Document:

Exhibit 10.30

 

MedicalCV, Inc.

 

August 19, 2003

 

 

Lawrence L. Horsch

1404 Hilltop Ridge

Houlton, WI 
54082

 

RE:                              Letter of Agreement

 

Dear Mr. Horsch:

 

This letter outlines the terms approved by
the MedicalCV, Inc. Board of Directors under which you will become Chairman of
the Board.

 

Since January 2003, you have acted as a
consultant to the Company.  Per the
terms of this letter and your signed acceptance, that relationship will
terminate and MedicalCV will bring current all outstanding obligations under that
previous agreement.

 

The Chairmanship of MedicalCV will be based
upon the following terms and will be effective on August 19, 2003:

 

•                  Annual compensation of $60,000 based on
thirty-two (32) hours per month assisting the Company’s management in addressing
strategic issues;

 

•                  Horsch will purchase from the Company under a
private placement $60,000 of common stock at a price of $0.70 per share.  The price is based on the previous closing
price of the stock when Mr. Horsch and the Company agreed to terms (June 19,
2003);

 

•                  Ten-year (10) option on 100,000 shares of
common stock at $0.70 per share with vesting based upon the following
terms.  Each term represents one-third
of the vesting process:

 

•                  The Company closes on $6.0 million of equity
/ debt before January 31, 2004 as approved by the Board;

 

•                  New technology, such as A-Fib or equivalent,
is moving toward development to the Board’s satisfaction, measured on the
twelve-month anniversary of you becoming Chairman;

 

•                  The Company stock, if it continues to be
publicly held, trades above $1.50 bid for at least ten market days measured to
the twelve-month anniversary of becoming Chairman.

 

The 100,000 options will all vest no later
than four (4) years from the effective anniversary date of your assuming duties
as Chairman of the Board or upon completion of the performance terms outlined
in this letter.  The terms outlined in
this Letter of Agreement are cancelled upon removal as Chairman of the Board.  Any shares that have vested per the terms
outlined above will remain the property of Mr. Horsch and are exercisable under
the terms of the option agreement.

 

 

Any disputes between MedicalCV and Mr. Larry
Horsch are subject to binding arbitration with the American Arbitration
Association located in Minneapolis, Minnesota.

 

If you agree with the terms outlined in this
letter of understanding, please sign and date in the area below.

 

	
  Agreed and Accepted

  	
  Agreed and Accepted

  
	
   

  	
   

  
	
  MedicalCV, Inc.

  	
  Lawrence L. Horsch

  
	
   

  	
   

  
	
  /s/ Blair P. Mowery

  	
   

  	
  /s/ Lawrence L. Horsch

  	
   

  
	
  Date August 19, 2003

  	
  Date August 19, 2003Exhibit 10.31

 

MEDICALCV,
INC.

 

NON-QUALIFIED
STOCK OPTION AGREEMENT

 

No. of shares subject to
option: 100,000

Date of grant: August 19,
2003

 

THIS OPTION AGREEMENT is entered into by and between MedicalCV, Inc., a
Minnesota corporation (the “Company”), and Lawrence L. Horsch (the “Optionee”).

 

W
I T N E S S E T H :

 

WHEREAS, the Company has agreed to grant Optionee an option to purchase
shares of its common stock outside the Company’s stock option plans; and

 

WHEREAS, the Board of Directors of the Company (“Board”) has authorized
and approved the grant of the following option (“Option”) on the terms set
forth in this Agreement,

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto have agreed,
and do hereby agree, as follows:

 

1.                                       Nature of the Option. 
This Option is not intended to qualify as an Incentive Stock Option
within the meaning of Section 422 of the United States Internal Revenue Code of
1986, as amended.  This Option is not
granted pursuant to the Company’s 2001 Equity Incentive Plan.

 

2.                                       Grant of Option.  The
Company grants to the Optionee, subject to the terms and conditions herein set
forth, the right and option to purchase from the Company all or a part of an
aggregate of 100,000 shares of Stock (the “Shares”) at the purchase price of
$0.70 per share, such Option to be exercised as hereinafter provided.

