EXHIBIT 10.2

Execution Version

MANUFACTURING AGREEMENT

THIS MANUFACTURING AGREEMENT, dated June 28, 2007 (this “Agreement”), is by and
between CryoCath Technologies Inc., a company incorporated under Part 1A of the
Companies Act (Quebec) (“Seller”), and ATS Acquisition Corp., a Minnesota
corporation (“Purchaser”).

Recitals

A. WHEREAS, the Seller and ATS Medical, Inc., a Minnesota corporation (“ATS
Medical”), have previously entered into that certain Asset Purchase Agreement
dated June 19, 2007 (the “Purchase Agreement”), whereby ATS Medical obtained the
right to acquire from Seller certain assets related to Seller’s business of
designing, developing, using, manufacturing, marketing, promoting, selling, and
distributing Argon-Based Cryoablation Devices.

B. WHEREAS, ATS Medical assigned all of its rights under the Purchase Agreement
to Purchaser, a Minnesota corporation and a wholly owned subsidiary of ATS
Medical, pursuant to the terms of a certain Assignment Agreement.

C. WHEREAS, it is a condition to the obligation of both parties to consummate
the transactions contemplated in the Purchase Agreement that the parties enter
into this Agreement. Capitalized terms used herein and not defined herein shall
have the meanings ascribed to them in the Purchase Agreement.

D. WHEREAS, as contemplated by the Purchase Agreement and in connection with the
transition of the Business to Purchaser and on the terms set forth in this
Agreement, Seller desires to manufacture, assemble, and supply to Purchaser, and
Purchaser desires to purchase from Seller, the products described on Exhibit A
attached hereto (together with the related consoles, the “Products”) pursuant to
purchase orders that Purchaser may, from time to time while this Agreement
remains in effect, issue to Seller.

E. WHEREAS Purchaser and Seller agree that during the term of this Agreement,
Seller will transition the manufacturing of the Products to Purchaser and Seller
will assist Purchaser with such transition, as more fully set forth herein.

Agreement

In consideration of the foregoing, incorporated herein by this reference, and
the representations, warranties, covenants and agreements contained herein, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto agree as follows:

ARTICLE 1
DEFINITIONS

1.1   “Act” means the United States Food, Drug and Cosmetic Act and the
regulations promulgated thereunder, as amended from time to time, and equivalent
foreign laws applicable to supply of medical devices.

1.2   “FDA” means the Food and Drug Administration of the U.S. Department of
Health and Human Services.

1.3   “Product Inventory” means all raw materials utilized by Seller in the
manufacture of the Products and related work-in-process inventory.

1.4   “Product Liability Damages” means any liability, claim or expense,
including but not limited to reasonable attorneys’ fees, to the extent arising
out of claims of third parties for personal injury or loss of or damage to
property to the extent relating to or arising out of the making or the approved
use of the Products.

1.5   “Regulatory Authority” means the FDA or any court, tribunal, arbitrator,
agency, commission, official or other instrumentality of competent jurisdiction
of any federal, state, county, city or other political subdivision, domestic or
foreign, that performs a function for such political subdivision similar to the
function performed by the FDA for the United States, including Notified Bodies
who are authorized by Competent Authorities in Europe.

1.6   “Regulatory Standards” means (i) any and all permits, licensing, filings
and certifications required by the FDA or other applicable Regulatory
Authorities, and compliance with Quality Systems Regulations, set forth as 21
CFR § 820, of the FDA and equivalent regulatory requirements of other Regulatory
Authorities, applicable to the manufacturing facility and the manufacturing,
processing, handling, storage, shipment, or distribution of the Products, and
(ii) any laws, rules, regulations and standards of any Governmental Authority,
within the United States or Canada that apply to the manufacturing facility or
the manufacturing, processing, handling, storage, shipment, or distribution of
the Products.

1.7   “Remedial Action” means any recall, market withdrawal, or general
corrective action, including any corrections and removals requiring notification
under 21 CFR Section 806, relating to the Product, whether voluntary or
involuntary.

1.8   “Vigilance Report” means the incident report for death, injury and
malfunction that could lead to death or serious injury required under the post
market surveillance system as defined by the European Council Directive
93/42/EEC or the relevant and applicable equivalent of any other Regulatory
Authority.

ARTICLE 2
ORDER, MANUFACTURE AND SUPPLY OF PRODUCTS AND RELATED SERVICES

2.1   Purchase Orders. During the term of this Agreement, upon receipt of a
purchase order from Purchaser (each a “Purchase Order”), Seller shall
manufacture, assemble and deliver Products to Purchaser according to the
specifications for such Products as currently in effect (the “Specifications”),
in such quantities and pursuant to the terms specified in such Purchase Order
and this Agreement. Each Purchase Order shall, at a minimum, include:
(a) identification of the Products ordered; (b) quantity; (c) requested delivery
date; and (d) shipping instructions and shipping address, subject to
Section 2.5, below.

