Document:

EXHIBIT 10.2

 

FEBRUARY 2005 DISCRETIONARY
CREDIT NOTE

 

	
  $500,000

  	
   

  	
  Minneapolis, Minnesota

  
	
   

  	
   

  	
  February 16, 2005

  

 

FOR VALUE RECEIVED, MEDICALCV, INC., a Minnesota
corporation (the “Borrower”) promises to pay to the order of PKM
PROPERTIES, LLC, a Minnesota limited liability company (the “Lender”) at
its office in Minneapolis, Minnesota or at such other place as may be
designated from time to time by the holder hereof, in lawful money of the
United States of America, the principal sum of Five Hundred Thousand Dollars
($500,000) or so much thereof as has been advanced by the Lender to or for the
benefit of the Borrower pursuant to that certain February 2005 Credit
Agreement, dated as of the date hereof, as amended from time to time, between
the Borrower and the Lender (the “Agreement”) and remains unpaid,
together with interest on the unpaid principal balance hereof from the date
hereof until this Note is fully paid, at an annual rate of interest, calculated
on the basis of actual number of days elapsed in a 360 day year, that shall at
all times be equal to the Interest Rate, as provided in the Agreement, each
change in the interest rate herein to become effective on the day the
corresponding change in the Interest Rate becomes effective.

 

Interest accruing on this Note shall be due and
payable on the last day of each month commencing March 31, 2005, and at
maturity or earlier prepayment in full. 
The principal of this Note and all accrued interest shall be due and
payable on or before the earlier of (a) June 16, 2005, or (b) the closing of
any debt or equity financing transaction by the Borrower after the date
hereof.  Payments hereunder shall be
applied first to the payment of accrued interest and then to the reduction of
principal.  The Borrower may prepay at
any time and from time to time, all or any portion of the balance from time to
time remaining on this Note, only as provided in the Agreement.

 

This Note is secured by, among other things, the May
Security Agreement, the Intellectual Property Security Agreement and other
Collateral referred to in the Agreement and is issued pursuant to and is
subject to the Agreement.

 

The Borrower agrees to pay all costs of collection,
including attorneys’ fees, in the event this Note is not paid when due.  This Note is being delivered in, and shall be
governed by, the laws of the State of Minnesota.  Presentment or other demand for payment,
notice of dishonor and protest are expressly waived.

 

	
   

  	
  MEDICALCV, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ John H. Jungbauer, CFO

  	
   

  
	
   

  	
   

  	
  Name: John H. Jungbauer

  
	
   

  	
   

  	
  Its: Vice President, FinanceEXHIBIT 10.3

WARRANT

 

To
Purchase

Common Stock

of

MEDICALCV, INC.

 

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

 

THIS CERTIFIES
THAT, for good and valuable consideration, PKM PROPERTIES, LLC, a Minnesota
limited liability company (“PKM Properties”) or its registered assigns,
is entitled to subscribe for and purchase from MedicalCV, Inc., a Minnesota
corporation (the “Company”),

 

(A)  the number of fully paid and nonassessable
shares of Common Stock of the Company that would be purchasable by an investor
pursuant to warrants issuable in connection with a $500,000 investment made
pursuant to the terms of a private placement of $3,000,000 or more of the
Company’s equity securities occurring on or before March 31, 2005, having an exercise
price per share and other terms equivalent to that of the warrant issuable to
such investor in such private placement, or

 

(B) if such
private placement involving the issuance of warrants does not occur on or
before March 31, 2005, the right to purchase at any time to and including the
date that is ten (10) years after the date hereof, up to Seven Hundred Fifty
Thousand (750,000) fully paid and nonassessable shares of the Common Stock of
the Company, having an exercise price of $0.50 per share (the “Warrant
Exercise Price”), subject to the antidilution provisions of this Warrant.

 

The shares
which may be acquired upon exercise of this Warrant are referred to herein as
the “Warrant Shares.” As used herein, the term “Holder” means PKM Properties,
any party who acquires all or a part of this Warrant as a registered transferee
of PKM Properties, or any record holder or holders of the Warrant Shares issued
upon exercise, whether in whole or in part, of the Warrant; the term “Common
Stock” means the Company’s Common Stock, $.01 par value.  If clause (A) above is applicable, then the
terms of the warrant issuable in such private placement shall be substituted
for the remaining terms of this Warrant.

