Document:

Exhibit 10.4

 

AMENDMENT
NUMBER ONE TO PURCHASE AND SALE AGREEMENT

 

The undersigned,
being all of the parties to that certain Purchase and Sale Agreement, dated as
of May 19, 2005 (the “Agreement”), hereby agree as follows:

 

1.             The following definitions are hereby added to Section
1.1 of the Agreement:

“Assignment
of Assets Agreement” shall mean the Assignment of Assets, dated May 17,
2005, by the Corporation in favor of Scheck Alpha.

“Bonus
Agreements” shall mean (a) the Agreement, dated May 27, 2005, by and
between the Corporation and Marty Yabrow, (b) the Agreement, dated May 27,
2005, by and between the Corporation and Jeffrey Kampel, (c) the Agreement,
dated May 27, 2005, by and between the Corporation and Joel Steigelfest, (d)
the Agreement, dated May 27, 2005, by and between the Corporation and Douglas
Kensrue, and (e) the Agreement, dated May 27, 2005, by and between the
Corporation and Bert Jorge.

“Secular
Trust Agreements” shall mean (a) the Marty Yabrow Irrevocable Trust dated
May 27, 2005, (b) the Jeffrey Kampel Irrevocable Trust dated May 27, 2005, (c)
the Joel Steigelfest Irrevocable Trust dated May 27, 2005, (d)
the Douglas Kensrue Irrevocable Trust dated May 27, 2005, and (e) the Bert
Jorge Irrevocable Trust dated May 27, 2005.

“Stock
Redemption Agreement” shall mean the Stock Redemption Agreement, dated as
of May 30, 2005, by and among the Corporation and Scheck Investments.

2.             The definition of “Related Agreement” set forth
in Section 1.1 of the Agreement is hereby amended to read in its entirety
as follows:  ““Related Agreement”
shall mean any Contract that is or is to be entered into at the Closing or
otherwise pursuant to this Agreement, including, for the avoidance of doubt,
each of the Assignment of Assets Agreement and the Stock Redemption
Agreement.  The Related Agreements
executed by a specified Person shall be referred to as “such Person’s Related
Agreements,” “its Related Agreements” or another similar expression.”

3.             The definition of “Shares” set forth in Section
1.1 of the Agreement is hereby amended to read in its entirety as
follows:  ““Shares” shall mean,
collectively, (a) the 100 shares of Class A Voting Common Stock, $.001 par
value per share, of the Corporation, held of record by the Shareholders and (b)
the 8,372 shares of Class B Non-Voting Common Stock, $.001 par value per share,
of the Corporation, held of record by the Shareholders.”

4.             Each reference in the Agreement to the name “Scheck
Family LLC” shall be replaced in its entirety with the following name:  “Scheck Family Holdings LLC”.

5.             The
last sentence of item 2 of Schedule 1.1(c) is hereby amended to read in
its entirety as follows:  “Any reserve in
respect of aged, damaged or obsolete inventory reflected on the GAAP version of
the Final Closing Date Balance Sheet shall reduce on a dollar-for-dollar basis
the aggregate purchase price adjustment made pursuant to clauses (c) and
(d) of the definition of “Adjusted Purchase Price”.”

 

 

6.             Section 5.1(b) of the Agreement is hereby amended
to read in its entirety as follows:

(b)           Except as set forth on Schedule
5.1(b), no Sweet Paper Entity has any direct or indirect subsidiaries,
either wholly or partially owned, and no Sweet Paper Entity holds any direct or
indirect economic, voting or management interest in any Person or directly or
indirectly owns any security issued by any Person.  For the avoidance of doubt, as of the
Closing, none of the Corporation or any Corporation Subsidiary holds any direct
or indirect economic, voting or management interest in Scheck Alpha or directly
or indirectly owns any security issued by Scheck Alpha.

7.             Section 5.4(a) of the Agreement is hereby amended
to read in its entirety as follows:

(a)           The authorized capital stock of the
Corporation consists of (i) 1,000 shares of Class A Voting Common Stock, $.001
par value per share, of which 100 are currently issued and outstanding, and
(ii) 99,000 shares of Class B Non-Voting Common Stock $.001 par value per
share, of which 8,372 are currently issued and outstanding.  The Shares constitute all of the issued and
outstanding shares of capital stock of the Corporation.

8.             Article 7 of the Agreement is hereby amended to
add the following Section 7.29 immediately after Section 7.28.

7.29         Good Standing of Sweet Paper Texas.  No later than September 15, 2005,  Sellers shall deliver to Purchaser a good
standing certificate of Sweet Paper Texas issued by the Office of the
Comptroller of Public Accounts of the State of Texas.

9.             Section 12.2 of the Agreement is hereby amended
to read in its entirety as follows:

12.2         Indemnification by the Sellers.  Upon the terms and subject to the conditions
set forth herein, each Seller jointly and severally agrees to indemnify each of
the Purchaser Indemnified Parties against, and agrees to hold each of them
harmless from, any and all Losses incurred or suffered by them to the extent
relating to, arising out of or resulting from any of the following:

(a)           any breach of or any inaccuracy in
any representation or warranty made by any Seller in this Agreement or any
Related Agreement or any document delivered by any Seller at the Closing;
provided, that (i) in the case of all representations and warranties, except
for Title and Authorization Warranties and Tax Warranties, a notice of the
Purchaser Indemnified Party’s claim shall have been given to the Seller
Representative not later than the close of business on the second anniversary
of the Closing Date and (ii) in the case of Tax Warranties, a notice of the
Purchaser Indemnified Party’s claim shall have been given to the Seller Representative
not later than the close of business on the Tax Statute of Limitations Date;

