
reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m.
(New York City time) to 4:02 p.m. (New York City time); (b)  if the OTC
Bulletin Board is not a Trading Market, the volume weighted average price of
the Common Stock for such date (or the nearest preceding date) on the OTC
Bulletin Board; (c) if the Common Stock is not then quoted for trading on the
OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink
Sheets” published by Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the investors who are signatories to the
Transaction Documents and reasonably acceptable to the Company.


Section 2.               Exercise.


a)             Exercise of Warrant.  Exercise of the purchase rights represented
by this Warrant may be made, in whole or in part, at any time or times on or
after the Initial Exercise Date and on or before the Termination Date by
delivery to the Company of a duly executed facsimile or “.pdf” copy of the
Notice of Exercise Form annexed hereto (or such other office or agency of the
Company as it may designate by notice in writing to the registered Holder at
the address of such Holder appearing on the books of the Company); and, within
3 Trading Days of the date said Notice of Exercise is delivered to the Company,
the Company shall have received payment of the aggregate Exercise Price of the
shares thereby purchased by wire transfer or cashier’s check drawn on a United
States bank.  Notwithstanding anything
herein to the contrary, the Holder shall not be



 2
 









required to physically
surrender this Warrant to the Company until the Holder has purchased all of the
Warrant Shares available hereunder and the Warrant has been exercised in full,
in which case, the Holder shall surrender this Warrant to the Company for
cancellation within 3 Trading Days of the date the final Notice of Exercise is
delivered to the Company.  Partial
exercises of this Warrant resulting in purchases of a portion of the total
number of Warrant Shares available hereunder shall have the effect of lowering
the outstanding number of Warrant Shares purchasable hereunder in an amount
equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain
records showing the number of Warrant Shares purchased and the date of such
purchases.  In the event of any dispute
or discrepancy, the records of the Company shall be controlling and
determinative in the absence of manifest error. 
The Holder and any assignee, by acceptance of this Warrant, acknowledge
and agree that, by reason of the provisions of this paragraph, following the
purchase of a portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be less than the
amount stated on the face hereof.


b)            Exercise Price.  The
exercise price per share of the Common Stock under this Warrant shall be $4.00,
subject to adjustment hereunder (the “Exercise Price”).


c)             Not applicable.


d)            Mechanics of Exercise.


i.              Authorization of Warrant Shares.  The Company covenants that all Warrant Shares
which may be issued upon the exercise of the purchase rights represented by
this Warrant will, upon exercise of the purchase rights represented by this
Warrant, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).


ii.             Delivery of Certificates Upon
Exercise.  Certificates for shares
purchased hereunder shall be transmitted by the transfer agent of the Company
to the Holder by crediting the account of the Holder’s prime broker with the
Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”)
system if the Company is a participant in such system, and otherwise by
physical delivery to the address specified by the Holder in the Notice of
Exercise within 3 Trading Days from the delivery to the Company of the Notice
of Exercise Form, surrender of this Warrant (if required) and payment of the
aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”).  This Warrant shall be deemed to have been
exercised on the date the Exercise Price is received by the Company.  The Warrant Shares shall be deemed to have
been issued, and Holder or any other person so designated to be named therein
shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the Warrant has been exercised by payment to the
Company of the Exercise Price and all taxes required to be paid by the Holder,
if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares, have
been paid.



 3
 









iii.            Delivery of New Warrants Upon
Exercise.  If this Warrant shall have
been exercised in part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of delivery of the
certificate or certificates representing Warrant Shares, deliver to Holder a
new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant
Shares called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.


iv.            Rescission Rights.  If the Company fails to cause its transfer
agent to transmit to the Holder a certificate or certificates representing the
Warrant Shares pursuant to this Section 2(d) by the Warrant Share Delivery
Date, then the Holder will have the right to rescind such exercise.


v.             No Fractional Shares or Scrip.  No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which Holder
would otherwise be entitled to purchase upon such exercise, the Company shall
at its election, either pay a cash adjustment in respect of such final fraction
in an amount equal to such fraction multiplied by the Exercise Price or round
up to the next whole share.


vi.            Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares
shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such certificate, all of
which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event
certificates for Warrant Shares are to be issued in a name other than the name
of the Holder, this Warrant when surrendered for exercise shall be accompanied
by the Assignment Form attached hereto duly executed by the Holder; and the
Company may require, as a condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto.


vii.           Closing of Books.  The Company will not close its shareholder
books or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.


Section 3.               Certain Adjustments.


a)             Stock Dividends and Splits.  If the Company, at any time while this
Warrant is outstanding: (A) pays a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company upon exercise of this Warrant, any other warrant or any option), (B)
subdivides outstanding shares of Common Stock into a larger number of shares,
(C) combines (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (D) issues by reclassification
of shares of the Common Stock any shares of capital stock of the Company, then
in each case the Exercise Price shall be multiplied by a fraction of which



 4
 









the numerator shall be
the number of shares of Common Stock (excluding treasury shares, if any)
outstanding immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event
and the number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted.  Any adjustment
made pursuant to this Section 3(a) shall become effective immediately after the
record date for the determination of shareholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.


b)            Adjustment for Issuance of Shares
of Common Stock Below Exercise Price. 
From the date hereof until 12 months after the date hereof (the “Adjustment
Period”), the Exercise Price shall be subject to adjustment from time to
time as provided in this Section 3(b).


i.              If
during the Adjustment Period, the Company issues or sells, or in accordance
with this Section 3(b) is deemed to have issued or sold, any shares of
Common Stock (excluding Excluded Securities) for a consideration per share (the
“New Securities Issuance Price”)
less than a price (the “Applicable
Price”) equal to the Exercise Price in effect immediately prior to
such time, then immediately after such issue or sale, the Exercise Price then
in effect shall be reduced to an amount equal to the New Securities Issuance
Price.


ii.             For
purposes of determining the adjusted Exercise Price under Section 3(b) hereof,
the following will be applicable:


(A)          Issuance of Rights or Options.
If the Company in any manner grants or sells any Options and the lowest price
per share for which one share of Common Stock is issuable upon the exercise of
any such Option or upon conversion, exchange or exercise of any Convertible
Securities issuable upon exercise of such Option is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the granting or sale of
such Option for such price per share. For purposes of this
Section 3(b)(ii)(A), the “lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or upon
conversion, exchange or exercise of any Convertible Securities issuable upon
exercise of such Option” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to
any one share of Common Stock upon granting or sale of the Option, upon
exercise of the Option and upon conversion, exchange or exercise of any
Convertible Security issuable upon exercise of such Option. No further
adjustment of the Exercise Price shall be made upon the actual issuance of such
Common Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon conversion,
exchange or exercise of such Convertible Securities.  “Convertible Securities” means any
evidence of indebtedness, shares or securities, in each case convertible into
or exchangable for Common Stock.  “Options”
means rights, options or



 5
 









warrants to subscribe for, purchase or otherwise
acquire shares of Common Stock or Convertible Securities.