 

 

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

 

1.                                       Exercise;
Conversion Right; Transferability

 

(a)                                  The
rights represented by this Warrant may be exercised by the Holder hereof at any
time, for a period of ten (10) years commencing on the date hereof, in whole or
in part (but not as to a fractional share of Common Stock), by written notice
of exercise (in the form attached hereto) delivered to the Company at the
principal office of the Company prior to the expiration of this Warrant and
accompanied or preceded by the surrender of this Warrant along with a check in
payment of the Warrant Exercise Price for such shares.

 

(b)                                 Subject
to the restrictions on transfer of this Warrant or the Warrant Shares set forth
herein, the Holder of this Warrant shall have the right to require the Company
to convert this Warrant (the “Conversion Right’) at any time after the
date hereof and prior to its expiration into shares of Common Stock as provided
for in Sections 1(b) through 1(d) hereof. 
Upon exercise of the Conversion Right, the Company shall deliver to the
Holder (without payment by the Holder of any Warrant Exercise Price) that
number of shares of Company Common Stock equal to the quotient obtained by
dividing (i) the value of the Warrant at the time the Conversion Right is
exercised (determined by subtracting the aggregate Warrant Exercise Price for
the Warrant Shares in effect immediately prior to the exercise of the
Conversion Right from the aggregate Fair Market Value (as defined in
Section 10 hereof) for the Warrant Shares immediately prior to the
exercise of the Conversion Right) by (ii) the Fair Market Value of one share of
Common Stock immediately prior to the exercise of the Conversion Right.

 

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

 

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

 

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

 

2.                                       Exchange
and Replacement.  Subject to Sections
1 and 7 hereof, this Warrant is exchangeable upon the surrender hereof by the
Holder to the Company at its office for new Warrants of like tenor and date
representing in the aggregate the right to purchase the number of Warrant Shares
purchasable hereunder, each of such new Warrants to represent the right to

 

2

 

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

 

3.                                       Issuance
of the Warrant Shares.

 

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

 

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

 

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

 

3

 

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

 

(a)                                  The
Warrant Exercise Price shall be subject to adjustment from time to time as
hereinafter provided.  Upon each
adjustment of the Warrant Exercise Price the holder of this Warrant shall thereafter
be entitled to purchase the number of shares of Common Stock of the Company
obtained by multiplying the Warrant Exercise Price in effect immediately prior
to such adjustment by the number of shares issuable pursuant to exercise
immediately prior to such adjustment and dividing the product thereof by the
Warrant Exercise Price resulting from such adjustment.

 

(b)                                 Except
for (i) options, warrants or other rights to purchase securities outstanding on
the date of the issuance of this Warrant (provided there is no adjustment to
the terms of such options, warrants or other securities on or after the date of
issuance of this Warrant); (ii) options to purchase shares of Common Stock and
the issuance of awards of Common Stock pursuant to stock option or employee
stock purchase plans adopted by the Company and shares of Common Stock issued
upon the exercise of such options granted pursuant to such plans (provided
there is no adjustment to the terms of such options, awards or other securities
on or after the date of issuance of this Warrant) (appropriately adjusted to
reflect stock splits, combinations, stock dividends, reorganizations,
consolidations and similar changes); (iii) up to four separate issues or sales
by the Company during any twelve month period, none of which shall exceed
25,000 shares of Common Stock or securities convertible into or exercisable for
the purchase of Common Stock; and (iv) Common Stock or securities convertible
into or exercisable for the purchase of Common Stock issued in connection with
any merger or acquisition of any business or tangible or intangible assets
which is approved by the Company’s Board of Directors; if and whenever the
Company shall issue or sell any additional securities, warrants or rights or
any security convertible or exchangeable into equity, securities, warrants or
rights (collectively, “Convertible Securities”) for a consideration per share
less than the Warrant Exercise Price in effect immediately prior to the time of
such issue or sale, then, forthwith upon such issue or sale, the Warrant
Exercise Price shall be adjusted to a price determined by multiplying such
Warrant Exercise Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issuance
plus the number of shares of Common Stock that the aggregate consideration
received by the Company for such issuance would purchase at such Warrant
Exercise Price; and the denominator of which shall be the number of shares of
such additional Common Stock and the number of shares of Common Stock
outstanding prior to such issuance.  For
the purpose of the above calculation, the number of shares of Common Stock
immediately prior to such issuance shall be calculated on a fully-diluted
basis, as if this Warrant and any other outstanding warrants, options or other
rights for the purchase of shares of stock or Convertible Securities had been
fully exercised as of such date.  Except
as provided in Section 5(e) below, no further adjustments of the Warrant
Exercise Price shall be made upon the actual issuance of Common Stock or of any
Convertible Securities upon the exercise of such rights or options or upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.