(b)           any breach by any Seller of or
failure by any Seller to perform any covenant, obligation or agreement of any
Seller set forth or contemplated in this

 

 

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Agreement
or any Related Agreement or any document delivered by any Seller at the
Closing;

(c)           the Withdrawn Corporation Assets, the
Withdrawn Corporation Obligations, the Excluded Assets, the Excluded
Obligations or, other than the Assumed Obligations, any other obligations or
liabilities relating to or arising out of the ownership or operation of the
Assets on or prior to the Closing Date;

(d)           any obligations or liabilities
relating to or arising from any Sweet Paper Debt;

(e)           any obligations or liabilities
relating to or arising from any product liability or warranty claims based on
products or services sold by any Sweet Paper Entity on or prior to the Closing
Date (except to the extent that any Purchaser Indemnified Party collects
reimbursements for such Losses from insurance proceeds or from indemnification
payments received from one or more third parties);

(f)            any obligations or liabilities
relating to or arising from the matters set forth on Schedule 12.2(f);

(g)           any obligations or liabilities
relating to or arising from AMJEMS, Inc. or Mira Corp.;

(h)           any obligations or liabilities
relating to or arising from the failure of the Corporation to obtain the
consent of GMAC to the sublease by the Corporation to Seaboard Warehouse
Terminal Ltd. of a portion of the Leased Real Property that is leased by the
Corporation pursuant to the Current Scheck Real Property Lease;

(i)            any obligations or liabilities
relating to or arising from any breach of or default under any Current Third
Party Real Property Lease by any Sweet Paper Entity prior to the Closing if
Sellers fail to deliver to Purchaser an estoppel certificate reasonably
satisfactory to Purchaser duly executed by the lessor under such Current Third
Party Real Property Lease effective as of the Closing;

(j)            any obligations or liabilities
relating to or arising from the matters set forth on Schedule 12.2(j);

(k)           any obligations or liabilities
relating to or arising from any third party claim that any Sweet Paper Entity
violated the Americans With Disabilities Act, or any rules, regulations and
guidelines promulgated thereunder, or any similar state Law, prior to the
Closing; provided, however, that a notice of the Purchaser Indemnified Party’s
claim with respect to this Section 12.2(k) shall have been given to the
Seller Representative not later than the close of business on the second
anniversary of the Closing Date;

(l)            any obligations or liabilities
relating to or arising from the failure of any Sweet Paper Entity to be
licensed or qualified to do business and be in good standing as a foreign
corporation in each jurisdiction where the nature of the

 

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properties
owned, leased or operated by such Sweet Paper Entity or the business transacted
by such Sweet Paper Entity require such licensing or qualification
(notwithstanding the disclosure of any information on Schedule 5.1(a) or
any other Schedule hereto);

(m)          any obligations or liabilities
relating to or arising from any motor vehicle lease agreements relating to any
vehicles used by any Shareholder;

(n)           any obligations or liabilities
relating to or arising from the matter set forth on Schedule 12.2(n);

(o)           any obligations or liabilities
relating to or arising from any breach by Scheck Family Holdings LLC or JEMS of
Miami, Inc. of any obligation (to be set forth in the New Scheck Real Property
Lease) that is described in the “Maintenance and Repair” section of Exhibit
7.28;

(p)           any obligations or liabilities
relating to or arising from the Stock Redemption Agreement;

(q)           any obligations, liabilities or Taxes
relating to or arising from any Bonus Agreement or any Secular Trust Agreement
(including any obligations or liabilities relating to or arising from any claim
regarding any right of continued employment under any Bonus Agreement or any
Secular Trust Agreement); and

(r)            any damages, fees or other amounts
claimed by the lessor (or by any Person claiming on behalf of the lessor,
including the lessor’s attorneys and other agents or representatives) under any
Real Property Lease set forth at item 13 or item 14 of Schedule 5.9(b)
relating to or arising from the failure to obtain any consent or approval that
is required under such Real Property Lease in connection with the performance
of this Agreement by the parties hereto and the consummation of the
transactions contemplated hereby.

10.           This Amendment Number One is solely
for the benefit of the parties hereto and, to the extent expressly provided
herein, their respective Affiliates, and no provision of this Amendment Number
One shall be deemed to confer upon other third parties any remedy, claim,
liability, reimbursement, cause of action or other right.

11.           This Amendment Number One may be
executed in counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

12.           The
provisions of the Agreement, as amended hereby, shall remain in full force and
effect.

 

[SIGNATURE PAGE FOLLOWS]

 

 

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IN WITNESS WHEREOF, the parties hereto have caused
this Amendment Number One to Purchase and Sale Agreement to be executed and
delivered as of the 30th day of May, 2005.

	
   

  	
  LAGASSE, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Brian S. Cooper

  
	
   

  	
   

  	
  Title:

  	
  Vice President and Treasurer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Shareholders:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SCHECK INVESTMENTS LIMITED PARTNERSHIP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Scheck Investments, Inc., as General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Michael Scheck

  
	
   

  	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SCHECK ALPHA LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Scheck Investments, Inc., as General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Michael Scheck

  
	
   

  	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Michael Scheck

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Raquel Scheck

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Jeffrey Scheck

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Martin Scheck

  

 

 

 

	
   

  	
   

  
	
   

  	
  Elise Scheck

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Steven Scheck

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Asset Sellers:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SWEET PAPER SALES GROUP, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael Scheck

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SWEET PAPER SALES CORP. OF TEXAS, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael Scheck

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SWEET PAPER SALES CORP. OF CALIFORNIA, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael Scheck

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SWEET PAPER SALES CORP. OF MASSACHUSETTS, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael Scheck

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DAMAR DISTRIBUTORS WAREHOUSE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael Scheck

  
	
   

  	
   

  	
  Title:

  	
  PresidentEXHIBIT 10.1

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT
AGREEMENT (“Agreement”) is made and entered into August 9, 2005, by and
between MedicalCV, Inc., a
corporation duly organized and existing under the laws of the State of
Minnesota, with a place of business at 9725 South Robert Trail, Inver Grove
Heights, Minnesota 55077 (hereinafter referred to as the “Company”),
and Marc P. Flores, a resident of
the state of Nevada (hereinafter referred to as “Executive”).