2.2   Acceptance of Orders. Subject to Section 2.3 below, all Purchase Orders
shall be deemed to be an offer by Purchaser to purchase the Products pursuant to
the terms of this Agreement and shall give rise to a contract between Purchaser
and Seller for the sale of the Products ordered only to the extent Seller
accepts, or is required to accept, the Purchase Order as set forth in
Section 2.3. The terms and conditions of this Agreement shall govern and
supersede any additional or contrary terms set forth in Purchaser’s Purchase
Order or any Seller or Purchaser acceptance, confirmation, invoice or other
document, unless the specific additional or contrary terms are stated in writing
and duly signed by an officer of Purchaser and an officer of Seller.

2.3   Forecasts. An initial twelve (12) month forecast of Purchaser’s expected
Product needs is attached to this Agreement as Exhibit B. Such forecast will be
updated on the first business day of each calendar month during the term of this
Agreement to reflect the number of Products for which Purchaser expects to take
delivery during the succeeding twelve month period. Purchaser shall be bound by
the first three (3) months of each twelve-month forecast (each a “Binding
Forecast”). Purchaser shall submit one or more Purchase Orders that call for
delivery of the quantity of Products reflected in the first three months of the
initial forecast within ten (10) days of the date hereof and will submit a
Purchase Order on the first business day of each calendar month while this
Agreement is in effect that calls for delivery of the Products reflected in the
third month of the forecast being submitted on such date (it being understood
that the first two months of each newly submitted forecast will be covered by
previously submitted Purchase Orders). It is understood that raw material
procurement will be driven from the provided rolling one-year forecast attached
as Exhibit B (and the Purchaser will purchase said material from Seller at
termination of this agreement pursuant to Section 7.3(c)). Seller shall accept
the Purchase Order for a given month corresponding to the Binding Forecast up to
an amount of Products in such Binding Forecast that is equal to one hundred and
twenty percent (120%) of the number of Products that Purchaser ordered for
delivery during the previous three month period divided by 3. For example, if
the initial forecast relates to the period July 1 – September 30 and Purchaser
orders 1,500 Products for delivery during such period, then Seller will accept a
Purchase Order submitted on August 1 that calls for delivery of up to 600
Products (500 * 120%) during October. Each Binding Forecast shall represent a
minimum purchase obligation of Purchaser over the applicable three period and
the 120% shall represent a maximum that Seller is obligated to sell to Purchaser
over the applicable three month period. Should the one year forecast indicate a
gradual reduction in quantities over time, the Seller reserves the right to
request a firm Purchase Order over an extended period so as to maintain a
reasonably constant rate of production. At no time shall monthly orders fall
below 90% of the initial three month average. To the extent that Purchase Orders
are in excess of this amount, Seller shall use commercially reasonable efforts
to supply such excess Products. All other months of each twelve-month forecast
of Products shall constitute a non-binding good faith estimate of expected
orders for Products. Notwithstanding the foregoing, Purchaser shall not be
obligated to provide any further forecasts or place any further Purchase Orders
beyond the three months for which it becomes bound under Section 2.3 once it has
given Seller notice of termination pursuant to Section 7.

2.4   Modification of Orders. No Purchase Order that has been accepted or which
is required to be accepted shall be modified or canceled except upon the mutual
agreement of the parties. Mutually agreed change orders shall be subject to all
provisions of this Agreement, whether or not the changed Purchase Order so
states. Notwithstanding the foregoing, subject to Purchaser’s obligation under
Section 7.3(c), all Purchase Orders that remain open on the effective date of
termination or expiration of this Agreement shall terminate on such date. Any
such cancellation by Purchaser must be by written notice to Seller following the
requested delivery date. Seller shall be allowed to ship Products in partial
shipments, provided that such shipments are in accordance with the delivery
dates set forth in the applicable Purchase Orders. Purchaser shall not reject
any shipments of Product solely for the quantity being incorrect so long as the
shipped quantity is within ten percent of the actual quantity ordered.

2.5   Shipment. All Products sold by Seller to Purchaser shall be suitably
packed for shipment in accordance with the applicable Specifications, marked for
shipment to such destination point indicated, and shall be shipped by Seller,
free on board at the location that Seller delivers the Products to the carrier
as contemplated below (“F.O.B.”, as defined in the UCC as adopted in Minnesota)
to Purchaser’s facility located in Minnesota, or such other facility as
Purchaser may designate by giving notice to Seller (the “Place of Destination”).
Seller shall pack and use a manner of shipment reasonably sufficient to prevent
damage, contamination, and degradation during shipment and during unpacking at
the destination. Seller shall ship all Products via a commercially reasonable
carrier selected and designated by Purchaser. Provided that Seller has shipped
the Products in accordance with this Agreement, Purchaser assumes all risk of
loss, and Seller’s title to the Products passes to Purchaser, upon Seller’s
delivery of the Products to the aforementioned carrier. Purchaser shall pay the
actual cost of all freight, shipping, and insurance charges, taxes, (excluding
taxes assessed on the income of Seller) fees, and all other government charges
applicable to the sale of Products to Purchaser under this Agreement.

