ATS Medical, Inc. (Form: 8-K)

THIS AMENDMENT to Loan and Security Agreement (this “Amendment”) is entered as of February 29, 2008 by and between Silicon Valley Bank (“Bank”) and ATS Medical, Inc., a Minnesota corporation (the “Borrower”) whose address is 3905 Annapolis Lane, Suite 105, Minneapolis, Minnesota 55447.

A. Bank and Borrower have entered into that certain Loan and Security Agreement dated as of July 28, 2004 (as amended, modified, supplemented or restated from time to time, the “Loan Agreement”).

B. Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.

C. Borrower has requested that Bank amend the Loan Agreement to (i) change the principal repayment schedule for the Term Loan and (ii) make certain other revisions to the Loan Agreement, as more fully set forth herein.

D. Bank has agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

Now, Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1. Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

2.1 Repayment of Term Loan. Section 2.1.7(c) of the Loan Agreement reads as follows:

(c) Repayment. Borrower shall make monthly payments of interest only on the Term Loan beginning on July 1, 2007 and continuing on the first day of each successive month until December 31, 2007. Beginning on January 1, 2008 and continuing on the first day of each successive month thereafter, Borrower shall make forty-two (42) monthly payments, each consisting of (i) $204,761.90 principal plus (ii) interest. On the due-date for such 42nd monthly payment (the “Term Loan Maturity Date”) any remaining unpaid principal and accrued interest is due and payable in full. The Term Loan may only be prepaid in accordance with Sections 2.1.7(e) and 2.1.7(f).

(c) Repayment. Borrower shall make monthly payments of interest only on the Term Loan beginning on July 1, 2007 and continuing on the first day of each successive month until March 31, 2008. Beginning on April 1, 2008 and continuing on the first day of each successive month thereafter, Borrower shall make thirty-nine (39) monthly payments, each consisting of (i) $220,512.82 principal plus (ii) interest. On the due-date for such 39th monthly payment (the “Term Loan Maturity Date”) any remaining unpaid principal and accrued interest is due and payable in full. The Term Loan may only be prepaid in accordance with Sections 2.1.7(e) and 2.1.7(f).

2.2 Collateral Audits. Section 6.2(d) of the Loan Agreement reads as follows:

(d) Allow Bank to audit Borrower’s Collateral at Borrower’s expense. Such audits may be conducted (i) within 90 days of the Closing Date, (ii) once every twelve months thereafter, and (iii) at such more frequent times as the Bank may from time to time determine, provided that Bank shall not require such an audit if both (y) an Event of Default does not then exist and (z) the ratio described below is equal to or greater than 1.5 to 1.0. The ratio referred to above shall be, as of the date of determination, (1) the greater of the daily average balance of unrestricted cash (and equivalents) of Borrower on deposit with Bank for the month prior to such date of determination or the amount of Borrower’s unrestricted cash (and equivalents) on deposit with Bank as of the last day of the month prior to such date of determination, (2) divided by the aggregate outstanding Term Loan as of the last day of the month prior to such date of determination.

2.3 Secured Guaranty From Domestic Subsidiaries. Section 3.10 of the June 2007 Amendment reads as follows:

3.10 Secured Guaranty from Domestic Subsidiaries. Within 30 days of the date hereof, Borrower shall cause each of 3F Therapeutics, Inc., a California corporation (“3F”), and ATS Acquisition Corp. (“ATSAC”), a Minnesota corporation, to (a) execute and deliver to Bank a guaranty of all of the Obligations of Borrower to Bank and a security agreement providing Bank with a security interest in the assets of such company which are of the same type as the assets of Borrower in which Bank has been provided a security interest, in such form as Bank shall reasonably request, and (b) provide Bank with a first-priority perfected security interest in such assets. Borrower represents and warrants that such assets are free and clear of Liens (other than Permitted Liens; provided that for purposes of the use of the term “Permitted Liens” in the context of 3F and ATSAC, when “Borrower” is used in such definition it shall be deemed to refer to 3F or ATSAC, as applicable).

Pursuant to the June 2007 Amendment, Borrower agreed to provide Bank with a guaranty and security of 3F and ATSAC in such form as Bank would reasonably request within 30 days of the date of the June 2007 Amendment. Bank hereby waives said time period set forth in the June 2007 Amendment for receipt of such guaranty and security agreement, and Borrower agrees that Borrower shall complete, execute and deliver to Bank such guaranty and security agreement within 30 days of the date hereof.

2.4 Perfection Certificate. Pursuant to the June 2007 Amendment, Borrower agreed to provide Bank with a Perfection Certificate within 30 days of the date of the June 2007 Amendment. Bank hereby waives said time period set forth in the June 2007 Amendment for receipt of a Perfection Certificate, and Borrower agrees that Borrower shall complete, execute and deliver to Bank a Perfection Certificate on Bank’s standard form on or before March 31, 2008.

3.1 The amendments and waivers set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and, except as set forth in Section 2, above, shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

3.2 This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

4. Representations and Warranties. To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows:

4.1 Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;

4.2 Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

4.3 The Second Restated Articles of Incorporation of ATS Medical, Inc. filed with the Minnesota Secretary of State on November 8, 2006, a copy of which was provided to Bank via email on June 13, 2007, remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

4.4 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized;

4.5 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

4.6 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and

4.7 This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

5. Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

6. Fees and Expenses. In consideration for Bank entering into this Amendment, Borrower shall concurrently pay Bank a fee in the amount of $5,000, which fee is deemed fully earned on the date hereof, and shall be non-refundable and in addition to all interest and other fees payable to Bank under the Loan Documents. Without limitation on the terms of the Loan Documents, Borrower agrees to reimburse Bank for all its costs and expenses (including reasonable attorneys’ fees) incurred in connection with this Amendment. Bank is authorized to charge said fees, costs and expenses to Borrower’s loan account or any of Borrower’s deposit accounts maintained with Bank.

In Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.


BANK		BORROWER
Silicon Valley Bank By: /s/ Nick Honigman Name: Nick Honigman		ATS Medical, Inc. By: /s/ Michael Kramer Name: Michael Kramer

Title: Relationship Manager		Title: CFO

A. Bank and Borrower have entered into that certain Loan and Security Agreement dated as of July 28, 2004 (as amended, modified, supplemented or restated from time to time, the “Loan Agreement”).

B. Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.

C. Borrower has established certain Subsidiaries and the Loan Agreement is being amended in connection therewith, to the extent, in accordance with the terms, subject to the conditions, and in reliance upon the representations and warranties, set forth below.

1. Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

2.1 Cross-Default. The following is hereby added to the end of Section 8.9 of the Loan Agreement:

Without limitation on the foregoing, each of the following shall also be an Event of Default: If 3F Therapeutics, Inc. (“3F”) or ATS Acquisition Corp. (“ATSAC”) defaults in any representation, warranty, or agreement under the Unconditional Guaranty, dated February 29, 2008, by 3F and ATSAC, in favor of Bank, with respect to the Obligations of Borrower, or if any Event of Default shall exist under the Security Agreement, dated February 29, 2008, among 3F, ATSAC and Bank.

2.2 Financial Statements. Clauses “i” and “ii” of Section 6.2(a) of the Loan Agreement reads as follows:

(i) as soon as available, but no later than 30 days after the last day of each month, a company prepared consolidated balance sheet, income statement, and cash flow statement covering Borrower’s consolidated operations during the period certified by a Responsible Officer and in a form acceptable to Bank; (ii) as soon as available, but no later than 120 days after the last day of Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm reasonably acceptable to Bank.

(i) as soon as available, but no later than 30 days after the last day of each month, a company prepared consolidated and consolidating balance sheet, income statement, and cash flow statement covering Borrower’s consolidated operations during the period certified by a Responsible Officer and in a form acceptable to Bank; (ii) as soon as available, but no later than 120 days after the last day of Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm reasonably acceptable to Bank.

2.3 Consolidating Budgets. Section 6.2(e) of the Loan Agreement reads as follows:

At least 30 days prior to the end of each fiscal year, Borrower will deliver to Bank consolidated annual operating budgets (including income statements, balance sheets and cash flow statements, by month) for the following fiscal year.

At least 30 days prior to the end of each fiscal year, Borrower will deliver to Bank consolidated and consolidating annual operating budgets (including income statements, balance sheets and cash flow statements, by month) for the following fiscal year.

2.4 Tax Returns of Subsidiaries. Section 6.2(f) of the Loan Agreement reads as follows:

Within 30 days of filing, Borrower will deliver to Bank copies of all quarterly and annual tax returns filed by AMI, AMSI and ATS Medical France SARL.

Within 30 days of filing, Borrower will deliver to Bank copies of all quarterly and annual tax returns filed by AMI, AMSI, ATS Medical France SARL, 3F Therapeutics, Inc., and ATS Acquisition Corp.

2.5 Default. The definition of “Default” contained in Section 13.1 of the Loan Agreement is hereby amended to read as follows:

“Default” shall mean any event or occurrence which with the passing of time or the giving of notice or both would become an Event of Default hereunder or under the Security Agreement among Bank, 3F Therapeutics, Inc., and ATS Acquisition Corp.

3.1 The amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

4. Representations and Warranties. To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows:

4.2 Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

4.4 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized;

5. Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

6. Expenses. Without limitation on the terms of the Loan Documents, Borrower agrees to reimburse Bank for all its costs and expenses (including reasonable attorneys’ fees) incurred in connection with this Amendment. Bank is authorized to charge said fees, costs and expenses to Borrower’s loan account or any of Borrower’s deposit accounts maintained with Bank.

In Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.


BANK		BORROWER
Silicon Valley Bank By: /s/ Nick Honigman Name: Nick Honigman		ATS Medical, Inc. By: /s/ Michael Kramer Name: Michael Kramer

Title: Relationship Manager		Title: CFO

This continuing Unconditional Guaranty (“Guaranty”) is entered into as of February 29, 2008, by each of the following parties (each, jointly and severally, a “Guarantor”), in favor of Silicon Valley Bank (“Bank”): 3F Therapeutics, Inc., a Delaware corporation, and ATS Acquisition Corp., a Minnesota corporation.

A. Bank and ATS Medical, Inc. (“Borrower”) have entered into that certain Loan and Security Agreement dated as of July 28, 2004 (as amended, restated, or otherwise modified from time to time, the “Loan Agreement”) pursuant to which Bank has agreed to make certain advances of money and to extend certain financial accommodations to Borrower (collectively, the “Loans”), subject to the terms and conditions set forth therein. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Loan Agreement.

B. In consideration of the Amendment to Loan and Security Agreement dated June 18, 2007 between Bank and Borrower, and the agreement of Bank to make the Loans to Borrower under the Loan Agreement, each Guarantor is willing to guaranty the full payment and performance by Borrower of all of its obligations thereunder and under the other Loan Documents, all as further set forth herein.

C. Guarantors are affiliates of Borrower and will obtain substantial direct and indirect benefit from the Loans made by Bank to Borrower under the Loan Agreement.

Now, Therefore, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound, each Guarantor hereby represents, warrants, covenants and agrees as follows:

1.1 Unconditional Guaranty of Payment. In consideration of the foregoing, each Guarantor hereby irrevocably, absolutely and unconditionally guarantees to Bank the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of all Obligations. Each Guarantor agrees that it shall execute such other documents or agreements and take such action as Bank shall reasonably request to effect the purposes of this Guaranty.

1.2 Separate Obligations. These obligations are independent of Borrower’s obligations and separate actions may be brought against each or any number of the Guarantors (whether action is brought against Borrower or whether Borrower is joined in the action).

(a) Such Guarantor (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; (ii) is duly qualified to do business and is in good standing in every jurisdiction where the nature of its business requires it to be so qualified (except where the failure to so qualify would not have a material adverse effect on Guarantor’s condition, financial or otherwise, or on Guarantor’s ability to pay or perform the obligations hereunder); and (iii) has all requisite power and authority to execute and deliver this Guaranty and each Loan Document executed and delivered by Guarantor pursuant to the Loan Agreement or this Guaranty and to perform its obligations thereunder and hereunder.