 

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(c)                                  For
purposes of this Section 5, in case any shares of Common Stock or
Convertible Securities or any rights or options to purchase any such Common
Stock or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by
the Company therefor, without deducting therefrom any expenses incurred or any
underwriting commissions, discounts or concessions paid or allowed by the
Company in connection therewith.  In case
any shares of Common Stock or Convertible Securities or any rights or options
to purchase any such Common Stock or Convertible Securities shall be issued or
sold for a consideration other than cash, the amount of the consideration other
than cash received by the Company shall be deemed to be the fair value of such
consideration as determined by the Board of Directors of the Company, without
deducting therefrom any expenses incurred or any underwriting commissions,
discounts or concessions paid or allowed by the Company in connection
therewith.  In case any shares of Common
Stock or Convertible Securities or any rights or options to purchase such
Common Stock or Convertible Securities shall be issued in connection with any
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor shall be deemed to be the fair value as
determined by the Board of Directors of the Company of such portion of the
assets and business of the non-surviving corporation or corporations as such
Board shall determine to be attributable to such Common Stock, Convertible
Securities, rights or options, as the case may be.  In the event of any consolidation or merger
of the Company in which the Company is not the surviving corporation or in the
event of any sale of all or substantially all of the assets of the Company for
stock or other securities of any other corporation, the Company shall be deemed
to have issued a number of shares of its Common Stock for stock or securities
of the other corporation computed on the basis of the actual exchange ratio on
which the transaction was predicated and for a consideration equal to the fair
market value on the date of such transaction of such stock or securities of the
other corporation, and if any such calculation results in adjustment of the
Warrant Exercise Price, the determination of the number of shares of Common
Stock issuable upon exercise immediately prior to such merger, conversion or
sale, for purposes of Section 5(f) below, shall be made after giving
effect to such adjustment of the Warrant Exercise Price.

 

(d)                                 In
case the Company shall at any time subdivide its outstanding shares of Common
Stock into a greater number of shares, the Warrant Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced, and
conversely, in case the outstanding shares of Common Stock of the Company shall
be combined into a smaller number of shares, the Warrant Exercise Price in
effect immediately prior to such combination shall be proportionately
increased.

 

(e)                                  If
(i) the purchase price provided for in any right or option referred to in
Section 5(b), or (ii) the additional consideration, if any, payable upon
the conversion or exchange of Convertible Securities, or (iii) the rate at
which any Convertible Securities are convertible into or exchangeable for
Common Stock, shall change at any time (other than under or by reason of
provisions designed to protect against dilution), or any Convertible Securities
shall terminate, expire or cease to be outstanding without exercise thereof,
the Warrant Exercise Price then in effect hereunder shall forthwith be
increased or decreased to such Warrant Exercise Price as would have applied had
the adjustments made upon the issuance of such rights, options or Convertible
Securities been made upon the basis of (a) the issuance of the number of
shares of Common Stock theretofore actually delivered upon the exercise of such
options or rights or upon

 