 

3.                                       Terms and Conditions.  It
is understood and agreed that the Option evidenced hereby is subject to the
following terms and conditions:

 

(a)                                  Expiration Date. 
Except as hereinafter provided, this Option shall expire ten years after
the date of grant specified above.

 

(b)                                 Exercise of Option.  Subject
to the terms of this Agreement regarding the exercisability of this Option,
this Option shall be exercisable cumulatively, to the extent it is vested, as
set forth in Schedule A.  Any exercise
shall be accompanied by a written notice to the Company specifying the number
of shares of Stock as to which the Option is being exercised.  Notation of any partial exercise shall be
made by the Company on Schedule A.  This
Option may not be exercised for a fraction of a Share, and must be exercised
for no fewer than one hundred (100) shares of Stock, or such lesser number of
shares as may be vested.  Except upon a
Change of Control as defined in Section 8 of this Agreement, if Optionee ceases
to serve as the Company’s Chairman for any reason, this Option shall terminate
with respect to non-vested option shares (as specified in Section 3(b) hereof).

 

(c)                                  Payment of Purchase Price Upon Exercise.  At
the time of any exercise, the Exercise Price of the Shares as to which this
Option is exercised shall be paid in cash to the Company.

 

 

(d)                                 Nontransferability. 
This Option shall not be transferable other than by will or by the laws
of descent and distribution.  During the
lifetime of the Optionee, this Option shall be exercisable only by the Optionee
or by the Optionee’s guardian or legal representative.  No transfer of this Option by the Optionee
by will or by the laws of descent and distribution shall be effective to bind
the Company unless the Company is furnished with written notice thereof and a
copy of the will and/or such other evidence as the Board may determine
necessary to establish the validity of the transfer.

 

(e)                                  Acceleration of Option Upon Change in Control.  In
the event of a Change in Control, as defined in Section 8, the provisions of
Section 3(b) and Schedule A hereof pertaining to vesting shall cease to apply
and this Option shall become immediately vested and fully exercisable with
respect to all Shares; provided, however, that the provisions of this
Subsection 3(e) shall not apply unless the Optionee has been engaged by the
Company as Chairman of the Board for a period equal to or exceeding one
calendar year.  No acceleration of
vesting shall occur under this Subsection 3(e) in the event a surviving
corporation or its parent assumes this Option or in the event the surviving
corporation or its parent substitutes an option agreement with substantially
the same terms as provided in this Agreement. 
Nothing in this Subsection 3(e) shall limit the Committee’s authority to
cancel this Option in accordance with Section 5.

 

(f)                                    Subject to Lock Up. 
Optionee understands that the Company at a future date may file a
registration or offering statement (the “Registration Statement”) with the
Securities and Exchange Commission to facilitate an underwritten public offering
of its securities.  The Optionee agrees,
for the benefit of the Company, that should such an underwritten public
offering be made and should the managing underwriter of such offering require,
the undersigned will not, without the prior written consent of the Company and
such underwriter, during the Lock Up Period as defined herein: sell, transfer
or otherwise dispose of, or agree to sell, transfer or otherwise dispose of
this Option or any of the Shares acquired upon exercise of this Option during the
Lock Up Period; or sell or grant, or agree to sell or grant, options, rights or
warrants with respect to any of the Shares acquired upon exercise of this
Option.  The foregoing does not prohibit
gifts to donees or transfers by will or the laws of descent 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 from effecting any sales or transfers of the Shares.  The Lock Up Period shall commence on the
effective date of the Registration Statement.

 

(g)                                 Not An Employment Contract.  The
Option will not confer on the Optionee any right with respect to employment or
continuance of service with the Company or any Subsidiary, nor will it
interfere in any way with any right the Company or any Subsidiary would
otherwise have to terminate or modify the terms of Optionee’s service at any
time.

 

(h)                                 No Rights as Shareholder.  The
Optionee shall have no rights as a shareholder of the Company with respect to
any Shares prior to the date of issuance to the Optionee of a certificate for
such Shares.

