Document:

Exhibit 10.34

 

TECHNOLOGY
PURCHASE AGREEMENT

 

THIS AGREEMENT, dated as
of August 27, 2003, by and among MedicalCV, Inc., a Minnesota corporation
(“MedicalCV”) and LightWave Ablation Systems, Inc., a North Carolina
corporation (“LightWave”), Gregory Brucker (Brucker), and Robert Svenson M.D.
(“Svenson”).

 

RECITALS

 

•                                          LightWave
has developed technology relating to a catheter/probe (the “Product”) used for
purposes of delivering laser energy to the epicardial surface (or epicardium)
of the heart for treatment of atrial fibrillation (the “Technology”), aspects
of which have been disclosed by LightWave to MedicalCV in a draft of a
provisional patent application attached hereto as Exhibit A.

 

•                                          LightWave
desires to sell to MedicalCV its entire right and interest in the Technology
and in all intellectual property relating thereto relating to the treatment of
atrial fibrillation (the “Transaction”).

 

•                                          MedicalCV
desires to acquire all of LightWave’s right and interest in all tangible and
intangible property relating to the Technology, including, but not limited to,
all documentation, rights and patents, patent applications, improvements,
designs, works of authorship, trade secrets and other intellectual property
related to the Technology and any Product which utilizes the Technology, all on
the terms set forth in this Agreement.

 

•                                          To induce
MedicalCV to enter into this Agreement, Brucker and Svenson agreed to be bound
by certain covenants set forth herein.

 

NOW, THEREFORE, the
parties agree as follows:

 

SECTION 1.

THE TRANSACTION

 

1.1                                 Definitions.  The following terms used in this Agreement
shall have the meanings set forth respectively:

 

(a)                                  “Acquired
Assets” has the meaning set forth in Section 1.2.

 

(b)                                 “Affiliate” means any person, firm or entity which
directly or indirectly controls, is controlled by or is under common control
with or is an employee of a party to whom reference is made.  The term “control” shall mean the ownership
of 10% or more of the beneficial interest in the entity referred to.

 

(c)                                  “Agreement” means this limited asset purchase agreement,
together with all Exhibits and Schedules attached hereto and the separately
prepared Disclosure Schedules.

 

(d)                                 “Closing” has the meaning set forth in
Section 2.1.

 

(e)                                  “Closing Date” has the meaning set forth in
Section 2.1.

 

 

(f)                                    “Commercial Sale” means a sale of the Product
to an unrelated party such as a distributor, end-user customer such as a
hospital or other healthcare provider. 
Commercial Sale does not include the distribution of the Product as a sample
or for evaluation purposes, or for use in connection with clinical studies.

 

(g)                                 “Confidential Information” shall mean all
proprietary information and materials (whether or not patentable), disclosed by
any party to this Agreement to another party, irrespective of the manner in
which such information is disclosed, in furtherance of this Agreement
including, but not limited to, designs, inventions, the Provisional
Application, documentation, Know-How, methodology, techniques, equipment, data,
works of authorship, specifications, sources of supply, vendors and customers,
as well as the terms and existence of this Agreement (unless the terms and
existence of this Agreement shall have been publicly disclosed by MedicalCV).

 

(h)                                 “Contract” means any agreement, contract,
obligation, promise, or undertaking (whether written or oral and whether
express or implied) that is legally binding.

 

(i)                                     “Disclosure Schedules” means those disclosure
schedules, signed and delivered by LightWave to MedicalCV concurrently with the
execution and delivery of this Agreement.

 

(j)                                     “Encumbrance” means any charge, claim, right,
covenant, community property interest, condition, reservation, equitable
interest, lien, mortgage, indenture, deed of trust, license, warrant, pledge,
security interest, right of first refusal, or restriction of any kind,
including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.

 

(k)                                  “Governmental
Authority” means any federal,
state, municipal, domestic, or foreign court, tribunal, or agency, department,
board, instrumentality, commission, or other governmental authority.

 

(l)                                     “Indemnified Party” has the meaning set forth in
Section 7.3.

 

(m)                               “Indemnifying Party” has the meaning set forth in Section 7.3.

 

(n)                                 “Intellectual
Property” as used in this agreement means any and all proprietary information
and rights and data as of the Closing Date in which LightWave has or obtains an
interest, which relates to the Technology or the Product including rights in
any (i) patent, (ii) patent application, (iii) works of authorship and
copyright interests, (iv) trade secret, (v) Know-How, (vi) materials lists,
(vii) designs and specifications, models, samples, prototypes, prints (viii)
inventors’ notes, laboratory notebooks and records; (ix) tools, dies,
murals;  (x) clinical and animal studies
records; (xi) vendor lists, (xii) patent files, including drafts of patent
applications (including the Provisional Application), patent counsel opinions
and correspondence and patent office correspondence, and (xiii) any other
documentation or proprietary information relating to the Technology.

 

(o)                                 “Know-How” as used in this Agreement shall
mean all information, including methods, techniques, formulae, designs,
studies, marketing methods, data, processes, prototypes, designs, or
specifications in which LightWave has or obtains an interest that relate to the
Technology, products integrating the Technology, the manufacture of products
using the Technology and the subject matter in patents on any aspect of the
Technology developed prior to the Closing Date, either solely or jointly with
others, including employees, agents or consultants of LightWave.

 

 

(p)                                 “Knowledge” of (i) an Brucker means the Brucker’s actual
knowledge and all knowledge that such Brucker would reasonably be expected to
have if he or she duly performed his or her duties as an officer, director,
manager, consultant or employee, as the case may be, with due care and made
reasonable and diligent inquiry and exercised due care with respect to the
matter in question and (ii) an entity or organization shall be deemed to
include the Knowledge of an Brucker who is performing his or her duties as an
officer, director, manager, a consultant or employee thereof.

 

(q)                                 “Liabilities” means all direct or indirect indebtedness,
liabilities, claims, debts, damages, deficiencies, obligations, undertakings or
responsibilities, whether known or unknown, determined or determinable,
accrued, fixed or unfixed, choate or unchoate, contingent or absolute,
liquidated or unliquidated, future or otherwise, and whether due or to become
due.

 

(r)                                    “License” means any license, permit, authorization,
franchise, Order or approval, notification, or required registration with any
Governmental Authority or other person.

 

(s)                                  “Litigation” means any action, suit, claim, demand,
Order, investigation or proceeding, at law or in equity, in or before any court or any Governmental
Authority, pending or, to LightWave’s Knowledge, Threatened by or against or
affecting LightWave or any of the Acquired Assets.

 

(t)                                    “Loss(es)” means all claims, demands, losses, costs,
judgments, awards, expenses, obligations, damages, liabilities, deficiencies,
interest including, without limitation, interest, penalties, reasonable
attorneys’ fees, whether or not involving a court proceeding, court costs and
fees and expenses of investigation.  The
amount of a Loss shall bear interest at the rate of eight percent (8%) per
annum from the date incurred until paid by offset or otherwise.  Loss shall include any demands, losses,
cost, judgments, awards, expenses, obligations, damages, deficiencies,
interest, reasonable attorneys fees, court costs and fees and expenses of
investigation incurred by MedicalCV or its Affiliates by reason of a claim that
the Technology infringes or constitutes a misappropriation of the rights of
third parties.

 

(u)                                 “Net
Sales” as used in this Agreement shall be determined by multiplying the number
of units of a particular Product sold at the applicable net selling price, only
if such Products fall within the scope of any Valid Claim of any Patent issued
based upon the Technology, reduced by allowances for cash discounts and other
trade and quantity discounts relating to the Product, credits for return to stock
of Products, credits given under a warranty of Products, credits for
replacement of Products, customary charges for related packaging, shipping,
freight and insurance, and any sales, use or excise taxes, tariffs or similar
governmental charges (except income taxes), all determined in accordance with
generally accepted accounting principles applicable in the United States,
consistently applied.  A sale of a
product shall not constitute Net Sales if the Product is not within the scope
of a Valid Claim.

 

(v)                                 “Order” means any order, judgment, writ, injunction,
award, decree, rule, charge, regulation, or similar action of any Governmental
Authority, instrumentality, or body of competent jurisdiction.

 

(w)                               “Patent”
as used in this Agreement shall mean any issued U.S. patent claiming the
Technology or any invention or method described or identified as a part of the
Intellectual Property.

 

(x)                                   “Product”
means the catheter/probe invention described in the Provisional Application,
including any disposable or nondisposable accessories thereto, and any other
apparatus incorporating one or more aspects of the Technology.

 

 

(y)                                 “Provisional
Application” means the draft of a U.S. Provisional Application prepared and
delivered by LightWave to MedicalCV and attached hereto as Exhibit A.

 

(z)                                   “Restricted
Business” means directly or indirectly engaging in the development,
manufacturing and sale of devices or methods for the treatment of atrial
fibrillation through the delivery of laser energy to affect or create lesions
to the epicardial surface of the heart; provided, however, that the restricted
activity shall not include:  (i)
engaging in the practice of medicine, including the treatment of atrial
fibrillation by any means and consultation in connection therewith, or other
professional activities of physicians such as participation in clinical trials;
or (ii) consultation with or employment by an organization or entity that
engages in the Restricted Business, provided that the subject of such
consultation or work does not involve the development, manufacture and sale of
devices or methods for the treatment of atrial fibrillation through the
delivery of laser energy to affect or create lesions to the epicardial surface
of the heart.

 

(aa)                            “Taxes” means taxes (except income taxes), tariffs, duties and similar
governmental charges paid or payable by MedicalCV or any licensee upon the sale
or transfer of the Product, and includes any sales, use or other tax or
governmental charge imposed by reason of the transfer of the Technology by
LightWave to MedicalCV.

 

(bb)                          “Technology” means the Intellectual Property and all other proprietary
information developed or owned by LightWave that relates to the Product (a
catheter/probe containing elements of an optical fiber, coolant passages with
or without electrodes for measuring electrical potentials of the heart for the
purpose of delivering laser energy to the epicardial surface of the heart for
treatment of a condition described as atrial fibrillation).

 

(cc)                            “Transaction Document”  means, as to any party hereto, any and all agreements,
certificates and other instruments expressly contemplated in this Agreement or
any Exhibit or Disclosure Schedule to be executed or delivered by or on
behalf of such party at or in connection with the Closing hereunder.

 

(dd)                          “Valid
Claim” as used in this Agreement shall mean any claim in an unexpired utility
Patent which has not otherwise been held unenforceable, unpatentable or invalid
by a court of competent jurisdiction or the U.S. Patent and Trademark office,
in an action or proceeding brought or initiated by a party other than MedicalCV
or an affiliate thereof, and such holding is unappealable or unappealed within
the time allowed for appeal, and which Patent has not been admitted to be
invalid or unenforceable through reissue proceedings or disclaimer.

 

1.2                                 Purchase
and Sale of Acquired Assets.  Subject to the terms and conditions of this
Agreement, LightWave agrees to sell, and MedicalCV agrees to purchase at
Closing, all of LightWave’s right, title and interests in the Technology
(collectively, the “Acquired Assets”):

 

1.3                                 Excluded Assets. 
Except for the Acquired Assets, all other assets of LightWave are
excluded from this Agreement.