2.6   Inspection. Seller shall inspect and test the Products as required by the
Specifications and the Regulatory Standards. By notification to Seller,
Purchaser will have the right to reject any Product and any lot that contains
Product, that does not meet, or the manufacture, packaging, testing, or supply
of which does not meet, the Specifications or Regulatory Standards or that are
otherwise defective (“Nonconforming Product”). Purchaser will provide Seller
with information as to the reason for the rejection of the Nonconforming Product
including a description of the test procedure, if any, and results or
observation on which the rejection is based. Seller shall have right to inspect
Nonconforming Product. Purchaser shall not return Products without compliance
with Seller’s standard return policy except with respect to a Nonconforming
Product that is alleged to have connector issues. Seller will instruct Purchaser
as to the disposal or return of Nonconforming Product; provided that Purchaser
shall have the right to dispose of the Product in any manner if Seller has not
otherwise disposed of the Product within thirty (30) days after Purchaser
rejects the Product. If Seller instructs Purchaser to return or otherwise
dispose of Nonconforming Product, Seller will be responsible for all shipping,
insurance, and other charges related to the return or other disposition of
Nonconforming Product and for any replacement Product. At Seller’s option,
Seller will either (i) replace or repair (or reimburse Purchaser’s reasonable
costs to repair) the Nonconforming Product, including units of Product that may
have been damaged in the inspection process, without additional cost to
Purchaser, and deliver to Purchaser no later than ten (10) days after Seller
confirms the non-conformity alleged in Purchaser’s notification of rejection
replacement Product for the Nonconforming Product rejected by Purchaser (if
Seller does not so confirm, it will so notify Purchaser and any dispute as to
non-conformity shall be resolved pursuant to Section 8.14); or (ii) credit
Purchaser for the purchase price of Nonconforming Product; provided that all
unused credits, if any, shall be refunded to Purchaser upon termination of this
Agreement. Notwitsthanding the foregoing, for any Product that is alleged to be
a Nonconforming Product because of connector issues, Seller shall, no later than
ten (10) days after receipt by Seller of such a Nonconforming Product, ship to
Purchaser (or Purchaser’s customer, at Purchaser’s request) a replacement
Product and Purchaser will pay Seller 50% of the price of such Product (with the
price determined in accordance with Section 3.1, except such price shall not be
marked up).

2.7   Process or Material Changes; Specifications. No deviations, exceptions or
changes to the Product Specifications, materials, manufacturing processes or
packaging may be made by either party without prior notice to, and the written
consent of, the other party. This will be accomplished through the use on the
Seller’s Engineering Change Process. Purchaser shall pay Seller the costs
incurred in connection with changes in Product specifications.

2.8   Packaging and Labeling. Seller shall be responsible for packaging,
labeling and shipping Products purchased under this Agreement as reasonably
directed by Purchaser pursuant to the terms of this Agreement and in accordance
with specifications and Regulatory Standards. Without limiting the foregoing,
Purchaser shall have the right to use the trademarks, trade names, logos, and
the like of Seller and its Affiliates but only to the extent present on the
Products, and any packaging and labeling, supplied to Purchaser or to change
labeling, including the trademarks, trade names, logos, colors, designs, and the
like, upon advance written notice to Seller.

Notwithstanding the foregoing, Purchaser shall be solely responsible for any and
all costs and expenses related to any new packaging, labeling and shipping
Products, any “over-labeling” and any new artwork used in connection with the
packaging, labeling and shipping of Products that is requested by Purchaser, and
shall indemnity Seller if any non-Seller intellectual property that Purchaser
requested to be used infringes the rights of any other person or entity.

2.9   Product Inventory. During the term of this Agreement, Seller and Purchaser
will cooperate in determining and maintaining reasonable levels of Product
Inventory necessary to fulfill the forecast and outstanding Purchase Orders,
including issuance of vendor purchase orders for purchases of raw materials by
Seller during the term of this Agreement. An initial list of raw material will
be provided and verified against the forecast. Approvals will be obtained for
procurement quantities that will fall outside of the forecast period or for cost
increases that are effected due to termination notice.

2.10   Limited License. During the term, Seller is hereby granted a
non-exclusive, royalty free, paid up license to all Intellectual Property owned
by Purchaser necessary for the manufacture of the Products for Purchaser under
this Agreement.

2.11   Seller Training Services. Subject to the terms and conditions of this
Agreement, from the date of this Agreement, Seller will provide to Purchaser and
its Affiliates all training reasonably necessary or helpful to manufacture the
Products in accordance with all applicable Regulatory Standard Specifications
and to advise the Purchaser how to prepare Purchaser’s place of manufacturing in
order to obtain a CE Mark and FDA approval for Purchaser’s manufacturing
location (collectively, the “Seller Training Services”) relating to the
manufacture of the Products. Unless otherwise agreed in writing, such training
will include, but not be limited to, providing to Purchaser, no more than five
kits for each of the Products and the related consoles, with each kit containing
all of the materials necessary to manufacture the applicable Product or console.
The number of units per kit will be mutually agreed by the parties for each kit.
Kits will be incorporated in Purchaser’s monthly purchase forecast provided to
Seller. The cost to Purchaser of such kits shall be Seller’s actual out of
pocket expenses to obtain such kits, which such cost is set forth on Schedule 1
(plus custom packaging if required. Kits must be forecast and ordered as set
forth in Section 2.3). All Seller Training Services will be provided at Seller’s
facility located in Montreal, where the Seller will train-the-trainer and act as
mentor as this individual trains Purchaser’s workers in Minnesota. At a mutually
agreed to time, the Seller will travel to Minnesota to audit and provide
additional feedback to the process. Additional trips to Minnesota and the
travel, hotel, meals and other reasonably related travel expenses will be paid
by Purchaser. Seller represents, warrants, and covenants that each of the Seller
Training Services will be provided in a commercially reasonable manner as to
allow Purchaser to continue the manufacture of the Products in substantially the
same manner as has been historically done by Seller.