 

(i)                                     Compliance with Law and Regulations. 
This Option and the obligation of the Company to sell and deliver Shares
hereunder shall be subject to all applicable laws, rules and regulations
(including, but not limited to, federal securities laws) and to such approvals
by any government or regulatory agency as may be required.  This Option shall not be exercisable, and
the Company shall not be required to issue or deliver any certificates for
Shares of Stock prior to the completion of any registration or qualification of
such Shares under any federal or state law, or any rule or regulation of any
government body which the Company shall, in its sole discretion, determine to
be necessary or advisable.

 

 

Moreover, this Option may not be exercised if its exercise or the
receipt of Shares of Stock pursuant thereto would be contrary to applicable
law.

 

(j)                                     Withholding.  All deliveries and
distributions under this Agreement are subject to withholding of all applicable
taxes.  At the election of the Optionee,
and subject to such rules and limitations as may be established by the
Committee from time to time, such withholding obligations may be satisfied
through the surrender of shares of Stock which the Optionee already owns, or to
which the Optionee is otherwise entitled hereunder.

 

(k)                                  Adjustments.  Subject to any required
action by the shareholders of the Company, the number of shares of common stock
covered by the Option, as well as the price per share of common stock covered
by the Option, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of common stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
common stock, or any other increase or decrease in the number of issued shares
of outstanding common stock effected without receipt of consideration by the
Company.  No other issuance by the
Company of shares of stock or any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of common stock subject
to the Option.

 

4.                                       Death of Optionee. 
Upon the death of Optionee prior to the expiration of the Option, the
following provisions shall apply:

 

(a)                                  If the Optionee is at the time of his death
engaged by the Company or a Subsidiary and has been in continuous service (as
determined by the Committee in its sole discretion) since the Date of Grant of
the Option, then the Option may be exercised by the Optionee’s estate or by a
person who acquired the right to exercise the Option by will or the laws of
descent and distribution, for one (1) year following the date of the Optionee’s
death or until the expiration date of the Option, whichever date is earlier,
but only to the extent the Optionee was vested in and entitled to exercise the
Option at the time of death.

 

(b)                                 If the Optionee dies within three (3) months
after termination of Optionee’s service with the Company or a Subsidiary the
Option may be exercised for nine (9) months following the date of Optionee’s
death or the expiration date of the Option, whichever date is earlier, by the
Optionee’s estate or by a person who acquires the right to exercise the Option
by will or the laws of descent or distribution, but only to the extent the Optionee
was vested in and entitled to exercise the Option at the time of termination.

 

5.                                       Termination of Relationship for Misconduct.  If
the Board or the Committee reasonably believes that the Optionee has committed
an act of misconduct or breached Optionee’s letter agreement with the Company,
it may suspend the Optionee’s right to exercise this option pending a
determination by the Board or the Committee. 
If the Board or the Committee determines that the Optionee has committed
an act of misconduct or breached Optionee’s letter agreement with the Company,
neither the Optionee nor the Optionee’s estate shall be entitled to exercise
any option whatsoever.  For purposes of
this Section 5, an act of misconduct shall include embezzlement, fraud,
dishonesty, nonpayment of an obligation owed to the Company, breach of
fiduciary duty or deliberate disregard of the Company’s rules resulting in
loss, damage or injury to the Company, or if the Optionee makes an unauthorized
disclosure of any Company trade secret or confidential information, engages in
any conduct constituting unfair competition with respect to the Company, or
induces any party to breach a contract with the Company,   In making such determination, the Board or
the Committee shall act fairly and shall give the Optionee an opportunity to
appear and present evidence on the Optionee’s behalf at a hearing before the
Board or the Committee.

 

 

6.                                       Restrictions on Transfer.

 

(a)                                  Securities Law Restrictions. 
Regardless of whether the offering and sale of common stock under this
Agreement have been registered under the Securities Act of 1933 (the “Act”) or
have been registered or qualified under the securities laws of any state, the
Company at its discretion may impose restrictions upon the sale, pledge or other
transfer of such common stock (including the placement of appropriate legends
on stock certificates or the imposition of stop-transfer instructions) if, in
the judgment of the Company, such restrictions are necessary or desirable in
order to achieve compliance with the Act, the securities laws of any state or
any other law.