 

1.4                                 Consideration
and Payment Terms. 
The consideration to be paid by MedicalCV to LightWave will consist of
(a) a standstill payment of 15,000 shares of common stock (receipt of which is
hereby acknowledged), (b) cash payments totaling $550,000 (in U.S. Dollars) at
Closing or upon reaching the milestones, as described below, (c) the issuance
of warrants to purchase common stock of MedicalCV per milestones described
below, and (d) earn-out payments based upon net sales of the Product.

 

 

(a)                                  Standstill Payment.  MedicalCV has issued LightWave 15,000 shares
of MedicalCV common stock upon the signing of a letter of intent dated
April 22, 2003 with respect to the Transaction.

 

(b)                                 Milestone Payments.  MedicalCV will pay to LightWave the
aggregate sum of $550,000 as follows:

 

(1)                                  $10,000
at the Closing of the Transaction;

 

(2)                                  $15,000
upon the earlier of MedicalCV receiving the CE Mark for the Product, or
eighteen (18) months following the Closing Date;

 

(3)                                  $15,000
upon the earlier of MedicalCV’s completion of a 510(k) filing with the U.S.
Food and Drug Administration, or twenty (20) months following the Closing Date;

 

(4)                                  $125,000
within forty-five days (45) following the first Commercial Sale in the U.S. or
Europe to two or more parties, at least one of which is an unrelated party; and

 

(5)                                  $385,000
within forty-five (45) days following MedicalCV achieving $1,500,000 in
cumulative gross product sales of disposables.

 

(c)                                  Milestone Warrants.  MedicalCV will issue seven-year warrants
(“Warrants”) to purchase its common stock, exercisable at an exercise price per
share of the average closing price of such stock for the five (5) trading days
prior to the day of execution of this Agreement.  If there is no trading during such five-day period, then the
exercise price will be the average of the high bid and low asked of prices of
the stock during for such period.  The
warrants shall be in the form of Exhibit A attached to this Agreement.  These Warrants will be issued in accordance
with the following schedule:

 

(1)                                  Warrants
to purchase 25,000 shares upon the Closing;

 

(2)                                  Warrants
to purchase 25,000 shares upon receiving a utility U.S. patent covering the
Product;

 

(3)                                  Warrants
to purchase 25,000 shares upon receiving FDA release of the Product for
Commercial Sale; and

 

(4)                                  Warrants
to purchase 25,000 shares upon first Commercial Sale.

 

(d)                                 Earn-Out.  Within sixty (60) days following each fiscal
quarter of MedicalCV after the first Commercial Sale, MedicalCV will pay
LightWave earn-out payments (the “Earn-Out”) equal to six (6) percent of Net
Sales of the Product sold or transferred to an unaffiliated third party, in
countries in which MedicalCV obtains patent protection for the Product (where,
in each case, the use of such Product in the United States would infringe a
Valid Patent issued to MedicalCV) and four (4) percent of net sales in areas
where there is no Patent protection for the Product.

 

(1)                                  If the
Company reasonably determines that it is required to license or acquire other
technology to be able to practice the Patent or manufacture, license or sell
the Product without infringement of rights of others, then the Earn-Out will be
reduced to the extent of payments made to third parties as royalties, license
fees or other amounts, including amounts paid in settlement of

 

 

claims of infringement by MedicalCV
or its Affiliates, licensees or customers. 
Under no circumstance, however, will the Earn-Out be reduced by more
than 2 percentage points as a result of such reductions.

 

(2)                                  Earn-Out
payments shall be paid for a period of ten (10) years following the first
Commercial Sale, unless MedicalCV terminates its obligations under this
Agreement pursuant to Section 9.5.

 

(3)                                  Commencing
with the second year following the first Commercial Sale, MedicalCV shall,
subject to Section 9.5, pay to LightWave the following Earn-Out payments
(“Minimum Annual Earn-Out Payments”):

 

	
  Year Following

  Commercialization

  	
   

  	
  Minimum Annual Earn-Out Payment

  	
   

  
	
  2

  	
   

  	
   

  	
  $

  	
  50,000

  	
   

  
	
  3

  	
   

  	
   

  	
  $

  	
  75,000

  	
   

  
	
  4

  	
   

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  5

  	
   

  	
   

  	
  $

  	
  200,000

  	
   

  
	
  6

  	
   

  	
   

  	
  $

  	
  300,000

  	
   

  
	
  7

  	
   

  	
   

  	
  $

  	
  350,000

  	
   

  
	
  8

  	
   

  	
   

  	
  $

  	
  350,000

  	
   

  
	
  9

  	
   

  	
   

  	
  $

  	
  400,000

  	
   

  
	
  10

  	
   

  	
   

  	
  $

  	
  500,000

  	
   

  

 

1.5                                 Reporting.  Within sixty (60) days after the end of each
fiscal quarter of MedicalCV, MedicalCV shall provide to LightWave a report
setting forth in reasonable detail the basis for determining the amount of
Earn-Out payments due to LightWave for the preceding fiscal quarter.  The report shall include, at a minimum, the
following information with respect to the applicable fiscal quarter:

 

(a)                                  Net Sales
of the Product by MedicalCV, its Affiliates and licensees;

 

(b)                                 The total
quantities of the Product sold or otherwise transferred by MedicalCV or any of
its Affiliates;

 

(c)                                  The
average gross price invoiced by MedicalCV or any of its Affiliates or
licensees; and

 

(d)                                 The total
Earn-Out payments accrued for such fiscal quarterly period.

 

1.6                                 Audit Rights.  MedicalCV shall maintain accurate records
and books of accounts efficient to substantiate the quantities of Product
sold.  Upon reasonable notice to
MedicalCV, LightWave shall have the right to conduct an audit, but not more
than once per calendar year, either itself or through an independent accounting
firm, of the quantities of the Product sold, and to examine the records and
books of account of MedicalCV in connection therewith.  LightWave shall bear the full cost and
expense of such audit, unless a discrepancy in excess of five (5) percent in
favor of LightWave is discovered, in which event MedicalCV shall bear the full
cost and expense of such audit.

 

1.7                                 No Assumption of
Liabilities.  MedicalCV does not and
will not assume, and does not agree to pay or discharge any liabilities,
obligations or undertakings of LightWave of any kind or nature whatsoever.

 

 

1.8                                 Allocation
of Purchase Price. 
The Purchase Price shall
be allocated among the Acquired Assets in accordance with Schedule 1.6
(Allocation of Purchase Price).  The
parties will follow and use such allocation for tax purposes, including without
limitation, the filing of all Tax Returns or other related reports required to
be filed with any Governmental Authority.

 

1.9                                 Taxes. 
Any Taxes, which may be payable in connection with the sale and transfer
of the Acquired Assets shall be paid by LightWave.

 

1.10                           Employees. 
Except as set forth in this Agreement, MedicalCV has not agreed to
engage any employee, contractor or consultant to LightWave.  LightWave will be responsible for satisfying
any and all claims of its employees as to compensation, accrued benefits,
worker compensation claims, termination and severance benefits and any
withdrawal liability and vested rights under any employee benefit plans existing
or arising as of or following the Closing Date, and in no event shall MedicalCV
have any liability or responsibility in respect thereof.

 

1.11                           Offset of Liabilities.  In the event MedicalCV is or becomes liable
for any expense, liability, cost or obligation (other than payment of the
purchase consideration set forth in Section 1.3 hereof), or MedicalCV is
entitled to a payment or reimbursement from LightWave pursuant to
Section 7, or as a result of an award by a court or arbitrator in favor of
MedicalCV (collectively, each included within the definition of Loss in 1.1(u)
herein), MedicalCV may, in addition to rights of indemnification provided
hereunder, be entitled to offset any such Loss against amounts due LightWave by
reason of this Agreement, or which MedicalCV elects to pay pursuant to
Section 9.5.

 

1.12                           Bulk Transfer Laws.  To the extent required under applicable law,
LightWave will comply with and be responsible for the obligations of MedicalCV
and LightWave under the provisions of all applicable bulk transfer laws of all
jurisdictions pertaining to the transactions contemplated by this Agreement,
including, without limitation, the bulk transfer laws of the State of North
Carolina.  LightWave agrees to indemnify
and hold harmless MedicalCV and its Affiliates from and against any loss
arising out of LightWave’s noncompliance with any bulk transfer laws of any
jurisdiction in connection with the transactions contemplated by this
Agreement.

 

1.13                           Further
Assurances. 
LightWave, Brucker and Svenson shall from time to time after the
Closing, without further consideration, execute and deliver such instruments of
transfer, conveyance and assignment (in addition to those delivered pursuant to
Section 2.2), and shall take such other action, as MedicalCV may
reasonably request to more effectively transfer, convey and assign to and vest
in MedicalCV, and to put MedicalCV in actual possession and control of, the
Acquired Assets.

 

SECTION 2.

THE CLOSING

 

2.1                                 Time; Place and Date. 
The closing of the transactions contemplated under this Agreement (the
“Closing”) shall occur at the offices of MedicalCV’s counsel, Briggs and
Morgan, P.A., 2200 IDS Center, 80 South Eighth Street, Minneapolis, Minnesota
55402, at 10:00 a.m. on August     , 2003, unless a
different date, time or place is mutually agreed upon by the parties (such date
and time of the Closing referred to as the “Closing Date”).  All actions to be taken at the Closing as
hereinafter set forth, and all documents and instruments executed and
delivered, and all payments made with respect thereto, shall be considered to
have been taken, delivered or made simultaneously, and no such action or
delivery or payment shall be considered as complete until all actions required
to be taken in connection with the Closing have been completed.

 

 

2.2                                 Instruments
of Transfer. 
At the Closing, LightWave shall deliver to MedicalCV such instruments of
transfer, assignment and conveyance, including (without limitation) bills of
sale, transferring all interests and title in and to the Acquired Assets to
MedicalCV, as may reasonably be requested by MedicalCV.  Such instruments shall include all documents
required from persons who may be deemed inventors of the Technology and all
documents necessary or desirable for the filing of patent application.  Such instruments shall be reasonably
satisfactory in form and substance to MedicalCV and its legal counsel and shall
vest in MedicalCV ownership of all the Acquired Assets, free and clear of all
Encumbrances.

 

SECTION 3.

REPRESENTATIONS AND WARRANTIES OF LIGHTWAVE

 

LightWave represents and warrants to
MedicalCV that the
statements contained in this Section 3 are true and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Section 3).

 

3.1                                 Organization and Qualification.  LightWave is a corporation duly organized,
validly existing and in good standing under the laws of the State of North
Carolina with full corporate power and authority to execute, deliver and fully
perform its obligations under this Agreement.

 

3.2                                 Authority of LightWave. 
The execution, delivery, and performance by LightWave of this Agreement
and the Transaction Documents to which it is a party have been duly authorized
by all necessary corporate action required on LightWave’s part.  No
further corporate authorization or any other authorization, consent or approval
by any Governmental Authority or by any other person is necessary with respect
to the execution, delivery, and performance of this Agreement and the
Transaction Documents by LightWave.

 

3.3                                 Enforceability. 
This Agreement and all Transaction Documents are valid, binding and
enforceable in accordance with their terms upon LightWave, subject to
limitations that may result from bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to creditor’s rights and limitations on the
remedy of specific performance and other forms of equitable relief.