2.12   Term of Training Services. The Training Services will be provided
commencing on the date of this Agreement until the later of (i) Purchaser
applying for the CE Mark for its manufacturing location for any of the Products
or (ii) Purchaser notifies Seller that it no longer wishes to have Seller
manufacture any Products for it; provided, however, that in no event,
notwithstanding anything to the contrary detailed in this Agreement, will Seller
be obligated to continue to manufacture Products pursuant to this Agreement
after one year from the date hereof.

2.13   Access to Data and Records. Purchaser shall allow Seller to use during
the term of this Agreement all business information and related books and
records, including working papers, files, computer discs and tapes, software and
hardware requirements and specifications, invoices, credit and sales records,
customer lists and agreements, all purchase order based arrangements, supplier
lists (including supplier cost information and agreements), manuals,
instructions, labeling including electronic files, design drawings, business
plans and other plans and specifications, accounting books and records, sales
literature, current price lists and discounts, promotional signs and literature,
marketing and sales programs and materials, and manufacturing and quality
control records and procedures acquired by Purchaser pursuant to the Purchase
Agreement and necessary for Seller to use in order for it to fulfill its
obligation hereunder (collectively, the “Business Information”). Seller hereby
covenants and agrees to return all Business Information (including all copies
thereof), whether in written or electronic form, to Purchaser upon the
expiration of the Term. Seller agrees to provide Purchaser access to the
Business Information during the Term as Purchaser may reasonably request.

2.14   Title/Risk of Loss/Maintenance/Insurance. Although title to the Purchased
Assets as provided in Section 1.1 of the Purchase Agreement (including the
Finished Goods and Console Inventory, Transferred Intellectual Property,
machinery and equipment, and Business Information) shall transfer to and remain
with Purchaser as of and after the Closing Date; notwithstanding anything to the
contrary contained in the Purchase Agreement, during the term of this Agreement
Seller shall maintain possession of the equipment specified on Exhibit C at the
Seller’s facility located in Quebec, Canada (all such property is hereinafter
referred to as “Stored Property”) until Purchaser delivers written instructions
to Seller to ship the Stored Product or until this Agreement terminates or
expires whichever is earlier. Seller shall hold Stored Property as bailee for
Purchaser and Seller shall bear all risk of loss with respect to Stored Property
until the Stored Property is delivered to Purchaser unless Purchaser fails to
receive the Stored Property within 20 days of giving notice that Seller should
ship the Stored Product (assuming Seller ships such Stored Product pursuant to
the immediately following sentence) or, if earlier, the expiration of this
Agreement. Seller shall ship the Stored Property (or any applicable portion
thereof), at Purchaser’s cost, to Purchaser’s facility in Minnesota upon receipt
of Purchaser’s written instructions or until this Agreement terminates or
expires, whichever is earlier. During the term of this Agreement, Seller
covenants and agrees to maintain Stored Property in good working order, ordinary
wear and tear excepted and to insure Stored Property against loss from fire,
theft, flood, destruction and other casualty for its full replacement cost.
Seller further covenants and agrees to maintain general commercial liability
insurance in amounts equal to or exceeding the coverage amounts in effect as of
the date hereof, insuring such property. All such policies shall name Purchaser
as an additional insured. Seller covenants and agrees to protect all Business
Information by taking commercially reasonable precautions, including maintaining
back-up copies of Business Information.

2.15   Maintenance of Consoles. From time to time while this Agreement remains
in effect, Seller will, at the request of Purchaser, perform such maintenance
service with respect to the consoles that it currently performs. Purchaser will
reimburse Seller for its actual out of pocket costs it incurs to perform such
maintenance services as well as labor and material that are used to perform such
services. Seller will use its commercially reasonable efforts to perform such
maintenance services in the timeframe requests by Purchaser.

2.16   Vendor Information. As soon as practicable after the date hereof, Seller
will provide to Purchaser, in such commercially reasonable electronic format as
is requested by Purchaser, a file containing all pertinent information
concerning the suppliers utilized by Seller in the operation of the Business,
including the suppliers from whom Seller purchased raw materials to manufacture
the Products.

2.17   Further Assurances. The parties hereto each agree to execute such other
documents, agreements or instruments as may be necessary or desirable for the
implementation of this Agreement and the consummation of the transactions
contemplated hereby, including the purchase by Purchaser of certain inventory
under Section 7.3(c) and the assumption by Purchaser (if it so desires) of
certain orders and contracts under Section 7.3(d).

