Document:

EXHIBIT 10.1

 

November 2, 2005

 

 

Mr. Marc P. Flores

President and Chief Executive
Officer

c/o MedicalCV, Inc.

9725 South Robert Trail

Inver Grove Heights, MN 55077

 

Dear Mr. Flores:

 

Reference is
made to your offer letter dated August 27, 2004 (the “Offer Letter”),
pursuant to which MedicalCV, Inc. (the “Company”) employed you as its
President and Chief Executive Officer. The Offer Letter described the Company’s
obligation to reimburse you for certain expenses in connection with the sale of
your Nevada home, relocation expenses and expenses in connection with the
establishment of a Minnesota residence (“Relocation Expenses”). The Board of
Directors of the Company has approved the following revised arrangements.

 

Since the
commencement of your employment, you have continued to maintain your Nevada
home while commuting to the Twin Cities area. The Company and you determined
that this strategy was reasonable and acceptable in view of the fact that
initially, the Company’s financial condition was uncertain, you and other
members of senior management spent much of your time traveling to the East and
West coasts in connection with meetings with financing sources and for meetings
in various states at medical centers with physicians. During this time, your
family, including school-age children, was rooted in the Lake Tahoe, Nevada
community. Now that the Company has received its funding for operations in 2005
and most of 2006, you have determined to move your family to Minnesota. You
will be living in a temporary rented residence. Your move to Minnesota should
be completed by November 5, 2005. During the period of your residence in
Nevada, the Company has paid all of your travel expenses, including reimbursing
you for travel to Minnesota. The Company has also reimbursed you for lodging
expenses. The Company’s outlay for reimbursement of your travel and lodging
expenses will substantially reduce when you complete your move of residence to
Minnesota. The Company believes that a move of residence to Minnesota will
reduce your burden of travel and will ease the burden on your family due to
your commuting schedule.

 

You have not
sold your Nevada residence to date and have advised the Company that this is an
inopportune time to put your home on the market. You have advised the Company
that when you determine to sell your Nevada residence, the prime time for
offering it for sale would be during the spring and summer months. In the
meantime, to assist you with the additional financial burden of maintaining the
temporary Twin Cities residence, the Company agrees to pay you for a period of
one year commencing November 1, 2005, a supplemental payment, in addition
to your agreed-upon salary and bonus compensation, in the amount of $2,500 per
month. Such monthly payment will end on November 1, 2006, or earlier if
you sell your Nevada residence. The Company will also reimburse you for the
cost of transporting your family, pets, personal vehicles and household goods
to the temporary Minnesota residence.

 

In addition,
the Company agrees to pay or reimburse to you the following Relocation Expenses
if you sell your home in Nevada and move to Minnesota:

 

 

1.                                       Packing,
transport and delivery of your household goods by a national freight carrier.

 

2.                                       Reasonable
and customary real estate closing costs for the sale of your home, excluding
seller paid points, prorated taxes, prorated interest and seller’s allowances.

 

3.                                       Customary
closing costs for the purchase of your Minnesota residence, with a maximum of 1
percent for a loan origination fee and excluding discount points, prepaids and
homeowner association fees.

 

All expenses are subject
to Company review for reasonableness and will be reimbursed only to the extent
they are incurred on or before November 1, 2006.

 

To the extent
the above benefits result in additional taxable wages to you, the Company will
make a separate payment to you for each tax year in which you receive either
the supplemental payment or Relocation Expenses to cover such additional state
or federal income taxes.

 

The understanding
reached in this Letter-Agreement will supersede all prior understandings and
agreements concerning the subject matter hereof, including your Employment
Agreement, dated August 8, 2005. The provisions for payments to you in
this Letter-Agreement will terminate upon the termination of your employment,
except to the extent you have incurred or submitted a reimbursement expense
prior to such termination.

 

If this letter
correctly sets forth the understanding we have reached, please indicate your
acceptance by signing and returning one copy of this letter.