 

3.4                                 Noncontravention.  Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will
(i) violate, conflict with, or result in a breach or default under any
provision of the articles of incorporation or bylaws of LightWave, (ii) violate
any constitution, statute, regulation, rule, Order, or other restriction of any
Governmental Authority to which LightWave is subject or (iv) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require or receive any notice under any material
agreement, contract, lease, license, instrument, or other arrangement to which
LightWave is a party or by which it is bound or to which any of LightWave’s
assets is subject.  LightWave does not
need to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any Governmental Authority in order for the parties to
consummate the transactions contemplated by this Agreement.

 

3.5                                 Ownership
of Acquired Assets. 
All Acquired Assets are owned by LightWave, free and clear of all
Encumbrances.

 

3.6                                 Intellectual
Property.  LightWave has conducted a reasonable
investigation concerning the Intellectual Property and represents and warrants
that:

 

 

(a)                                  To the best of its knowledge, no other
parties have any rights to the Technology or Intellectual Property of LightWave
described in this Agreement and to be conveyed to MedicalCV pursuant hereto;
that LightWave has taken all proper and adequate steps to ensure the continued
proprietary nature of all Intellectual Property related to the Technology and
nothing has transpired that would compromise or call into question the proprietary
nature of the Intellectual Property; that LightWave has the full right, power
and authority to enter into this Agreement and, to the best of its knowledge,
has the right to convey such Intellectual Property to MedicalCV; and LightWave
represents and warrants that LightWave has the full right, power and authority
to perform the services required hereunder.

 

(b)                                 The trade secrets included in the
Intellectual Property and Know-How are the property of LightWave.

 

(c)                                  The Intellectual Property Rights are owned by
LightWave free and clear of any Encumbrance;

 

(d)                                 To the best of its knowledge, products made
within the scope of claims of the Provisional Application can be manufactured,
sold and used in the United States without infringing upon any valid US Patent,
but no representation, warranty or guaranty is made that any US Patent will
issue for any invention disclosed as a part of the Intellectual Property,
including the Provisional Application; and

 

(e)                                  All former and current employees of, and
consultants to, LightWave have executed written Contracts with LightWave that
assign to LightWave all rights to any inventions, improvements, discoveries, or
information relating to LightWave’s Business, and no employee or consultant
LightWave has entered into any Contract that restricts or limits in any way the
scope or type of work in which the employee may be engaged or requires the
employee to transfer, assign, or disclose information concerning his work to
anyone other than LightWave.  The
inventors of Technology are Brucker and Svenson.

 

(f)                                    Patents.

 

Disclosure Schedule 3.6 (Intellectual Property) contains a
complete and accurate list and summary description of patent application drafts
and disclosures.  LightWave is the owner
of all right, title, and interest in the Provisional Application and invention
disclosed therein.

 

(g)                                 Copyrights.

 

(1)                                  Disclosure Schedule 3.6 (Intellectual
Property) contains a complete and accurate list and summary description of all
works of authorship (“Works”). 
LightWave is the owner of all right, title, and interest in and to each
of the Works.  At Closing, LightWave
will cause each Works to be free and clear of all liens, security interests,
charges, encumbrances, equities, and other adverse claims.

 

(2)                                  To the best of its knowledge, none of the
subject matter of any of the Works infringes or is alleged to infringe any
copyright of any third party or is a derivative work based on the work of a
third party.

 

(h)                                 Trade Secrets.

 

 

(1)                                  With respect to each Trade Secret, the
documentation relating to such Trade Secret is current, accurate, and
sufficient in detail and content to identify and explain it and to allow its
full and proper use without reliance on the knowledge or memory of any
individual.

 

(2)                                  LightWave has taken all reasonable precautions
to protect the secrecy, confidentiality, and value of its Trade Secrets.

 

(3)                                  LightWave has good title and ownership or
right to use the Trade Secrets.  The
Trade Secrets are not part of the public knowledge or literature, and, to
LightWave’s Knowledge, have not been used, divulged (other than to LightWave’s
employees), or appropriated either for the benefit of any person or to the
detriment of LightWave.  No Trade Secret
is subject to any adverse claim or has been challenged or Threatened in any
way.

 

3.7                                 Other
Contracts. 
Disclosure Schedule 3.7 (Other Contracts) lists all of the
following Contracts relating to the Product or the Intellectual Property:

 

(a)                                  All
partnership, joint venture agreements, licenses and all other agreements
involving the sharing of profits or revenues from the sale of the Product;

 

(b)                                 Any agreement of LightWave concerning
confidentiality or noncompetition;

 

(c)                                  Any agreement involving LightWave and its
Affiliates; and

 

if requested by MedicalCV, LightWave will deliver to MedicalCV a
correct and complete copy of any of the Other Contracts listed on Disclosure
Schedule 3.7 (as amended to date).

 

3.8                                 Litigation. 
There is no Litigation pending or threatened against LightWave or any of
the Acquired Assets.  Except as described
on Disclosure Schedule 3.8, LightWave is not subject to, and the Acquired
Assets are not affected by, any continuing Order, nor is LightWave in default
with respect to any Order.

 

3.9                                 Compliance
with Laws. 
LightWave has been operating its business in compliance with all
federal, state, municipal and other statutes, rules, ordinances and regulations
applicable to the operation of its business and the Acquired Assets (including
without limitation all environmental protection and occupational safety and health
rules, regulations and laws).

 

3.10                           Finders. 
LightWave is not a party to or in any way obligated under any contract
or other agreement, and there are no outstanding claims against it, for the
payment of any broker’s or finder’s fee in connection with the origin,
negotiation, execution or performance of this Agreement.

 

3.11                           Full
Disclosure. 
The representations and warranties made under this Section 3 or in
any Disclosure Schedules or certificates furnished to MedicalCV pursuant hereto
do not and will not contain any untrue statement of a fact or omit to state a
fact required to be stated herein or therein or necessary to make the
representations or warranties herein or therein, in light of the circumstances
in which they are made, not misleading.

 

 

SECTION 4.

REPRESENTATIONS AND WARRANTIES OF MEDICALCV

 

MedicalCV represents and warrants to
LightWave that the
statements contained in this Section 4 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Section 4).

 

4.1                                 Organization and Qualification. 
MedicalCV is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Minnesota with full corporate power and authority to
execute, deliver and fully perform its obligations under this Agreement.

 

4.2                                 Authority of MedicalCV. 
The execution, delivery, and performance by MedicalCV of this Agreement
and the Transaction Documents to which it is a party have been duly authorized
by all necessary corporate action required on MedicalCV’s part.  No
further corporate authorization or other authorization, consent or approval by
any Governmental Authority or by any other person is necessary with respect to
the execution, delivery, and performance of this Agreement and the Transaction
Documents by MedicalCV.

 

4.3                                 Enforceability. 
This Agreement and all Transaction Documents are valid, binding and
enforceable in accordance with their terms upon MedicalCV, subject to
limitations that may result from bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to creditor’s rights and limitations on the
remedy of specific performance and other forms of equitable relief.

 

4.4                                 Noncontravention.  Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will
(i) violate, conflict with, or result in a breach or default under any
provision of the articles of incorporation or bylaws of MedicalCV, (ii) violate
any constitution, statute, regulation, rule, Order, or other restriction of any
Governmental Authority to which MedicalCV is subject or (iii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require or receive any notice under any material
agreement, contract, lease, license, instrument, or other arrangement to which
MedicalCV is a party or by which it is bound or to which any of its assets are
subject.  MedicalCV does not need to
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any Governmental Authority in order for the parties to
consummate the transactions contemplated by this Agreement.

 

4.5                                 Finders. 
MedicalCV is not a party to or in any way obligated under any contract
or other agreement, and there are no outstanding claims against it, for the
payment of any broker’s or finder’s fee in connection with the origin,
negotiation, execution, or performance of this Agreement.

 

4.6                                 Financial Statements and
Condition.  MedicalCV’s unaudited
financial statements, dated as of April 30, 2003, as heretofore furnished
to LightWave, fairly present the financial condition of MedicalCV.  MedicalCV has filed all forms, reports and
documents required to be filed by it with the SEC since November 21, 2001
and has heretofore made available to the Lender, in the form filed with the SEC
(excluding any exhibits thereto), (i) its Annual Report on Form 10-KSB for the
fiscal year ended April 30, 2002, and (ii) all other forms, reports,
registration statements and other documents filed by MedicalCV with the SEC
since November 21, 2001 (the forms, reports, registration statements and
other documents referred to in clauses (i) and (ii) above being referred to
herein, collectively, as the “MedicalCV SEC Reports”).  Since April 30, 2003, except as set forth
in the MedicalCV SEC Reports, there has been no material adverse change in the
financial condition or assets of MedicalCV. 
To the best of Borrower’s knowledge, MedicalCV SEC Reports (i) were
prepared substantially in accordance with the requirements of the Securities
Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act
of 1934, as amended, as the case may be, and the rules and regulations
thereunder and (ii) did not at the time they were filed, contain any untrue
statement of a material fact or omit to state a

 

 

material fact required to be stated
therein or necessary in order to make the statements made therein, in the light
of the circumstances under which they were or are made, not misleading.  LightWave acknowledges or represents that:

 

(a)                                  It has received and reviewed MedicalCV SEC
Reports;

 

(b)                                 It is able to bear the economic risk of the
transaction described in this Agreement;

 

(c)                                  It understands the risk of investment in MedicalCV;

 

(d)                                 It has been given access to full and complete
information regarding MedicalCV,
including the opportunity to meet with officers, ask questions of and receive
answers from such officers, and review such documents as it may have requested,
and has utilized such access to his satisfaction for the purpose of obtaining
information in addition to, or verifying information included in, MedicalCV SEC Reports and other information disclosed
by MedicalCV orally or in writing.

 

(e)                                  Neither the Warrants nor common stock of
MedicalCV issuable upon exercise of the thereof (“Shares”) have been registered
under the Securities Act or state securities laws; and

 

(f)                                    The Warrants and Shares are being acquired
for its own account and for investment and without the intention of reselling
or redistributing the same, and that if LightWave should determine to dispose
or transfer the Warrants or Shares, it will not do so without (1) obtaining an
opinion of counsel satisfactory to MedicalCV that such proposed disposition or transfer may lawfully be made
without registration under the Act, or (2) such registrations are in effect.

 

SECTION 5.

PRE-CLOSING COVENANTS

 

5.1                                 Covenants
of LightWave Pending Closing.  LightWave covenants with MedicalCV that:

 

(a)                                  Conduct of Business.  From
the date of this Agreement to the Closing Date, LightWave shall maintain and
carry on its business in the ordinary and normal manner consistent with past
practices.

 

(b)                                 Access to Information and
LightWave’s Employees, Agents and Consultants.  Prior to Closing, LightWave will give to
MedicalCV, its counsel, accountants and other representatives, full and free
access to all of the properties, books, contracts, commitments, records,
employees and consultants of LightWave so that MedicalCV may have full
opportunity to make such investigation as it shall desire regarding the
Acquired Assets.

 

(c)                                  Consents
and Approvals.  LightWave will use its
best efforts to obtain the necessary consents and approvals of other persons
which may be required to be obtained on their part to consummate the
transactions contemplated by this Agreement.

 

(d)                                 Bulk Transfer
Laws.  To the extent
required under applicable law, LightWave will comply with and be responsible
for all obligations of LightWave and LightWave under the provisions of all
applicable bulk transfer laws of all jurisdictions pertaining to the transactions

 

 

contemplated by this Agreement, including, without limitation, the bulk
transfer laws of the State of North Carolina.