(b) The execution, delivery and performance by such Guarantor of this Guaranty (i) are within Guarantor’s powers and have been duly authorized by all necessary action; (ii) do not contravene Guarantor’s charter documents or any law or any contractual restriction binding on or affecting Guarantor or by which Guarantor’s property may be affected; (iii) do not require any authorization or approval or other action by, or any notice to or filing with, any governmental authority or any other Person under any indenture, mortgage, deed of trust, lease, agreement or other instrument to which Guarantor is a party or by which Guarantor or any of its property is bound, except such as have been obtained or made; and (iv) do not result in the imposition or creation of any Lien upon any property of Guarantor.

(c) This Guaranty is a valid and binding obligation of such Guarantor, enforceable against Guarantor in accordance with its terms, except as the enforceability thereof may be subject to or limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar laws relating to or affecting the rights of creditors generally.

(d) There is no action, suit or proceeding affecting such Guarantor pending or threatened before any court, arbitrator, or governmental authority, domestic or foreign, which may have a material adverse effect on the ability of Guarantor to perform its obligations under this Guaranty.

(e) Such Guarantor’s obligations hereunder are not subject to any offset or defense against Bank or Borrower of any kind.

(f) To ensure the legality, validity, enforceability or admissability into evidence of this Guaranty in each of the jurisdictions in which such Guarantor is incorporated or organized and any jurisdiction in which such Guarantor conducts business, it is not necessary that (i) this Guaranty be filed or recorded with any court or other authority in such jurisdiction, (ii) any other filings, notices, authorizations, approvals be obtained or other actions taken, or (iii) any stamp or similar tax be paid on or with respect to this Guaranty, or, if any of the foregoing actions are necessary, they have been duly taken.

(g) Neither such Guarantor nor its property has any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) under applicable law.

(h) The incurrence of such Guarantor’s obligations under this Guaranty will not cause Guarantor to (i) become insolvent; (ii) be left with unreasonably small capital for any business or transaction in which Guarantor is presently engaged or plans to be engaged; or (iii) be unable to pay its debts as such debts mature.

(i) Such Guarantor covenants, warrants, and represents to Bank that all representations and warranties contained in this Guaranty shall be true at the time of Guarantor’s execution of this Guaranty, and shall continue to be true so long as this Guaranty remains in effect. Such Guarantor expressly agrees that any misrepresentation or breach of any warranty whatsoever contained in this Guaranty shall be deemed material.

(a) Any right to require Bank to (i) proceed against Borrower or any other person; (ii) proceed against or exhaust any security or (iii) pursue any other remedy. Bank may exercise or not exercise any right or remedy it has against Borrower or any security it holds (including the right to foreclose by judicial or nonjudicial sale) without affecting Guarantor’s liability hereunder.

(b) Any defenses from disability or other defense of Borrower or from the cessation of Borrowers liabilities.

(d) Any defense from the absence, impairment or loss of any right of reimbursement or subrogation or any other rights against Borrower. Until Borrower’s obligations to Bank have been paid, Guarantor has no right of subrogation or reimbursement or other rights against Borrower.

(g) Any demands for performance, notices of nonperformance or of new or additional indebtedness incurred by Borrower to Bank. Guarantor is responsible for being and keeping itself informed of Borrower’s financial condition.

(h) The benefit of any act or omission by Bank which directly or indirectly results in or aids the discharge of Borrower from any of the Obligations by operation of law or otherwise.

(i) The benefit of California Civil Code Section 2815 permitting the revocation of this Guaranty as to future transactions and the benefit of California Civil Code Sections 2809, 2810, 2819, 2839, 2845, 2848, 2849, 2850, 2899 and 1432 with respect to certain suretyship defenses.

Section 4. Real Property Security Waiver. Each Guarantor acknowledges that, to the extent such Guarantor has or may have rights of subrogation or reimbursement against Borrower for claims arising out of this Guaranty, those rights may be impaired or destroyed if Bank elects to proceed against any real property security of Borrower by non-judicial foreclosure. That impairment or destruction could, under certain judicial cases and based on equitable principles of estoppel, give rise to a defense by Guarantor against its obligations under this Guaranty. Each Guarantor waives that defense and any others arising from Bank’s election to pursue non-judicial foreclosure. Without limiting the generality of the foregoing, each Guarantor expressly waives all rights, benefits and defenses, if any, applicable or available to Guarantor under either California Code of Civil Procedure Sections 580a or 726, which provide, among other things, that the amount of any deficiency judgment which may be recovered following either a judicial or nonjudicial foreclosure sale is limited to the difference between the amount of any indebtedness owed and the greater of the fair value of the security or the amount for which the security was actually sold. Without limiting the generality of the foregoing, each Guarantor further expressly waives all rights, benefits and defenses, if any, applicable or available to Guarantor under either California Code of Civil Procedure Sections 580b, providing that no deficiency may be recovered on a real property purchase money obligation, or 580d, providing that no deficiency may be recovered on a note secured by a deed of trust on real property if the real property is sold under a power of sale contained in the deed of trust.

Section 5. Reinstatement. Notwithstanding any provision of the Loan Agreement to the contrary, the liability of each Guarantor hereunder shall be reinstated and revived and the rights of Bank shall continue if and to the extent that for any reason any payment by or on behalf of any Guarantor or Borrower is rescinded or must be otherwise restored by Bank, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not been paid. The determination as to whether any such payment must be rescinded or restored shall be made by Bank in its sole discretion; provided, however, that if Bank chooses to contest any such matter at the request of any Guarantor, each Guarantor agrees to indemnify and hold harmless Bank from all costs and expenses (including, without limitation, reasonable attorneys’ fees) of such litigation. To the extent any payment is rescinded or restored, each Guarantor’s obligations hereunder shall be revived in full force and effect without reduction or discharge for that payment.

Section 6. No Waiver; Amendments. No failure on the part of Bank to exercise, no delay in exercising and no course of dealing with respect to, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. This Guaranty may not be amended or modified except by written agreement between Guarantor and Bank, and no consent or waiver hereunder shall be valid unless in writing and signed by Bank.

Section 7. Compromise and Settlement. No compromise, settlement, release, renewal, extension, indulgence, change in, waiver or modification of any of the Obligations or the release or discharge of Borrower from the performance of any of the Obligations shall release or discharge any Guarantor from this Guaranty or the performance of the obligations hereunder.