(B)           Issuance of Convertible Securities.
If the Company in any manner issues or sells any Convertible Securities and the
lowest price per share for which one share of Common Stock is issuable upon
such conversion, exchange or exercise thereof is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the issuance or sale of
such Convertible Securities for such price per share. For the purposes of this
Section 3(b)(ii)(B), the “lowest price per share for which one share of Common
Stock is issuable upon such conversion, exchange or exercise” shall be equal to
the sum of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to any one share of Common Stock upon the issuance
or sale of the Convertible Security and upon the conversion, exchange or
exercise of such Convertible Security. No further adjustment of the Exercise
Price shall be made upon the actual issuance of such Common Stock upon
conversion, exchange or exercise of such Convertible Securities, and if any
such issue or sale of such Convertible Securities is made upon exercise of any
Options for which adjustment of the Exercise Price had been or are to be made
pursuant to other provisions of this Section 3(b)(ii), no further adjustment of
the Exercise Price shall be made by reason of such issue or sale.


(C)           Change in Option Price or
Conversion Rate. If the purchase or exercise price provided for in any
Options, or the additional consideration, if any, payable upon the issue,
conversion, exchange or exercise of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exchangeable or
exercisable for Common Stock changes at any time, the Exercise Price in effect
at the time of such change shall be adjusted to the Exercise Price which would
have been in effect at such time had such Options or Convertible Securities
provided for such changed purchase price, additional consideration or changed
conversion rate, as the case may be, at the time initially granted, issued or
sold. For purposes of this Section 3(b)(ii)(C), if the terms of any Option or
Convertible Security that was outstanding as of the Closing Date are changed in
the manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such change.  No adjustment shall
be made if such adjustment would result in an increase of the Exercise Price
then in effect.  Notwithstanding the
foregoing, no adjustment shall be made to the Exercise Price of this Warrant
due to anti-dilution adjustments made to securities outstanding as of the date
hereof as a result of the issuance of Securities pursuant to the Transaction
Documents.


(D)          Calculation of Consideration
Received. In case any Option is issued in connection with the issue or sale
of other securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such Options by
the parties thereto, the Options will be deemed to have been issued for a
consideration of $0.01. If any Common Stock, Options or



 6
 









Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor will be
deemed to be the gross amount received by the Company therefor. If any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by
the Company will be the fair value of such consideration, except where such consideration
consists of marketable securities, in which case the amount of consideration
received by the Company will be the arithmetic average of the closing sale
prices of such securities during the ten (10) consecutive trading days
ending on the date of receipt of such securities. The fair value of any
consideration other than cash or securities will be determined jointly by the
Company and the holders of at least a majority in interest of the Warrants then
outstanding.


(E)           Exceptions to Adjustment of Exercise
Price. Notwithstanding the foregoing, no adjustment will be made under this
Section 3(b) in respect of Excluded Securities.   “Excluded Securities” means the
issuance of (a) shares of Common Stock or options to employees, officers or
directors of, or consultants to, the Company pursuant to any stock option
agreement, stock option plan or equity incentive plan duly adopted by a
majority of the non-employee members of the Board of Directors of the Company
or a majority of the members of a committee of non-employee directors  established for such purpose (for purposes of clarity, the
issuance of shares of Common Stock upon exercise of options granted pursuant to
a stock option agreement, stock option plan or equity incentive plan subsequent
to the date hereof shall also be Excluded Securities), (b) securities upon the
exercise or exchange of or conversion of (i) any Securities issued in
connection with the Purchase Agreement; (ii) securities to a registered
broker-dealer in connection with the transactions contemplated by the Purchase
Agreement; and/or (iii) other securities or rights exercisable or exchangeable
for or convertible into shares of Common Stock which are issued and outstanding
on the date of the Purchase Agreement, provided that such securities have not
been amended since the date of the Purchase Agreement (other than on a
non-discretionary basis pursuant to the pre-existing anti-dilution provisions
thereof) to increase the number of such securities or to decrease the exercise,
exchange or conversion price of any such securities, (c) securities issued
pursuant to acquisitions or strategic transactions approved by  a majority of the disinterested directors, provided any
such issuance shall only be to a Person which is, itself or through its subsidiaries,
an operating company in a business synergistic with the business of the Company
and in which the Company receives benefits in addition to the investment of
funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities, (d) shares of Common Stock or
other securities issued in connection with any stock split, stock dividend or
recapitalization of the Company (subject to Section 3(a) hereof), and (e)
shares of Common Stock or other securities issued in connection with any
registered primary public offering.



 7
 









c)             Calculations.  All calculations under this Section 3 shall
be made to the nearest cent or the nearest 1/100th of a share, as the case may
be.  For purposes of this Section 3, the
number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.


d)            Voluntary Adjustment By Company.  The Company may at any time during the term
of this Warrant reduce the then current Exercise Price to any amount and for
any period of time deemed appropriate by the Board of Directors of the Company.


e)             Notice to Holders.


i.              Adjustment to Exercise Price.  Whenever the Exercise Price is adjusted
pursuant to any provision of this Section 3, the Company shall promptly mail to
each Holder a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.


ii.             Notice to Allow Exercise by
Holder.  If (A) the Company shall
declare a dividend (or any other distribution in whatever form) on the Common
Stock; (B) the Company shall declare a special nonrecurring cash dividend on or
a redemption of the Common Stock; (C) the Company shall authorize the granting
to all holders of the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights; (D) the
approval of any shareholders of the Company shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to
which the Company is a party, any sale or transfer of all or substantially all
of the assets of the Company, of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or property; (E) the
Company shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Company; then, in each case, the Company
shall cause to be mailed to the Holder at its last address as it shall appear
upon the Warrant Register of the Company, at least 20 calendar days prior to
the applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.  The Holder is entitled
to exercise this Warrant during the 20-day period commencing on the date of
such notice to the effective date of the event triggering such notice.