 

(e)                                  Exclusivity.  LightWave agrees that it shall not enter
into any agreements or commitments, or initiate, solicit or encourage any
offers, proposals or expressions of interest, or otherwise hold any discussions
with any investment bankers or finders, with respect to the possible sale or
other disposition of the Technology, other than with MedicalCV.

 

(f)                                    No Public Announcement.  LightWave shall not make any public
announcement or release of information relative to this Agreement or the
Transaction, including the existence thereof, unless a public announcement
thereof has first been made by MedicalCV or MedicalCV has consented in writing
to such announcement or release.

 

5.2                                 Covenants
of MedicalCV Pending Closing.  MedicalCV covenants with LightWave that:

 

(a)                                  Consents
and Approvals.  MedicalCV will use its
best efforts to obtain the necessary consents and approvals of other persons
which may be required to be obtained on its part to consummate the transactions
contemplated in this Agreement.

 

SECTION 6.

CONDITIONS TO OBLIGATIONS TO CLOSE

 

6.1                                 Conditions
to Obligation of MedicalCV.  The obligations of MedicalCV under this
Agreement shall be subject to the following conditions, any of which may be
expressly waived by MedicalCV in writing:

 

(a)                                  Representations
and Warranties True; Covenants Performed. 
MedicalCV shall not have discovered any material error, misstatement or
omission in the representations and warranties made by LightWave in
Section 3; LightWave shall have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied with by
them at or prior to the Closing.

 

(b)                                 Pre-Acquisition
Review.  MedicalCV and its
representatives shall have completed and be satisfied with its a
pre-acquisition review of the financial information, books and records, and
properties and assets of the Business and shall have discovered no change in the
Acquired Assets business or prospects of the Affiliates which could, in the
sole determination of MedicalCV, have an adverse effect on the value to
MedicalCV of the Acquired Assets being acquired hereunder.

 

(c)                                  Noncompetition and
Consulting Agreements.  Brucker and Svenson shall have entered into the Technology
Assignment Agreement in the form of Exhibit C and the Proprietary Information
and Inventions Agreement in the form of Exhibit D.  Svenson shall have entered into the Technical Assistance
Agreement in the form of Exhibit E. 
Brucker shall have entered into the Technical Assistance Agreement in
the Form of Exhibit F.

 

(d)                                 No
Loss or Damage.  Prior to the Closing
there shall not have occurred any loss or damage to any substantial portion of
the Acquired Assets.

 

 

(e)                                  Delivery
of Technology.  LightWave shall have
delivered to MedicalCV the Acquired Assets and all documents and instruments
required to assign and transfer to MedicalCV the Acquired Assets.

 

6.2                                 Conditions
to Obligations of LightWave.  The obligations of LightWave under this
Agreement shall be subject to the following conditions, any of which may be
expressly waived by LightWave in writing:

 

(a)                                  Representations
and Warranties True; Covenants Performed. 
LightWave shall not have discovered any material error, misstatement or
omission in the representations and warranties made by MedicalCV in
Section 4, MedicalCV shall have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied with by
it at or prior to the Closing.

 

(b)                                 Payment of Purchase
Price.  LightWave shall have
received payment of the Purchase Price due at Closing in accordance with
Section 1.3.

 

6.3                                 Mutual Conditions. 
Unless waived in writing
by both of the parties hereto, each and every obligation of MedicalCV, on the
one hand, and LightWave, on the other hand, to be performed at or upon the
Closing shall be subject to the satisfaction at or prior thereto of each and
all of the following conditions precedent:

 

(a)                                  There being no (i) proceedings which
have been brought, asserted, commenced or threatened against MedicalCV or
LightWave by any person involving or affecting in any way MedicalCV’s or
LightWave’s consummation of the transactions contemplated hereby, or (ii) applicable
laws restraining or enjoining, or which may reasonably be expected to nullify
or render ineffective, this Agreement or the consummation of the transactions
contemplated hereby or which otherwise could reasonably be expected to have a
material adverse effect on the Acquired Assets or the operations of LightWave.

 

(b)                                 MedicalCV
and LightWave shall have received evidence, in form and substance reasonably
satisfactory to LightWave and MedicalCV, that all consents, waivers, releases,
authorizations, approvals, licenses, certificates, and permits to complete the
Transaction.

 

SECTION 7.

INDEMNIFICATION

 

7.1                                 Indemnification
by LightWave. 
LightWave agrees to indemnify and hold harmless MedicalCV, its
Affiliates and its successors and assigns from and against any and all Losses
which are caused by or arise out of (i) any breach or default in the
performance by LightWave of any covenant or agreement of LightWave contained in
this Agreement, (ii) any breach of a warranty or inaccurate or erroneous
representation made by LightWave in this Agreement, any Exhibit or Disclosure
Schedule, certificate or other instrument delivered by or on behalf of
LightWave pursuant hereto; (iii) any Loss arising from the operations, business
or actions of LightWave prior to the Closing; and (iv) any breach by LightWave
of a post-closing covenant.

 

7.2                                 Indemnification
by MedicalCV. 
MedicalCV agrees to indemnify and hold harmless LightWave, and its
Affiliates, successors and assigns from and against any Losses which are caused
by or arise out of (i) any breach or default in the performance by MedicalCV of
any covenant or agreement of

 

 

MedicalCV contained in this
Agreement (ii) any breach of a warranty or inaccurate or erroneous
representation made by MedicalCV in this Agreement, any Exhibit or in any
Disclosure Schedule, certificate or other instrument delivered by or on behalf
of MedicalCV pursuant hereto.

 

7.3                                 Third
Party Claims. 
Upon receipt by a party
eligible for indemnification hereunder (“Indemnified Party”) of notice of any
action, proceeding, claim or potential claim (“Claim”) which could give rise to
a right to indemnification pursuant to this Section 7, the Indemnified
Party shall give the other party responsible for such indemnification
(“Indemnifying Party”) prompt written notice describing the circumstances
relating to the Claim in reasonable detail (“Claims Notice”); provided, that
the failure to provide such Claims Notice will not relieve the Indemnifying
Party of its obligations hereunder unless it is actually and materially
prejudiced by such failure.  The
Indemnifying Party shall have the right, at its option, to compromise or
defend, at its own expense and by its own counsel, any such matter involving
the asserted liability of the Indemnified Party; provided, that any such
compromise (i) shall include as an unconditional term thereof the giving by the
claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect of such claim and (ii) shall not result in the imposition
on the Indemnified Party of any remedy other than monetary damages.  If any Indemnifying Party shall undertake to
compromise or defend any such asserted liability, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party agrees
to cooperate fully with the Indemnifying Party and its counsel in the
compromise of, or defense against, any such asserted liability.  In any event, the Indemnified Party shall
have the right, at its own expense, to participate in the defense of such
asserted liability.  The Indemnified
Party shall have the right to control the defense or settlement of that portion
of any claim which seeks an Order against the Indemnified Party which could
materially interfere with the business, operations, assets or financial condition
of the Indemnified Party; provided, that in connection with the defense or
settlement of the portion of such claim which seeks equitable relief, the
Indemnified Party shall cooperate with the Indemnifying Party and use its
reasonable best efforts to limit the liability of the Indemnifying Party for
the damages portion of such claim. 
Under no circumstances shall the Indemnified Party or the Indemnifying
Party compromise any such asserted liability without the written consent of the
other which consent shall not be unreasonably withheld, unless the Indemnifying
Party shall have failed or refused to undertake the defense or compromise of
any such asserted liability after a reasonable period of time has elapsed
following the Indemnifying Party’s receipt of the Claims Notice in accordance
with this Section 7.3.

 

7.4                                 Withholding
of Payment.  Upon the occurrence of a Claim and the
giving of a Claim Notice to LightWave, MedicalCV may withhold, or set-off
against, any consideration to which LightWave may be entitled under this
Agreement until such Claim is resolved. 
The withholding of any such amount by MedicalCV in good faith, whether
or not ultimately determined to be justified, will not constitute a breach of
this Agreement or be a basis for damages in favor of LightWave.

 

7.5                                 No Election. 
Neither the exercise of rights to indemnification or to withhold or
set-off amounts due LightWave by MedicalCV, nor its failure to exercise such
rights, will constitute an election of remedies or limit MedicalCV in any
manner in the enforcement of any other remedies to which it may be entitled;
and all remedies of MedicalCV shall be cumulative.

 

SECTION 8.

TERMINATION

 

8.1                                 Efforts
to Satisfy Conditions.  LightWave agrees to use all reasonable
commercial efforts to bring about the satisfaction of the conditions specified
Section 6.1, and MedicalCV agrees to use reasonable commercial efforts to
bring about the satisfaction of the conditions specified in Section 6.2.

 

 

8.2                                 Termination. 
This Agreement may be terminated prior to Closing by:

 

(a)                                  The
mutual written consent of LightWave and MedicalCV;

 

(b)                                 MedicalCV,
if a material default shall be made by LightWave in the observance or in the
due and timely performance by any of LightWave’s covenants herein contained, or
if there shall have been a material breach or misrepresentation by LightWave of
any of its warranties and representations herein contained, or if the
conditions of this Agreement to be complied with or performed by LightWave at
or before the Closing shall not have been complied with or performed at the
time required for such compliance or performance and such noncompliance or
nonperformance shall not have been expressly waived by MedicalCV in writing;

 

(c)                                  LightWave,
if a material default shall be made by MedicalCV in the observance or in the
due and timely performance by MedicalCV of any of its covenants herein
contained, or if there shall have been a material breach or misrepresentation
by MedicalCV of any of its warranties and representations herein contained, or
if the conditions of this Agreement to be complied with or performed by
MedicalCV at or before the Closing shall not have been complied with or
performed at the time required for such compliance or performance and such
noncompliance or nonperformance shall not have been expressly waived by
LightWave in writing; or

 

(d)                                 Either
LightWave or MedicalCV, if the Closing has not occurred by September 30,
2003, provided that the failure of the Closing to occur by such date is not due
to the breach or default of a material representation or covenant herein
contained by the party seeking to terminate this Agreement.

 

8.3                                 Liability
Upon Termination. 
If this Agreement is terminated under Sections 8.2 (a) or (d), then no
party shall have any liability to any other party hereunder.  If this Agreement is terminated under
Sections 8.2(b) or (c), then (i) the party so terminating this Agreement shall
not have any liability to any other party hereto, provided the terminating party
has not breached any representation or warranty or failed to comply with any of
its covenants in this Agreement, and (ii) such termination shall not prejudice
the rights and remedies of the terminating party against any other party which
has breached any of its representations, warranties or covenants herein prior
to such termination.

 

SECTION 9.

POST-CLOSING COVENANTS

 

9.1                                 LightWave
Technical Assistance.

 

(a)                                  For a period of one-hundred and twenty (120)
days following the Closing Date, LightWave will, without charge, provide
reasonable technical support to MedicalCV in connection with any and all
aspects of the development, manufacture and Marketing of the Product, as well
as in connection with any regulatory filings which MedicalCV may pursue.  LightWave’s technical support, consultation
and assistance shall be provided primarily by Brucker.  If required during such period, Svenson also
agrees to provide such assistance. 
MedicalCV will pay all direct out-of-pocket expenses (other than
salaries, fees or benefits) incurred by LightWave, as set forth in budgets
approved in writing by MedicalCV.  Such
expenses may include reasonable travel (economy class), food, ground
transportation and lodging expenses, but shall not include any amounts
attributable to LightWave’s normal recurring general and administrative
expenses.