Section 8. Notice. Any notice or other communication herein required or permitted to be given shall be in writing and may be delivered in person or sent by facsimile transmission, overnight courier, or by United States mail, registered or certified, return receipt requested, postage prepaid and addressed as follows:


If to any or all Guarantors:		c/o ATS Medical, Inc.
		3905 Annapolis Lane, Suite 105
		Plymouth, MN 55447
		Attention: ____________
		Fax: ________________
		(A notice or communication to ATS Medical, Inc.
		shall be deemed a notice or
		communication to all Guarantors)
If to Bank:		Silicon Valley Bank
		301 Carlson Parkway, Suite 255
		Minnetonka, MN 55305
		Attn: Mr. Jay McNeil
		Fax: 952.475.8471
with copies to:		Levy, Small & Lallas
		815 Moraga Drive
		Los Angeles, CA 90049-1633
		Attn: William Wippich
		Fax: 310.471.7990

or at such other address as may be substituted by notice given as herein provided. Every notice, demand, request, consent, approval, declaration or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered or sent by facsimile transmission or three (3) Business Days after the same shall have been deposited in the United States mail. If sent by overnight courier service, the date of delivery shall be deemed to be the next Business Day after deposited with such service.

Section 9. Entire Agreement. This Guaranty and the Security Agreement concurrently being entered into among Bank and the Guarantors constitute and contain the entire agreement of the parties and supersede any and all prior and contemporaneous agreements, negotiations, correspondence, understandings and communications between each Guarantor and Bank, whether written or oral, respecting the subject matter hereof.

Section 10. Severability. If any provision of this Guaranty is held to be unenforceable under applicable law for any reason, it shall be adjusted, if possible, rather than voided in order to achieve the intent of Guarantors and Bank to the extent possible. In any event, all other provisions of this Guaranty shall be deemed valid and enforceable to the full extent possible under applicable law.

Section 11. Subordination of Indebtedness. Any indebtedness or other obligation of Borrower now or hereafter held by or owing to any Guarantor is hereby subordinated in time and right of payment to all obligations of Borrower to Bank, except as such indebtedness or other obligation is expressly permitted to be paid under the Credit Agreement; and such indebtedness of Borrower to such Guarantor is assigned to Bank as security for this Guaranty, and if Bank so requests shall be collected, enforced and received by such Guarantor in trust for Bank and to be paid over to Bank on account of the Obligations of Borrower to Bank, but without reducing or affecting in any manner the liability of any Guarantor under the other provisions of this Guaranty. Any notes now or hereafter evidencing such indebtedness of Borrower to such Guarantor shall be marked with a legend that the same are subject to this Guaranty.

Section 12. Payment of Expenses. Each Guarantor shall pay, promptly on demand, all Expenses incurred by Bank in defending and/or enforcing this Guaranty. For purposes hereof, “Expenses” shall mean costs and expenses (including reasonable fees and disbursements of any law firm or other external counsel and the allocated cost of internal legal services and all disbursements of internal counsel) for defending and/or enforcing this Guaranty (including those incurred in connection with appeals or proceedings by or against any Guarantor under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief).

Section 13. Assignment; Governing Law. This Guaranty shall be binding upon and inure to the benefit of each Guarantor and Bank and their respective successors and assigns, except that no Guarantor shall have the right to assign its rights hereunder or any interest herein without the prior written consent of Bank, which may be granted or withheld in Bank’s sole discretion. Any such purported assignment by any Guarantor without Bank’s written consent shall be void. This Guaranty shall be governed by, and construed in accordance with, the laws of the State of California without regard to principles thereof regarding conflict of laws.

Section 14. Joint and Several Liability. If more than one person has executed this Guaranty, the term “Guarantor” as used herein shall be deemed to refer to all and any one or more such persons and their obligations hereunder shall be joint and several. Without limiting the generality of the foregoing, if more than one person has executed this Guaranty, this Guaranty shall in all respects be interpreted as though each person signing this Guaranty had signed a separate Guaranty, and references herein to “other guarantors” or words of similar effect shall include without limitation other persons signing this Guaranty.

Section 15. CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE. California law governs this Guaranty without regard to principles of conflicts of law. Each Guarantor and Bank submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California; provided, however, that nothing in this Guaranty shall be deemed to operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize on any collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Bank. Each Guarantor expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and each Guarantor hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Each Guarantor hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to such Guarantor at the address set forth in Section 8 of this Guaranty and that service so made shall be deemed completed upon the earlier to occur of such Guarantor’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH GUARANTOR AND BANK WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS GUARANTY OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS GUARANTY. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and order applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.


3F THERAPEUTICS, INC. By: /s/ Michael Dale		ATS ACQUISITION CORP. By: /s/ Michael Dale

Name: Michael Dale		Name: Michael Dale

Title: CEO		Title: CEO

This Security Agreement (this “Agreement”) is entered into as of February 29, 2008, by and between Silicon Valley Bank (“Bank”) and each of the following parties (each, a “Pledgor” and collectively and jointly and severally, “Pledgors”): 3F Therapeutics, Inc., a Delaware corporation, and ATS Acquisition Corp., a Minnesota corporation.

Bank and ATS Medical, Inc. (“Borrower”) have entered into that certain Loan and Security Agreement dated as of July 28, 2004 (as amended, restated, or otherwise modified from time to time, the “Loan Agreement”) pursuant to which Bank has agreed to make certain advances of money and to extend certain financial accommodations to Borrower (collectively, the “Loans”), subject to the terms and conditions set forth therein. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Loan Agreement.

In consideration of the Amendment to Loan and Security Agreement dated June 18, 2007 between Bank and Borrower, and the agreement of Bank to extend credit and make other financial accommodations to Borrower under the Loan Agreement, Pledgors have executed that certain Unconditional Guaranty of substantially even date in favor of Bank (as amended, restated, or otherwise modified from time to time, the “Guaranty”).

Each Pledgor’s obligations under the Guaranty (all such obligations of Pledgors are collectively referred to as the “Guarantor Obligations”) shall be secured pursuant to and in accordance with the terms of this Agreement.

1. DEFINITIONS. Unless otherwise defined herein, capitalized terms used herein shall have the following meanings:

“Bank Expenses” means all costs and expenses (including reasonable attorneys’ fees and expenses) incurred by Bank in preparing, negotiating, administering, amending, defending, and enforcing this Agreement and the Guarantor Obligations (including, without limitation, those incurred during appeals and/or Insolvency Proceedings).