 8
 









Section 4.               Transfer of Warrant.


a)             Transferability.  Subject to compliance with any applicable
securities laws and the conditions set forth in Section 4(d) hereof, this
Warrant and all rights hereunder (including, without limitation, any
registration rights) are transferable, in whole or in part, upon surrender of
this Warrant at the principal office of the Company or its designated agent,
together with a written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such
transfer.  Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denomination or
denominations specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled.  A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.


b)            New Warrants.  This Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or
attorney.  Subject to compliance with
Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.


c)             Warrant Register.  The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered
Holder of this Warrant as the absolute owner hereof for the purpose of any
exercise hereof or any distribution to the Holder, and for all other purposes,
absent actual notice to the contrary.


d)            Transfer Restrictions.  If, at the time of the surrender of this
Warrant in connection with any transfer of this Warrant, the transfer of this
Warrant shall not be registered pursuant to an effective registration statement
under the Securities Act and under applicable state securities or blue sky
laws, the Company may require, as a condition of allowing such transfer (i)
that the Holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such transfer may be made without registration
under the Securities Act and under applicable state securities or blue sky
laws, (ii) that the Holder or transferee execute and deliver to the Company an
investment letter in form and substance acceptable to the Company and (iii)
that the transferee be an “accredited investor” as defined in Rule 501(a)(1),
(a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or a “qualified
institutional buyer” as defined in Rule 144A(a) under the Securities Act.



 9
 









Section 5.               Miscellaneous.


a)             No Rights as Shareholder Until
Exercise.  This Warrant does not
entitle the Holder to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof as set forth in Section 2(d)(ii).


b)            Loss, Theft, Destruction or
Mutilation of Warrant.  The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.


c)             Saturdays, Sundays, Holidays,
etc.  If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.


d)            Authorized Shares.


The Company covenants
that during the period the Warrant is outstanding, it will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of the Warrant Shares upon the exercise of any purchase rights
under this Warrant.  The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant.  The Company will take all such reasonable
action as may be necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or regulation, or of
any requirements of the Trading Market upon which the Common Stock may be
listed.


Except and to the extent
as waived or consented to by the Holder, the Company shall not by any action,
including, without limitation, amending its articles of incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant
against impairment.  Without limiting the
generality of the foregoing, the Company will (a) not increase the par value of
any Warrant Shares above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the exercise of
this Warrant, and (c) use commercially reasonable efforts to obtain



 10
 









all such authorizations, exemptions or consents from
any public regulatory body having jurisdiction thereof as may be necessary to
enable the Company to perform its obligations under this Warrant.


Before taking any action
which would result in an adjustment in the number of Warrant Shares for which
this Warrant is exercisable or in the Exercise Price, the Company shall obtain
all such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction
thereof.


e)             Jurisdiction.  All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be determined in
accordance with the provisions of the Purchase Agreement.


f)             Restrictions.  The Holder acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.


g)            Nonwaiver and Expenses.  No course of dealing or any delay or failure
to exercise any right hereunder on the part of Holder shall operate as a waiver
of such right or otherwise prejudice the Company’s or the Holder’s rights,
powers or remedies, notwithstanding the fact that all rights hereunder
terminate on the Termination Date.  If
the Company or a Holder willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the Holder
or Company (as the case may be), the breaching party shall pay to the other
party such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys’ fees, including those of
appellate proceedings, incurred by the non-breaching party in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.


h)            Notices.  Any notice, request or other document
required or permitted to be given or delivered to the Holder by the Company
shall be delivered in accordance with the notice provisions of the Purchase
Agreement.


i)              Limitation of Liability.  No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.


j)              Remedies.  Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to seek specific performance of its rights under this Warrant.  The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach by
it of the provisions of this Warrant and hereby agrees to waive and not to
assert the defense in any action for specific performance that a remedy at law
would be adequate.



 11
 









k)             Successors and Assigns.  Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of Holder.  The
provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and shall be enforceable by any such Holder
or holder of Warrant Shares.


l)              Amendment.  This Warrant may be modified or amended or
the provisions hereof waived with the written consent of the Company and the
Holder.


m)            Severability.  Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.


n)            Headings.  The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.


********************



 12
 









IN WITNESS WHEREOF, the Company has caused this
Warrant to be executed by its officer thereunto duly authorized.


Dated:  April     , 2007


	
  

  	
  MEDICALCV, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Marc P. Flores

  
	
   

  	
   

  	
  Title:

  	
  President and Chief Executive Officer

  



 



 13














NOTICE OF EXERCISE


To:


(1)           The undersigned hereby elects to
purchase                 
Warrant Shares of the Company pursuant to the terms of the attached Warrant
(only if exercised in full), and tenders herewith payment of the exercise price
in full, together with all applicable transfer taxes, if any.


(2)           Payment shall take the form of lawful
money of the United States.


(3)           Please issue a certificate or
certificates representing said Warrant Shares in the name of the undersigned or
in such other name as is specified below:


	
  

  	
   

  	
   

  



 


The Warrant Shares shall
be delivered to the following DWAC Account Number or by physical delivery of a
certificate to:


	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


(4)           Accredited Investor.  The undersigned is an “accredited investor”
as defined in Regulation D promulgated under the Securities Act of 1933, as
amended.


[SIGNATURE OF HOLDER]


	
  Name of Investing Entity:

  	
   

  
	
  Signature of Authorized Signatory of Investing
  Entity:

  	
   

  
	
  Name of Authorized Signatory:

  	
   

  
	
  Title of Authorized Signatory:

  	
   

  
	
  Date:

  	
   

  
						



 











ASSIGNMENT FORM


(To assign the foregoing warrant, execute

this form and supply required information. 


Do not use this form to exercise the warrant.)


FOR VALUE RECEIVED, [        ]
all of or [            ]
shares of the foregoing Warrant and all rights evidenced thereby are hereby
assigned to


	
  

  	
  whose address is

  
	
   

  	
  .

  
	
   

  	
   

  
			



 


	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Holder’s Signature:

  	
   

  	
   

  
	
   

  	
  Holder’s Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Signature Guaranteed: 

  	
   

  	
   

  	
   

  	
   

  	
   

  
									



 


NOTE:  The signature to this Assignment Form must
correspond with the name as it appears on the face of the Warrant, without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank or trust company.  Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
















EXHIBIT
C


SECURITY
AGREEMENT AND FORM OF UCC FINANCING STATEMENT


THIS SECURITY AGREEMENT (this “Agreement”) is entered into effective as of
April 20, 2007 by MedicalCV, Inc., a Minnesota corporation having its principal
offices at 9725 South Robert Trail, Inver Grove Heights, Minnesota 55077 (the “Debtor”), in favor
of the parties listed on Exhibit 1 attached hereto (the “Secured Parties”).