 

 

(b)                                 Following the execution of this Agreement and
for a period of three (3) years following the Closing Date, LightWave will
cause Brucker and Svenson to provide reasonable consultation and assistance to
MedicalCV and its agents in connection with the evaluation and preparation of
patent applications for inventions disclosed in or arising out of the
Intellectual Property and evaluation and preparation of responses to patent
office communications relating to the same and, to the extent LightWave
employees shall be deemed to have inventorship or ownership in any inventions
disclosed or claimed in such patent applications, they shall execute and
deliver such documents and instruments as shall be necessary or desirable, in
the opinion of MedicalCV’s patent counsel, to effect the filing of such patent
applications and the recordation of the appropriate inventorship and ownership.

 

9.2                                 LightWave
Noncompetition.  LightWave, Brucker and Svenson
acknowledge that as an inducement to MedicalCV to enter into this Agreement,
that for a period of five (5) years after the Closing Date, LightWave and
Brucker will not, directly or indirectly, engage or invest in, own, manage,
operate, finance, control or participate in the ownership, management, operation
or control of, or in any manner be connected with, any business that engages in
the Restricted Business, anywhere in the world; provided, however, that
LightWave, Brucker or Svenson may purchase or otherwise acquire up to (but not
more than) one percent of any class of securities of any enterprise (but
without otherwise participating in the activities of such enterprise) if such
securities are listed on any national stock exchange or the Nasdaq stock market
or have been registered under Section 12(g) of the Securities Exchange Act
of 1934.  LightWave, Brucker and Svenson
agree that this covenant is reasonable with respect to its duration,
geographical area and scope.  No activities
engaged in at the request of MedicalCV or its Affiliates, successors or assigns
shall be deemed to violate this covenant.

 

9.3                                 LightWave
Nondisclosure.  During the term of this Agreement and for a
period of five (5) years thereafter, LightWave shall maintain all Confidential
Information relating to the Acquired Assets or received from MedicalCV in
confidence, and shall not disclose, divulge or otherwise communicate such
Confidential Information to others, or use it for any purpose, except pursuant
to, and in order to carryout, the terms and conditions of this Agreement.  LightWave shall exercise all reasonable
precautions to prevent and restrain the unauthorized disclosure of such
Confidential Information by any director, officer, employee, consultant,
subcontractor or agent of LightWave.

 

9.4                                 Improvements.  For
a period of five (5) years after the Closing Date, any improvements or
additional inventions relating to the Technology, or improvements to the
Product, conceived or developed, in whole or in part, by LightWave, Brucker or
Svenson shall be deemed an invention or improvement owned by MedicalCV and
subject to transfer of Technology pursuant to this Agreement, and upon request
of MedicalCV, LightWave, Brucker and Svenson agree to irrevocably assign in
writing all rights in and to such inventions or improvements to MedicalCV.  LightWave, Brucker and Svenson agree to
disclose to MedicalCV all such inventions and improvements relating to the
Technology, and assign such inventions or improvements to MedicalCV; provided,
however, LightWave and Brucker shall not be deemed to have made representations
and warranties contained in Sections 3.5 and 3.6 with respect to such
inventions or improvements.  At the end
of the five year period following the Closing Date, Brucker and Svenson shall
provide a written communication to MedicalCV summarizing any and all
improvements or additional inventions relating to the Technology, or
improvements to the Product, conceived or developed, in whole or in part, by
LightWave, Brucker or Svenson.

 

9.5                                 MedicalCV
Commercialization of Product.  MedicalCV agrees to use reasonable
commercial efforts to commercialize the Technology within a period of three (3)
years following the Closing Date.

 

(a)                                  If MedicalCV shall fail to commercialize the
Product and effect a Commercial Sale of the Product in the United States or
Europe within such three (3) year period, LightWave shall

 

 

have the right, upon written request to MedicalCV, to obtain an
exclusive worldwide license to the Technology with a right to manufacture,
license, use and sell the Technology; provided, however, that MedicalCV may,
upon receiving such written notice from LightWave, extend such three (3) year
period for up to an additional twenty-four (24) months upon payment to
LightWave of the additional sum of $125,000.

 

(b)                                 Notwithstanding the foregoing, if at any time
after the Closing Date, MedicalCV determines to discontinue the development of
the Technology or the marketing of the Product (directly or through licensees),
it may do so without liability to LightWave and shall have no further obligation
to pay amounts due LightWave under this Agreement, shall so notify LightWave
and LightWave may, upon written request and subject to outstanding licenses of
the Technology, obtain from MedicalCV a license to use the Intellectual
Property or, at MedicalCV’s option, MedicalCV may assign its rights in the
Intellectual Property to LightWave (subject to all license, for the Technology
then in effect).  In such event,
LightWave may retain all consideration which has been paid to it through the
date of such termination.

 

(c)                                  If by reason of Net Sales levels, MedicalCV
shall have failed for any year to pay, the Minimum Annual Earn-Out Payment,
MedicalCV may, at its option, (1) elect to pay the difference between the
Earn-Out payments made for such year and the Minimum Annual Earn-Out Payment
for such year; or (2) grant to LightWave a nonexclusive right to the
Technology, including a nonexclusive license to manufacture and sell products
covered by any Patent owned by MedicalCV. 
MedicalCV shall have no other obligation or liability to LightWave by
reason of the failure of MedicalCV to achieve Minimum Annual Net Sales for any
year or by reason of its failure to pay the Minimum Annual Earn-Out Payment
based upon such level of sales.  The
sole and exclusive remedy of LightWave in the event of such failure shall be to
either receive a payment equal to the difference of the Earn-Out Payment
actually made by MedicalCV and the Minimum Annual Earn-Out Payment for such
year or, at MedicalCV’s election, to receive such nonexclusive rights to use
the Technology and nonexclusive licenses to MedicalCV’s Patents.

 

(d)                                 MedicalCV shall have sole discretion as to
the methods, time schedule, personnel, resources, marketing decisions and
strategies utilized in developing and commercializing the Technology, and shall
have sole discretion to determine to cease efforts to commercialize the
Technology and to cease marketing the Product, all without any liability to
LightWave as a result of the exercise of such discretion.  MedicalCV shall have sole discretion as to
pursuit and implementation of a patent strategy, including, but not limited to,
the filing of patent applications, continuations and continuations-in part, the
countries in which patent protection will be sought, and the maintenance or
abandonment of patents.

 

9.6                                 Litigation
Support.  LightWave, Brucker and Svenson agree that
during the later of (a) term of the Earn-Out, or (b) the life of any Patent,
they will, in any action to enforce a Patent or defend any claim or suit
against MedicalCV or its assignees or licensees alleging its infringement of
rights of third parties, provide without charge reasonable cooperation and
assistance to MedicalCV or its assignees or licensees therein, including
in-person and telephonic consultation with legal counsel prosecuting or
defending such claims or suits and the giving of testimony in any deposition or
proceeding.  Such cooperation and
assistance shall be requested in a manner to reasonably minimize the interruption
of the employment and professional duties of Brucker and Svenson.  MedicalCV shall reimburse LightWave, Brucker
and Svenson for out-of-pocket expenses incurred by them in providing such
services, including expenses for travel (economy class), food, ground
transportation and lodging.

 

 

SECTION 10.

 

ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS

 

10.1                           Administrative. 
The following administrative provisions shall apply to this Agreement:

 

(a)                                  Construction.  For
purposes of construction, (1) the recitals set forth above constitute a part of
this Agreement, (2) captions and Section headings used herein are for
convenience only and are not a part of this Agreement, and shall not be used in
construing it, (3) references herein to a Section shall apply to the
Sections of this Agreement, (4) all Exhibits and Schedules attached and
Disclosure Schedules  are
incorporated into this Agreement by reference, (5) all references to “person”
herein shall include any individual, partnership, corporation, trust,
organization or other entity, unless the context requires otherwise, (6) the
terms “hereof,” “herein,” “hereto,” and “hereunder” shall refer to this
Agreement, (7) all references in this Agreement to one gender shall include all
genders; any reference to the singular shall include the plural, where appropriate,
and vice-versa, and (9) for ease and consistency in reference, the neuter
gender is primarily used throughout this Agreement.

 

(b)                                 Entire
Agreement.  This Agreement and all of
the Transaction Documents referred to herein constitute the entire agreement of
the parties hereto, and supersede all prior understandings with respect to the
subject matter hereof and thereof (including, without limitation, the letter of
intent between MedicalCV and LightWave dated April 22, 2003).

 

(c)                                  Assignment.  This Agreement may not be assigned by any
party hereto without the prior written consent of the other party; provided,
however, that following the Closing, MedicalCV may assign its rights hereunder
without the consent of LightWave to an Affiliate or a successor-in-interest of
MedicalCV (whether by merger, sale of assets or otherwise); provided, however,
that MedicalCV shall remain liable for its obligations under the Note and this
Agreement.  Nothing in this Agreement, express
or implied, is intended to confer upon any person, other than the parties to
this Agreement and their successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.

 

(d)                                 Nature
of Statements.  All statements contained
in this Agreement or any Exhibit or Disclosure Schedule hereto shall be
deemed representations and warranties of the party executing or delivering the
same.

 

(e)                                  Survival of Representations and
Warranties.  The representations and warranties of each
party shall survive this Agreement and shall not be merged into any assignment,
transfer instrument or other document.

 

(f)                                    Expenses.  Except as otherwise specifically stated
herein, the parties shall each pay their own expenses in connection with the
negotiation, preparation and carrying out of this Agreement and the
consummation of the transactions contemplated herein.

 

(g)                                 Notices.  Any
notice, demand, request, waiver or other communication under this Agreement
shall be in writing and shall be deemed to have been duly given (i) on the date
of delivery if delivered to the address of the party specified below (including
delivery by courier), or (ii) on the fifth day after mailing if mailed to the
party to whom notice is to be given to the address specified below, by first
class mail, certified or registered, return receipt requested, postage prepaid,
or (iii) on the date of transmission if sent by facsimile transmission to the
facsimile number given below, and telephonic confirmation of receipt is
obtained promptly after completion of transmission:

 

 

	
  If to MedicalCV:

  

  

  Attention:  Chief Executive Office

  9725 South Robert Trail

  Inver Grove Heights, MN  55077

  	
   

  	
  With copy to:

  

  Avron L. Gordon, Esq.

  Briggs and Morgan, P.A.

  2200 IDS Center

  Minneapolis, MN 55402

  
	
  Facsimile:  (651) 234-6669

  	
   

  	
  Facsimile:

  	
  612-977-8650

  
	
  Telephone:  (651) 234-6698

  	
   

  	
  Telephone:

  	
  612-977-8455

  
	
   

  	
   

  	
   

  
	
  If to LightWave:

  

  

  Attention:  Gregory Brucker

  LightWave Ablation Systems, Inc.

  142 Stutts Road

  Mooresville, North Carolina 28117

  	
   

  	
   

  

 

Any
party may from time to time change its address or facsimile number for the
purpose of notices to that party by a similar notice specifying a new address
or facsimile number, but no such change shall be deemed to have been given
until it is actually received by the party sought to be charged with its contents.