ARTICLE 3
COMPENSATION

3.1   Prices. The purchase price of all Products sold hereunder, shall be
(i) for Products scheduled for delivery during the first six (6) months of this
Agreement, Seller’s fully loaded direct costs of manufacturing such Products
(i.e., the costs of raw materials and Seller’s cost of labor plus overhead
directly attributable to manufacturing the Product) multiplied by One Hundred
Twenty Percent (120%) and (ii) for Products scheduled for delivery after the
first six (6) months of this Agreement, Seller’s fully loaded direct costs of
manufacturing such Products multiplied by One Hundred Twenty-Five Percent
(125%). Seller’s good faith estimate of its current fully loaded direct costs of
manufacturing Products is set forth on Exhibit D. Seller will provide Purchaser
with sixty (60) days notice of any increase in its fully loaded costs of
manufacturing and will, upon reasonable request of Purchaser, provide
documentation supporting such increase. Following the first year of this
Agreement, if Purchaser requests and Seller agrees in its sole discretion to
keep this Agreement in force, cost will be negotiated between the parties but in
no event will be less than 125% multiplied by the “fully loaded” costs described
above. For purposes of clarity, neither the 120% or 125% markup shall apply to
any third party charges for which Purchaser is responsible, including without
limitation the charges for shipping, insurances and taxes for which Purchaser is
responsible hereunder and the costs specified in Section 3.3 below. The price
for Products not delivered within one week of the delivery date required by
Purchaser pursuant to a Purchase Order shall be reduced by 2% for each week past
the delivery date that the Products are delivered.

3.2   Payment Terms. Seller will invoice Purchaser for amounts due under this
Agreement for the purchase by the Purchaser of Products, and all such invoices
shall be due and payable in full within thirty-five (35) days from the date
thereof. All amounts set forth herein are denominated in United States Dollars
and all payments required to be made under this Agreement shall be made in
United States Dollars. Invoices not paid in full on or before the due date and
not otherwise disputed in good faith shall bear interest at the lesser of
eighteen percent (18%) per annum or the maximum rate permitted by law, until
paid in full.

3.3   Costs of Providing Training Services. Purchaser will reimburse Seller for
all the actual cost of all reasonable travel and lodging and meal expenses
incurred by Seller’s employees while providing Training Services at Purchaser’s
facility.

ARTICLE 4
REGULATORY MATTERS; AUDIT RIGHTS

4.1   Manufacturing Compliance. All Products delivered to Purchaser (or shipped
to a third party at the direction of Purchaser) under this Agreement shall be
free of defects in material and workmanship and meet the Specifications, and
applicable Regulatory Standards. Seller represents and warrants that it has the
necessary expertise, personnel, facilities and equipment to perform its
obligations in accordance with this Agreement and that it shall operate and
maintain its manufacturing facility in compliance with Regulatory Standards.

4.2   Remedial Actions. Each party shall notify the other immediately, and
promptly confirm such notice in writing, if it obtains information indicating
that any of the Product would reasonably be expected to be subject to Remedial
Action. The parties shall assist each other in gathering and evaluating such
information as is necessary to determine the necessity of conducting or
appropriate responses to Remedial Action. Purchaser shall solely make the final
determination whether and how to commence any Remedial Action with respect to
the Product. Each party shall maintain adequate records to permit Purchaser to
trace the manufacture of the Product and the distribution and use of the
Product. In the event Purchaser determines that any Remedial Action with respect
to the Product should be commenced or Remedial Action is required by any
governmental authority having jurisdiction over the matter, Purchaser shall have
exclusive control of, and shall coordinate, all efforts necessary to conduct
such Remedial Action; provided, however, that if Purchaser seeks indemnity for
Seller for such Remedial Action, Seller shall be allowed to control the Remedial
Action. If Purchaser conducts any Remedial Action related to the Product and
Seller is ultimately determined to be responsible for the problem requiring the
Remedial Action including faulty manufacture, failure to comply with Regulatory
Standards, or failure to produce Product that meets Specifications, then Seller,
at Purchaser’ option, shall reimburse Purchaser for its cost of all Purchaser
devices subject to such Remedial Action.

4.3   Complaints and Medical Device Reporting. Purchaser will comply with
applicable governmental medical device reporting regulatory requirements (e.g.,
the FDA’s Medical Device Reporting (MDR) Regulations) and applicable
governmental regulatory requirements with respect to Vigilance Reports, and
Seller shall cooperate with Purchaser to the extent reasonably necessary for
Purchaser’s compliance therewith. Purchaser and Seller agree to notify the other
within ten (10) Business Days of receipt of any written complaint (provided,
however, that such notice period shall be reduced to three (3) Business Days in
the event that the complaint necessitates remedial action under 21 CFR
Section 803.53)) associated with a Product.

4.4   Purchaser Audits. Seller shall maintain good and accurate records of
Product Inventory and documentation that support its direct costs of
manufacturing the Products during the term of this Agreement. Seller shall give
Purchaser reasonable access to its records to allow Purchaser to conduct audits
relating to the Product and Seller’s fully loaded direct manufacturing costs but
in no event not more than two times per annum. Such audits will be conducted
during Seller’s normal business hours, after reasonable prior written notice to
Seller by Purchaser. Seller shall make appropriate personnel reasonably
available to Purchaser in connection with such audits, and Purchaser shall use
commercially reasonable efforts to minimize interference with Seller’s
operations during each such audit.