 

(b)                                 Investment Intent at Grant. 
Optionee represents and agrees that the Shares to be acquired upon
exercising this Agreement will be acquired for investment, and not with a view
to the sale or distribution thereof.

 

(c)                                  Investment Intent at Exercise.  In
the event that common stock issued under this Agreement is not registered under
the Act but an exemption is available which requires an investment
representation or other representation, Optionee shall represent and agree at
the time of exercise that the common stock being acquired upon exercising the
Option is being acquired for investment, and not with a view to the sale or
distribution thereof, and shall make such other representations as are deemed
necessary or appropriate by the Company and its counsel.

 

(d)                                 Legends.  All certificates evidencing
Shares issued under this Agreement in an unregistered transaction shall bear
the following legend (and such other restrictive legends as are required or
deemed advisable under the provisions of any applicable law):

 

“THE SHARES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY
AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

(e)                                  Removal of Legends.  If,
in the opinion of the Company and its counsel, any legend placed on a stock
certificate representing Shares issued under this Agreement is no longer
required, the holder of such certificate shall be entitled to exchange such
certificate for a certificate representing the same number of shares of common
stock but without such legend.

 

(f)                                    Administration.  Any
determination by the Company and its counsel in connection with any of the
matters set forth in this section shall be conclusive and binding on Optionee
and all other persons.

 

7.                                       Heirs and Successors. 
This Agreement shall be binding upon, and inure to the benefit of, the
Company and its successors and assigns, and upon any person acquiring, whether
by merger, consolidation, purchase of assets or otherwise, all or substantially
all of the Company’s assets and business. 
If any rights exercisable by the Optionee or benefits deliverable to the
Optionee under this Agreement have not been exercised or delivered,
respectively, at the time of the Optionee’s death, such rights shall be
exercisable by his Designated Beneficiary. 
The “Designated Beneficiary” shall be the beneficiary or beneficiaries
designated by the Optionee in a writing filed with the Committee in such form
and at such time as the Committee shall require.  If a deceased Optionee fails to designate a beneficiary, or if
the Designated Beneficiary does not survive the Optionee, any rights that would
have been exercisable by the Optionee and any benefits distributable to the
Optionee shall be exercised by or

 

 

distributed to the legal
representative of the estate of the Optionee. 
If a deceased Optionee designates a beneficiary and the Designated
Beneficiary survives the Optionee but dies before the Designated Beneficiary’s
exercise of all rights under this Agreement or before the complete distribution
of benefits to the Designated Beneficiary under this Agreement, then any rights
that would have been exercisable by the Designated Beneficiary shall be
exercised by the legal representative of the estate of the Designated
Beneficiary, and any benefits distributable to the Designated Beneficiary shall
be distributed to the legal representative of the estate of the Designated
Beneficiary.

 

8.                                       Change in Control.  The
term “Change in Control” shall mean:

 

(a)                                  the acquisition by any person or group deemed
a person under Sections 3(a)(9) and 13(d)(3) of the Exchange Act (other than
the Company and its subsidiaries as determined immediately prior to that date)
of beneficial ownership, directly or indirectly (with beneficial ownership
determined as provided in Rule 13d-3, or any successor rule, under the Exchange
Act), of a majority of the total combined voting power of all classes of Stock
of the Company having the right under ordinary circumstances to vote at an
election of the Board, if such person or group deemed a person prior to such
acquisition was not a beneficial owner of at least five percent (5%) of such
total combined voting power of the Company;

 

(b)                                 the date of approval by the stockholders of
the Company of an agreement providing for the merger or consolidation of the
Company with another corporation or other entity where (x) stockholders of the
Company immediately prior to such merger or consolidation would not
beneficially own following such merger or consolidation shares entitling such
stockholders to a majority of all votes (without consolidation of the rights of
any class of stock to elect directors by a separate class vote) to which all
stockholders of the surviving corporation would be entitled in the election of
directors, or (y) where the members of the Board, immediately prior to such
merger or consolidation, would not, immediately after such merger or
consolidation, constitute a majority of the board of directors of the surviving
corporation; or

 

(c)                                  the sale of all or substantially all of the
assets of the Company.