 

BACKGROUND OF AGREEMENT

 

•                       Executive is
currently the President and Chief Executive Officer of the Company and is
employed on an at-will basis.

 

•                       The Company and
Executive desire to memorialize the terms and conditions of Executive’s
employment, including additional terms and conditions which have been approved
by the Company’s Board of Directors.

 

In consideration of the
foregoing, the Company and Executive agree as follows:

 

ARTICLE 1

EMPLOYMENT

 

1.01  Subject
to the terms of Articles 3 and 6, the Company hereby agrees to employ Executive
pursuant to the terms of this Agreement, and Executive agrees to such
employment.  Executive is currently
employed by the Company as its President and Chief Executive Officer and shall
continue to hold such title under the terms of this Agreement.

 

1.02 
Executive shall generally have the authority, responsibilities, and such
duties as are customarily performed by the chief executive of businesses of
similar size and industry, and shall also render such additional services and
duties as may be reasonably requested of him from time to time by the Company’s
Board of Directors (“Board”).

 

1.03 
Executive shall report to the Board or any committee thereof as the
Board shall direct, and shall generally be subject to direction, orders and
advice of the Board.

 

ARTICLE 2

BEST EFFORTS OF EXECUTIVE

 

2.01  In his
capacity as President and Chief Executive Officer, Executive shall use his best
energies and abilities in the performance of his duties, services and
responsibilities for the Company.  As of
the date of this Agreement, in recognition of the substantial responsibilities
of the Company to develop markets for the Company’s products and cultivate
relationships with the physician and medical center community, the Company is
not requiring Executive to relocate his residence to Minnesota.  For as long as these extensive travel
responsibilities exist, the Company will pay Executive’s travel and lodging
expenses.  The Board may, at a later
date, and upon not less than 60 days prior written notice, require Executive to
relocate his 

 

 

residence to Minnesota, within a radius of 50 miles from its
headquarters building, and will pay Executive’s reasonable relocation expenses,
as provided by resolution of the Board of Directors.

 

2.02  During
the term of his employment, Executive shall devote substantially all of his
business time and attention to the business of the Company and its subsidiaries
and affiliates and shall not engage in any substantial activity inconsistent
with the foregoing, whether or not such activity shall be engaged in for
pecuniary gain, unless approved by the Board; provided, however, that, to the
extent such activities do not violate, or substantially interfere with his
performance of his duties, services and responsibilities under this Agreement,
Executive shall be permitted to serve on civic or charitable boards or
committees thereof.

 

ARTICLE 3

NATURE OF EMPLOYMENT

 

3.01 
Executive’s employment pursuant to this Agreement shall be on an at-will
basis, with either Executive or the Company having the right to terminate
Executive’s employment with or without cause on not less than sixty (60) days’
prior written notice subject to the Company’s obligations to Executive pursuant
to Sections 6 and 7.  The terms and
conditions of this Agreement may be amended from time to time with the consent
of the Company and Executive.  All such
amendments shall be effective when memorialized by a written agreement between
the Company and Executive or by resolutions of the Board or the Company’s
Compensation Committee (the “Committee”).

 

ARTICLE 4

COMPENSATION AND BENEFITS

 

4.01  During
the term of employment hereunder, Executive shall be paid a base salary at the
rate of Two Hundred Twenty-Two Thousand Five Hundred ($222,500) per year (“Base
Salary”), payable in bi-weekly installments in accordance with the Company’s
established pay periods, reduced by all deductions and withholdings required by
law and as otherwise specified by Executive. 
The Company shall cause the Committee to review Executive’s performance
and Base Salary level each year during the Term, commencing fiscal year
2007.  Executive’s salary may be
increased (but not decreased), in the sole discretion of the Board.  In the event Executive’s employment shall,
for any reason, terminate during the Term, Executive’s final monthly Base
Salary payment shall be made on a pro-rated basis as of the last day of the
month in which such employment terminated.

 

4.02  In
addition to payments of Base Salary set forth above, Executive shall be
eligible to participate in a performance-based cash bonus or equity award plan
in fiscal 2006 and fiscal 2007 with a target
bonus opportunity equal to 30% of Executive’s Base Salary, based upon
achievement of milestones to be agreed upon by Executive and the Company.  At the Company’s option, the Company may pay
up to 60% of such bonus amount in Company common stock valued on the date of
the declaration of the bonus based upon the closing sale price of common stock
on the trading day proceeding such date.

 

4.03  During
the term of employment, Executive shall be entitled to participate in employee
benefit plans, policies, programs, perquisites and arrangements, as the same
may be provided and amended from time to time, that are provided generally to
similarly situated executive employees of the Company, to the extent Executive
meets the eligibility requirements for any such plan, policy, program,
perquisite or arrangement.

 

2

 

4.04  The
Company shall reimburse Executive for all reasonable business expenses incurred
by Executive in carrying out Executive’s duties, services, and responsibilities
under this Agreement.  Executive shall
comply with generally applicable policies, practices and procedures of the
Company with respect to reimbursement for, and submission of expense reports,
receipts or similar documentation of, such expenses.