Pursuant to the Secured Note Purchase Agreement
dated of even date herewith by and among the Debtor and the Secured Parties
(the “Note Purchase
Agreement”), and for good and valuable consideration, Debtor
hereby agrees for the benefit of the Secured Parties as follows:


1.             SECURITY
INTEREST AND COLLATERAL


Debtor hereby grants the Secured Parties a first
priority security interest in all of the Debtor’s right, title, and interest in
and to the property described below (collectively referred to as the “Security
Interest”) as a security for the payment and performance of certain Secured
Promissory Notes issued pursuant to the Note Purchase Agreement by Debtor in
favor of the Secured Parties, respectively (the “Notes”), together with accrued but
unpaid interest thereon, and costs of collection, including reasonable
attorneys’ fees, and all other obligations of Debtor to Secured Parties of any
nature whatsoever (all known collectively as the “Obligations”).  The Security Interest shall attach to all
assets of the Debtor of every kind and every description, whether now owned or
hereafter acquired, and all proceeds thereof (the “Collateral”),
which shall include without limitation the following:


General Intangibles: All general intangibles of the Debtor,
whether now owned or hereafter acquired, including without limitation all
present and future patents and patent applications in all jurisdictions and
territories (foreign and domestic), together with all divisions, reissues,
reexaminations, term extensions, and continuations associated therewith,
copyrights, trademarks, service marks, trade names, trade secrets, know-how,
processes, and all licenses or agreements of any kind or nature pursuant to
which the Debtor possesses, uses, or has authority to possess or use any of the
foregoing, customer or supplier lists and contracts, manuals, operating
instructions, permits, franchises, the right to use the Debtor’s name and the
goodwill of the Debtor’s business.


Inventory: All inventory of the Debtor, as that term is
defined in the Uniform Commercial Code, whether now owned or hereafter acquired
or in which the Debtor obtains rights, whether consisting of whole goods, spare
parts or components, supplies or materials whether acquired, held or furnished
for sale, for lease or under contracts or for manufacture or processing, and
wherever located;


Equipment: All equipment of the Debtor, whether now
owned or hereafter acquired, including all present and future machinery,
vehicles, furniture, fixtures, office and recordkeeping equipment, parts,
tools, supplies and all other goods (except inventory) used or bought for use
by the Debtor for any business or enterprise and including specifically
(without limitation) all accessions thereto, all substitutions and replacements
thereof, and all like or similar property now owned or hereafter acquired by
the Debtor, and all of which is owned by the Debtor; and


Receivables: Each and every right of the Debtor to the
payment of money, whether such right to payment now exists or hereafter arises,
whether such right to payment arises out of a sale, lease or other disposition
of goods or other property, out of a rendering of services, or of a loan, out
of the overpayment 













of taxes or other liabilities, or any other
transaction or event, whether such right to payment is created, generated or
earned by the Debtor or by some other person who subsequently transfers his,
her or its interest to the Debtor, whether such right to payment is or is not
already earned by performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests (including all liens
and other security interests) which the Debtor may at any time have by law or
agreement against any account debtor or other person obligated to make such
payment or against any property of such account debtor or other persons
including, but not limited to, all present and future accounts, contract
rights, chattel paper, bonds, notes and other debt instruments, and rights to
payment in the nature of general intangibles.


The Collateral shall include (i) all substitutes and
replacements for and proceeds of any and all of the foregoing property, and in
the case of all tangible Collateral, all accessions, accessories, attachments,
parts, equipment and repairs now or hereafter attached or affixed to or use in
connection with any such goods and (ii) all warehouse receipts, bills of lading
and other documents of title now or hereafter covering such goods.


2.             REPRESENTATIONS, WARRANTIES AND
COVENANTS


Debtor represents, warrants,
and covenants that:


(a)           Existence
and Authority.  Debtor is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Minnesota,
having full power and authority to make and deliver this Agreement.  The correct name of the Debtor is set forth
at the beginning of this Agreement. 
Debtor’s principal place of business and president are located at the
address as set forth in the opening paragraph of this Agreement.  The Debtor covenants with the Secured Parties
that it will not change its name, principal executive office, its mailing
address, its registered agent or its type or jurisdiction of organization
without providing each Secured Party ten days prior written notice.


(b)           Title;  Maintenance. 
Debtor is and will be, the owner of the Collateral, free of all liens,
encumbrances and security interests except for the security interests created
hereby or any interest specifically consented to in writing by the Secured
Parties.  The Debtor will keep the Collateral in good order and repair.


(c)           Financing Statements.  The
Debtor authorizes the Secured Parties to file all financing statements,
documents or records, and any amendments thereto, in such form as the Secured
Parties deem necessary to perfect their Security Interest.


(e)           No Encumbrances.  The
debtor will not pledge, lien or in any way encumber the Collateral without the
prior written consent of the Secured Parties.


(f)            Negative Covenants.  Debtor will not at any time
without the Secured Parties’ prior written consent (i) other than in the
ordinary course of its business, sell, lease or otherwise dispose of or
transfer any of the Collateral, (ii) merge or consolidate with another entity
or (iii) change its state of organization or location.


(g)           Inspections.  Debtor grants the Secured
Parties an irrevocable license to enter Debtor’s business location during
normal business hours upon giving reasonable notice to Debtor to (i) account
for and inspect all Collateral, (ii) verify Debtor’s compliance with this
Agreement and (iii) examine and copy Debtor’s books and records relating to the
Collateral.



 2
 









3.             DEFAULT,
REMEDIES AND ACTIONS OF SECURED PARTIES


(a)           Defaults. 
Debtor shall be in default under this Agreement upon the happening of
any of the Events of Default as defined in the Note Purchase Agreement.


(b)           Remedies.  In the event of a default (i) the Secured
Parties shall have the right, at their option and without demand or notice, to
declare all or any part of the Obligations immediately due and payable (to the
extent that the Obligations are not already by their terms immediately due and
payable without any action on the part of the Secured Parties);  (ii) the Secured Parties may exercise, in
addition to the rights and remedies granted hereby, all of the rights and
remedies of a secured party under the Uniform Commercial Code as adopted in
Minnesota or under any other applicable law (the “UCC”); 
(iii) the Secured Parties may exercise their rights to possess, transfer
and dispose of the Collateral;  (iv) the
Secured Parties may request, and Debtor will agree, to segregate and keep the
Collateral in trust for the Secured Parties in good order and repair and will
immediately deliver the Collateral at a place specified by the Secured Parties
together with all related documents;  and
(v) Debtor agrees to pay all costs and expenses incurred by the Secured Parties
in the collection of any of the Obligations or the enforcement of any of the
Secured Parties’ rights.