 

9.                                       Notices.  Any notice hereunder to the
Company shall be addressed to it at its principal executive offices, located at
9725 South Robert Trail, Inver Grove Heights, Minnesota 55077, Attention: Chief
Executive Officer; and any notice hereunder to the Optionee shall be addressed
to the Optionee at the address last appearing in the Company’s records; subject
to the right of either party to designate at any time hereunder in writing some
other address.

 

10.                                 Counterparts. 
This Agreement may be executed in two counterparts each of which shall
constitute one and the same instrument.

 

11.                                 Governing Law. 
This Agreement shall be governed by and construed in accordance with the
laws of the State of Minnesota, except to the extent preempted by federal law,
without regard to the principles of comity or the conflicts of law provisions
of any other jurisdiction.

 

 

IN
WITNESS WHEREOF, MedicalCV, Inc. has caused this Agreement to be executed by
its Chief Executive Officer and the Optionee has executed this Agreement, both
as of the day and year first above written.

 

	
   

  	
  MEDICALCV, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Blair P. Mowery

  	
   

  
	
   

  	
  By Blair P. Mowery

  
	
   

  	
  Its President and Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Lawrence L. Horsch

  	
   

  
	
   

  	
  Lawrence L. Horsch

  
	
   

  	
   

  
	
   

  	
  1404 Hilltop Ridge

  
	
   

  	
  Houlton, WI 54082

  
				

 

 

SCHEDULE
A

 

OPTION
AND VESTING DATA

 

	
  Name of Optionee:

  	
  Lawrence L. Horsch

  
	
  Number of Shares Subject
  to Option:

  	
  100,000

  
	
  Date of Grant:

  	
  August 19, 2003

  
	
  Vests in Full:

  	
  August 19, 2007

  

 

The foregoing
vesting schedule may be accelerated upon the occurrence of the performance
measures set forth below.

 

	
  EVENT

  	
   

  	
  AGGREGATE
  NUMBER OF

  SHARES EXERCISABLE

  
	
   

  	
   

  	
   

  
	
  The Company completes the
  sale of $6.0 million of debt or equity financing  between August 19, 2003 and January 31, 2004

  	
   

  	
  33,333

  
	
   

  	
   

  	
   

  
	
  The board of directors of
  the Company determines in good faith that any new product under development
  as of August 19, 2003 is authorized to move to the next phase of development
  on or before August 19, 2004.

  	
   

  	
  33,333

  
	
   

  	
   

  	
   

  
	
  The bid price of the
  common stock of the Company exceeds $1.50 for at least ten consecutive
  trading days between August 19, 2003 and August 19, 2004.

  	
   

  	
  33,334

  

 

The above vesting schedule assumes an ongoing relationship with the
Company.  Your rights to exercise the
unvested portion of your option will cease upon termination of your
relationship with the Company, subject to Change in Control provisions set
forth in Section 8 of the Agreement. 
Reference is made to relevant sections of the Agreement between you and
the Company for your rights to exercise the vested portion of your option in
the event of termination of your relationship with the Company during your
lifetime or upon death.  The above
vesting schedule is in all respects subject to the terms of those documents.

 

	
  OPTIONEE

  	
  MEDICALCV, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Lawrence L. Horsch

  	
   

  	
  /s/ Blair P. Mowery

  	
   

  
	
  Lawrence L. Horsch

  	
  By Blair P. Mowery

  
	
   

  	
  Its President and Chief
  Executive Officer

  
				

 

 

NOTATIONS
AS TO PARTIAL EXERCISE

 

	
  Date of

  Exercise

  	
   

  	
  Number of

  Purchased

  Shares

  	
   

  	
  Balance of

  Shares on

  Option

  	
   

  	
  Authorized

  Signature

  	
   

  	
  Date

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