 

4.05  If the
Company, based upon an opinion of legal counsel or a judicial determination,
determines that Section 304 of the Sarbanes-Oxley Act of 2002 is
applicable to Executive, then to the extent that the Company is required to
prepare an accounting restatement due to the material noncompliance of the
Company, as a result of misconduct, with any financial reporting requirement
under the securities laws, Executive shall reimburse the Company for any bonus
or other incentive or equity-based compensation received from the Company
during the 12-month period following the first public issuance or filing with
the Securities and Exchange Commission (whichever first occurs) of the
financial document embodying such financial reporting requirement and any
profits received from the sale of the Company’s securities during that 12-month
period.  In the event Executive fails to
make prompt reimbursement of any such amount, the Company may, to the extent
permitted by applicable law, deduct the amount required to be reimbursed from
Executive’s compensation otherwise due under this Agreement.

 

ARTICLE 5

VACATION AND LEAVE OF ABSENCE

 

5.01 
Executive shall be entitled to three (3) weeks of paid vacation per
year, in addition to the Company’s normal holidays.  Vacation time will be scheduled taking into
account the Executive’s duties and obligations at the Company.  Unused paid vacation time shall not
accumulate from year to year, unless otherwise approved in writing by the Board
or Committee.  Sick leave and all other
leaves of absence will be in accordance with the Company’s stated personnel
policies.

 

ARTICLE 6

TERMINATION

 

6.01  The
Company may terminate Executive’s employment without Cause by giving Executive
at least sixty (60) days written notice thereof.  In the event of such termination, Executive
shall receive only the severance compensation set forth in Article 7.01
and Executive shall also be entitled to all or a portion of any bonus due
Executive pursuant to any bonus plan or arrangement established or mutually
agreed-upon prior to termination, to the extent earned or performed through the
date of termination, based upon the requirements or criteria of such bonus plan
or arrangement, as the Board shall in good faith determine.  Such pro-rated bonus, shall be payable at the
time and in the manner payable to other executives of the Company who
participate in such plan or arrangement.

 

6.02 
Executive’s employment will be deemed terminated as of the date of the
death of the Executive.  In the event of
such termination, there shall be payable to Executive’s estate compensation
earned through the date of death together with a pro-rata portion of any bonus
due Executive pursuant to any bonus plan or arrangement established or mutually
agreed-upon prior to termination, to the extent earned or performed based upon
the requirements or criteria of such plan or arrangement, as the Board shall in
good faith determine.  Such pro-rated
bonus shall be payable at the time and in the manner payable to other
executives of the Company who participate in such plan or arrangement.

 

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6.03  Any
other provision of this Agreement notwithstanding, the Company may terminate
Executive’s employment upon written notice specifying a termination date based
on any of the following events that constitute Cause:

 

(a)               Any commission
or nolo contendere plea by Executive to a felony, gross misdemeanor or misdemeanor
involving moral turpitude, or any public conduct by Executive that has or can
reasonably be expected to have a detrimental effect on the Company;

 

(b)              Any act of
material misconduct, willful and gross negligence, or breach of duty to the
Company, including, but not limited to, embezzlement, fraud, dishonesty,
nonpayment of an obligation owed to the Company, or willful breach of fiduciary
duty to the Company which results in a material loss, damage, or injury to the
Company;

 

(c)               Any material
breach of any material provision of this Agreement or of the Company’s
announced rules, codes or polices, which remains uncured or uncorrected for a
period of thirty (30) days following written notice thereof to Executive
specifying such breach;

 

(d)              Any act of
insubordination by Executive; provided, however, an act of insubordination by
Executive shall not constitute Cause if Executive cures or remedies such
insubordination within thirty (30) days after written notice to Executive,
without material harm or loss to the Company, unless such insubordination is a
part of a pattern of chronic insubordination, which may be evidenced by reports
or warning letters given by the Company to Executive, in which case such
insubordination is deemed not curable.

 

(e)               Any unauthorized
disclosure of any Company trade secret or confidential information, or conduct
constituting unfair competition with respect to the Company, including inducing
a party to breach a contract with the Company; or

 

(f)                 A willful
violation of federal or state securities laws.

 

In making such determination, the Board shall
act in good faith and give Executive a reasonably detailed written notice and a
reasonable opportunity to be heard on the issues at a Board or Committee
meeting.  For purposes of this Agreement,
no act or failure by the Executive shall be considered “willful” if such act is
done by Executive in good faith in the belief that such act is or was lawful
and in the best interest of the Company or one or more of its businesses.  Nothing in this paragraph 6.03 shall be
construed to prevent Executive from contesting the Board or Committee’s
determination that Cause exists.  In the
event of such termination, and not withstanding any contrary provision
otherwise stated, Executive shall receive only his Base Salary earned through
the date of termination.

 

6.04  The
employment of the Executive shall in no event be considered to have been
terminated for Cause if the termination of his employment took place:

 

(a)               as a result of
an act or omission which occurred more than 360 days prior to the Executive’s
having been given notice of the termination of his employment for such act or
omission, unless the commission of such act or such omission could not at the
time of such commission or omission have been known to a member of the Board
(other than the Executive, if he is then a member of the Board), in which case
there shall not be termination for Cause if notice of termination took place
more than 360 days from the date that the commission of such act or such
omission was or could reasonably have been so known; or

 

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(b)              as a result of
a continuing course of action which commenced and was or reasonably could have
been known to a member of the Board (other than the Executive) more than 360
days prior to notice having been given to the Executive of the termination of
his employment.