 

(h)                                 Mutual
Preparation.  Each party acknowledges that it has had the
opportunity to participate in the preparation and negotiation of this
Agreement, and that, therefore, in the event of any ambiguity or controversy
with respect to the meaning of any term or provision contained in this
Agreement, no presumption or inference will be drawn against either party’s
interpretation of this Agreement by reason of such party’s or its counsel’s
participation in the preparation of this Agreement.

 

(i)                                     Governing Law; Jurisdiction.  This
Agreement shall be interpreted under and governed by the internal laws of the
State of Minnesota, without regard to applicable conflicts of law provisions of
any jurisdiction, and any and all proceedings pertaining to, arising under or
in connection with this Agreement shall be conducted in the state or federal
courts or before, an arbitrator, located within the State of Minnesota, and
each party hereto hereby irrevocably consents to the venue and personal
jurisdiction of such courts and of the/any arbitrator, as applicable, and
further irrevocably consents to service of process for such purpose either
within or outside the State of Minnesota.

 

10.2                           Miscellaneous Provisions.  The following other miscellaneous rules and
provisions shall apply to the interpretation and enforcement of the parties’
obligations under this Agreement: (i) each party
hereto shall execute and deliver such instruments and take such other actions
as the other party may reasonably request in order to carry out the intent of
this Agreement; (ii) this Agreement may be amended,
modified, or terminated only with the written consent of all parties hereto; (iii) this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
assigns, heirs and personal representatives, (iv) no waiver of a breach of any provision of
this Agreement shall be binding unless in writing and signed by the parties
hereto, and any such waiver shall not be construed to be a waiver of any
subsequent breach of the same or any other provision of this Agreement; (v) each party acknowledges that breach by it of the
provisions of this Agreement will cause the other party irreparable harm that
is not fully remedied by monetary damages and, accordingly, each party agrees
(1) that the other party shall, in addition to any relief afforded by law, be
entitled to injunctive relief, (2) that both damages at law and injunctive
relief shall be proper modes of relief and are not to be considered alternative
remedies, and (3) that all rights and remedies of any party shall be cumulative
and may be exercised singularly or concurrently, at such party’s option, and
the exercise or enforcement of any one such right or remedy shall neither be a
condition to nor bar the exercise or enforcement of any

 

 

other; (vi) any term of this Agreement that
is illegal or unenforceable at law or in equity shall be deemed to be void and
of no force and effect to the extent necessary to bring such term within the
provisions of any such applicable law or laws, and such terms as so modified
and the balance of the terms of this Agreement shall be fully enforceable; and (vii) this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one agreement.

 

10.3                           Breach;
Termination; Resolution of Disputes.  In the event of a breach of
any warranty, covenant, or other provision of this Agreement, the following
notice and cure procedures shall apply:

 

(a)                                  The Party not in breach (“Nonbreaching
Party”) shall give the Party in breach (the “Breaching Party”) notice
describing the breach and specifying a reasonable period (which shall not be
less than twenty (20) days) within which the Breaching Party must substantially
commence to cure the breach.

 

(b)                                 Both MedicalCV and LightWave wish to avoid
disputes relating to or arising out of this Agreement.  In the event of any dispute or perceived
problem, each party hereto pledges itself to give notice to the other party and
to first seek an amicable resolution without resorting to arbitration.  A Breaching Party shall immediately commence
to cure the breach.  A Breaching Party
shall meet with the Nonbreaching Party to attempt to resolve any claims for
damages by the Nonbreaching Party as a result of the breach.

 

(c)                                  Failing such amicable resolution or cure of a
breach, all disputes arising out of or relating to this Agreement (including
any question of fraud or questions concerning the validity or enforceability of
this Agreement or any of the rights herein conveyed) shall, unless earlier
resolved according to Section 10.3(b) hereof, be settled by arbitration to
be held at a suitable location specified by the party initiating the
claim.  Such arbitration shall be
conducted in accordance with the then-existing Rules of the American
Arbitration Association and, if applicable, the Patent Arbitration Rules
thereof (collectively the “Rules”).  If
the matter in dispute involves a monetary amount of less than $200,000, the
dispute shall be decided by a single arbitrator.  All other disputes hereunder shall be decided by three (3)
arbitrators, unless the Parties agree otherwise.  Arbitrators shall be selected in the manner prescribed by the
Rules.  If the dispute relates to the
INTELLECTUAL PROPERTY rights, at least one (1) of such arbitrator shall be an
attorney practicing in the field of intellectual property law.

 

(d)                                 In no event will the arbitrator(s) have the
power to include any element of punitive damages or incidental or consequential
damages in the arbitration award. 
Judgment on the arbitration award in accordance with this Agreement may
be entered in any state or federal court of competent jurisdiction.

 

(e)                                  It is the intention of the Parties that the
arbitration be speedily concluded with the hearing to take place and the awards
to be made within ninety (90) days of the filing of any demand for
arbitration.  Specific performance and
injunctive relief may be ordered by the award. 
Costs and attorney fees shall be paid as the arbitrator’s award shall
specify.  As the sole exception to
arbitration, a Party shall have the right to obtain injunctive relief only from
any court having jurisdiction so as to avoid irreparable harm or to preserve
such Party’s rights for resolution in any pending or imminent arbitration
proceedings, and the injunction may be modified or vacated as a result of the
arbitration award.

 

 

IN WITNESS WHEREOF, this
Agreement has been executed and delivered as of the date first above written.

 

	
   

  	
  BUYER:

  
	
   

  	
   

  
	
   

  	
  MedicalCV, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Blair P. Mowery

  	
   

  
	
   

  	
   

  	
  Blair P. Mowery, President

  
	
   

  	
   

  
	
   

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
  LightWave Ablation Systems, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gregory Brucker

  	
   

  
	
   

  	
   

  	
  Gregory Brucker, President

  
	
   

  	
   

  
	
   

  	
  GREGORY BRUCKER (as to Sections 1.13, 9.2,

  9.4 and 9.6)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Gregory Brucker

  	
   

  
	
   

  	
  Gregory Brucker

  
	
   

  	
   

  
	
   

  	
  ROBERT SVENSON M.D. (as to Sections 1.13,

  9.2, 9.4 and 9.6)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert Svenson M.D.

  	
   

  
	
   

  	
  Robert Svenson M.D.

  
					

 

 

Schedule 3.7

 

LightWave
has entered into confidentiality and/or non-use of information agreements with
three parties concerning possible future business relationships.  Such Agreements do not conflict with, or
impair LightWave’s obligations under, the Technology Purchase Agreement.Exhibit 10.35

 

WARRANT

 

To Purchase
25,000 Shares of

Common
Stock

of

MEDICALCV,
INC.

 

No. LW001

 

This
Warrant and the securities issuable upon exercise of this Warrant have not been
registered under the Securities Act of 1933 (the “Securities Act”) or under any
state securities or “Blue Sky” laws (“Blue Sky Laws”).  No transfer, sale, assignment, pledge,
hypothecation or other disposition of this Warrant or the securities issuable
upon exercise of this Warrant or any interest therein may be made except (a) pursuant
to an effective registration statement under the Securities Act and any
applicable Blue Sky Laws or (b) if the Company has been furnished with an
opinion of counsel for the holder, which opinion and counsel shall be
reasonably satisfactory to the Company, to the effect that no registration is
required because of the availability of an exemption from registration under
the Securities Act and applicable Blue Sky Laws.

 

THIS CERTIFIES THAT, for good and valuable
consideration, LIGHTWAVE ABLATION SYSTEMS, INC., a North Carolina corporation
(“LightWave”) or its registered assigns, is entitled to subscribe for
and purchase from MedicalCV, Inc., a Minnesota corporation (the “Company”),
at any time to and including the date that is seven (7) years after the date
hereof.  Twenty-five thousand (25,000)
fully paid and nonassessable shares of the Common Stock of the Company at the
price of $1.46 per share (the “Warrant Exercise Price”), subject to the
antidilution provisions of this Warrant. 
The shares which may be acquired upon exercise of this Warrant are
referred to herein as the “Warrant Shares.” 
As used herein, the term “Holder” means LightWave, any party who
acquires all or a part of this Warrant as a registered transferee of LightWave,
or any record holder or holders of the Warrant Shares issued upon exercise,
whether in whole or in part, of the Warrant; the term “Common Stock” means the
Company’s Common Stock, $.01 par value.

 

This Warrant is subject to the following provisions,
terms and conditions:

 

1.                                       Exercise; Conversion Right; Transferability.

 

(a)                                  The rights represented by this Warrant may be
exercised by the Holder hereof at any time, for a period of seven (7) years
commencing on the date hereof, in whole or in part (but not as to a fractional
share of Common Stock), by written notice of exercise (in the form attached
hereto) delivered to the Company at the principal office of the Company prior
to the expiration of this Warrant and accompanied or preceded by the surrender
of this Warrant along with a check in payment of the Warrant Exercise Price for
such shares.

 

(b)                                 Subject to the restrictions on transfer of
this Warrant or the Warrant Shares set forth herein, the Holder of this Warrant
shall have the right to require the Company to convert this Warrant (the “Conversion
Right’) at any time after the date hereof and prior to its expiration into
shares of Common Stock as provided for in Sections 1(b) through 1(d)
hereof.  Upon exercise of the Conversion
Right, the Company shall deliver to the Holder (without payment by the Holder
of any Warrant Exercise Price) that number of shares of Company Common Stock
equal to the quotient obtained by dividing (i) the value of

 

 

the Warrant at the time the Conversion Right is exercised (determined
by subtracting the aggregate Warrant Exercise Price for the Warrant Shares in
effect immediately prior to the exercise of the Conversion Right from the
aggregate Fair Market Value (as defined in Section 10 hereof) for the
Warrant Shares immediately prior to the exercise of the Conversion Right) by
(ii) the Fair Market Value of one share of Common Stock immediately prior to
the exercise of the Conversion Right.

 

(c)                                  The Conversion Right may be exercised by the
Holder, at any time or from time to time, after the date hereof and prior to
its expiration, on any business day by delivering a written notice in the form
attached hereto (the “Conversion Notice”) to the Company at the offices
of the Company exercising the Conversion Right and specifying (i) the total
number of shares of Common Stock the Holder will purchase pursuant to such
conversion and (ii) a place and date not less than one or more than 20 business
days from the date of the Conversion Notice for the closing of such purchase.

 

(d)                                 At any Closing under Section 1(c)
hereof, (i) the Holder will surrender the Warrant, (ii) the Company will
deliver to the Holder a certificate or certificates for the number of shares of
Common Stock issuable upon such conversion, together with cash, in lieu of any
fraction of a share, and (iii) the Company will deliver to the Holder a new
warrant representing the number of shares, if any, with respect to which the
Warrant shall not have been exercised.

 

(e)                                  Subject to the provisions of Section 7
hereof, this Warrant shall be fully transferable, in whole or in part; provided
that this Warrant shall be transferable only on the books of the Company by the
Holder in person, or by duly authorized attorney, on surrender of the Warrant,
properly assigned.