(c)           Sale of Collateral.  Upon any default, Debtor agrees
that ten (10) or more calendar days prior written notice is commercially
reasonable notice of any public or private sale or transfer of Collateral by
the Secured Parties.  Upon any default,
Debtor irrevocably grants the Secured Parties a license to enter upon Debtor’s
premises without notice or judicial order to take possession of the
Collateral.  The Secured Parties are
hereby granted a license or other right to use, without charge, all of the
Debtor’s property, including, without limitation, all of the Debtor’s labels,
trademarks, copyrights, patents and advertising matter or any property of a
similar nature, as it pertains to the Collateral, in completing production of
advertising for sale and selling any Collateral, and Debtor’s rights under all
licenses shall inure to the Secured Parties’ benefit until the Obligations are
paid in full.


(d)           Power of
Attorney.  Debtor
grants the Secured Parties an irrevocable Power of Attorney to (i) execute or
endorse on Debtor’s behalf any checks, financing statements, instruments,
certificates of title and statements of origin pertaining to the
Collateral;  (ii) supply any omitted
information and correct errors in any documents between the Secured Parties and
Debtor;  (iii) initiate and settle any
insurance claims pertaining to the Collateral; and (iv) do anything to preserve
and protect the Collateral and the Secured Parties’ rights and interests
therein.


(e)           Costs and Expenses.  The
Debtor will pay or reimburse the Secured Parties on demand for all
out-of-pocket expenses (including in each case all filing, recording fees,
taxes and all reasonable fees and expenses of counsel and of any experts and
agents) incurred by the Secured Parties in connection with the creation,
perfection, protection, satisfaction or foreclosure of the Collateral and the
preparation, administration, continuance, amendment or enforcement of this
Agreement, and all such costs and expenses shall be part of the Obligations
secured by the Collateral.


(f)            Defense.  The
Debtor will at its own expense, and using its commercially reasonable efforts
and sound business judgment, protect and defend the Collateral against all
claims or demands of all persons other than the Secured Parties that would
cause material harm to the Secured Parties.


(j)            Waiver of Notice and Hearing.  The Debtor hereby waives all
rights to a judicial hearing of any kind prior to the exercise by the Secured Parties
of their rights to possession of the 



 3
 









Collateral without judicial process or of their rights
to replevin, attach or levy upon the Collateral without prior notice or
hearing.  In the event that a
pre-judgment order for replevin is obtained, Debtor waives any requirement of
the Secured Parties to post bond.  DEBTOR HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.


(k)           Joint
Action of the Secured Parties.  With
respect to any action taken in connection with this Agreement, the Secured
Parties shall act in accordance with and under the directions of the Secured
Parties holding a majority-in-interest of the outstanding Principal Amount of
the Notes, or a designee appointed thereby. 
If the Secured Parties determine to act through a single Secured Party
or other designee, the Secured Parties shall so inform the Debtor in writing.  Action thereafter taken by such Secured Party
or designee shall be deemed to be taken on behalf of all Secured Parties.


4.             Miscellaneous.


(a)           No Waiver;  Cumulative Remedies.  No failure delay on the part of
the Secured Parties to exercise any right, power or remedy under this Agreement
shall operate as a waiver thereof.  In
addition, no single or partial exercise of any right, power or remedy shall
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy under this Agreement. 
The remedies provided for in this Agreement are cumulative and not
exclusive of any remedies provided by law.


(b)           Law Governing and Construction.  The validity, construction and
enforceability of this Agreement shall be governed by the laws of the State of
Minnesota, without giving effect to conflict of laws principles thereof.


(c)           Continuing Interest.  This Agreement shall create a continuing
security interest in the Collateral and shall remain in full force and effect
until the satisfaction in full of all of the Obligations.  At such time as Debtor shall completely
satisfy all of the Obligations, this Agreement shall terminate and the Secured
Parties shall execute and deliver to Debtor all instruments as may be necessary
to re-vest in Debtor full title to the Collateral or evidence such termination.


(d)           Severability.  The
provisions of this Agreement are severable. 
If any clause or provision is held invalid and unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect only such clause or provision, or part thereof, in such jurisdiction,
and shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Agreement in any
jurisdiction.


(e)           Modifications.  Any
modifications or termination of this Agreement may be made only by a writing
signed by all of the parties.


(f)            Binding
Effect.  This Agreement and the Security Interest
granted hereby, is binding upon Debtor, its successors and assigns, and shall
inure to the benefit of and be enforceable by the Secured Parties and each of
their successors and assigns.


[Signature Pages Follow]


 



 4















IN WITNESS WHEREOF, the undersigned have executed this Security
Agreement as of the date first written above.


	
  

  	
  MEDICALCV, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Marc P. Flores

  
	
   

  	
   

  	
  Its President and Chief Executive Officer

  



 


[Separate Secured Party Signature Pages Follow]













SECURED PARTIES:


WHITEBOX
READY LTD.


a British Virgin Islands limited company


	
  By:

  	
   

  	
   

  
	
   

  	
  Jonathan D. Wood

  
	
   

  	
  Chief Financial
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  3033 Excelsior
  Boulevard

  
	
   

  	
  Suite 300

  
	
   

  	
  Minneapolis, MN
  55416

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Tax I.D./Social
  Security No.

  
				



 













Exhibit 1


Secured Parties


Whitebox
Ready Ltd.




















UCC FINANCING STATEMENT


FOLLOW INSTRUCTIONS (front and back) CAREFULLY


 


A. NAME & PHONE OF CONTACT AT FILER [optional]


 


B. SEND ACKNOWLEDGMENT TO: (Name and Address)


 


Fulbright & Jaworski
L.L.P.

80 South 8th Street, Suite 2100

Minneapolis, MN 55402

Attn: Cathy Herman




	
  

  	
  THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY

  
	
   

  	
   

  
	
  1.

  	
  DEBTOR’S EXACT FULL LEGAL NAME - Insert only one
  debtor name (1a or 1b) - do not abbreviate or combine names

  
	
   

  	
   

  
	
   

  	
  1a.

  	
  ORGANIZATION’S NAME

  Medical CV, Inc.

  
	
  OR

  	
   

  	
   

  
	
   

  	
  1b.

  	
  INDIVIDUAL’S LAST NAME

  	
  FIRST NAME

  	
  MIDDLE NAME 

  	
  SUFFIX

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1c.

  	
  MAILING ADDRESS

  9725 South Robert Trail

  	
  CITY

      Inver Grove Heights

  	
  STATE

      MN

  	
  POSTAL CODE

      55077

  	
  COUNTRY

      USA

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1d.

  	
  TAX ID#: SSN OR EIN

  	
  ADD’L INFO RE

  ORGANIZATION

  DEBTOR

  	
  1e. TYPE OF ORGANIZATION

       Corporation

  	
  1f. JURISDICTION OF      ORGANIZATION

       Minnesota

  	
  1g. ORGANIZATIONAL       ID
  #, If any

        7J-436

  	
  o NONE

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  ADDITIONAL DEBTOR’S EXACT FULL LEGAL NAME - insert
  only one debtor name (2a or 2b) - do not abbreviate or combine names

  
	
   

  	
   

  
	
   

  	
  2a.