 

6.05 
Executive may terminate his employment upon sixty (60) days prior
written notice to the Company for “Good Reason.”  For purposes of this Agreement, “Good Reason”
means any of the following actions taken by the Company without Cause:

 

(a)               the Company or
any of its subsidiaries reduces Executive’s Base Salary or materially reduces
his current cash bonus plan or current equity compensation opportunities, or
benefit plans (other than company-wide changes to benefit plans covering all
full-time eligible employees);

 

(b)              without
Executive’s express written consent, the Company or any of its subsidiaries
significantly reduces Executive’s job authority and responsibility over
operations of the Company as contemplated in Article 1;

 

(c)               without
Executive’s express written consent, the Company or any of its subsidiaries
requires Executive to change the location of Executive’s job or office, so that
Executive will be based at a location more than fifty (50) miles from the
location of Executive’s office immediately prior to the Change of Control;
provided, however, that any required relocation to Minnesota from Executive’s
home-office in Nevada shall not constitute Good Reason;

 

(d)              a successor
company fails or refuses to assume the Company’s obligations under this
Agreement; or

 

(e)               the Company or
any successor company breaches any of the material provisions of this
Agreement; provided, however, that Executive shall provide detailed information
to the Company in such written notice and such grounds for Good Reason are not
remedied or continue for a period of thirty (30) days or more following receipt
of such notice.

 

6.06  During
the term of his employment and for 24 months after the date of Executive’s
termination of employment, (i) Executive shall not, directly or
indirectly, make or publish any disparaging statements (whether written or
oral) regarding the Company or any of its affiliated companies or businesses,
or the affiliates, directors, officers, agents, principal shareholders or
customers of any of them and (ii) neither the Company or any of its
affiliated companies or businesses or their affiliates, directors, or officers
shall directly or indirectly, make or publish any disparaging statements
(whether written or oral) regarding Executive. 
Information which the Company or Executive is required to make or
disclose regarding the other to comply with laws or regulations, or makes in a
pleading on the advice of litigation counsel, shall not constitute a
disparaging statement.

 

6.07  Upon any
termination of Executive’s employment with the Company, Executive shall be
deemed to have resigned from all other positions he then holds as an officer,
employee or director or other independent contactor of the Company or any of
its subsidiaries or affiliates, unless otherwise agreed by the Company and
Executive.

 

5

 

ARTICLE 7

SEVERANCE PAYMENTS

 

7.01  The
Company, its successors or assigns, will pay Executive as severance pay a lump
sum amount equal to twelve (12) months of the Executive’s monthly Base Salary
for full-time employment at the time of Executive’s termination if the
employment of Executive is terminated by the Company without Cause, or by
Executive for Good Reason.  Nothing in
this Subsection 7.01 shall limit the authority of the Committee or Board
to terminate Executive’s employment in accordance with Section 6.03.  Payment of severance payments pursuant to Section 7.01,
less customary withholdings, shall be made in one lump sum within thirty (30)
days of the Executive’s termination or resignation.

 

7.02  In
addition to the severance amount payable pursuant to Section 7.01, the
Company will pay Executive a pro-rata portion of any bonus earned by Executive
as of the date of termination, as provided by Sections 6.01 and 6.02.  The payments to Executive pursuant to
Sections 6.01, 6.02 or 7.01 are not intended to be cumulative or duplicative
and an amount payable as a payment of base salary or pro-rata bonus under any
one of such sections shall be reduced to the extent of similar payments made
under another of such sections.  In
addition, the severance payment of Base Salary shall be reduced by the amount
of cash severance-type benefits to which Executive may be entitled pursuant to
any other cash severance plan, agreement, policy or program of the Company or
any of its subsidiaries; including any payment for post-employment
restrictions, provided, however, that if the amount of cash severance
benefits payable under such other severance plan, agreement, policy or program
is greater than the amount payable pursuant to this Agreement, Executive will
be entitled to receive the amounts payable under such other plan, agreement,
policy or program which exceeds the Base Salary severance payment.  Without limiting other payments which would
not constitute “cash severance-type benefits” hereunder, any cash settlement of
stock options, accelerated vesting of stock options and retirement, pension and
other similar benefits shall not constitute “cash severance-type benefits” for
purposes of this Section 7.03.

 

7.03  If
Executive becomes entitled to a severance payment of Base Salary pursuant to
Sections 7.01, Executive shall receive:  (a) such
amount in a lump sum payment, plus (b) if Executive is eligible to and
elects to continue medical coverage as provided by law (commonly referred to as
the COBRA continuation period), as part of the severance benefit, the Company
will pay the cost of premiums for COBRA coverage for Executive and his eligible
dependents for a period of twelve (12) months following termination.  Executive must be eligible for COBRA
coverage, elect COBRA during the COBRA election period, and comply with all
requirements to obtain such coverage, to be eligible for coverage and for this
benefit.

 

7.04 
Notwithstanding any other provision of this Agreement, the Company and
Executive intend that any payments, benefits or other provisions applicable to this
Agreement comply with the payout and other limitations and restrictions imposed
under Section 409A of the Code (“Section 409A”), as clarified or
modified by guidance from the U.S. Department of Treasury or the Internal
Revenue Service – in each case if and to the extent Section 409A is
otherwise applicable to this Agreement and such compliance is necessary to
avoid the penalties otherwise imposed under Section 409A.  In this connection, the Company and Executive
agree that the payments, benefits and other provisions applicable to this
Agreement, and the terms of any deferral and other rights regarding this
Agreement, shall be deemed modified if and to the extent necessary to comply
with the payout and other limitations and restrictions imposed under Section 409A,
as clarified or supplemented by guidance from the U.S. Department of Treasury
or the Internal Revenue Service – in each case if and to the extent Section 409A
is otherwise applicable to this Agreement and such compliance is necessary to
avoid the penalties otherwise imposed under Section 409A.