5

 

the conversion or exchange of such Convertible
Securities, and the total consideration received therefor, and (b) the
issuance at the time of such change of any such options, rights, or Convertible
Securities then still outstanding for the consideration, if any, received by
the Company therefor and to be received on the basis of such changed price; and
on the expiration of any such option or right or the termination of any such
right to convert or exchange such Convertible Securities, the Warrant Exercise
Price then in effect hereunder shall forthwith be increased to such Warrant
Exercise Price as would have been obtained had the adjustments made upon the
issuance of such rights or options or Convertible Securities been made upon the
basis of the issuance of the shares of Common Stock theretofore actually
delivered (and the total consideration received therefor) upon the exercise of
such rights or options or upon the conversion or exchange of such Convertible
Securities.  If the purchase price
provided for in any right or option referred to in Section 5(b), or the
rate at which any Convertible Securities referred to in Section 5(b) are
convertible into or exchangeable for Common Stock, shall decrease at any time
under or by reason of provisions with respect thereto designed to protect
against dilution, then in case of the delivery of Common Stock upon the
exercise of any such right or option or upon conversion or exchange of any such
Convertible Security, the Warrant Exercise Price then in effect hereunder shall
forthwith be decreased to such Warrant Exercise Price as would have applied had
the adjustments made upon the issuance of such right, option or Convertible
Security been made upon the basis of the issuance of (and the total consideration
received for) the shares of Common Stock delivered as aforesaid.

 

(f)                                    If
any capital reorganization or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with another corporation, or
the sale of all or substantially all of its assets to another corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, and except as otherwise provided herein, lawful
and adequate provision shall be made whereby the holder of this Warrant shall
thereafter have the right to receive upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of the Common Stock of
the Company immediately theretofore receivable upon the exercise of this
Warrant, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of such
Common Stock equal to the number of shares of such stock immediately
theretofore receivable upon the exercise of this Warrant had such
reorganization, reclassification, consolidation, merger or sale not taken
place, and in any such case appropriate provision shall be made with respect to
the rights and interests of the holder of this Warrant to the end that the
provisions hereof (including without limitation provisions for adjustments of
the Warrant Exercise Price and of the number of shares receivable upon the
exercise hereof) shall thereafter be applicable, as nearly as may be in
relation to any shares of stock, securities or assets thereafter receivable
upon the exercise of this Warrant.  The
Company shall not effect any such consolidation, merger or sale, unless prior
to the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume by written instrument executed and mailed
to the registered holder of this Warrant, at the last address of such holder
appearing on the books of the Company, the obligation to deliver to such holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to receive.

 

6

 

(g)                                 Upon
any adjustment of the Warrant Exercise Price, the Company shall give written
notice thereof, by first-class mail, postage prepaid, addressed to the
registered holder of this Warrant, as shown on the books of the Company, which
notice shall state the Warrant Exercise Price resulting from such adjustment
and the increase or decrease, if any, in the number of shares purchasable at
such price upon the exercise of this Warrant, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.  No adjustment to the Warrant
Exercise Price shall be required unless such adjustment would require an increase
or decrease of at least five cents ($0.05); provided, however, that any
adjustments which by reason of this Section 5(g) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment; and, provided further, that adjustment shall be required and made
in accordance with the provisions of this Section 5 (other than this
Section 5(g)) not later than such time as may be required in order to
preserve the tax-free nature of a distribution to the holders of shares of
Common Stock.  All calculations under
this Section 5 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. 
Anything in this Section 5 to the contrary notwithstanding, the Company
shall be entitled to make such increases in the conversion rate in addition to
those required by this Section 5 as it in its discretion shall determine to be
advisable in order that any stock dividends, subdivisions of shares,
distribution of rights to purchase stock or securities, or distribution of
securities convertible into or exchangeable for stock hereafter made by the
Company to its stockholders shall not be taxable.

 

(h)                                 In
case at any time: (i) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its assets
to, another corporation; or (ii) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company; then, in any one or more
of said cases, the Company shall give written notice, by first-class mail,
postage prepaid, addressed to the registered holder of this Warrant at the
address of such holder as shown on the books of the Company, of the date on
which (a) the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights, or (b) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be.  Such notice shall also specify the date as of
which the holders of Common Stock of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding up, as the case may be.  Such
written notice shall be given at least twenty (20) days prior to the action in
question and not less than twenty (20) days prior to the record date or the
date on which the Company’s transfer books are closed in respect thereto.

 

(i)                                     If
any event occurs as to which in the opinion of the Board of Directors of the
Company the other provisions of this Section 5 are not strictly applicable or
if strictly applicable would not fairly protect the rights of the holder of
this Warrant in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make an adjustment in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such rights as aforesaid.