  	
  ORGANIZATION’S NAME



  	
   

  
	
  OR

  	
   

  	
   

  	
   

  
	
   

  	
  2b.

  	
  INDIVIDUAL’S LAST NAME

  	
  FIRST NAME

  	
  MIDDLE NAME 

  	
  SUFFIX

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2c.

  	
  MAILING ADDRESS

  	
  CITY

  	
  STATE



  	
  POSTAL CODE



  	
  COUNTRY



  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2d.

  	
  TAX ID#: SSN OR EIN

  	
  ADD’L INFO RE

  ORGANIZATION

  DEBTOR

  	
  2e. TYPE OF ORGANIZATION



  	
  2f. JURISDICTION OF
       ORGANIZATION

  	
  2g. ORGANIZATIONAL
        ID #, If any

  	
  o NONE

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  SECURED PARTY’S NAME (or NAME of TOTAL ASSIGNEE of
  ASSIGNOR S/P) - Insert only one secured party name (3a or 3b)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3a.

  	
  ORGANIZATION’S NAME

  Whitebox Ready Ltd.

  	
   

  
	
  OR

  	
   

  	
   

  	
   

  
	
   

  	
  3b.

  	
  INDIVIDUAL’S LAST NAME

  	
  FIRST NAME

  	
  MIDDLE NAME 

  	
  SUFFIX

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3c.

  	
  MAILING ADDRESS

  3033 Excelsior Boulevard, Suite 300

  	
  CITY

      Minneapolis

  	
  STATE

      MN

  	
  POSTAL CODE

      55416

  	
  COUNTRY

      USA

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  This FINANCING STATEMENT covers the following
  collateral:

  
	
   

  	
  See Exhibit A attached hereto and made a part hereof.

  
	
   

  	
   

  
	
  5.

  	
  ALTERNATIVE DESIGNATION [if applicable]: o LESSEE/LESSOR o CONSIGNEE/CONSIGNOR o BAILEE/BAILOR o SELLER/BUYER 

  o AG.LIEN o NON-UCC FILING

  
	
   

  	
   

  
	
  6.

  	
  o

  	
  This FINANCING STATEMENT is to be filed (for record) 

  (or recorded) in the REAL ESTATE RECORDS. Attach 

  Addendum
                                             (if
  applicable)

  	
  7.

  	
  Check to REQUEST SEARCH 

  REPORT(S) on Debtor(s) 

  [ADDITIONAL
  FEE]             [optional]

  	
  o All Debtors o Debtor 1 o Debtor 2

  
	
   

  	
   

  
	
  8.

  	
  OPTIONAL FILER REFERENCE DATA

  
	
   

  	
  File with the Minnesota Secretary of State

  
	
   

  	
   

  
	
  FILING OFFICE COPY — NATIONAL UCC FINANCING STATEMENT
  (FORM UCC1) (REV. 07/29/98)

  
														



 











EXHIBIT
A TO UCC-1 FINANCING STATEMENT


	
  Debtor:

  	
  MedicalCV, Inc.

  
	
   

  	
   

  
	
  Secured Party:

  	
  Whitebox Ready Ltd.

  



 


This FINANCING
STATEMENT is being filed pursuant to a Security Agreement dated 04/20/07
between Debtor and the Secured Party and covers all assets of the Debtor of
every kind and every description, whether now owned or hereafter acquired, and
all proceeds thereof, which shall include without limitation the following (the
“Collateral”):


General
Intangibles: All general intangibles of the Debtor, whether
now owned or hereafter acquired, including without limitation all present and
future patents and patent applications in all jurisdictions and territories
(foreign and domestic), together with all divisions, reissues, reexaminations,
term extensions, and continuations associated therewith, copyrights,
trademarks, service marks, trade names, trade secrets, know-how, processes, and
all licenses or agreements of any kind or nature pursuant to which the Debtor
possesses, uses, or has authority to possess or use any of the foregoing, customer
or supplier lists and contracts, manuals, operating instructions, permits,
franchises, the right to use the Debtor’s name and the goodwill of the Debtor’s
business.


Inventory:
All inventory of the Debtor, as that term is defined in the Uniform Commercial
Code, whether now owned or hereafter acquired or in which the Debtor obtains
rights, whether consisting of whole goods, spare parts or components, supplies
or materials whether acquired, held or furnished for sale, for lease or under
contracts or for manufacture or processing, and wherever located;


Equipment:
All equipment of the Debtor, whether now owned or hereafter
acquired, including all present and future machinery, vehicles, furniture,
fixtures, office and recordkeeping equipment, parts, tools, supplies and all
other goods (except inventory) used or bought for use by the Debtor for any
business or enterprise and including specifically (without limitation) all
accessions thereto, all substitutions and replacements thereof, and all like or
similar property now owned or hereafter acquired by the Debtor, and all of
which is owned by the Debtor; and


Receivables:
Each and every right of the Debtor to the payment of money,
whether such right to payment now exists or hereafter arises, whether such
right to payment arises out of a sale, lease or other disposition of goods or
other property, out of a rendering of services, or of a loan, out of the
overpayment of taxes or other liabilities, or any other transaction or event,
whether such right to payment is created, generated or earned by the Debtor or
by some other person who subsequently transfers his, her or its interest to the
Debtor, whether such right to payment is or is not already earned by
performance, and howsoever such right to payment may be evidenced, together
with all other rights and interests (including all liens and other security
interests) which the Debtor may at any time have by law or agreement against
any account debtor or other person obligated to make such payment or against
any property of such account debtor or other persons including, but not limited
to, all present and future accounts, contract rights, chattel paper, bonds,
notes and other debt instruments, and rights to payment in the nature of
general intangibles.


The Collateral shall
include (i) all substitutes and replacements for and proceeds of any and all of
the foregoing property, and in the case of all tangible Collateral, all
accessions, accessories, attachments, parts, equipment and repairs now or
hereafter attached or affixed to or use in connection with any such goods and
(ii) all warehouse receipts, bills of lading and other documents of title now
or hereafter covering such goods.















EXHIBIT D


MEDICALCV, INC.


COMPLIANCE CERTIFICATE


The undersigned officer
of MedicalCV, Inc., a Minnesota corporation (the “Company”), does hereby
certify pursuant to Section 7.1 of the Secured Note Purchase Agreement dated
April 20, 2007 (the “Agreement”) to the holders listed on Schedule 1.0 of the
Agreement (the “Holders”) as follows:


(1)           Representations and Warranties
True; Performance of Obligations. 
The representations and warranties made by the Company in the Agreement
are true and correct in all material respects as of the Effective Date, and the
Company has performed all obligations and conditions therein required to be
performed or observed by it on or prior to the Closing.