 

6

 

7.05  The
Company may withhold from any amounts payable under this Agreement all federal,
state, city or other taxes required by applicable law to be withheld by the
Company.

 

7.06  The
provisions of this Article 7 will be deemed to survive the termination of
this Agreement for the purposes of satisfying the obligations of the Company
and Executive hereunder.

 

ARTICLE 8

NONDISCLOSURE AND INVENTIONS

 

8.01  Except
as permitted or directed by the Company or as may be required in the proper
discharge of Executive’s employment hereunder, Executive shall not, during his
employment or at any time thereafter, divulge, furnish or make accessible to
anyone or use in any way any Confidential Information of the Company.  “Confidential Information” means any
information or compilation of information that the Executive learns or develops
during the course of his/her employment that is not generally known, that is
proprietary to or within the unique knowledge of the Company, from which it
derives economic value (whether or not conceived, originated, discovered, or
developed in whole or in part by Executive). 
Confidential Information includes but is not limited to, the following
types of information and other information of a similar nature (whether or not
reduced to writing), all of which Executive agrees constitutes the valuable
trade secrets of the Company: research, designs, development, know how,
computer programs and processes, marketing plans and techniques, existing and
contemplated products and services, customer and product names and related
information, prices sales, inventory, personnel, computer programs and related
documentation, technical and strategic plans, and finances.  Confidential Information also includes any
information of the foregoing nature that the Company treats as proprietary or
designates as Confidential Information, whether or not owned or developed by
the Company.  “Confidential Information”
does not include information that (a) is or becomes generally available to
the public through no fault of Executive, (b) was known to Executive prior
to its disclosure by the Company, as demonstrated by files in existence at the
time of the disclosure, (c) becomes known to Executive, without
restriction, from a source other than the Company, without breach of this
Agreement by Executive and otherwise not in violation of the Company’s rights,
or (d) is explicitly approved for release by written authorization of the
Company.

 

8.02 
Executive acknowledges that new and valuable proprietary concepts,
methods, processes, discoveries, trade secrets (as defined in the Minnesota
Uniform Trade Secrets Act), improvements, adaptations, or ideas (herein
individually and collectively referred to as “Inventions”) may be developed,
originated, authorized, conceived, invented, or made by Executive, either alone
or jointly with others, in the course of Executive’s employment by the
Company.  All such Inventions shall be
the exclusive property of the Company, whether or not be patentable or
copyrightable, and they may or may not be shown or described in writing or
reduced to practice.  With respect to all
such Inventions developed, originated, authored, conceived, or invented, or made
by Executive (whether in whole or in part) during Executive’s employment by the
Company, Executive shall:

 

(i)                           keep accurate,
complete and timely records all such Inventions, which records shall be the
Company’s property and be retained on the Company’s premises;

 

(ii)                        promptly and
fully disclose and describe all such Inventions to the Company;

 

(iii)                     assign (and Executive hereby
does assign) to the Company all of Executive’s rights to such Inventions and to
applications for letters patent or copyrights in

 

7

 

all
countries and to letters patent or copyrights granted with respect to such
Inventions in all countries; and

 

(iv)                    acknowledge and deliver
promptly to the Company (without charge to the Company but at the expense of
the Company) such written instruments and cooperate and do such other acts as
may be necessary in the opinion of the Company to preserve property rights to
such Inventions against forfeiture, abandonment, or loss and to obtain and maintain
letters patent or copyrights and to vest the entire right and title thereto
exclusively in the Company.

 

(a)                                  If Executive is
needed, at any time, to give testimony, evidence, or opinions in any litigation
or proceeding involving any patents or copyrights or applications for patents
or copyrights, both domestic and foreign, relating to inventions, improvements
discoveries, software, writings or other works of authorship conceived,
developed or reduced to practice by Executive, Executive agrees to do so.  With respect to any obligations performed by
the Executive under this Section following termination of Executive’s
employment, the Company will pay or reimburse all reasonable out-of-pocket
expenses.

 

(b)                                 The obligations
of this paragraph shall continue beyond the termination of employment with
respect to Inventions conceived or made by Executive during the period of
his/her employment and shall be binding upon assigns, executors, administrators
and other legal representatives.  For
purposes of this Agreement, any Invention relating to the business of the
Company on which Executive files or claims a copyright, or files a patent
application, within one (1) year after termination of employment with the
Company, shall be presumed to cover Inventions conceived by Executive during
the term of his employment with the Company, subject to proof to the contrary
by good faith, written and duly corroborated records establishing that such
Invention was conceived and made following termination of employment.

 

NOTICE:  The
Company hereby notifies Executive that the foregoing does not apply to
inventions or ideas for which no equipment, supplies, facility, or trade secret
information of the Company was used and that was developed entirely on
Executive’s own time, and (1) which does not relate (a) directly to
the business of the Company and (b) to the Company’s actual or
demonstrably anticipated research or development, or (2) which does not
result from any work performed by Executive for the Company.

 

8.03  In the
event of a breach or threatened breach by Executive of the provisions of this Article 8,
the Company shall be entitled to an injunction restraining Executive from
directly or indirectly disclosing, disseminating, lecturing upon, publishing or
using such confidential, trade secret or proprietary information (whether in
whole or in part) and restraining Executive from rendering any services or
participating with any person, firm, corporation, association or other entity
to whom such knowledge or information (whether in whole or in part) has been
disclosed, without the posting of a bond or other security.  Nothing herein shall be construed as
prohibiting the Company from pursuing any other equitable or legal remedies
available to it for such breach or threatened breach, including the recovery of
damages from Executive.