4.5   Regulatory Inspections. Each party to this Agreement will promptly notify
the other of any inspection of any facility related to the Product or any
component part of a Product by any Regulatory Authority or ISO organization
which relates to the manufacture, assembly, or packaging of the Product and
provide to the other party full information about the progress and outcome of
such inspection, including, without limitation, copies of any notice of
observations or warnings, requests for remedial action, corrective actions or
other adverse findings.

ARTICLE 5
WARRANTIES

5.1   Limited Warranty. Seller warrants to Purchaser that the Products sold to
Purchaser hereunder shall materially conform to the Specifications and will be
free from defects in materials and workmanship for one year from the date of
invoice. EXCEPT AS SET FORTH IN THE PRECEDING SENTENCE AND IN SECTION 4.1,
SELLER DOES NOT MAKE ANY, AND EXPRESSLY DISCLAIMS, ALL OTHER WARRANTIES
INCLUDING MERCHANTABILITY AND FITNESS FOR A PARTICULAR USE.

ARTICLE 6
INDEMNIFICATION

6.1   Indemnification by Seller. Seller shall indemnify, defend and hold
harmless Purchaser, and its directors, officers, employees and agents, from and
against any and all liabilities, damages, settlements, claims, actions, suits,
penalties, fines, costs or expenses (including, without limitation, reasonable
attorneys’ fees and other expenses of litigation any of the foregoing,
“Damages”) but specifically excluding any consequential (other than with respect
to Remedial Actions) incidental, special or punitive damages suffered or
incurred by any of the foregoing Persons to the extent resulting from a claim by
a non-Affiliate third party against such a Person that concerns: (a) any breach
of any express representation or warranty on the part of Seller that is set
forth in this Agreement; (b) Product Liability Damages, but only to the extent
directly resulting from the negligent manufacture of Products, or any component
thereof, by Seller or its suppliers or out of any failure to comply with the
Specifications or Regulatory Standards; or (c) any Remedial Action, but only to
the extent directly resulting from the negligent manufacture, shipping or
delivery of Products, or any component thereof, by Seller or any of its
suppliers other than suppliers approved by Purchaser or out of any failure to
comply with the Specifications or Regulatory Standards; provided, however, that
Seller shall have no liability hereunder for any failure of Seller to satisfy
its obligations hereunder if such failure is a direct result of its inability to
procure raw materials from a vendor despite Seller’s commercially reasonable
attempts to do so. Nothing contained herein shall limit in any manner
Purchaser’s indemnification obligations to Seller contained in the Purchase
Agreement.

6.2   Indemnification by Purchaser. Purchaser shall indemnify, defend and hold
harmless Seller, its Affiliates and their respective directors, officers,
employees and agents, from and against any and all Damages suffered or incurred
by any of the foregoing Persons to the extent resulting from a claim by a
non-Affiliate third party against such a Person that concerns: (a) any breach of
any express representation or warranty on the part of Purchaser that is set
forth in this Agreement; or (b) Product Liability Damages, to the extent
directly resulting from the marketing or sale of Product by Purchaser and not as
the result of any matter within the scope of Seller’s indemnity under
Section 6.1; (c) any Remedial Action, to the extent directly resulting from the
marketing or sale of Product by the Purchaser or (d) any infringement of a third
party’s intellectual property rights caused by a specific request by Purchaser
of Seller to include such third party’s intellectual property rights in a
Product or on any packaging; provided that in no event shall Purchaser be liable
under this Section 6.2 for any matters within the scope of Seller’s indemnity
under Section 6.1. Nothing contained herein shall limit in any manner Seller’s
indemnification obligations to Purchaser contained in the Asset Purchase
Agreement.