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Susan L.
  Critzer

  	
   

  
	
   

  	
  Susan L.
  Critzer

  
	
   

  	
  Chairperson

  

 

Agreed
and accepted, effective November 3, 2005

 

 

	
  /s/
  Marc P. Flores

  	
   

  
	
  Marc
  P. FloresEXHIBIT 10.2

 

 

November 3, 2005

 

 

James E. Jeter

10904 West 120th Street

Overland Park, KS 
66213

 

Dear Jim:

 

The
following will serve as an agreement for you to join MedicalCV, Inc. as
Vice President, Sales commencing Monday, November 7, 2005.

 

Your
base compensation will be at a monthly rate of $10,416.67, with performance
bonuses at plan at the same rate. For the first three months, you will be
guaranteed a minimum of $14,583.34 per month (which includes base compensation
and bonus) with an upside at plan at $20,833.34 (which includes base
compensation and bonus). You will have fringe benefits the same as all
full-time employees including medical/dental insurance (amount is determined by
the number of dependents covered), 401(k) (employer matches 20 percent of the
first 10 percent contributed), and term life insurance of $50,000.

 

You
will receive a ten-year stock option for 232,500 shares of common stock priced
at market on the date you start your employment with a vesting period of 25
percent on the first year anniversary of the grant and 6.25 percent  on each subsequent quarterly anniversary.

 

The
basic terms and conditions of your employment will be set forth in the company’s
standard form of executive employment agreement that you and the Company will
enter into upon commencement of your employment.  That agreement will
contain a general description of your duties, the Company’s responsibilities to
you, confidentiality, inventions, nondisclosure and non-competition provisions.
We will forward that agreement to you on Friday, November 4, 2005.

 

Congratulations
on your new position. I am looking forward to working with you. We will do a
public relations press release, reviewed by both parties, as soon as this
agreement is effective.

 

If
you are in agreement with the above, please sign below. The signed acceptance
agreement deadline is Friday, November 4, 2005 at 5:00 central time. If
you have any questions, please call Jack Jungbauer at (651) 234-6699.

 

 

	
  /s/ Marc P. Flores

  	
   

  	
  /s/ James E. Jeter

  	
   

  
	
  Marc P. Flores

  	
   

  	
  James E. Jeter

  	
   

  
	
  President and CEO

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  November 4, 2005

  	
   

  
	
   

  	
   

  	
  DateEXHIBIT 10.1

 

	
  

  	
   

  	
  NINTH
  MODIFICATION TO 

  LOAN AND SECURITY AGREEMENT

  

 

This
Ninth Modification to Loan and Security Agreement (this “Modification”) is
entered into by and between ORANGE 21 Inc. (“Borrower”) and Comerica Bank (“Bank”),
at San Jose, California, as of November 4, 2005.

 

RECITALS

 

This
Modification is entered into upon the basis of the following facts and
understandings of the parties, which facts and understandings are acknowledged
by the parties to be true and accurate:

 

Bank
and Borrower have previously entered into that certain Loan and Security
Agreement (Accounts and Inventory), dated October 5, 2001, as modified by
that certain First Modification dated July 17, 2002, as modified by that
certain Second Modification dated March 21, 2003, as modified by that
certain Third Modification dated August 14, 2003, as modified by that
certain Fourth Modification dated November 26, 2003, as modified by that
certain Fifth Modification dated December 16, 2003, as modified by that
certain Sixth Modification dated August 5, 2004, as modified by that
certain Seventh Modification dated December 2, 2004, as modified by that
certain Eighth Modification dated January 27, 2005.  The Loan and Security Agreement (Accounts and
Inventory), as amended, modified, revised or restated from time to time shall
be referred to herein as the “Agreement.”

 

NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as set forth below.

 

AGREEMENT

 

1.               Incorporation
by Reference. 
The Recitals and the documents referred to therein are incorporated
herein by this reference.  Except as
otherwise noted, the terms not defined herein shall have the meaning set forth
in the Agreement.