 

8.04 
Executive agrees that all notes, data, reference materials, documents,
business plans, business and financial records, computer programs, and other
materials that in any way incorporate, embody, or reflect any of the
Confidential Information, whether prepared by Executive or others, are the
exclusive property of the Company, and Executive agrees to forthwith deliver to
the Company all such materials, including all copies or memorializations
thereof, in Executive’s possession or control, whenever

 

8

 

requested to do so by the Company, and in any event, upon termination
of Executive’s employment with the Company.

 

8.05  The
Executive understands and agrees that any violation of this Article 8
while employed by the Company may result in immediate disciplinary action by
the Company, including termination of employment for Cause.

 

8.06  The
provisions of this Article 8 shall survive termination of this Agreement
indefinitely.

 

ARTICLE 9

NONCOMPETITION AND NON-RECRUITMENT

 

9.01 
Executive agrees that during the term of his employment and for a period
of one (1) year after termination of employment (the “Restricted Period”)
he will not directly or indirectly render service to any person or entity in
connection with the design, development, manufacture, marketing, or sale of a
Competitive Product that is sold or intended for use or sale in any geographic
area in which the Company actively markets a Company Product or has planned to
actively market a Company Product of the same general type or function.  This territory currently includes North
America, Europe and Japan.

 

(a)                                  Without
limiting the generality of the above, Executive expressly agrees that during
the Restriction Period discussed above, he will not directly or indirectly (on
his own behalf or on behalf of another person or entity) sell Competitive
Products to, attempt to sell such products to, or otherwise solicit purchases
of such services or products from, the following:

 

(i)                                     any customer
with whom Executive (or any other Executive or representative under Executive’s
supervision) has had direct or indirect contact or to whom Executive (or any
other Executive or representative under Executive’s supervision) has directly
or indirectly sold such services or products during the period of Executive’s
employment; or

 

(ii)                                  any prospective
customer who has been directly or indirectly solicited by Company, or who has
approached Company, and with whom Executive (or any other Executive or
representative under the Executive’s supervision) has had direct or indirect
contact or to whom Executive (or any other Executive or representative under
Executive’s supervision) has directly or indirectly attempted to sell such
services or products during the term of Executive’s employment.

 

(b)                                 Executive
further agrees that during the Restriction Period he will not directly or
indirectly (i) in any way interfere or attempt to interfere with the
Company’s relationships with any of its current or potential customers, or (ii) employ
or attempt to employ any of the Company’s then Executives on behalf of any
other entity, whether or not such entity competes with the Company.

 

(c)                                  For the
purposes of this Section 9.01,

 

(i)                                     “Competitive
Product” means any surgical product or research to develop information useful
in connection with a product or service that is being designed, developed,
manufactured, marketed or sold by anyone other than the Company and is of the
same general type, performs similar functions, or is used for the same purposes
as a

 

9

 

Company Product on which the
Employee worked, dealt with, or marketed during the preceding two years of
employment or about which he received or had knowledge of Confidential
Information; provided, however, that the term “surgical product” shall not
include non-invasive or percutaneous products; and

 

(ii)                                  “Company
Product” means any product, product line or service (including any component
thereof or research to develop information useful in connection with a product
or service) that is being designed, developed, manufactured, marketed or sold
by the Company or with respect to which the Company has acquired Confidential
Information which it intends to use in the design, development, manufacture,
marketing or sale of a product or service.

 

9.02  At its
sole option, the Company may, by express written notice to Executive, waive or
limit the time and/or geographic area in which Executive cannot engage in competitive
activity or the scope of such competitive activity.

 

9.03 
Executive agrees that breach by him of the provisions of this Article 9
will cause the Company irreparable harm that is not fully remedied by monetary
damages.  In the event of a breach or
threatened breach by Executive of the provisions of this Article 9, the
Company shall be entitled to an injunction restraining Executive from directly
or indirectly competing or recruiting as prohibited herein, without posting a
bond or other security.  Nothing herein
shall be construed as prohibiting the Company from pursuing any other equitable
or legal remedies available to it for such breach or threatened breach,
including the recovery of damages from Executive.

 

9.04  The
Executive understands and agrees that any violation of this Article 9
while employed by the Company may result in immediate disciplinary action by
the Company, including termination of employment for Cause.

 

9.05  The
obligations contained in this Article 9 shall survive the termination of
this Agreement indefinitely.

 

ARTICLE 10

MISCELLANEOUS

 

10.01  Governing
Law.  This Agreement shall be
governed and construed according to the laws of the State of Minnesota without
regard to conflicts of law provisions. 
The Company and Executive agree that if any action is brought pursuant
to this Agreement that is not otherwise resolved by arbitration pursuant to Section 10.06,
such dispute shall be resolved only in the District Court of Hennepin County,
Minnesota, or the United States District Court for Minnesota, and each party
hereto unconditionally (a) submits for itself in any proceeding relating
to this Agreement, or for recognition and enforcement of any judgment in
respect thereof, to the exclusive jurisdiction of the Hennepin County, Minnesota
District Courts or the United States Federal District Court for Minnesota, and
agrees that all claims in respect to any such proceeding shall be heard and
determined in Hennepin County, Minnesota, Minnesota District Court or, to the
extent permitted by law, in such federal court, (b) consents that any such
proceeding may and shall be brought in such courts and waives any objection
that it may now or thereafter have to the venue or jurisdiction of any such
proceeding in any such court or that such proceeding was brought in an
inconvenient court and agrees not to plead or claim the same; waives all right
to trial by jury in any proceeding (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement, or its performance under
or the enforcement of this Agreement; (d) agrees that service of process
in any such proceeding may be effected by mailing a copy of such process by
registered or certified mail (or any

 

10

 

substantially similar form of mail), postage prepaid, to such party at
its address as provided in Section 10.06; and (e) agrees that nothing
in this Agreement shall affect the right to effect service of process in any
other manner permitted by the laws of the State of Minnesota.