 

(j)                                     As
used in this Section 5 the term “Common Stock” shall mean and include the
Company’s presently authorized Common Stock and any additional Common Stock
that may be

 

7

 

authorized by due action of the Company’s Board of
Directors and shareholders entitled to vote thereon.

 

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

 

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

 

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

 

(b)                                 If
in the opinion of either of the counsel referred to in this Section 7, the
proposed transfer or disposition of this Warrant or such Warrant Shares
described in the written notice given pursuant to this Section 7 may not be
effected without registration or qualification of this Warrant or such Warrant
Shares the Company shall promptly give written notice thereof to the Holder,
and the Holder will limit its activities in respect to such transfer or
disposition as, in the opinion of both such counsel, are permitted by law.

 

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

 

9.                                       Registration
Rights.

 

(a)                                  If
the Company at any time until two (2) years after complete exercise or
expiration of this Warrant proposes to register under the Securities Act
(except by a Form S-4 or

 

8

 

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

 

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

 

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

 

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

 

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

 

(b)                                 Further,
on a one-time basis only, at any time until two (2) years after complete
exercise or expiration of this Warrant, upon request by the Holder or Holders
of a majority in interest of this Warrant, of any Warrants issued pursuant to
Section 2 and/or Section 3(a) hereof, and of any Warrant Shares, the Company
will promptly take all necessary steps to register or qualify, under the
Securities Act and the securities laws of such states as the Holders may
reasonably request, such number of Warrant Shares issued and to be issued upon
conversion of the Warrants requested by such Holders in their request to the
Company; provided that the Company shall not be obligated to include any
Warrant Shares in any such registration for any Holder who is able to sell all
of the Warrant Shares in a single transaction pursuant to Rule 144 under the
Securities Act (or any other similar rule or regulation) during the three-month
period

 

9

 

beginning on the date such notice is received by such
holder, calculated as of the date of such receipt.  The Company shall keep effective and maintain
any registration, qualification, notification, or approval specified in this
Paragraph (b) for such period as may be reasonably necessary for such Holder or
Holders of such Warrant Shares to dispose thereof and from time to time shall
amend or supplement the prospectus used in connection therewith to the extent
necessary in order to comply with applicable law.

 

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

 

(d)                                 With
respect to each inclusion of securities in a registration statement pursuant to
this Section 9, the Company shall bear the following fees, costs, and expenses:
all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, fees and disbursements
of counsel for the underwriter or underwriters of such securities (if the
Company is required to bear such fees and disbursements), all internal
expenses, and legal fees and disbursements and other expenses of complying with
state securities laws of any jurisdictions in which the securities to be
offered are to be registered or qualified. 
Fees and disbursements of special counsel and accountants for the
selling Holders, underwriting discounts and commissions, and transfer taxes for
selling Holders and any other expenses relating to the sale of securities by
the selling Holders not expressly included above shall be borne by the selling
Holders.

 

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

 

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

 

(a)                                  If
the Company’s Common Stock is traded on an exchange or is listed on the Nasdaq
National Market or the Nasdaq SmallCap Market, then the average closing or last
sale

 

10

 

prices, respectively, reported for the ten (10)
business days immediately preceding the Determination Date; or

 

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

 

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

 

[signature page follows]

 

11

 

IN WITNESS
WHEREOF, MedicalCV, Inc. has caused this Warrant to be signed by its duly
authorized officer and this Warrant this 16th day of February, 2005.

 

	
   

  	
  MEDICALCV,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
    /s/
  John H. Jungbauer, CFO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Its

  	
    Vice
  President, Finance

  	
   

  
						

 

12

 

NOTICE OF EXERCISE OF WARRANT

 

(To be signed upon the exercise of the
Warrant)

 

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

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Name)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Address)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Social
  Security or Tax Ident. No.)

  

 

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

 

13

 

CONVERSION NOTICE

 

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

 

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

 

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

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Name)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Address)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Social
  Security or Tax Ident. No.)

  

 

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

 

14

 

ASSIGNMENT OF WARRANT

 

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

 

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

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Name)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Address)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Social
  Security or Tax Ident. No.)

  

 

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

 

15

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