(2)           Consents, Permits, and Waivers.
The Company has obtained any and all consents, permits and waivers necessary or
appropriate for consummation of the transactions contemplated by the
Transaction Agreements (except for such as may be properly obtained subsequent
to the Closing).


(3)           Proceedings and Documents.  All corporate and other proceedings in
connection with the transactions contemplated at the Closing have been taken.


The
undersigned certifies that he has made or caused to be made such investigations
as are necessary in order to permit him to verify the accuracy of the information
set forth herein and, to the best of his knowledge, this certificate does not
misstate any material fact and does not omit to state any fact necessary to
make this certificate not misleading.


Capitalized
terms not defined herein have the meanings attributed to them in the Agreement.


	
  Dated:

  	
  April 20, 2007

  	
  MEDICALCV, INC.

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Marc P. Flores

  	
   

  
	
   

  	
   

  	
   

  	
  President and Chief
  Executive Officer

  	
   

  
						



 











EXHIBIT E


MEDICALCV, INC.


LEGAL OPINION


April 20, 2007


To:                              Holder
under the Secured Note Purchase Agreement dated April 20, 2007


Ladies and Gentlemen:


We have acted as counsel to MedicalCV, Inc., a
Minnesota corporation (the “Company”) in connection with a Secured Note
Purchase Agreement (the “SNPA”) dated as of April 20, 2007 between the Company
and an affiliate of Whitebox Advisors, LLC (“Whitebox”).  This opinion letter is delivered to you at
the Company’s request under Section 7.1(g) of the SNPA.  All capitalized terms used, and not otherwise
defined, in this opinion letter have the meanings given to them in the SNPA.


In connection with
this opinion, we have reviewed drafts of the following documents (collectively,
the “Transaction Agreements”), each of which is dated as of April 20, 2007,
unless otherwise described:


1.                                       the
Secured Note Purchase Agreement;


2.                                       the
Secured Promissory Note;


3.                                       the
Security Agreement; and


4.                                       the
Closing Warrant.


For purposes of this opinion letter we have reviewed
such documents and made such other investigation as we have deemed
appropriate.  As to certain matters of
fact material to the opinions expressed in this letter, we have relied on the
representations made in the Transaction Agreements and certificates of officers
of the Company.  We have not independently
established the facts so relied on.


As used in this opinion letter, the term “Collateral”
has the meaning given in the Security Agreement.  References in this opinion letter to the
“UCC” mean the Uniform Commercial Code as in effect in the State of Minnesota
on the date hereof.  As used in this
opinion letter, the phrases “to our knowledge,” “known to us” or similar words
mean the actual, conscious awareness on the date of this letter of Briggs and
Morgan, Professional Association, the lawyers in our firm who have been
actively involved in the negotiation or preparation of the Transaction
Agreements or this letter.











We assume with your permission and without
investigation: (i) the due authorization, execution and delivery of the
Transaction Agreements by all parties thereto other than the Company, (ii) the
validity, binding effect and enforceability under applicable law of the
Transaction Agreements against the parties thereto other than the Company,
(iii) the authenticity of all documents submitted to us as originals, (iv) the
genuineness of all signatures; (v) the legal capacity of natural persons, (vi)
the conformity to originals of all documents submitted to us as copies and the
authenticity of the originals of such copies, and (vii) that Whitebox has given
value and the Company has rights in the Collateral, in each case within the
meaning of Section 9 of the UCC, and (viii) that the description of the
Collateral reasonably identifies what is described, within the meaning of
Section 9 of the UCC.


Based upon the
assumptions set forth above and the other limitations and qualifications set
forth below, we are of the opinion that:


1.             The
Company is duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Minnesota.


2.             The
Company has corporate power and authority to conduct its business as described
in the Company’s SEC Filings and to enter into and perform its obligations
under the Transaction Agreements.


3.             The
Company is duly qualified to transact business and is in good standing in any
jurisdiction in which it owns or leases substantial property or in which the
conduct of its business requires such qualification, except where the failure
to do so would not, individually or in the aggregate, have a material adverse
effect on the properties, assets, operations, business or condition (financial
or otherwise) of the Company.


4.             To
our knowledge, all of the outstanding shares of the Company’s capital stock
have been duly authorized and validly issued, are fully paid and nonassessable
and have been issued in compliance with the registration and qualification
requirements of federal and state securities laws or were issued pursuant to an
available exemption from the registration and qualification requirements of
applicable federal and state securities laws.


5.             Pursuant
to a Securities Purchase Agreement dated October 13, 2006, Potomac Capital
Partners LP, Potomac Capital International Ltd. and Pleiades Investment
Partners-R LP were granted participation rights in future financings of the
Company, which participation rights have been validly waived by said parties in
connection with the transaction contemplated by the Transaction
Agreements.  Otherwise, to our knowledge,
no stockholder of the Company or any other person has any preemptive right,
right of first refusal or other similar right to subscribe for or purchase the
Company’s securities arising (a) by operation of the Articles of Incorporation
or Bylaws of the Company or the Minnesota Business Corporation Act or (b)
otherwise.











6.             The
Transaction Agreements have been duly authorized, executed and delivered by,
and are valid and binding agreements of, the Company, enforceable in accordance
with their terms, except as rights to indemnification thereunder may be limited
by applicable law and except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors’ rights generally or by general equitable
principles.


7.             The
Notes, Warrants and Warrant Shares have been duly authorized for issuance and
sale pursuant to the Transaction Agreements and, when issued and delivered by
the Company pursuant to payment of the consideration set forth in the
Transaction Agreements, will be validly issued, fully paid and nonassessable.


8.             The
provisions of the Security Agreement are sufficient to create in favor of
Whitebox the security interest, as described therein, in all right, title and
interest of the Company in those items and types of Collateral described in the
Security Agreement in which a security interest may be created under Section 9
of the UCC.  The filing of a UCC-1
financing statement (within the meaning of Section 9-502(a) of the UCC) with
the Office of the Secretary of the State of Minnesota is sufficient to perfect
a security interest in the Collateral, to the extent that a security interest
may be perfected by filing a financial statement under the UCC in such office.


9.             No
governmental approvals or filings are required for the execution and delivery
of the Transaction Agreements on behalf of the Company, the payment of the
Company’s obligations under the Transaction Agreements, or the creation by the
Company of the security interests created by the Transaction Agreements, except
for the filings necessary to perfect the liens granted under the Transaction
Agreements.