“Code” means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of California.

“Default” means any event or occurrence which with the passing of time or the giving of notice or both would become an Event of Default hereunder.

“Insolvency Proceeding” are proceedings by or against Borrower and/or a Pledgor under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with either party’s creditors, or proceedings seeking reorganization, arrangement, or other relief.

(a) Liens existing on the date hereof and shown on a Schedule hereto (if any) or arising under this Agreement or other Loan Documents;

(b) Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Pledgor maintains adequate reserves on its books, if they have no priority over any of Bank’s security interests;

(c) Purchase money Liens (i) on Equipment acquired or held by such Pledgor or incurred for financing the acquisition of the Equipment, or (ii) existing on Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment;

(d) Non-exclusive licenses or sublicenses granted in the ordinary course of Pledgor’s business and, with respect to any licenses where Pledgor is the licensee, any interest or title of a licensor or under any such license or sublicense, if the licenses and sublicenses permit granting Bank a security interest;

(e) Leases or subleases entered into in the ordinary course of Pledgor’s business, including in connection with Pledgor’s leased premises or leased property;

(f) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;

(g) Liens in respect of property or assets of Pledgor imposed by law which were incurred in the ordinary course of business, such as carriers’, warehousemen’s, and mechanics’ Liens, statutory landlord’s Liens, and other similar Liens arising in the ordinary course of business, which (y) do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of Pledgor and (z) which are not delinquent;

(h) Easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances with respect to real estate and not interfering in any material respect with the ordinary conduct of the business of Pledgor;

(i) Banker’s Liens, rights of setoff and similar Liens incurred on deposits made in the ordinary course of business;

(j) Liens arising from (i) judgments or attachments (or securing of appeal bonds with respect thereto) in an aggregate amount of less than $250,000 provided that the same have no priority over any of the security interests of Bank in any of the Collateral (including, without limitation, with respect to future advances) as determined by Bank in its commercially reasonable discretion or (ii) judgments (or securing of appeal bonds with respect thereto) in circumstances not constituting an Event of Default under Section 6.7, provided that the aggregate of all cash and property (other than proceeds of insurance payable by reason of such judgments, decrees or attachments) that is deposited or delivered to secure any such judgments, or any appeal bonds in respect thereof, does not exceed $250,000 in fair market value and provided further that the same have no priority over any of the security interests of Bank in any of the Collateral (including, without limitation, with respect to future advances) as determined by Bank in its commercially reasonable discretion; and

(k) Liens imposed by law incurred in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security provided that the same have no priority over any of the security interests of Bank in any of the Collateral (including, without limitation, with respect to future advances).

“Responsible Officer” with respect to any Pledgor is any of such Pledgor’s Chief Executive Officer, the President, the Chief Financial Officer and the Controller.

2.1 Grant of Security Interest. Each Pledgor grants Bank a continuing security interest in the Collateral of such Pledgor to secure the prompt payment and performance of such Pledgor’s Guarantor Obligations. Subject to any Permitted Liens that, pursuant to the terms of this Agreement, are allowed to be prior to the security interest of Bank in any Collateral, such security interest constitutes a valid, first priority security interest in the presently existing Collateral of such Pledgor, and will constitute a valid, first priority security interest in Collateral of such Pledgor acquired after the date hereof. Bank may liquidate a Pledgor’s Collateral and apply such funds toward repayment of such Pledgor’s Guarantor Obligations. Such liquidation shall not be deemed a set-off.

2.2 Delivery of Additional Documentation Required; Perfection Certificates. Each Pledgor will from time to time execute and deliver to Bank, at the request of Bank, all financing statements and other documents that Bank may reasonably request, in form satisfactory to Bank, to perfect and continue the perfection of Bank’s security interests in the Collateral of such Pledgor. Each Pledgor authorizes Bank to file financing statements without notice to Pledgor, in all appropriate jurisdictions, as Bank deems appropriate, to perfect or protect Bank’s interest in the Collateral of such Pledgor. On or before March 31, 2008, each Pledgor shall have executed and delivered to Bank a completed Perfection Certificate, in the form previously provided by Bank, the substance of which shall be acceptable to Bank in its discretion (each, a “Perfection Certificate” and collectively, “Perfection Certificates”).

3.1 Due Organization and Qualification. Such Pledgor is duly existing and in good standing under the laws of its jurisdiction of formation and is qualified and licensed to do business in, and is in good standing in, any state in which the conduct of its business or its ownership of property requires that it be so qualified, except where the failure to do so could not reasonably be expected to cause a Material Adverse Change.

3.2 Due Authorization; No Conflict. The execution, delivery, and performance of this Agreement are within such Pledgor’s powers, have been duly authorized, and neither conflict with nor constitute a breach of any provision contained in such Pledgor’s formation documents or bylaws, nor will they constitute an event of default under any material agreement to which such Pledgor is a party or by which such Pledgor is bound.

3.3 No Prior Encumbrances. Subject to Permitted Liens, such Pledgor has good title to the Collateral, free and clear of any liens, security interests, or other encumbrances other than the security interest in favor of Bank.

3.4 Litigation. There is no action, suit or proceeding affecting such Pledgor pending or threatened before any court, arbitrator, or governmental authority, domestic or foreign, in which a likely adverse decision could reasonably be expected to cause a Material Adverse Change, other than such actions, suits or proceedings described in such Pledgor’s Perfection Certificate.

3.5 Solvency. The incurrence of such Pledgor’s obligations under this Agreement will not cause such Pledgor to (a) become insolvent; (b) be left with unreasonably small capital for any business or transaction in which such Pledgor is presently engaged or plans to be engaged; or (c) be unable to pay its debts as such debts mature.

3.6 Perfection Certificate. All information set forth on its Perfection Certificate is accurate and complete.

Each Pledgor covenants and agrees that, until the Guarantor Obligations (other than contingent indemnification Guarantor Obligations) of such Pledgor cease, such Pledgor shall do all of the following:

4.1 Good Standing. Maintain its existence and its good standing in its jurisdiction of formation and maintain qualification in each jurisdiction in which the failure to so qualify could reasonably be expected to have a material adverse effect on such Pledgor’s business.