 

2.               Modification
to the Agreement. 
Subject to the satisfaction of the conditions precedent as set forth in Section 3
hereof, the Agreement is hereby modified as set forth below.

 

A.           The “Revolving Maturity
Date” defined in Exhibit A of the Agreement entitled “Definitions” is
hereby amended to read as follows:

 

“Revolving
Maturity Date means January 5, 2006.”

 

B.             A new Section 11.1
is hereby added to the Agreement and should read as follows:

 

“11.1 Reference Provision.

 

1

 

a.                                       The
parties prefer that any dispute between them be resolved in litigation subject
to a Jury Trial Waiver as set forth in Section 10.5 above, however, that
process may not be available due to the decision Grafton Partners LP v.
Superior Court, California Supreme Court Case No. S123344.  This Reference Provision will be applicable
so long as the Jury Waiver in Section 10.5 is not permitted by law. Delay
in requesting appointment of a referee pending a determination of the validity
of Section 10.5 above will not be deemed a waiver of this Reference
Provision.

 

b.                                      Other
than (i) nonjudicial foreclosure of security interests in real or personal
property,  (ii) the appointment of a
receiver or (iii) the exercise of other provisional remedies (any of which
may be initiated pursuant to applicable law), any controversy, dispute or claim
(each, a “Claim”) between the parties arising out of or relating to this
Agreement, will be resolved by a reference proceeding in California in
accordance with the provisions of Section 638 et seq.
of the California Code of Civil Procedure (“CCP”), or their successor sections,
which shall constitute the exclusive remedy for the resolution of any Claim,
including whether the Claim is subject to the reference proceeding.  Except as otherwise provided in this
Agreement, venue for the reference proceeding will be in the Superior Court or
Federal District Court in the County or District where venue is otherwise
appropriate under applicable law (the “Court”).

 

c.                                       The
referee shall be a retired Judge or Justice selected by mutual written
agreement of the parties.  If the parties
do not agree, the referee shall be selected by the Presiding Judge of the Court
(or his or her representative).  A
request for appointment of a referee may be heard on an ex parte or
expedited basis, and the parties agree that irreparable harm would result if ex parte relief is not granted.  The referee shall be appointed to sit with
all the powers provided by law.  Each
party shall have one peremptory challenge pursuant to CCP §170.6.  Pending appointment of the referee, the Court
has power to issue temporary or provisional remedies.

 

d.                                      The
parties agree that time is of the essence in conducting the reference
proceedings.  Accordingly, the referee
shall be requested to (a) set the matter for a status and trial-setting
conference within fifteen (15) days after the date of selection of the referee,
(b) if practicable, try all issues of law or fact within ninety (90) days
after the date of the conference and (c) report a statement of decision
within twenty (20) days after the matter has been submitted for decision.  Any decision rendered by the referee will be
final, binding and conclusive, and judgment shall be entered pursuant to CCP
§644.

 

e.                                       The
referee will have power to expand or limit the amount and duration of
discovery.   The referee may set or
extend discovery deadlines or cutoffs for good cause, including a party’s
failure to provide requested discovery for any reason whatsoever.  Unless otherwise ordered, no party shall be
entitled to “priority” in conducting discovery, depositions may be taken by
either party upon seven (7) days written notice, and all other discovery
shall be responded to within fifteen (15) days after service.  All disputes relating to discovery which
cannot be

 

2

 

resolved by the parties shall be submitted to
the referee whose decision shall be final and binding.

 

f.                                         Except
as expressly set forth in this Agreement, the referee shall determine the
manner in which the reference proceeding is conducted including the time and
place of hearings, the order of presentation of evidence, and all other
questions that arise with respect to the course of the reference
proceeding.  All proceedings and hearings
conducted before the referee, except for trial, shall be conducted without a
court reporter, except that when any party so requests, a court reporter will
be used at any hearing conducted before the referee, and the referee will be
provided a courtesy copy of the transcript. 
The party making such a request shall have the obligation to arrange for
and pay the court reporter.  Subject to
the referee’s power to award costs to the prevailing party, the parties will
equally share the cost of the referee and the court reporter at trial.