10.           To
our knowledge, the Company is not in violation of its Articles of Incorporation
or Bylaws or any law, administrative regulation or administrative or court
decree applicable to the Company and is not in default in the performance or
observance of any obligation, agreement, covenant or condition contained in any
material existing instrument or agreement.


11.           The
execution and delivery of the Transaction Agreements by the Company and the
performance by the Company of its obligations thereunder (a) will not result in
any violation of the provisions of the Articles of Incorporation or Bylaws of
the Company; (b) will not constitute a breach of, or a default under, or result
in the creation or imposition of, any lien, charge or encumbrance upon any
property or assets of the Company pursuant to, to our knowledge, any existing
instrument or agreement of the Company; and (c) to our knowledge, will not
result in any violation of any law, administrative regulation or administrative
or court decree applicable to the Company.


12.           The
Company is not, and, assuming the Company does not invest its assets in any
“investment securities” as defined in Section 3(a)(2) of the Investment Company
Act of 1940, as amended (the “1940 Act”), will not become, as a result of the
consummation of the transactions contemplated by the Transaction Agreements and
the receipt of payment for the Notes, Warrants 











or, if issued upon
exercise of the Warrants, the Warrant Shares thereunder, an “investment
company” as defined in the 1940 Act, and the rules and regulations promulgated
thereunder.


Our opinions are
subject to the following additional qualifications:


(a)           Our
opinions are limited to the law of the State of Minnesota and the federal
securities laws of the United States of America.


(b)           The
enforceability of the Transaction Agreements is subject to and may be limited
by (i) the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights and remedies of creditors
generally, (ii) general principles of equity and (iii) applicable statutes of
limitation.


(c)           We
express no opinion with respect to the validity and enforceability of (i)
indemnification provisions, rights of contribution and exculpatory provisions
to the extent they may be limited on public policy grounds or subject to
securities laws; (ii) broadly stated powers of attorney; (iii) any remedies
insofar as any party exercising such remedies may take any action which is
arbitrary or capricious, unreasonable, not in good faith, or not commercially
reasonable; (iv) provisions to the effect that failure to exercise or delay in
exercising rights or remedies will not operate as a waiver of any such right or
remedy or which purport to render ineffective any waiver, modification or
amendment not in writing; (v) waivers of any statutory or constitutional rights
or remedies; (vi) provisions to the effect that remedies are cumulative or that
stated remedies are not exclusive; and (vii) any provision for late payment
fees, default interest, liquidated damages or other fees, charges or amounts
that may be construed as a penalty.


(d)           We
express no opinion with respect to the ability of any party to collect or be
reimbursed for costs and expenses, including attorneys’ fees, to the extent its
rights may be limited to reasonable fees and expenses as determined by a court,
or it is not the prevailing party in the action.


(e)           We
express no opinion with respect to whether Whitebox is required to file a Notice
of Business Activities Report under Minnesota Statutes Section 290.371.  Any party who is so required and does not
file such a report has no cause of action upon which it may bring suit under
Minnesota law, except for issues related to its Minnesota tax liability, unless
and until it pays all taxes, interest, and civil penalties due the State of
Minnesota for all periods, or provides for their payment by security or bond.


(f)            We
express no opinion as to (i) the existence of or the Company’s title to any
Collateral; (ii) the creation or perfection of any security interest, except as
expressly set forth in paragraph 8; (iii) any security interest in commercial
tort claims; (iv) the priority of any security interest; or (v) the effect of
any security interest perfected prior to July 1, 2001 under the UCC or
otherwise.











(g)           We
express no opinion regarding laws or regulations relating to medical devices or
laws or regulations relating to reimbursement for medical devices or services.


(h)           We
express no opinion regarding patents or other intellectual property.


Our opinion is rendered solely in connection with the
transaction contemplated under the Transaction Agreements and may not be relied
upon in any manner by any Person other than the addressees hereof and any
successor or assignee of any addressee (collectively, the “Reliance Parties”),
and may not be relied upon by any Reliance Party for any other purpose.


No copies of this opinion may be delivered or
furnished to any other party other than a Reliance Party, nor may all or
portions of this opinion be quoted, circulated or referred to in any other
document without our prior written consent, except that copies of this opinion
may be provided to any regulatory agency having supervisory authority over a
Reliance Party and except that this opinion may be used in connection with the
assertion of a defense as to which this opinion is relevant and necessary or in
response to a court order or other legal process.


Very truly yours,


 


BRIGGS AND MORGAN,


PROFESSIONAL ASSOCIATION


EXHIBIT
F


MEDICALCV,
INC.


SECRETARY’S
CERTIFICATE


I, Eapen Chacko, Chief Financial Officer and Secretary
of MedicalCV, Inc., a Minnesota corporation (the “Company”), do hereby certify
hereby certify pursuant to Section 7.1(i) of the Secured Note Purchase
Agreement dated April 20, 2007 (the “Agreement”) to the holders listed on
Schedule 1.0 of the Agreement (the “Holders”) as follows:


(1)           Attached
hereto as Exhibit A is a true and correct copy of the Articles of Incorporation
of the Company, as amended as of the date of this certificate, and there have
been no changes or amendments to the attached Articles of Incorporation of the
Company, and no proceedings pending or contemplated for: (i) the amendment of
said Articles of Incorporation, (ii) the merger, consolidation or dissolution
of the Company, or (iii) the sale of all or substantially all of the assets or
business of the Company have commenced since the date of the Agreement or are
pending, and that the Company is in good standing and has paid all of its
corporate franchise taxes due as of the date hereof.


(2)           Attached
hereto as Exhibit B is a true and correct copy of the Bylaws of the Company, as
amended to the date hereof, and that there have been no changes or amendments
to the attached Bylaws and there are no proceedings pending or contemplated for
the amendment of such Bylaws.


(3)           Attached
hereto as Exhibit C are true and correct copies of the written consent actions
of the Audit Committee and the Board of Directors of the Company relating to
the Agreement and the transactions contemplated thereby; the resolutions set
forth therein relating to such matters have not been amended, modified or
rescinded, and are in full force and effect as of the date hereof and are the
only resolutions adopted by the Board of Directors of the Company relating to
approval of the Agreement and the transactions contemplated thereby.


(4)           The
following named individual is a duly elected or appointed, qualified and acting
officer of the Company who holds the office set opposite his name:




	
  Marc P. Flores

  	
   

  	
  President and Chief Executive Officer

  






 


	
  Dated: April 20, 2007

  	
   

  	
  

  
	
   

  	
  MEDICALCV, INC.

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
  Eapen Chacko

  
	
   

  	
   

  	
  Chief Financial Officer and

  Secretary