4.2 Government Compliance. Comply with all statutes, laws, ordinances and government rules and regulations to which it is subject, noncompliance with which could reasonably be expected to have a material adverse effect on such Pledgor’s business.

(a) At such Pledgor’s expense, keep the Collateral of such Pledgor insured against loss or damage by fire, theft, explosion, sprinklers, and all other hazards and risks, and in such amounts, as ordinarily insured against by other owners in similar businesses conducted in the locations where such Pledgor’s business is conducted on the date hereof. Such Pledgor shall also maintain insurance relating to such Pledgor’s ownership and use of the Collateral in amounts and of a type that are customary to businesses similar to such Pledgor’s.

(b) All such policies of insurance shall be in such form, with such companies, and in such amounts as reasonably satisfactory to Bank. All such policies of property insurance shall contain a lender’s loss payable endorsement, in a form satisfactory to Bank, showing Bank as an additional loss payee thereof and all liability insurance policies shall show the Bank as an additional insured, and shall specify that the insurer must give at least 20 days notice to Bank before canceling its policy for any reason.

4.4 Taxes. Make timely payment of all foreign, federal, state, and local taxes or assessments (other than taxes and assessments which such Pledgor in good faith contests its obligations by appropriate proceedings promptly and diligently instituted and conducted), and shall deliver to Bank, upon demand, appropriate certificates attesting to such payments.

4.5 Audit of Collateral. Allow Bank to audit Pledgor’s Collateral at Pledgor’s expense. Such audits may be conducted (i) once every twelve months, and (ii) at such more frequent times as the Bank may from time to time determine; provided that Bank shall not require any such audit during any period for which Bank has agreed, under the Loan Agreement, not to require an audit of Borrower’s collateral.

Each Pledgor covenants and agrees that, until the Guarantor Obligations (other than contingent Guarantor Obligations) of such Pledgor cease, such Pledgor shall not do any of the following:

5.1 Dispositions. Convey, sell, lease, transfer, pledge, assign control over or otherwise dispose of (collectively, “Transfer”) all or any part of the Collateral of such Pledgor other than Transfers of the type permitted by Section 7.1 of the Loan Agreement.

5.2 Encumbrances. Create, incur, or allow any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, except for Permitted Liens; subject to any Permitted Liens that, pursuant to the terms of this Agreement, are allowed to be prior to the security interest of Bank in any Collateral, permit any Collateral from such Pledgor not to be subject to the first priority security interest granted herein; or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting any Pledgor from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of such Pledgor’s intellectual property, except as is otherwise permitted in Section 7.1 of the Loan Agreement and the definition of “Permitted Lien”.

5.3 Change in Jurisdiction of Formation, Organizational Structure, Type. Without 30 days prior written notice to Bank, change its jurisdiction of formation or its organizational structure or type.

Any one or more of the following events shall constitute an Event of Default under this Agreement:

(a) If any Pledgor fails or neglects to perform, keep, or observe any term, provision, condition, covenant, or agreement in the Guaranty or in Sections 5.1, 5.2 or 5.3 of this Agreement; or

(b) If any Pledgor fails or neglects to perform, keep, or observe any other material term, provision, condition, covenant or agreement contained in this Agreement, and as to any default (other than those specified in this Section 6) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Pledgor be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Pledgor shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default. Grace periods provided under this section shall not apply with respect to subsection (a) above.

6.2 Attachment. If any material portion of any Pledgor’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver and the attachment, seizure or levy is not removed in 10 days, or if any Pledgor is enjoined, restrained, or prevented by court order from conducting a material part of its business or if a judgment or other claim becomes a Lien on a material portion of any Pledgor’s assets, or if a notice of lien, levy, or assessment is filed against any of any Pledgor’s assets by any government agency and not paid within 10 days after such Pledgor receives notice. These are not Events of Default if stayed or if a bond is posted pending contest by Pledgor.

6.3 Misrepresentations. If any material misrepresentation or material misstatement exists now or hereafter in any warranty or representation set forth herein or in any certificate delivered to Bank by any Pledgor pursuant to this Agreement or the Guaranty or to induce Bank to enter into this Agreement or the Guaranty.

6.4 Insolvency. (a) any Pledgor becomes insolvent; (b) any Pledgor begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against any Pledgor and not dismissed or stayed within 30 days.

6.5 Material Adverse Change. If there (a) occurs a material adverse change in the business, operations, or financial condition of any Pledgor, or (b) is a material impairment of the value or priority of Bank’s security interest in any of the Collateral of any Pledgor (any of the foregoing is referred to herein as a “Material Adverse Change”).

6.6 Other Agreements. If there is a default in any agreement between Pledgor and a third party that gives the third party the right to accelerate any Indebtedness exceeding $250,000 or that could cause a Material Adverse Change.

6.7 Judgments. If money judgments in the aggregate of at least $250,000 are rendered against the Pledgors and are unsatisfied and unstayed for 10 days.

6.8 Event of Default Under Loan Agreement. Any Event of Default shall exist under the Loan Agreement.

7.1 Rights and Remedies. Upon the occurrence and during the continuance of an Event of Default, Bank may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by Pledgors:

(b) Set off and apply to the obligations any and all (i) balances and deposits of any Pledgor held by Bank or in which Bank acts as custodian, or (ii) indebtedness at any time owing to or for the credit or the account of any Pledgor held by Bank; and

(c) Sell all or any part of the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including any Pledgor’s premises) as Bank determines is commercially reasonable in accordance with the Code.

7.2 Remedies Cumulative. Bank’s rights and remedies under the Loan Agreement and any documents related thereto, the Guaranty, and this Agreement shall be cumulative. Bank shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by Bank of one right or remedy shall be deemed an election, and no waiver by Bank of any Event of Default on any Pledgor’s part shall be deemed a continuing waiver. No delay by Bank shall constitute a waiver, election, or acquiescence by it.

7.3 Demand; Protest. Except to the extent expressly provided for in this Agreement or the Guaranty, each Pledgor waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees at any time held by Bank on which any Pledgor may in any way be liable.

