Document:

Exhibit 10.3

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

COMMON STOCK
PURCHASE WARRANT

To Purchase                   
Shares of Common Stock of

MEDICALCV, INC.

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

Section 1.                                            Definitions.  Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement (the “Purchase Agreement”), dated October     ,
2006, among the Company and the purchasers signatory thereto.

Section 2.                                            Exercise.

a)                                      Exercise
of Warrant.  Exercise of the purchase
rights represented by this Warrant may be made, in whole or in part, at any
time or times on or after the Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed facsimile or “.pdf”
copy of the Notice of Exercise Form annexed hereto (or such other office or
agency of the Company as it may designate by notice in writing to the
registered Holder at the address of such Holder appearing on the books of the
Company); and, within 3 Trading Days of the date said Notice of Exercise is
delivered to the Company, the Company shall have received  payment of the aggregate Exercise Price

 

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

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

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

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

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

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

d)                                     Mechanics
of Exercise.

i.                                          Authorization
of Warrant Shares.  The Company
covenants that all Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of the purchase
rights represented by this Warrant, be duly authorized, validly issued, fully
paid and nonassessable and free from all taxes, liens and charges created by
the Company in respect of

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the issue thereof (other
than taxes in respect of any transfer occurring contemporaneously with such
issue).

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

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

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

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

vi.                                   Charges,
Taxes and Expenses.  Issuance of
certificates for Warrant Shares shall be made without charge to the Holder for
any issue or transfer tax or other incidental expense in respect of the
issuance of such certificate, all of which taxes and expenses shall be paid by
the Company, and such certificates shall be issued in the name of the Holder or
in such name or names as may be directed by

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the Holder; provided,
however, that in the event certificates for Warrant Shares are to be
issued in a name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder; and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.

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

Section 3.                                            Certain
Adjustments.

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

b)                                     Adjustment
for Issuance of Shares of Common Stock Below Exercise Price.  From the date hereof until 9 months after the
Closing Date (the “Adjustment Period”), the Exercise Price shall be
subject to adjustment from time to time as provided in this Section 3(b).

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

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

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

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

(C)                                Change
in Option Price or Conversion Rate. If the purchase or exercise price
provided for in any Options, or the additional consideration, if any, payable
upon the issue, conversion, exchange or exercise of any Convertible Securities,
or the rate at which any Convertible Securities are convertible into or

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exchangeable or exercisable for Common Stock changes
at any time, the Exercise Price in effect at the time of such change shall be
adjusted to the Exercise Price which would have been in effect at such time had
such Options or Convertible Securities provided for such changed purchase
price, additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold. For purposes of this Section
3(b)(ii)(C), if the terms of any Option or Convertible Security that was
outstanding as of the Closing Date are changed in the manner described in the
immediately preceding sentence, then such Option or Convertible Security and
the Common Stock deemed issuable upon exercise, conversion or exchange thereof
shall be deemed to have been issued as of the date of such change. No
adjustment shall be made if such adjustment would result in an increase of the
Exercise Price then in effect unless the holders of the Warrant are provided at
least ten (10) Business Days’ prior notice.  Notwithstanding the foregoing, no adjustment
shall be made to the Exercise Price of this Warrant due to anti-dilution
adjustments made to securities outstanding as of the Closing Date as a result
of the issuance of Securities pursuant to the Transaction Documents.

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

(E)                                 Exceptions
to Adjustment of Exercise Price. Notwithstanding the foregoing, no
adjustment will be made under this Section 3(b) in respect of Excluded
Securities.   “Excluded Securities”
means the issuance of (a) shares of Common Stock or options to employees,
officers or directors of, or consultants to, the Company pursuant to any stock
option agreement, stock option plan or equity incentive plan duly adopted by a
majority of the non-employee members of the Board of Directors of the Company
or a majority of the members of a committee of non-employee directors established for such purpose (for purposes of clarity, the
issuance of shares of Common Stock upon exercise of options granted pursuant to
a stock option agreement, stock option plan or equity incentive plan subsequent
to the date hereof shall also be Excluded Securities), (b) securities upon the
exercise or exchange of or conversion of (i) any Securities issued under

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the Purchase
Agreement; (ii) securities to a registered broker-dealer in connection with the
transactions contemplated by the Purchase Agreement; and/or (iii) other
securities or rights exercisable or exchangeable for or convertible into shares
of Common Stock which are issued and outstanding on the date of the Purchase
Agreement, provided that such securities have not been amended since the date
of the Purchase Agreement (other than on a non-discretionary basis pursuant to
the pre-existing anti-dilution provisions thereof) to increase the number of
such securities or to decrease the exercise, exchange or conversion price of
any such securities, (c) securities issued pursuant to acquisitions or
strategic transactions approved by a majority of
the disinterested directors, provided any such issuance shall only be to a
Person which is, itself or through its subsidiaries, an operating company in a
business synergistic with the business of the Company and in which the Company
receives benefits in addition to the investment of funds, but shall not include
a transaction in which the Company is issuing securities primarily for the
purpose of raising capital or to an entity whose primary business is investing
in securities, (d) shares of Common Stock or other securities issued in
connection with any stock split, stock dividend or recapitalization of the
Company (subject to Section 3(a) and Section 4.14 of the Purchase Agreement
hereof), and (e) shares of Common Stock or other securities issued in
connection with any registered primary public offering.

