Document:

EXHIBIT 10.7

MAY DISCRETIONARY

CREDIT NOTE

 

	
  $1,000,000

  	
   

  	
  Minneapolis, Minnesota

  
	
   

  	
   

  	
  July 1, 2003

  

 

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
One Million Dollars ($1,000,000) or so much thereof as has been advanced by the
Lender to or for the benefit of the Borrower pursuant to that certain May
Discretionary 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 May 28, 2003 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 June 30, 2003, 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 May 27, 2004.  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 the May Security Agreement 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/ Jules L.
  Fisher

  	
   

  
	
   

  	
   

  	
  Jules L.
  Fisher

  
	
   

  	
   

  	
  its Chief
  Financial OfficerEXHIBITS 10.8

AMENDMENT TO WARRANTS

 

 

THIS AMENDMENT
to WARRANTS is made as of July 1, 2003, by and between MEDICAL CV, INC., a
Minnesota corporation (the “Company”) and PKM PROPERTIES, LLC, a Minnesota
limited liability company (the “Lender”).

 

RECITALS:

 

A.            The Company and the Lender are
parties to: (a) that certain Warrant To Purchase 350,000 Shares of Common Stock
of Medical CV, Inc. dated January 17, 2003, and (b) that certain Warrant To
Purchase 350,000 Shares of Common Stock of Medical CV, Inc. dated April 4, 2003
(collectively, the “Warrants”).

 

B.            The Company and the Lender desire to
amend the Warrants as provided herein, and upon the terms and conditions of
this Agreement.

 

AGREEMENTS:

 

IN
CONSIDERATION of the foregoing, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:

 

1.             Defined Terms.  Any capitalized terms not otherwise defined
herein shall have the meaning ascribed to them in the Warrants.

 

2.             Amendment to
Duration of Exercise Rights. 
Notwithstanding anything to the contrary in either of the Warrants, the
rights represented by each of the Warrants may be exercised by the “Holder”
thereof at any time, for a period of ten (10) years commencing on the date of
such Warrant.

 

3.             Amendment to Section 5 of the
Warrants.  Section 5 of each of the
Warrants is hereby amended in its entirety to read as follows:

 

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

 

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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.

 

(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

 

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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

 

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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 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

 

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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.

 

(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

 

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

 

4.             Representations and Warranties.  To induce the Lender to enter into this
Amendment, the Company represents and warrants to the Lender that the
execution, delivery and performance by the Company of this Amendment and any
other documents required to be executed and/or delivered by the Company by the
terms of this Amendment have been duly authorized by all necessary corporate
action, do not require any approval or consent of, or any registration,
qualification or filing with, any government agency or authority or any
approval or consent of any other person (including, without limitation, any
stockholder or partner), do not and will not conflict with, result in any
violation of or constitute any default under, any provision of the Company’s
Articles of Incorporation or Bylaws, any agreement binding on or applicable to the
Company or any of its property, or any law or governmental regulation or court
decree or order, binding upon or applicable to the Company or of any of its
property and will not result in the creation or imposition of any security
interest or other lien or encumbrance in or on any of its property pursuant to
the provisions of any agreement applicable to the Company or any of its
property.

 

5.             Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument. 
Any executed counterpart of this Agreement delivered by facsimile or
other electronic transmission to a party hereto shall constitute an original
counterpart of this Agreement.

 

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6.             No Other Modification.  Except as expressly amended by the terms of
this Amendment, all other terms of the Warrants shall remain unchanged and in
full force and effect.

 

(The signature page follows.)

 

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THE PARTIES
have executed this Amendment to Warrants as of the day and year first above
written.

 

	
   

  	
   

  	
   

  	
   

  	
  MEDICAL CV, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  /s/ Jules L.
  Fisher

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Jules L.
  Fisher, Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  PKM PROPERTIES, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  /s/ Paul K.
  Miller

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Paul K.
  Miller, Chief Manager

  
							

 

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