 

g.                                      The
referee shall be required to determine all issues in accordance with existing
case law and the statutory laws of the State of California.  The rules of evidence applicable to
proceedings at law in the State of California will be applicable to the
reference proceeding.  The referee shall
be empowered to enter equitable as well as legal relief, provide all temporary
or provisional remedies, enter equitable orders that will be binding on the
parties and rule on any motion which would be authorized in a trial,
including without limitation motions for summary judgment or summary
adjudication.  The referee shall issue a
decision at the close of the reference proceeding which disposes of all claims
of the parties that are the subject of the reference.  The referee’s decision shall be entered by
the Court as a judgment or an order in the same manner as if the action had
been tried by the Court.  The parties
reserve the right to appeal from the final judgment or order or from any
appealable decision or order entered by the referee.  The parties reserve the right to findings of
fact, conclusions of laws, a written statement of decision, and the right to
move for a new trial or a different judgment, which new trial, if granted, is
also to be a reference proceeding under this provision.

 

h.                                      If
the enabling legislation which provides for appointment of a referee is
repealed (and no successor statute is enacted), any dispute between the parties
that would otherwise be determined by reference procedure will be resolved and
determined by arbitration.  The
arbitration will be conducted by a retired judge or Justice, in accordance with
the California Arbitration Act §1280 through §1294.2 of the CCP as amended from
time to time.  The limitations with
respect to discovery set forth above shall apply to any such arbitration
proceeding.

 

THE PARTIES RECOGNIZE AND AGREE THAT ALL
DISPUTES RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE
AND NOT BY A JURY, AND THAT THEY ARE IN EFFECT WAIVING THEIR RIGHT TO TRIAL BY
JURY IN AGREEING TO THIS REFERENCE PROVISION. 
AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL
OF THEIR OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY AND FOR THEIR MUTUAL
BENEFIT AGREES THAT THIS REFERENCE PROVISION

 

3

 

WILL APPLY TO ANY DISPUTE BETWEEN THEM WHICH
ARISES OUT OF OR IS RELATED TO THIS AGREEMENT.”

 

3.               Legal
Effect.  Except as
specifically set forth in this Modification, all of the terms and conditions of
the Agreement remain in full force and effect. 
Except as expressly set forth herein, the execution, delivery, and
performance of this Amendment shall not operate as a waiver of, or as an
amendment of, any right, power, or remedy of Bank under the Agreement, as in
effect prior to the date hereof. 
Borrower ratifies and reaffirms the continuing effectiveness of all
promissory notes, guaranties, security agreements, mortgages, deeds of trust,
environmental agreements, and all other instruments, documents and agreements
entered into in connection with the Agreement. 
Borrower represents and warrants that the Representations and Warranties
contained in the Agreement are true and correct as of the date of this
Amendment, and that no Event of Default has occurred and is continuing.  The effectiveness of this Modification and
each of the documents, instruments and agreements entered into in connection
with this Modification, including without limit any replacement promissory note
entered into in connection herewith, is conditioned upon receipt by Bank of
this Modification, any other documents which Bank may require to carry out the
terms hereof.

 

4.               Miscellaneous
Provisions. 

 

(a)          This is an
integrated Modification and supersedes all prior negotiations and agreements regarding
the subject matter hereof.  All
amendments hereto must be in writing and signed by the parties.

 

(b)         This
Modification may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one
instrument.

 

 

IN WITNESS WHEREOF, the parties have agreed
as of the date first set forth above.

 

	
  ORANGE 21 INC.

  	
   

  	
  COMERICA BANK

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Michael Brower

  	
   

  	
  By:

  	
  /s/ Richmond Boyce

  
	
  Name:

  	
  Michael Brower

  	
   

  	
   

  	
  Richmond Boyce

  
	
  Title:

  	
  Chief Financial Officer

  	
   

  	
   

  	
  Vice President - Western Division

  

 

4

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