 

2.                                       Exchange and Replacement. 
Subject to Sections 1 and 7 hereof, this Warrant is exchangeable upon
the surrender hereof by the Holder to the Company at its office for new
Warrants of like tenor and date representing in the aggregate the right to
purchase the number of Warrant Shares purchasable hereunder, each of such new
Warrants to represent the right to purchase such number of Warrant Shares (not
to exceed the aggregate total number purchasable hereunder) as shall be
designated by the Holder at the time of such surrender.  Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction, or mutilation of
this Warrant, and, in case of loss, theft or destruction, of indemnity
reasonably satisfactory to it, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will make and deliver a new Warrant of like
tenor, in lieu of this Warrant.  This
Warrant shall be promptly canceled by the Company upon the surrender hereof in
connection with any exchange or replacement. 
The Company shall pay all expenses, taxes (other than stock transfer
taxes), and other charges incurred by it in connection with the preparation,
execution, and delivery of Warrants pursuant to this Section 2.

 

3.                                       Issuance of the Warrant Shares.

 

(a)                                  The Company agrees that the shares of Common
Stock purchased upon exercise of this Warrant shall be and are deemed to be
issued to the Holder as of the close of business on the date on which this
Warrant shall have been surrendered and the payment made for such Warrant
Shares as aforesaid.  Subject to the
provisions of paragraph (b) of this Section 3, certificates for the
Warrant Shares so purchased shall be delivered to the Holder within a
reasonable time, not exceeding fifteen (15) days after the rights represented
by this Warrant shall have been so exercised, and, unless this Warrant has
expired, a new Warrant representing the right to purchase the number of Warrant
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be delivered to the Holder within such time.

 

(b)                                 Notwithstanding the foregoing, the Company
shall not be required to deliver any certificate for Warrant Shares upon
exercise of this Warrant except in accordance with exemptions from

 

 

the applicable securities registration requirements or registrations
under applicable securities laws. 
Nothing herein, however, shall obligate the Company to effect
registrations under federal or state securities laws, except as provided in
Section 9.  If registrations are
not in effect and if exemptions are not available when the Holder seeks to
exercise the Warrant, the Warrant exercise period will be extended, if need be,
to prevent the Warrant from expiring, until such time as either registrations
become effective or exemptions are available, and the Warrant shall then remain
exercisable for a period of at least 30 calendar days from the date the Company
delivers to the Holder written notice of the availability of such registrations
or exemptions.  The Holder agrees to
execute such documents and make such representations, warranties, and
agreements as may be required solely to comply with the exemptions relied upon
by the Company, or the registrations made, for the issuance of the Warrant
Shares.

 

4.                                       Covenants of the Company.  The
Company covenants and agrees that all Warrant Shares will, upon issuance, be
duly authorized and issued, fully paid, nonassessable, and free from all taxes,
liens, and charges with respect to the issuance thereof.  The Company further covenants and agrees
that during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant.

 

5.                                       Antidilution Adjustments.  The
provisions of this Warrant are subject to adjustment as provided in this
Section 5; provided that no adjustment shall be made pursuant to this
Section 5 which has the effect of duplicating any adjustment made pursuant
to the Articles of Incorporation of the Company or any Certificate of
Designation thereto, if any.

 

(a)                                  The Warrant Exercise Price shall be adjusted
from time to time such that in case the Company shall hereafter:

 

(i)                                     pay any dividends on any class of stock of
the Company payable in Common Stock or securities convertible into Common
Stock;

 

(ii)                                  subdivide its then outstanding shares of
Common Stock into a greater number of shares; or

 

(iii)                               combine outstanding shares of Common Stock,
by reclassification or otherwise;

 

then, in any such event, the Warrant Exercise Price in effect
immediately prior to such event shall (until adjusted again pursuant hereto) be
adjusted immediately after such event to a price (calculated to the nearest
full cent) determined by dividing (A) the number of shares of Common Stock
outstanding immediately prior to such event, multiplied by the then existing
Warrant Exercise Price, by (B) the total number of shares of Common Stock
outstanding immediately after such event (including in each case the maximum
number of shares of Common Stock issuable in respect of any securities
convertible into Common Stock), and the resulting quotient shall be the
adjusted Warrant Exercise Price per share. 
An adjustment made pursuant to this subsection shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification.  If, in connection with an adjustment made
pursuant to this subsection or otherwise, the Holder of any Warrant
thereafter surrendered for exercise shall become entitled to receive shares of
two or more classes of capital stock or shares of Common Stock and other
capital stock of the Company, the Board of Directors (whose determination shall
be conclusive) shall determine the allocation of the adjusted Warrant Exercise
Price between or among shares of such classes of capital stock or shares of
Common Stock and other capital stock. 
All calculations under this subsection shall be made to the nearest
cent or to the nearest 1/100 of a share, as the case may be.  In the

 

 

event that at any time, in connection with an adjustment made pursuant
to this subsection or otherwise, the Holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive any shares of the
Company other than shares of Common Stock, thereafter the Warrant Exercise
Price of such other shares so receivable upon exercise of any Warrant shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Common Stock contained
in this Section.

 

(b)                                 Upon each adjustment of the Warrant Exercise
Price pursuant to Section 5(a) above, the Holder of each Warrant shall
thereafter (until another such adjustment) be entitled to purchase at the
adjusted Warrant Exercise Price the number of shares, calculated to the nearest
full share, obtained by multiplying the number of shares specified in such
Warrant (as adjusted as a result of all adjustments in the Warrant Exercise
Price in effect prior to such adjustment) by the Warrant Exercise Price in
effect prior to such adjustment and dividing the product so obtained by the
adjusted Warrant Exercise Price.

 

(c)                                  In case of any consolidation or merger to
which the Company is a party other than a merger or consolidation in which the
Company is the continuing corporation, or in case of any sale or conveyance to
another corporation of all or substantially all of the assets of the Company,
as an entirety, or in the case of any statutory exchange of securities with
another corporation (including any exchange effected in connection with a
merger of a third corporation into the Company), there shall be no adjustment
under subsection (a) of this Section above but the Holder of each
Warrant then outstanding shall have the right thereafter to convert such Warrant
into the kind and amount of shares of stock and other securities and property
which the Holder would have owned or have been entitled to receive immediately
after such consolidation, merger, statutory exchange, sale, or conveyance had
such Warrant been converted immediately prior to the effective date of such
consolidation, merger, statutory exchange, sale, or conveyance.  The Company shall give written notice, by
first-class mail, postage prepaid, addressed to the Holder as shown on the
books of the Company, of the date on which such consolidation, merger, sale,
conveyance or statutory exchange shall take place.  Such notice shall also specify the date as of which the Holder
shall be entitled to exchange such Holder’s Warrant Shares (if any) for securities
or other property deliverable upon such consolidation, merger, sale, conveyance
or statutory exchange, as the case may be. 
Such written notice shall be at least 20 days prior to the action in
question.  In any such case, if deemed
necessary by the Company’s Board of Directors to fairly protect the rights of
the Holders stated herein, appropriate adjustment shall be made in the
application of the provisions set forth in this Section with respect to
the rights and interests thereafter of any Holders of the Warrant, to the end
that the provisions set forth in this Section shall thereafter
correspondingly be made applicable, as nearly as may reasonably be, in relation
to any shares of stock and other securities and property thereafter deliverable
on the exercise of the Warrant.  The
provisions of this subsection shall similarly apply to successive
consolidations, mergers, statutory exchanges, sales or conveyances.

 

(d)                                 Upon any adjustment of the Warrant Exercise
Price, then and in each such case, the Company shall give written notice
thereof, by first-class mail, postage prepaid, addressed to the Holder as shown
on the books of the Company, which notice shall state the Warrant Exercise
Price resulting from such adjustment and the increase or decrease, if any, in
the number of shares of Common Stock purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.

 

6.                                       No Voting Rights. 
This Warrant shall not entitle the Holder to any voting rights or other
rights as a shareholder of the Company.

 

7.                                       Notice of Transfer of Warrant or Resale of
the Warrant Shares.

 

 

(a)                                  The Holder, by acceptance hereof, agrees to
give written notice to the Company before transferring this Warrant or
transferring any Warrant Shares of such Holder’s intention to do so, describing
briefly the manner of any proposed transfer. 
Promptly upon receiving such written notice, the Company shall present
copies thereof to the Company’s counsel and to counsel to the original
purchaser of this Warrant.  If in the
opinion of each such counsel the proposed transfer may be effected without
registration or qualification (under any federal or state securities laws), the
Company, as promptly as practicable, shall notify the Holder of such opinion,
whereupon the Holder shall be entitled to transfer this Warrant or to dispose
of Warrant Shares received upon the previous exercise of this Warrant, all in
accordance with the terms of the notice delivered by the Holder to the Company;
provided that an appropriate legend may be endorsed on this Warrant or the
certificates for such Warrant Shares respecting restrictions upon transfer
thereof necessary or advisable in the opinion of counsel and satisfactory to
the Company to prevent further transfers which would be in violation of
Section 5 of the Securities Act of 1933, as amended (the “Securities Act”)
and applicable state securities laws; and provided further that the prospective
transferee or purchaser shall execute such documents and make such
representations, warranties, and agreements as may be required solely to comply
with the exemptions relied upon by the Company for the transfer or disposition
of the Warrant or Warrant Shares.

 

(b)                                 If in the opinion of either of the counsel
referred to in this Section 7, the proposed transfer or disposition of
this Warrant or such Warrant Shares described in the written notice given
pursuant to this Section 7 may not be effected without registration or
qualification of this Warrant or such Warrant Shares, the Company shall
promptly give written notice thereof to the Holder, and the Holder will limit
its activities in respect to such transfer or disposition as, in the opinion of
both such counsel, are permitted by law. 
Notwithstanding the foregoing, the Company shall not be obligated to
permit a transfer of this Warrant or the Warrant Shares to any transferee that
is not an accredited investor within the meaning of Rule 501 of Regulation D
under the Securities Act.

 

8.                                       Fractional Shares. 
Fractional shares shall not be issued upon the exercise of this Warrant,
but in any case where the Holder would, except for the provisions of this
Section, be entitled under the terms hereof to receive a fractional share, the
Company shall, upon the exercise of this Warrant for the largest number of
whole shares then called for, pay a sum in cash equal to the sum of (a) the
excess, if any, of the Fair Market Value of such fractional share over the
proportional part of the Warrant Exercise Price represented by such fractional
share, plus (b) the proportional part of the Warrant Exercise Price, if paid by
the Holder, represented by such fractional share.