6.3   Claims for Indemnification.

  (a)   Whenever any claim arises for indemnification hereunder or an event
which may result in a claim for such indemnification has occurred, the party
seeking indemnification (the “Indemnified Party”), shall promptly notify the
party from whom indemnification is sought (the “Indemnifying Party”) of the
claim and, to the extent known, the facts constituting the basis for such claim;
provided, however, that any failure to give such notice will not waive any
rights of the Indemnified Party, except to the extent the Indemnifying Party is
actually prejudiced thereby. The notice to the Indemnifying Party will specify
with reasonable specificity, to the extent known, the basis under which the
right to indemnification is being asserted and the amount or an estimate of the
amount of the liability arising therefrom. The Indemnifying Party shall have the
exclusive right to dispute, settle and defend all claims and Damages for which
it is responsible under this Section 6 and thereafter shall so defend and pay
any adverse final judgment or award or settlement amount for which it is
responsible under this Section 6. Such defense and settlement shall be
controlled exclusively by the Indemnifying Party, and the cost of such defense
shall be borne by the Indemnifying Party, provided that the Indemnified Party
shall have the right to participate in such defense at its own expense, subject
to the exclusive control of the Indemnifying Party. The Indemnified Party shall
cooperate in all reasonable respects in the investigation, trial, settlement and
defense of each such claim, including making personnel, books, and records
relevant to the claim available to the Indemnifying Party, without charge,
except for reasonable out-of-pocket expenses. If the Indemnifying Party fails to
reasonably defend or settle a lawsuit for which it is responsible under this
Section 6 as set forth above in breach of its obligations under this Section 6,
then the Indemnified Party shall have the right to pay, compromise or defend any
such lawsuit and to assert the amount of any judgment or settlement, plus the
reasonable expenses of defense or settlement, as the claim for which the
Indemnifying Party is responsible under this Section 6. The Indemnified Party
shall also have the right, upon delivery of ten (10) days advance written notice
to such effect to the Indemnifying Party, exercisable in good faith, to take
such action as may be reasonably necessary to avoid a default judgment in such a
lawsuit prior to the assumption of the defense of the claim by the Indemnifying
Party, and any reasonable expenses incurred by Indemnified Party so acting prior
to the Indemnifying Party taking appropriate action shall be paid by the
Indemnifying Party. Except as otherwise provided in this Section 6 above, the
Indemnified Party shall not settle or compromise any claim for which it is
entitled to indemnification hereunder without the prior written consent of the
Indemnifying Party, which will not be unreasonably withheld. The parties intend
that all indemnification claims be made as promptly as practicable. Except as
otherwise expressly set forth in this Section 6.3(a) above, the Indemnifying
Party shall have no liability or responsibility for any cost, expenses, or
settlements incurred without its prior written consent, not to be unreasonably
withheld.

  (b)   If the Indemnifying Party is of the opinion that the Indemnified Party
is not entitled to indemnification, the Indemnifying Party will deliver a
written objection to such claim and written specifications in reasonable detail
of the aspects or details objected to, and the grounds for such objection. Any
such dispute will be resolved pursuant to the procedures referenced in
Section 8.14, below.

ARTICLE 7
TERM AND TERMINATION

7.1   Term. This Agreement shall take effect as of the Closing Date and shall
continue in force for twelve (12) calendar months thereafter, unless terminated
earlier as provided herein (the “Term”).

7.2   Termination. Notwithstanding the provisions of Section 7.1, this Agreement
may be terminated only in accordance with the following provisions:

  (a)   Either party may terminate this Agreement at any time by giving notice
in writing to the other party, which notice shall be effective upon dispatch,
should the other party file a petition of any type as to its bankruptcy, be
declared bankrupt, make a general assignment of all or substantially all of its
assets for the benefit of creditors (other than grants of security for debt), or
go into liquidation or receivership.

  (b)   Either party may terminate this Agreement by giving notice in writing to
the other party in the event the other party is in material breach of this
Agreement and shall have failed to cure such breach within thirty (30) days
after notice thereof from the non-breaching party.

  (c)   Purchaser may, in its sole discretion, terminate this Agreement upon
ninety (90) days prior written notice to Seller; provided at the time it gives
such notice, it shall also deliver a final Purchase Order to Seller for any
Products (that would be in addition to any Product previously ordered by
Purchaser) it is required (or deemed to be required) to procure from Seller
during the ninety (90) day period. Any such final Purchase Order shall be
subject to the provisions of Section 2.3. If Purchaser terminates any Purchase
Order that has been accepted by Seller, Purchaser will, in addition to, but
without duplication of, its obligation under Section 7.3(c), reimburse Seller
for any out of pocket costs incurred by Seller in procuring Product Inventory
that would be necessary to fill such Purchase Orders.

7.3   Rights and Obligations on Termination. In the event of termination or
expiration of this Agreement for any reason, the parties shall have the
following rights and obligations:

  (a)   Unless mutually agreed to in writing, termination of this Agreement
shall not release either party from the obligation to make payment of all
amounts then or thereafter due and payable and shall not release Seller from any
liability for failure to deliver Products prior to the applicable delivery dates
(regardless if the applicable Purchase Orders are terminated effective upon the
termination of this Agreement).

  (b)   Subject to Purchaser’s obligations under Section 7.2(c), all outstanding
Purchase Orders shall automatically be terminated on the date the Agreement
terminates or expires.

  (c)   Within ten (10) Business Days of the effective date of termination
Seller will provide a list of Product Inventory, which may be observed by
Purchaser and/or Purchaser’s accountants or representative, and will list the
type and quantity of all items included in the Product Inventory and report the
same to Purchaser. Within five (5) Business Days following such count and report
to Purchaser, Purchaser shall purchase, and Seller shall sell to Purchaser, such
existing Product Inventory (except for any such Product Inventory that is
related to SurgiFrost 6 which Purchaser has indicated to Seller it does not
desire) pursuant to a bill of sale (under which Seller shall represent and
warrant that it has good title to such Product Inventory, free and clear of all
liens) in consideration for payment equal to Seller’s cost of all Product
Inventory determined in accordance with Canadian GAAP plus packaging and
shipping cost. In addition, Purchaser shall purchase from Seller any finished
goods inventory related to Products, at a price equal to the price set forth in
Section 3.1 with respect to any Products that were ordered on a terminated
Purchaser Order and were scheduled for delivery after the date of such
termination (and at Seller’s costs for producing any other finished goods
determined in accordance with Canadian GAAP) plus packaging and shipping cost,
provided that Purchaser shall not be obligated to purchase a quantity of
finished goods that exceeds than 110% of the quantity of Products that had
scheduled shipment dates after the date of termination on Purchaser Orders that
were terminated pursuant to Section 7.3(b).