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

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

e)                                      Notice
to Holders.

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

ii.                                       Notice
to Allow Exercise by Holder.  If (A)
the Company shall declare a dividend (or any other distribution in whatever
form) on the Common Stock; (B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class or of any
rights; (D) the approval of any shareholders of the Company shall be required
in connection with any reclassification of the Common Stock, any consolidation
or merger to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any compulsory share
exchange whereby the Common Stock is

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

Section 4.                                            Transfer
of Warrant.

a)                                      Transferability.  Subject to compliance with any applicable
securities laws and the conditions set forth in Section 4(d) hereof and to the
provisions of Section 4.1 of the Purchase Agreement, this Warrant and all
rights hereunder (including, without limitation, any registration rights) are
transferable, in whole or in part, upon surrender of this Warrant at the
principal office of the Company or its designated agent, together with a
written assignment of this Warrant substantially in the form attached hereto
duly executed by the Holder or its agent or attorney and funds sufficient to
pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled.  A
Warrant, if properly assigned, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant issued.

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

c)                                      Warrant
Register.  The Company shall register
this Warrant, upon records to be maintained by the Company for that purpose
(the “Warrant Register”), in the name

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of the record Holder
hereof from time to time.  The Company
may deem and treat the registered Holder of this Warrant as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.

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

Section 5.                                            Miscellaneous.

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

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

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

d)                                     Authorized
Shares.

The Company covenants
that during the period the Warrant is outstanding, it will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of the Warrant Shares upon the exercise of any purchase rights
under this Warrant.  The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its

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officers who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for the
Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable
action as may be necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or regulation, or of
any requirements of the Trading Market upon which the Common Stock may be
listed.

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

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

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

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

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

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attorneys’ fees,
including those of appellate proceedings, incurred by the non-breaching party in
collecting any amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.

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

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

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

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

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

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

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

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

 11
 

 

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

Dated:  October     , 2006

	
  

  	
   

  	
  MEDICALCV, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Eapen Chacko

  	 

	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President, Finance and Chief

  	 

	
   

  	
   

  	
   

  	
   

  	
  Financial Officer

  	 

									

 12

 

 

NOTICE OF EXERCISE

To:                                                                           

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

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

o  in
lawful money of the United States; or

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

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

	
  

  	
   

  	
   

  

 

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

	
  

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

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

[SIGNATURE OF HOLDER]

	
  Name of Investing Entity:

  	
   

  
	
  Signature
  of Authorized Signatory of Investing Entity:

  	
   

  
	
  Name of
  Authorized Signatory:

  	
   

  
	
  Title of
  Authorized Signatory:

  	
   

  
	
  Date:

  	
   

  
						

 

 

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information. 

Do not use this form to exercise the warrant.)

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

	
  

  	
  whose address is

  
	
   

  
	
   

  	
  .

  
	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Dated:                       ,
               

  
			

 

	
   

  	
  Holder’s Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Holder’s
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

	
  Signature Guaranteed: 

  	
   

  	
   

  

 

NOTE:  The signature to this Assignment Form must
correspond with the name as it appears on the face of the Warrant, without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank or trust company.  Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.Exhibit
4.13

Execution Copy

SHAREHOLDERS
AGREEMENT

SHAREHOLDERS AGREEMENT, dated as of October 10, 2006
(this “Agreement”), by and between ITC Holdings
Corp., a Michigan corporation (the “Company”) and Macquarie
Essential Assets Partnership, an Ontario limited partnership (the
“Stockholder”).

WHEREAS, pursuant to and in accordance with the terms
of that certain Purchase Agreement, dated as of May 11, 2006 (as the same may be amended, the “Purchase
Agreement”), by and among the Company, the Stockholder and the other
parties thereto, the Company has agreed to acquire all of the issued and
outstanding capital stock of the Acquired Entities (as defined in the Purchase
Agreement) in exchange for cash and shares of Common Stock (defined below);

WHEREAS, the Stockholder has elected to receive Common
Stock pursuant to the terms of the Purchase Agreement and, as a result of and
immediately following the consummation of the transactions contemplated by the
Purchase Agreement, the Stockholder owns that number of Registrable Securities
(defined below) set forth on the signature page hereto; and

WHEREAS, in connection with the consummation of the
transactions contemplated by the Purchase Agreement, the Company and the
Stockholder desire to enter into this Agreement to set forth certain rights and
obligations of the Company and the Stockholder with respect to the ownership by
the Stockholder of the Common Stock, all in accordance with the terms and
conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing and
for other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, the parties hereby agree as follows.