 

10.02  Successors.  This Agreement is personal to Executive and
Executive may not assign or transfer any part of his rights or duties
hereunder, or any compensation due to him hereunder, to any other person or
entity.  This Agreement may be assigned
by the Company and the Company.  The
Company shall require any successor or assignee, whether direct or indirect, by
purchase, merger, consolidation or otherwise, to all or substantially all the
business or assets of the Company, expressly and unconditionally to assume and
agree to perform the Company’s obligations under this Agreement, in the same
manner and to the same extent that the Company would be required to perform if
no such succession or assignment had taken place.  In such event, the term “Company,” as used in
this Agreement, shall mean the Company as defined above and any successor or
assignee to the business or assets which by reason hereof becomes bound by the
terms and provisions of this Agreement.

 

10.03  Waiver.  The waiver by the Company of the breach or
nonperformance of any provision of this Agreement by Executive will not operate
or be construed as a waiver of any future breach or nonperformance under any
such provision of this Agreement or any similar agreement with any other Executive.

 

10.04  Entire
Agreement; Modification.  This
Agreement supersedes, revokes and replaces any and all prior oral or written
understandings, if any, between the parties relating to the subject matter of
this Agreement.  The parties agree that
this Agreement: (a) is the entire understanding and agreement between the
parties; and (b) is the complete and exclusive statement of the terms and
conditions thereof, and there are no other written or oral agreements in regard
to the subject matter of this Agreement. 
Except for modifications described in Article 3, this Agreement
shall not be changed or modified except by a written document signed by the
parties hereto.

 

10.05  Severability
and Blue Penciling.  To the extent
that any provision of this Agreement shall be determined to be invalid or
unenforceable as written, the validity and enforceability of the remainder of
such provision and of this Agreement shall be unaffected.  If any particular provision of this Agreement
shall be adjudicated to be invalid or unenforceable, the Company and Executive
specifically authorize the tribunal making such determination to edit the
invalid or unenforceable provision to allow this Agreement, and the provisions
thereof, to be valid and enforceable to the fullest extent allowed by law or
public policy.

 

10.06  Arbitration.  Any dispute, claim or controversy arising
under this Agreement shall, at the request of any party hereto be resolved by
binding arbitration by a single arbitrator selected by employer and Executive,
with arbitration governed by The United States Arbitration Act (Title 9, U.S.
Code); provided, however, that a dispute, claim or controversy shall be subject
to adjudication by a court in any proceeding against the Company or Executive
involving third parties (in addition to the Company or Executive).  Such arbitrator shall be a disinterested
person who is either an attorney, retired judge or labor relations
arbitrator.  In the event employer and
Executive are unable to agree upon such arbitrator, the arbitrator shall, upon
petition by either the Company or Executive, be designated by a judge of the
Hennepin County District Court.  The
arbitrator shall have the authority to make awards of damages as would any
court in Minnesota having jurisdiction over a dispute between employer and
Executive, except that the arbitrator may not make an award of exemplary
damages or consequential damages.  In
addition, the Company and Executive agree that all other matters arising out of
Executive’s employment relationship with the Company shall be arbitrable,
unless otherwise restricted by law.

 

11

 

(a)                        In any
arbitration proceeding, each party shall pay the fees and expenses of its or
his own legal counsel.

 

(b)                       The arbitrator,
in his or her discretion, shall award legal fees and expenses and costs of the
arbitration, including the arbitrator’s fee, to a party who substantially
prevails in its claims in such proceeding.

 

(c)                        Notwithstanding
this Section 10.06, in the event of noncompliance or violation, as the
case may be, of Sections 8 or 9 of this Agreement, the Company may
alternatively apply to a court of competent jurisdiction for a temporary
restraining order, injunctive and/or such other legal and equitable remedies as
may be appropriate, if it and such court reasonably determines that the Company
would have no adequate remedy at law for such violation or noncompliance.

 

10.07  Legal
Fees.  If any contest or dispute
shall arise between the Company and Executive regarding any provision of this
Agreement, and such dispute results in court proceedings or arbitration, a
party that prevails to a substantial extent with respect to a claim brought and
pursued in connection with such dispute, shall be entitled to recover its legal
fees and expenses reasonably incurred in connection with such dispute.  Such reimbursement shall be made as soon as
practicable following the resolution of the dispute (whether or not appealed)
to the extent a party receives documented evidence of such fees and expenses.

 

10.08  Notices.  For purposes of this Agreement, notices and
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when personally delivered or may send by
certified mail, return receipt requested, postage prepaid, addressed to
Executive at his residence address appearing on the records of the Company and
to the Company at its then current executive offices to the attention of the
Board.  All notices and communications
shall be deemed to have been received on the date of delivery thereof or on the
third business day after the mailing thereof, except that notice of change of
address shall be effective only upon actual receipt.  No objection to the method of delivery may be
made if the written notice or other communication is actually received.

 

10.09  Survival.  The provisions of this Article 10 shall
survive the termination of this Agreement, indefinitely.

 

IN WITNESS WHEREOF the
following parties have executed the above instrument the day and year first
above written.

 

	
   

  	
  MEDICALCV,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Lawrence
  L. Horsch

  	
   

  
	
   

  	
   

  	
  Lawrence L.
  Horsch

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Marc P.
  Flores

  	
   

  
	
   

  	
   

  	
  Marc P.
  Flores

  
						

 

12

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