 

9.                                       Registration Rights.

 

(a)                                  If the Company at any time until two (2)
years after complete exercise or expiration of this Warrant proposes to
register under the Securities Act (except by a Form S-4 or Form S-8
Registration Statement or any successor forms thereto) any of its equity
securities, it will give written notice to all Holders of this Warrant, any
Warrants issued pursuant to Section 2 and/or Section 3(a) hereof, and
any Warrant Shares of its intention to do so and, on the written request of any
such Holder given within twenty (20) days after receipt of any such notice
(which request shall specify the Warrant Shares intended to be sold or disposed
of by such Holder and describe the nature of any proposed sale or other
disposition thereof), the Company will use its best efforts to cause all such
Warrant Shares, the Holders of which shall have requested the registration or
qualification thereof, to be included in such registration statement proposed
to be filed by the Company; provided that:

 

(i)                                     if a greater number of Warrant Shares is
offered for participation in the proposed offering than in the reasonable
opinion of the managing underwriter of the proposed offering can be
accommodated without adversely affecting the proposed offering, then the amount
of Warrant Shares proposed to be offered by such Holders for registration, as
well as the number of securities

 

 

of any other selling shareholders
participating in the registration, shall be proportionately reduced to a number
deemed satisfactory by the managing underwriter

 

(ii)                                  the Company may, at its sole discretion and
without the consent of any holder of the Warrant Shares, withdraw such
registration statement and abandon the proposed offering in which any such
holder had requested to participate;

 

(iii)                               if the offering to which the registration
statement relates is to be distributed by or through an underwriter, each
holder of the Warrant Shares shall agree, as a condition to the inclusion of
such holder’s securities in such registration, to sell securities held by such
holder through such underwriter on the same terms and conditions as the
underwriter agrees to sell securities on behalf of the Company and not to sell,
transfer, pledge, assign or otherwise dispose of the Warrant Shares of the
Company not sold by such holder in such offering for such period (up to 180
days after the effective date of the registration statement) as may be required
by the underwriter;

 

(iv)                              the Company shall not be obligated to include
any Warrant Shares in any such registration for any Holder who is able to sell
all of the Warrant Shares in a single transaction pursuant to Rule 144 under
the Securities Act (or any other similar rule or regulation) during the
three-month period beginning on the date such notice is received by such
holder, calculated as of the date of such receipt.

 

(b)                                 Further, on a one-time basis only, at any
time until two (2) years after complete exercise or expiration of this Warrant,
upon request by the Holder or Holders of a majority in interest of this
Warrant, of any Warrants issued pursuant to Section 2 and/or Section 3(a)
hereof, and of any Warrant Shares, the Company will promptly take all necessary
steps to register or qualify, under the Securities Act and the securities laws
of such states as the Holders may reasonably request, such number of Warrant
Shares issued and to be issued upon conversion of the Warrants requested by
such Holders in their request to the Company; provided that the Company shall
not be obligated to include any Warrant Shares in any such registration for any
Holder who is able to sell all of the Warrant Shares in a single transaction
pursuant to Rule 144 under the Securities Act (or any other similar rule or
regulation) during the three-month period beginning on the date such notice is
received by such holder, calculated as of the date of such receipt.  The Company shall keep effective and
maintain any registration, qualification, notification, or approval specified
in this Paragraph (b) for such period as may be reasonably necessary for such
Holder or Holders of such Warrant Shares to dispose thereof and from time to
time shall amend or supplement the prospectus used in connection therewith to
the extent necessary in order to comply with applicable law.

 

(c)                                  Upon the exercise of registration rights
pursuant to this Section 9, Holder agrees to supply the Company with such
information as may be required by the Company to register or qualify the shares
to be registered.

 

(d)                                 With respect to each inclusion of securities
in a registration statement pursuant to this Section 9, the Company shall
bear the following fees, costs, and expenses: all registration, filing and NASD
fees, printing expenses, fees and disbursements of counsel and accountants for
the Company, fees and disbursements of counsel for the underwriter or
underwriters of such securities (if the Company is required to bear such fees
and disbursements), all internal expenses, and legal fees and disbursements and
other expenses of complying with state securities laws of any jurisdictions in
which the securities to be offered are to be registered or qualified.  Fees and disbursements of special counsel
and accountants for the selling Holders, underwriting discounts and
commissions, and transfer taxes for selling Holders and

 

 

any other expenses relating to the sale of securities by the selling
Holders not expressly included above shall be borne by the selling Holders.

 

(e)                                  The Company hereby indemnifies each of the
Holders of this Warrant and of any Warrant Shares, and the officers and
directors, if any, who control such Holders, within the meaning of
Section 15 of the Securities Act, against all losses, claims, damages, and
liabilities caused by (i) any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus (and as
amended or supplemented if the Company shall have furnished any amendments
thereof or supplements thereto), any Preliminary Prospectus or any state
securities law filings; (ii) any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading except insofar as such losses, claims,
damages, or liabilities are caused by any untrue statement or omission
contained in information furnished in writing to the Company by such Holder
expressly for use therein; and each such Holder by its acceptance hereof
severally agrees that it will indemnify and hold harmless the Company, each of
its officers who signs such Registration Statement, each underwriter of the
Common Stock so registered, and each person, if any, who controls the Company
or such underwriter, within the meaning of Section 15 of the Securities
Act, with respect to losses, claims, damages, or liabilities which are caused
by any untrue statement or omission contained in information furnished in
writing to the Company by such Holder expressly for use therein.

 

(f)                                    The Company will furnish the Warrantholder
with a reasonable number of copies of any prospectus or offering circular and
one copy of the registration statement included in such filings and will amend
or supplement the same as required during the nine (9) month period following
the effective date of the registration statement, provided, that the expenses
of any amendment or supplement made or filed more than three (3) months after
the effective date of the registration statement, at the request of the
Warrantholder, shall be borne by the Warrantholder.

 

(g)                                 It shall be a condition of the Company’s
obligation to register the Warrant Shares hereunder that the Warrantholder
agrees to cooperate with the Company in the preparation and filing of any such
registration statement, or in its efforts to establish that the proposed sale
is exempt under the Securities Act, as to any proposed distribution.  It shall also be a condition of the
Company’s obligations under this Agreement that, in the case of the filing of
any registration statement, and to the extent permissible under the Securities
Act, and controlling precedent thereunder, the Company and the Warrantholder
provide cross-indemnification agreements to each other in customary scope
covering the accuracy and completeness of the information furnished by
each.  The Company shall not be
obligated to register any Warrant Shares which are eligible for sale under Rule
144(k) under the Securities Act, or any successor or similar rule under the
Securities Act which permits the exempt sale of the Warrant Shares.

 

10.                                 Fair Market Value. 
Fair Market Value of a share of Common Stock as of a particular date
(the “Determination Date”) shall mean:

 

(a)                                  If the Company’s Common Stock is traded on an
exchange or is listed on the Nasdaq National Market or the Nasdaq SmallCap
Market, then the average closing or last sale prices, respectively, reported
for the ten (10) business days immediately preceding the Determination Date; or

 

(b)                                 If the Company’s Common Stock is not traded
on an exchange or listed on the Nasdaq National Market or the Nasdaq SmallCap
Market but is listed on the OTC Bulletin Board, the National Quotation Bureau,
the BBX, or any comparable reporting service, then the average of the closing
bid and ask prices reported for the ten (10) business days immediately
preceding the Determination Date; or

 

 

(c)                                  If the Company’s Common Stock is not listed
on an exchange, on the Nasdaq National Market, the Nasdaq SmallCap Market, the
OTC Bulletin Board, the National Quotation Bureau, the BBX, or any comparable
reporting service, then the fair market value as determined in good faith by
the Board of Directors of the Company.

 

11.                                 Miscellaneous.

 

(a)                                  The Company may deem and treat the registered
Holder as the holder and owner hereof (notwithstanding any notations of
ownership or writing made hereon by anyone other than the Company) for all
purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for transfer as provided herein and then only if
such transfer meets the requirements of Section 7.

 

(b)                                 The Holder understands that the Company at a
future date may file a registration or offering statement (the “Registration
Statement”) with the Commission to facilitate a public offering of its
securities.  The Holder agrees, for the
benefit of the Company, that should such a public offering be made and should
the managing underwriter of such offering require, the Holder will not, without
the prior written consent on the Company and such underwriter, during the “Lock
Up Period,” as defined herein:

 

(i)                                     sell, transfer or otherwise dispose of, or
agree to sell, transfer or otherwise dispose of any of the Shares beneficially
held by the Holder during the Lock Up Period;

 

(ii)                                  sell, transfer or otherwise dispose of, or
agree to sell, transfer or otherwise dispose of any options, rights or warrants
to purchase any of the Shares beneficially held by the Holder during the Lock
Up Period; or

 

(iii)                               sell or grant, or agree to sell or grant,
options, rights or warrants with respect to any of the Shares.

 

The foregoing does not prohibit gifts to donees or transfers by will or
the laws of descent or distribution to heirs or beneficiaries provided that
such donees, heirs and beneficiaries shall be bound by the restrictions set
forth herein.  The term “Lock Up Period”
shall mean the lesser of (x) 180 days or (y) the period during which Company
officers and directors are restricted by the managing underwriter in connection
with such public offering from effecting any sales or transfers of the
Company’s Common Stock.  The Lock Up
Period shall commence on the effective date of the Registration Statement.

 

[signature
page follows]

 

 

IN WITNESS WHEREOF, MedicalCV, Inc. has caused this
Warrant to be signed by its duly authorized officer and this Warrant to be
dated August 27, 2003.

 

 

	
   

  	
  MEDICALCV,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  Blair P. Mowery

  	
   

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

  

 

 

NOTICE OF EXERCISE OF WARRANT

 

(To be signed upon the exercise of the Warrant)

 

The undersigned hereby irrevocably elects to
exercise the attached Warrant to purchase, for cash,
                                
of the shares of Common Stock issuable upon the exercise of such Warrant, and
requests that certificates for the shares of Common Stock (together with a new
Warrant to purchase the number of shares, if any, with respect to which this
Warrant is not exercised) be issued in the name and address set forth below.

 

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Name)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Address)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Social
  Security or Tax Ident. No.)

  

 

*                                         The signature on the Notice of Exercise of
Warrant must correspond to the name as written upon the face of the Warrant in
every particular without alteration or enlargement or any change
whatsoever.  When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.

 

 

CONVERSION NOTICE

 

(To be signed upon exercise of Warrant pursuant to Sections 1(b)
through 1(d))

 

The undersigned hereby irrevocably elects to
exercise the Conversion Right provided in Sections 1(b) through 1(d) of the
within Warrant for, and to acquire thereunder,
                
shares of Common Stock.  If said number
of shares shall not be all the shares purchasable under the within Warrant, a
new Warrant is to be issued in the name of said undersigned for the balance
remaining of the shares purchasable thereunder rounded up to the next higher number
of shares.

 

Please issue a certificate or certificates for the
shares of Common Stock in the name set forth below.

 

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Name)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Address)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Social
  Security or Tax Ident. No.)

  

 

*                                         The signature on the Conversion Notice must
correspond to the name as written upon the face of the Warrant in every
particular without alteration or enlargement or any change whatsoever.  When signing on behalf of a corporation,
partnership, trust or other entity, PLEASE indicate your position(s) and
title(s) with such entity.

 

 

ASSIGNMENT OF WARRANT

 

(To be signed only upon authorized transfer of the Warrant)

 

FOR VALUE RECEIVED, the undersigned hereby sells,
assigns, and transfers unto
                            
the right to purchase
                
shares of Common Stock of MedicalCV, Inc., to which the within Warrant relates
and appoints                                 ,
as attorney-in-fact, to transfer said right on the books of MedicalCV, Inc.
with full power of substitution in the premises.  By accepting such transfer, the transferee has agreed to be bound
in all respects by the terms and conditions of the within Warrant.

 

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Name)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Address)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Social
  Security or Tax Ident. No.)

  

 

*                                         The signature on the Assignment of Warrant
must correspond to the name as written upon the face of the Warrant in every
particular without alteration or enlargement or any change whatsoever.  When signing on behalf of a corporation,
partnership, trust or other entity, PLEASE indicate your positions) and
title(s) with such entity.

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