1.             Definitions.           As
used in this Agreement, the following terms shall have the following meanings:

(a)           “Affiliate” of a specified Person means a
Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the Person
specified.  For the avoidance of doubt, the
Canadian Pension Plan Investment Board shall be considered an Affiliate of the
Stockholder for all purposes of this Agreement.

(b)           “Closing Date” has the meaning assigned to
such term in the Purchase Agreement.

(c)           “Common Stock” means common stock, no par
value, of the Company.

(d)           “Exchange Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the SEC
promulgated thereunder.

(e)           “Holder” means the Stockholder and any
Affiliate of the Stockholder to whom the Stockholder Transfers Registrable
Securities in accordance with the terms of this Agreement and who agrees in
writing with the Company to be bound by the provisions of this Agreement.

 

(f)            “Lock-Up Period” shall mean the period
commencing on the Closing Date and ending on the date that is the first
anniversary of the Closing Date.

(g)           “Person” means any individual, partnership,
joint venture, corporation, limited liability company, trust, unincorporated
organization, government or any department or agency thereof or any other
entity.

(h)           “Registrable Securities” means shares of
Common Stock issued to the Stockholder by the Company pursuant to the Purchase
Agreement, and any Common Stock which may be issued or distributed in respect
thereof by way of stock dividend or stock split or other distribution,
recapitalization or reclassification. 
Any particular Registrable Securities that are issued shall cease to be
Registrable Securities when (i) a registration statement with respect to the
sale by the Holder of such shares of Common Stock shall have become effective
under the Securities Act and such securities shall have been disposed of in
accordance with such registration statement; (ii) such shares of Common Stock
shall have been distributed to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act; (iii) the date on which all such
shares of Common Stock may be freely sold publicly under Rule 144(k) under the
Securities Act (or any successor provision) (assuming the “holding period” for
purposes of Rule 144 commenced on the date hereof) and the Company shall (upon
receipt by the Company of any necessary legal opinions to such effect from the
Holder’s counsel) have issued to the applicable Holder new unlegended shares
and cancelled any stop transfer restrictions or other restrictions with respect
to such shares of Common Stock; or (iv) such shares of Common Stock shall have
ceased to be outstanding.

(i)            “Registration Expenses” means any and all
expenses (other than underwriting discounts and commissions) incurred in
connection with the registrations, filings or qualifications of Registrable
Securities pursuant to Section 3 for each Holder, including (i) all SEC and
stock exchange or National Association of Securities Dealers, Inc. (the “NASD”) registration and filing fees, (ii)
all fees and expenses of complying with securities or blue sky laws (including
fees and disbursements of counsel for the underwriters in connection with blue
sky qualifications of the Registrable Securities), (iii) all printing,
messenger and delivery expenses and (iv) the fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of any special audits and/or “cold comfort” letters required by or
incident to such performance and compliance; provided that such expenses
shall not include expenses of counsel other than those provided for in clause
(iv) above.

(j)            “Securities Act” means the Securities Act
of 1933, as amended, and the rules and regulations of the SEC promulgated
thereunder.

(k)           “SEC” means the United States Securities
and Exchange Commission.

(l)            “Transfer” 
means any voluntary or involuntary attempt to, directly or indirectly
through the transfer of interests in controlled Affiliates or otherwise, offer,
sell, assign, transfer, grant a participation in, pledge or otherwise dispose
of any Registrable Securities, or the consummation of any such transactions.

 2
 

 

2.             Transfer of the Registrable Securities.

(a)           Restrictions
on Transfer.  The Stockholder may not
Transfer any Registrable Security without the Company’s prior written consent
except:

(i)            during the
Lock-Up Period, to any Affiliate of the Stockholder who agrees in writing with
the Company to be bound by all of the provisions of this Agreement to the same
extent as the Stockholder; or

(ii)           after the
expiration of the Lock-Up Period and:

(A)          pursuant
to an effective registration statement under the Securities Act;

(B)           pursuant
to Rule 144 under the Securities Act; or

(C)           upon
receipt by the Company of an opinion of counsel, delivered by such Stockholder
and reasonably satisfactory to the Company, that such Transfer is exempt from
registration under the Securities Act.