7.4 Power of Attorney. Effective only when an Event of Default occurs and continues, each Pledgor irrevocably appoints Bank as its lawful attorney to: (a) endorse such Pledgor’s name on any checks or other forms of payment or security; (b) sign such Pledgor’s name on any invoice or bill of lading for any account or drafts against account debtors, (c) make, settle, and adjust all claims under such Pledgor’s insurance policies; (d) settle and adjust disputes and claims about the accounts directly with account debtors, for amounts and on terms Bank determines reasonable; and (e) transfer the Collateral of such Pledgor into the name of Bank or a third party as the Code permits. Bank may exercise the power of attorney to sign any Pledgor’s name on any documents necessary to perfect or continue the perfection of any security interest regardless of whether an Event of Default has occurred. Bank’s appointment as each Pledgor’s attorney in fact, and all of Bank’s rights and powers, coupled with an interest, are irrevocable until the Guarantor Obligations cease.

7.5 Bank Expenses. If any Pledgor fails to pay any amount due hereunder or furnish any required proof of payment to third persons in connection with the Collateral, Bank may make all or part of the payment and take any action Bank deems prudent, and Bank shall give written notice to Borrower of the same promptly after making any such payment or taking any such action that is material. Any amounts paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then applicable rate and secured by the Collateral. No payments by Bank are deemed an agreement to make similar payments in the future or Bank’s waiver of any Event of Default. After the sale of any of the Collateral of any Pledgor, Bank may deduct all reasonable legal and other expenses and attorneys’ fees for preserving, collecting, selling and delivering the Collateral and for enforcing its rights with respect to the Guarantor Obligations of such Pledgor, and shall apply the remainder of the proceeds to the Guarantor Obligations of such Pledgor in such manner as Bank in its reasonable discretion shall determine, and shall pay the balance, if any, to such Pledgor.

7.6 Bank’s Liability for Collateral. If Bank complies with reasonable banking practices, it is not liable or responsible for the safekeeping of the Collateral.

Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement shall be in writing and shall be given in accordance with the notice provision set forth in the Guaranty.

California law governs this Agreement without regard to principles of conflicts of law. Each Pledgor and Bank submits to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize on any collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Bank. Each Pledgor expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and each Pledgor hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Each Pledgor hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to such Pledgor at the address for notice set forth in the Guaranty and that service so made shall be deemed completed upon the earlier to occur of such Pledgor’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PLEDGOR AND BANK WAIVES THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE GUARANTY, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

10.1 Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. No Pledgor may assign this Agreement or any rights under it without Bank’s prior written consent which may be granted or withheld in Bank’s reasonable discretion. Bank has the right, without the consent of or notice to any Pledgor, to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights and benefits under this Agreement.

10.2 Indemnification. Each Pledgor will indemnify, defend and hold harmless Bank and its officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities asserted by any other party in connection with the transactions contemplated by the Guaranty and/or this Agreement; and (b) all losses or Bank Expenses incurred, or paid by Bank from, following, or consequential to transactions between Bank and such Pledgor under the Guaranty and/or Agreement (including reasonable attorneys’ fees and expenses), except for losses caused by Bank’s gross negligence or willful misconduct. A person seeking to be indemnified under this Section 10.2 shall notify the applicable Pledgor of any event requiring indemnification within a reasonable time following such person’s receipt of notice of commencement of any action or proceeding giving rise to a claim for indemnification hereunder, provided that (i) there shall be no obligation to so notify such Pledgor if an Event of Default has occurred and is continuing, and (ii) neither Bank nor any such person shall have any liability or obligation for any inadvertent failure to provide such notice, and (iii) no failure to provide such notice shall affect such Pledgor’s obligation to provide indemnity hereunder. In such a proceeding, such person shall use commercially reasonable efforts to keep such Pledgor reasonably informed of its defense and any settlement of any such action or proceeding and negotiations to settle or otherwise resolve any claim, provided that (i) such person shall have the exclusive right to decide to accept or reject any settlement offer, and (ii) there shall be no obligation to keep such Pledgor so informed if an Event of Default has occurred and is continuing, and (iii) neither Bank nor any such person shall have any liability or obligation for any inadvertent failure to keep such Pledgor so informed, and (iv) no failure to keep such Pledgor so informed shall affect such Pledgor’s obligation to provide indemnity hereunder.

10.3 Time of Essence. Time is of the essence for the performance of all obligations set forth in this Agreement.

10.4 Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.

10.5 Amendments in Writing, Integration. All amendments to this Agreement must be in writing and executed by the parties hereto. This Agreement and the Guaranty represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement merge into this Agreement and the Guaranty.

10.6 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, are an original, and all taken together, are one Agreement.

10.7 Survival. All covenants, representations and warranties made in this Agreement continue in full force while any obligations remain outstanding. The obligations of Pledgors in Section 10.2 to indemnify Bank will survive until all statutes of limitations for actions that may be brought against Bank have run.

10.8 Attorneys’ Fees, Costs and Expenses. In any action or proceeding between any Pledgor and Bank arising out of the Guaranty or this Agreement, the prevailing party will be entitled to recover its reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other relief to which it may be entitled, whether or not a lawsuit is filed.

10.9 Disclosure of Information; Borrower Collateral. Each Pledgor acknowledges that it has, independently of and without reliance on Bank, made its own credit analysis of Borrower and the assets pledged by Borrower to Bank under the Loan Agreement, if any (the “Borrower Collateral”), performed its own legal review of this Agreement, the Guaranty, the Loan Agreement and all related documents and filings, and is not relying on Bank with respect to any of the aforesaid items. Each Pledgor has established adequate means of obtaining from Borrower, on a continuing basis, financial and other information pertaining to Borrower’s financial condition and the value of the Borrower Collateral and status of Bank’s lien on and in the Borrower Collateral. Each Pledgor agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect such Pledgor’s risks hereunder or under the Guaranty, and each Pledgor further agrees that Bank shall have no obligation to disclose to Pledgor information or material with respect to Borrower or the Borrower Collateral acquired in the course of Bank’s relationship with Borrower. Bank makes no representation, express or implied, with respect to the Borrower Collateral or its interest in, or the priority or perfection of its lien on and in the Borrower Collateral. Each Pledgor acknowledges that its obligation hereunder will not be affected by (a) Bank’s failure properly to create a lien on or in the Borrower Collateral, (b) Bank’s failure to create or maintain a priority with respect to the lien purported to be created in the Borrower Collateral, or (c) any act or omission of Bank (whether negligent or otherwise) which adversely affects the value of the Borrower Collateral or Bank’s lien thereon or the priority of such lien.