(b)           Restrictive
Legends.  The Stockholder hereby
acknowledges and agrees that, during the term of this Agreement, each of the
certificates or book-entry confirmations representing Registrable Securities
shall be subject to stop transfer instructions and shall include the applicable
portion(s) of the legend set forth below:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR
CONFIRMATION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF (“TRANSFERRED”) EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR
CONFIRMATION ARE SUBJECT TO THE TERMS OF THE SHAREHOLDERS AGREEMENT, DATED AS
OF OCTOBER 10, 2006, AND MAY NOT BE TRANSFERRED UNLESS SUCH TRANSFER COMPLIES
WITH THE PROVISIONS OF SUCH SHAREHOLDERS AGREEMENT.   A COPY OF SUCH SHAREHOLDERS AGREEMENT IS ON
FILE WITH THE SECRETARY OF ITC HOLDINGS CORP. AND IS AVAILABLE WITHOUT CHARGE
UPON WRITTEN REQUEST THEREFOR.  THE
HOLDER OF THESE SHARES, BY ACCEPTANCE OF THIS CERTIFICATE OR CONFIRMATION,
AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF THE AFORESAID AGREEMENT.”

The certificates or book-entry confirmations
representing such Registrable Securities shall be replaced, at the expense of
the Company, with certificates or book-entry confirmations not bearing the
legend required by this Section 2(b) and any such stop transfer restrictions
shall be cancelled, upon (i) the Transfer of Registrable Securities in
compliance with Section 2 or (ii) the 

 3
 

 

applicability of clause (iii) of the definition
of “Registrable Securities” with respect to the Common Stock.

(c)           Transfers
Not In Compliance.  A purported or
attempted Transfer of Registrable Securities by the Stockholder that does not
comply with this Agreement shall be void ab initio and the purported transferee or successor by
operation of law shall not be deemed to be a stockholder of the Company for any
purpose and shall not be entitled to any of the rights of a stockholder,
including the right to vote any Registrable Securities or to receive a
certificate or certificates for the Registrable Securities or any dividends or
other distributions on or with respect to the Registrable Securities.

(d)           Restriction
on Certain Transactions.  From and
after the date hereof until the expiration of the Lock-Up Period, the
Stockholder hereby covenants and agrees that such Stockholder shall not,
directly or indirectly, enter into any transaction with respect to the Common
Stock held by the Stockholder designed to reduce its risk relative to its
position as a holder of Common Stock, without the Company’s written consent.

3.                                      Incidental
Registrations.

(a)           Right
to Include Registrable Securities. 
If the Company at any time following the expiration of the Lock-Up
Period and before the date that is the second anniversary of the date of this
Agreement proposes to register Common Stock under the Securities Act for its
own account (other than a registration on Form S-4 or S-8, or any successor or
other forms promulgated for similar purposes, or a registration of Common Stock
to be issued by the Company to acquire the assets or securities of another
entity in connection with an acquisition or other business combination
transaction) in a manner which would permit registration of Registrable Securities
for sale to the public under the Securities Act, the Company will, at each such
time, give prompt written notice to all Holders of Registrable Securities of
its intention to do so and of such Holders’ rights under this Section 3.  Upon the written request of any such Holder
made within 15 days after the receipt of any such notice (which request shall
specify the Registrable Securities intended to be disposed of by such Holder),
the Company will use its commercially reasonable efforts to effect the registration
under the Securities Act of all Registrable Securities which the Company has
been so requested to register by the Holders thereof, to the extent required to
permit the disposition of the Registrable Securities so to be registered; provided
that (i) if, at any time after giving written notice of its intention to
register any Registrable Securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to proceed with the proposed registration of
the securities to be sold by it, the Company may, at its election, give written
notice of such determination to each Holder of Registrable Securities and,
thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration, and (ii) if such registration
involves an underwritten offering, all Holders of Registrable Securities
requesting to be included in the Company’s registration must sell their
Registrable Securities to the underwriters selected by the Company on the same
terms and conditions as apply to the Company, with such differences, including
any with respect to indemnification and liability insurance, as may be
customary or appropriate in combined primary and secondary offerings.  If a registration requested pursuant to this
Section 3(a) involves an underwritten public offering, any Holder of
Registrable Securities requesting to be included in such registration may
elect, in 

 4
 

 

writing prior to the effective date of the registration statement filed
in connection with such registration, not to register such securities in
connection with such registration.

(b)           Expenses.  The Company will pay all Registration
Expenses in connection with each registration of Registrable Securities.  The Holders shall bear and pay any
underwriting commissions and discounts applicable to the Registrable Securities
offered for their account in connection with any registrations, filings and
qualifications made pursuant to this Agreement, as well as fees and
disbursements of counsel or other advisors to the Holders.

(c)           Priority
in Incidental Registrations.  If a
registration pursuant to this Section 3 involves an underwritten offering and
the managing underwriter advises the Company in writing that, in its opinion,
the number of securities requested to be included in such registration exceeds
the number which can be sold in such offering, so as to be likely to have an
adverse effect on the price, timing or distribution of the securities offered
in such offering as contemplated by the Company (other than the Registrable
Securities), then the Company will include in such registration (i) first, 100%
of the securities the Company proposes to sell, (ii) second, up to 100% of the
securities, if any, requested to be registered by any holder of Common Stock
pursuant to demand registration rights in any agreement between the Company and
such Person, and (iii) third, to the extent of the number of Registrable
Securities (and Common Stock held by any other Persons with similar incidental
registration rights) requested to be included in such registration pursuant to
this Section 3 which, in the opinion of such managing underwriter, can be sold
without having the adverse effect referred to above, the number of Registrable
Securities (and such Common Stock held by any other Person) which the Holders
(and such other Persons) have requested to be included in such registration,
such amount to be allocated pro rata among all requesting Holders (and such
other Persons) on the basis of the relative number of shares of Registrable
Securities then held by each such Holder (or shares of Common Stock then held
by such other Person); provided that any shares thereby allocated to any
such Holder (or such other Person) that exceed such Holder’s (or such other
Person’s) request will be reallocated among the remaining requesting Holders
(and such other Persons) in like manner.

4.                                      Registration Procedures.

(a)           If
and whenever the Company is required to use its commercially reasonable efforts
to effect or cause the registration of any Registrable Securities under the
Securities Act as provided in this Agreement, the Company will use its
commercially reasonable efforts to:

(i)            prepare and,
in any event within 120 days after the end of the period within which a request
for registration may be given to the Company pursuant to Section 3, file with
the SEC a registration statement with respect to such Registrable Securities
and use its reasonable best efforts to cause such registration statement to
become effective; provided, however, that the Company may
discontinue any registration of its securities which is being effected pursuant
to Section 3 at any time prior to the effective date of the registration
statement relating thereto;

(ii)           prepare and
file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary
with respect to the disposition of all securities covered by such registration 

 5
 

 

statement during such period in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement;

(iii)          furnish to
each seller of such Registrable Securities such number of copies of such registration
statement and of each amendment and supplement thereto (in each case including
all exhibits filed therewith, including any documents incorporated by
reference), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and summary
prospectus), in conformity with the requirements of the Securities Act, and
such other documents as such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities by such seller;

(iv)          use its
commercially reasonable efforts to register or qualify such Registrable
Securities covered by such registration in such jurisdictions as each seller
shall reasonably request, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
where, but for the requirements of this clause (iv), it would not be obligated
to be so qualified, to subject itself to taxation in any such jurisdiction or
to consent to general service of process in any such jurisdiction;

(v)           use its
commercially reasonable efforts to cause such Registrable Securities covered by
such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller
or sellers thereof to consummate the disposition of such Registrable
Securities;

(vi)          notify each
seller of any such Registrable Securities covered by such registration
statement, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the Company’s becoming aware that the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and at the request
of any such seller, prepare and furnish to such seller a reasonable number of
copies of an amended or supplemental prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;

(vii)         (A) use its
commercially reasonable efforts to list such Registrable Securities on any
securities exchange on which the Common Stock is then listed if such Registrable
Securities are not already so listed and if such listing is then permitted
under the rules of such exchange; and (B) use its commercially reasonable
efforts to provide a transfer agent and registrar for such Registrable
Securities covered by such registration statement not later than the effective
date of such registration statement;

 6
 

 

(viii)        notify the
sellers of Registrable Securities included in such registration statement and
the managing underwriter or agent (A) when the registration statement, or any
post-effective amendment to the registration statement, shall have become
effective, or any supplement to the prospectus or any amendment prospectus
shall have been filed, (B) of the receipt of any comments from the SEC, (C) of
any request of the SEC to amend the registration statement or amend or
supplement the prospectus or for additional information, and (D) of the
issuance by the SEC of any stop order suspending the effectiveness of the
registration statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of the
registration statement for offering or sale in any jurisdiction, or of the
institution or threatening of any proceedings for any of such purposes;

(ix)           use
commercially reasonable efforts to prevent the issuance of any stop order
suspending the effectiveness of the registration statement or of any order
preventing or suspending the use of any preliminary prospectus and, if any such
order is issued, to obtain the withdrawal of any such order at the earliest
possible moment;

(x)            cooperate
with the sellers of Registrable Securities covered by the registration
statement and the managing underwriter or agent, if any, to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legends) representing securities to be sold under the registration statement,
and enable such securities to be in such denominations and registered in such
names as the managing underwriter or agent, if any, or such sellers may
request; and

(xi)           cooperate
with each seller of Registrable Securities and each underwriter or agent
participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with the
NASD.