10.10 Joint and Several. If two or more Pledgors are liable under the terms hereof for the same obligation, then such liability shall be joint and several.

10.11 Confidentiality. In handling any confidential information, Bank will exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made (i) to Bank’s subsidiaries or affiliates in connection with their business with Borrower or Pledgors, (ii) to prospective transferees or purchasers of any interest in the loans to the Borrower (provided, however, Bank shall use commercially reasonable efforts in obtaining such prospective transferee or purchasers written agreement to the terms of this provision), (iii) as required by law, regulation, subpoena, or other order, (iv) as required in connection with Bank’s examination or audit and (v) as Bank considers appropriate exercising remedies under this Agreement. Confidential information does not include information that either: (a) is in the public domain or in Bank’s possession when disclosed to Bank, or becomes part of the public domain after disclosure to Bank; or (b) is disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information.


3F THERAPEUTICS, INC. By: /s/ Michael Dale		ATS ACQUISITION CORP. By: /s/ Michael Dale

Name: Michael Dale		Name: Michael Dale

Title: CEO		Title: CEO

The Collateral consists of all of each Pledgor’s right, title and interest in and to the following personal property of such Pledgor:

All goods and equipment now owned or hereafter acquired, including, without limitation, all machinery, fixtures, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located;

All inventory, now owned or hereafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products including such inventory as is temporarily out of Pledgor’s custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above;

All contract rights and general intangibles now owned or hereafter acquired, including the Intellectual Property (as defined below) only, however, to the extent and subject to the limitations set forth in the Exclusion Clause (as defined below);

All now existing and hereafter arising accounts, contract rights, payment intangibles, royalties, license rights and all other forms of obligations owing to Pledgor arising out of the sale or lease of goods, the licensing of technology or the rendering of services by Pledgor, whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Pledgor;

All documents, cash, deposit accounts, securities, securities entitlements, securities accounts, investment property, financial assets, letters of credit, letter-of-credit rights, commercial tort claims, certificates of deposit, instruments and chattel paper now owned or hereafter acquired; and

All Pledgor’s books and records relating to the foregoing and any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions to and proceeds thereof.

Notwithstanding the foregoing, the Collateral shall not include any Intellectual Property, provided that if a judicial authority (including a U.S. Bankruptcy Court) holds that a security interest in the underlying Intellectual Property is necessary to have a security interest in such items that are proceeds of the Intellectual Property consisting of payment intangibles, accounts, license revenues, or general intangibles relating to rights to payment arising therefrom or relating thereto, then in such circumstance, the Collateral shall automatically, and effective as of the date hereof, include the Intellectual Property only to the extent necessary to permit perfection of Bank’s security interest in such proceeds, including, without limitation, payment intangibles, accounts, license revenues, or general intangibles relating to rights to payment (the foregoing is referred to herein collectively as the “Exclusion Clause”).

The term “Intellectual Property” as used herein shall mean the following: Pledgor’s right, title or interest, whether now owned or hereafter acquired, in and to any intellectual property rights of Pledgor of any nature or character, including without limitation, and whether domestic or foreign, the following: (i) any copyrights and copyright applications, whether registered or unregistered, copyright registration and like protection in each work of authorship and derivative work thereof, whether published or unpublished, and whether said copyrights are statutory or arise under common law, and all rights, claims and demands in any way related to any such copyrights or works, including any rights to sue for past, present or future infringement, and any rights of renewal and extension of copyrights; (ii) any patents, patent applications, patent rights and like protections and any licenses relating to any of the foregoing, and any improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part thereof and any rights to sue for past present or future infringement thereof and any rights arising therefrom and pertaining thereto; (iii) any state (including common law), federal and foreign trademarks, service marks and trade names, and applications for registration of such trademarks, service marks and trade names, and any licenses relating to any of the foregoing, whether registered or unregistered and wherever registered, any rights to sue for past, present or future infringement of unconsented use thereof, all rights arising therefrom and pertaining and any reissues, extensions and renewals thereof and the goodwill of the business of Pledgor connected with and symbolized by any of the foregoing; (iv) any trade secrets, trade dress, trade styles, logos, other source of business identifiers, mask-works, mask-work registrations or mask-work applications, integrated circuit masks, software, circuit designs and documentation relating thereto, and the goodwill of the business of Pledgor connected with and symbolized by any of the foregoing, including, without limitation, any rights to unpatented inventions, know-how, and operating manuals, including any rights to sue for past, present or future infringement or unconsented use thereof, all rights arising therefrom and pertaining thereto, provided that with respect to any and all of the foregoing, the term “Intellectual Property” shall not include any proceeds thereof (other than proceeds in the direct form of Intellectual Property) and specifically, without limitation, and regardless of any of the foregoing, the term “Intellectual Property” shall not include any payment intangibles, accounts, license revenues, or general intangibles relating to rights to payment arising therefrom or relating thereto.


Minnesota	0-18602	41-1595629
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

3905 Annapolis Lane North, Minneapolis, Minnesota		55447
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	ATS Medical, Inc.

March 6, 2008	By:	Michael R. Kramer

		Name: Michael R. Kramer
		Title: Chief Financial Officer


Exhibit No.		Description

10.1		First Amendment, dated February 29, 2008, to the Loan and Security Agreement between Silicon Valley Bank and the Company dated July 28, 2004.
10.2		Second Amendment, dated February 29, 2008, to the Loan and Security Agreement between Silicon Valley Bank and the Company dated July 28, 2004.
10.3		Unconditional Guaranty, dated February 29, 2008, entered into by 3F Therapeutics and ATS Acquisition Corp., in favor of Silicon Valley Bank.
10.4		Security Agreement, dated February 29, 2008, by and between Silicon Valley Bank, 3F Therapeutics, Inc. and ATS Acquisition Corp.


Date of Report (Date of Earliest Event Reported):		February 29, 2008


Registrant’s telephone number, including area code:		763-553-7736


By:		/s/ Nick Honigman

Name:		Nick Honigman

Title:		Relationship Manager