(b)           The
Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company with such information
regarding such seller and pertinent to the disclosure requirements relating to
the registration and the distribution of such securities as the Company may
from time to time reasonably request in writing.

(c)           Each
Holder of Registrable Securities agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in clause (vi)
of this Section 4, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Holder’s receipt of the copies of the
supplemented or amended prospectus contemplated by clause (vi) of this Section
4, and, if so directed by the Company, such Holder will deliver to the Company
all copies, other than permanent file copies then in such Holder’s possession,
of the prospectus covering such Registrable Securities current at the time of
receipt of such notice.

5.                                      Indemnification.

(a)           Indemnification
by the Company.  In the event of any
registration of any securities of the Company under the Securities Act pursuant
to Section 3, the Company will, and it hereby does, indemnify and hold
harmless, to the extent permitted by law, the seller of any 

 7
 

 

Registrable Securities covered by such registration statement, each
affiliate of such seller and their respective directors and officers, members
or general and limited partners (including any director, officer, affiliate,
employee, agent and controlling Person of any of the foregoing), each other
Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such seller or any such
underwriter within the meaning of the Securities Act (collectively, the “Indemnified Parties”), against any and all
losses, claims, damages or liabilities, joint or several, and expenses
(including reasonable attorney’s fees and reasonable expenses of investigation)
to which such Indemnified Party may become subject under the Securities Act,
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary, final or summary prospectus
contained therein, or any amendment or supplement thereto, or (ii) any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of a
prospectus, in light of the circumstances under which they were made) not
misleading, and the Company will reimburse such Indemnified Party for any legal
or any other expenses reasonably incurred by it in connection with
investigating or defending against any such loss, claim, liability, action or
proceeding; provided that the Company shall not be liable to any
Indemnified Party in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement or
amendment or supplement thereto or in any such preliminary, final or summary
prospectus in reliance upon and in conformity with information furnished to the
Company by such seller; and provided, further, that the Company
will not be liable to any Person who participates as an underwriter in the
offering or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the Securities Act, under the
indemnity agreement in this Section 5(a) with respect to any preliminary
prospectus or the final prospectus or the final prospectus as amended or
supplemented, as the case may be, to the extent that any such loss, claim,
damage or liability of such underwriter or controlling Person results from the
fact that such underwriter sold Registrable Securities to a person to whom
there was not sent or given, at or prior to the written confirmation of such
sale, a copy of the final prospectus or of the final prospectus as then amended
or supplemented, whichever is most recent, if the Company has previously
furnished copies thereof to such underwriter. 
For purposes of the last proviso to the immediately preceding sentence,
the term “prospectus” shall not be deemed to include the documents, if any,
incorporated therein by reference, and no Person who participates as an
underwriter in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, shall be obligated to send or give any supplement or amendment
to any document incorporated by reference in any preliminary prospectus or the
final prospectus to any person other than a person to whom such underwriter had
delivered such incorporated document or documents in response to a written
request therefor.  Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such seller or any Indemnified Party and shall survive the transfer
of such securities by such seller.

(b)           Indemnification
by the Seller.  The Company may
require, as a condition to including any Registrable Securities in any
registration statement filed in accordance with 

 8
 

 

Section 4 herein, that the Company shall have received an undertaking
reasonably satisfactory to it from the prospective seller of such Registrable
Securities or any underwriter to indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 5(a)) the Company and all
other prospective sellers with respect to any untrue statement or alleged
untrue statement in or omission or alleged omission from such registration
statement, any preliminary, final or summary prospectus contained therein, or
any amendment or supplement, if such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with information furnished to the Company by such seller or underwriter.  Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Company or
any of the prospective sellers, or any of their respective affiliates,
directors, officers or controlling Persons and shall survive the transfer of
such securities by such seller.  In no
event shall the liability of any selling Holder of Registrable Securities
hereunder be greater in amount than the dollar amount of the proceeds received
by such Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.

(c)           Notices
of Claims, Etc.  Promptly after
receipt by an Indemnified Party hereunder of written notice of the commencement
of any action or proceeding with respect to which a claim for indemnification
may be made pursuant to this Section 5, such Indemnified Party will, if a claim
in respect thereof is to be made against an indemnifying party, give written
notice to the latter of the commencement of such action; provided that
the failure of the Indemnified Party to give notice as provided herein shall
not relieve the indemnifying party of its obligations under this Section 5,
except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice.  In case any such
action is brought against an Indemnified Party, unless in such Indemnified
Party’s reasonable judgment a conflict of interest between such Indemnified
Party and indemnifying parties may exist in respect of such claim, the
indemnifying party will be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
Indemnified Party, and after notice from the indemnifying party to such
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation.  No indemnifying party will consent to entry
of any judgment or enter into any settlement which does not include, as an
unconditional term thereof, the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.

(d)           Contribution.  If the indemnification provided for in this
Section 5 from the indemnifying party is unavailable to an Indemnified Party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to herein, then the indemnifying party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and such Indemnified Party in connection with the
actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations.  The relative fault of such indemnifying party
and such Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
indemnifying party or Indemnified Parties, 

 9
 

 

and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such action. 
The amount paid or payable by a party under this Section 5(d) as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.

The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph.  No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.

(e)           Other
Indemnification.  Indemnification
similar to that specified in the preceding provisions of this Section 5 (with
appropriate modifications) shall be given by the Company and each seller of
Registrable Securities with respect to any required registration or other
qualification of securities under any federal or state law or regulation or
governmental authority other than the Securities Act.

(f)            Non-Exclusivity.  The obligations of the parties under this
Section 5 shall be in addition to any liability which any party may otherwise
have to any other party.

6.             Rule 144.              The
Company covenants that it will file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder, and it will take such further action as any
Holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell shares of Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (i) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the SEC.  Upon the
request of any Holder of Registrable Securities, the Company will deliver to
such Holder a written statement as to whether it has complied with such
requirements.  Notwithstanding anything
contained in this Section 6, the Company may deregister under Section 12 of the
Exchange Act if it then is permitted to do so pursuant to the Exchange Act and
the rules and regulations thereunder.

7.                                      Miscellaneous.

(a)           Other
Investors.  The Company may enter
into agreements with other purchasers or holders of Common Stock making them
parties hereto (and thereby giving them all, or a portion, of the rights,
preferences and privileges of an original party hereto) with respect to
additional shares of Common Stock (the “Supplemental
Agreements”); provided, however, that pursuant to any
such Supplemental Agreement, such purchaser expressly agrees to be bound by all
of the terms, conditions and obligations of this Agreement as if such purchaser
were an original party hereto.  All
shares of Common Stock issued or issuable pursuant to, or otherwise covered by,
such Supplemental Agreements shall be deemed to be Registrable Securities to
the extent provided therein.

 10
 

 

(b)           Holdback
Agreement.  If any such registration
shall be in connection with an underwritten public offering, each Holder of
Registrable Securities agrees not to effect any public sale or distribution,
including any sale pursuant to Rule 144 under the Securities Act, of any equity
securities of the Company, or of any security convertible into or exchangeable
or exercisable for any equity security of the Company (in each case, other than
as part of such underwritten public offering), within seven days before or such
period not to exceed 180 days as the underwriting agreement may require (or
such lesser period as the managing underwriters may permit) after the effective
date of such registration, and the Company hereby also so agrees and agrees to
cause each other holder of any equity security, or of any security convertible
into or exchangeable or exercisable for any equity security, of the Company
purchased from the Company (at any time other than in a public offering) to so
agree.

(c)           Termination.  Except with respect to Section 2, this
Agreement and the obligations of the parties hereunder (other than Section 7
hereof) shall terminate on the earliest of (i) the first date on which the
Stockholder and its Affiliates beneficially own, in the aggregate, less than 1%
of the outstanding shares of Common Stock and (ii) the first date on which the
Stockholder ceases to beneficially own any Registrable Securities.

(d)           Amendments
and Waivers.  This Agreement may be
amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company
shall have obtained the written consent to such amendment, action or omission
to act, of the Holders of a majority of the Registrable Securities then
outstanding.  Each Holder of any Registrable
Securities at the time or thereafter outstanding shall be bound by any consent
authorized by this Section 7(d), whether or not such Registrable Securities
shall have been marked to indicate such consent.

(e)           Successors,
Assigns and Transferees.  This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.

(f)            Notices.  All notices, consents or other communications
required or permitted hereunder shall be in writing and shall be deemed given
or delivered when delivered personally or on the third business day following
the business day when sent by registered or certified mail or on the business
day following the business day sent by overnight courier or on the business day
sent by facsimile if sent prior to 5.00 pm (New York time) to a party hereto at
its address specified below or to such other address as any party may indicated
by a notice delivered to the other parties hereto:

	
  

  	
   

  	
  (i)

  	
   

  	
  if to the Company:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  ITC Holdings
  Corp.

  
	
   

  	
   

  	
   

  	
   

  	
  39500 Orchard
  Hill Place, Suite 200

  
	
   

  	
   

  	
   

  	
   

  	
  Novi, Michigan
  48375

  
	
   

  	
   

  	
   

  	
   

  	
  Attention:

  	
   

  	
  Daniel J. Oginsky, Esq.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Vice President,
  General Counsel and Secretary

  
	
   

  	
   

  	
   

  	
   

  	
  Facsimile:

  	
   

  	
  (248) 374-7117

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  with an
  additional copy (which shall not constitute notice)
  to:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Simpson Thacher
  & Bartlett LLP

  

 

 11
 

 

 

	
  

  	
   

  	
   

  	
   

  	
  425 Lexington
  Avenue

  
	
   

  	
   

  	
   

  	
   

  	
  New York, New
  York 10017

  
	
   

  	
   

  	
   

  	
   

  	
  Attention:

  	
   

  	
  David J. Sorkin

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Brian M. Stadler

  
	
   

  	
   

  	
   

  	
   

  	
  Facsimile:

  	
   

  	
  (212) 455-2502

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)

  	
   

  	
  if to the Stockholder:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Macquarie
  Essential Assets Partnership

  
	
   

  	
   

  	
   

  	
   

  	
  c/o Macquarie
  Canadian Infrastructure Management Limited

  
	
   

  	
   

  	
   

  	
   

  	
  Canadian Pacific
  Tower

  
	
   

  	
   

  	
   

  	
   

  	
  100 Wellington
  Street West

  
	
   

  	
   

  	
   

  	
   

  	
  Suite 2200

  
	
   

  	
   

  	
   

  	
   

  	
  Toronto, Ontario
  M5K 1J3

  
	
   

  	
   

  	
   

  	
   

  	
  Attention:

  	
   

  	
  Alina Osorio

  
	
   

  	
   

  	
   

  	
   

  	
  Telephone:

  	
   

  	
  (416) 607-5035

  
	
   

  	
   

  	
   

  	
   

  	
  Facsimile:

  	
   

  	
  (416) 607-5073

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  with an
  additional copy (which shall not constitute notice)
  to:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Ian Macdonald

  
	
   

  	
   

  	
   

  	
   

  	
  Gowling Lafleur
  Henderson LLP

  
	
   

  	
   

  	
   

  	
   

  	
  Suite 1600

  
	
   

  	
   

  	
   

  	
   

  	
  1 First Canadian
  Place

  
	
   

  	
   

  	
   

  	
   

  	
  100
  King Street West

  
	
   

  	
   

  	
   

  	
   

  	
  Toronto,
  Ontario, Canada

  
	
   

  	
   

  	
   

  	
   

  	
  M5X 1G5

  

 

If to any other holder of
Registrable Securities, to the address of such other holder as shown in the
stock record book of the Company, or to such other address as any of the above
shall have designated in writing to all of the other above.

(g)           Entire Agreement.  This Agreement constitutes the entire
agreement of the parties and supersedes all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to the
subject matter hereof.

(h)           Descriptive
Headings.  The headings in this
Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning of terms contained herein.

(i)            Interpretation.  When reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless
otherwise indicated.  Whenever the words “include”,
“includes” or “including” are used in this Agreement, they shall be deemed to
be followed by the words “without limitation.” 
The words “hereof,” “herein,” “hereby” and “hereunder” and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.  The word “or” shall not be exclusive.  This Agreement shall be construed without
regard to any presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted.

 12
 

 

(j)            Severability.  In the event that any one or more of the
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the remaining provisions, paragraphs,
words, clauses, phrases or sentences hereof shall not be in any way impaired,
it being intended that all rights, powers and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.

(k)           Counterparts.  This Agreement may be executed in
counterparts (including by facsimilie), and by different parties on separate
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.

(l)            Governing
Law; Submission to Jurisdiction. 
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York.  The parties to this Agreement hereby agree to
submit to the jurisdiction of the courts of the State of New York, the courts
of the United States of America for the Southern District of New York, and
appellate courts from any thereof in any action or proceeding arising out of or
relating to this Agreement.

(m)          Specific
Performance.  The parties hereto
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. 
Accordingly, it is agreed that they shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court of competent
jurisdiction in the United States or any state thereof, in addition to any
other remedy to which they may be entitled at law or in equity.

[Remainder of Page Left Blank Intentionally]

 

 13

 

IN WITNESS WHEREOF, each
of the undersigned has executed this Agreement or caused this Agreement to be
duly executed on its behalf as of the date first written above.

	
   

  	
   

  	
  ITC HOLDINGS CORP.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Joseph L. Welch

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Joseph L. Welch

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  President and CEO

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MACQUARIE ESSENTIAL ASSETS PARTNERSHIP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  Macquarie Canadian Infrastructure

  
	
   

  	
   

  	
   

  	
   

  	
  Management Limited, its General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Alina Osorio

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Alina Osorio

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  CEO

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Gregory Smith

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Gregory Smith

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Director

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Shares of Common Stock issued to Stockholder on
  the date hereof:  2,195,045

  

 

 

 

[SIGNATURE
PAGE—SHAREHOLDERS AGREEMENT]

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