  (d)   Purchaser shall assume all or any portion of purchase orders and
contracts to which Seller is a party, and which are assignable by Seller to
Purchaser and that relate to any supplies or materials that would have been used
in making, assembling, or manufacturing Products that were ordered on a
terminated Purchaser Order and were scheduled for delivery after the date of
such termination. Seller shall take all actions as are necessary to assign to
Purchaser such purchase orders and contracts that Purchaser wishes to assume.

  (e)   Sections 2.6, 4.1-4.5, and 7.3, and Articles, 5, 6 and 8, shall survive
termination or expiration of this Agreement. All other provisions of this
Agreement shall terminate upon termination of this Agreement.

ARTICLE 8

MISCELLANEOUS

8.1   Confidentiality. The Parties agree that Section 4.1 (titled
“Confidentiality”) of the Purchase Agreement is incorporated by reference herein
and shall apply to all information disclosed in the performance of this
Agreement.

8.2   Notices. All notices, requests, demands, claims and other communications
hereunder shall be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given (a) if personally delivered,
when so delivered, (b) if given by facsimile, once such notice or other
communication is transmitted to the facsimile number specified below and
electronic confirmation is received; or (c) if sent through an overnight
delivery service in circumstances to which such service guarantees next day
delivery, the day following being so sent:

If to Seller:

To: CryoCath Technologies, Inc.

16771 Chemin Ste-Marie
Montreal, Quebec
H9H 5H3
Canada
Attn: President & CEO
Fax: 514 694 7075 (Marked Confidential)

With a copy to:

Davies Ward Phillips & Vineberg LLP
1501 McGill College Avenue, 26th Floor
Montreal, Quebec
H3A 3N9
Canada
Attn: Neil Kravitz or Elliot Greenstone.
Fax: (514) 841-6499

If to Purchaser:

To: ATS Medical, Inc.

3905 Annapolis Lane #105
Minneapolis, Minnesota 55447
Attn: Rick Curtis
Fax: (763) 557-2020

With a copy to:

Oppenheimer Wolff & Donnelly LLP
3300 Plaza VII
45 South Seventh Street
Minneapolis, Minnesota 55402
Attn: Thomas R. Marek, Esq.
Fax: (612) 607-7100

Any party may give any notice, request, demand, claim or other communication
hereunder using any other means (including ordinary mail or electronic mail),
but no such notice, request, demand, claim or other communication shall be
deemed to have been duly given unless and until it actually is received by the
individual for whom it is intended. Any party may change the address to which
notices, requests, demands, claims and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.

8.3   Amendments; No Waivers.

  (a)   Subject to Applicable Law, any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by all parties hereto, or in the case of a
waiver, by the party against whom the waiver is to be effective.

  (b)   No waiver by a party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent occurrence. No failure or delay by a party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.

8.4   Expenses. Except as otherwise provided herein, all costs, fees and
expenses incurred in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and in closing and carrying out the
transactions contemplated hereby shall be paid by the party incurring such cost
or expense. This Section 9.4 shall survive the termination of this Agreement.

8.5   Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns. No party hereto may assign either this Agreement or any of its rights,
interests or obligations hereunder, by operation of law or otherwise, without
the prior written approval of the other party. Notwithstanding the foregoing,
either party shall have the right to assign and otherwise transfer this
Agreement as a whole without consent to any entity that acquires all or
substantially all of its business or assets to which this Agreement relates,
whether by sale of stock or assets, operation of the law, or otherwise. All
transfers in violation of the foregoing shall be void.

8.6   Governing Law. This Agreement shall be governed by, construed and enforced
in accordance with the internal laws of the State of New York (regardless of the
laws that might otherwise govern under applicable principles of conflicts of
law).

8.7   Counterparts; Effectiveness. This Agreement may be signed in any number of
counterparts and the signatures delivered by facsimile, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement shall become effective when each party
hereto shall have received a counterpart hereof signed by the other parties
hereto.

8.8   Entire Agreement. This Agreement (including all Exhibits which are hereby
incorporated by reference), all other agreements referred to herein or therein
or in the Purchase Agreement, and the other agreements signed by the parties
hereto or to the Purchase Agreement simultaneously herewith constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior and contemporaneous agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter of this Agreement.

8.9   Captions. The captions herein are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof. All
references to an Article or Section include all subparts thereof.

8.10   Severability. If any provision of this Agreement, or the application
thereof to any Person, place or circumstance, shall be held by a court of
competent jurisdiction to be invalid, unenforceable or void, the remainder of
this Agreement and such provisions as applied to other Persons, places and
circumstances shall remain in full force and effect and the parties hereto shall
use diligent efforts to agree upon a substitute provision that is valid and
enforceable that reflects the original intent of the parties as nearly as
possible.

8.11   Construction. The parties hereto intend that each representation,
warranty and covenant contained herein shall have independent significance. If
any party has breached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) that the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.

8.12   Cumulative Remedies. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.

8.13   Third Party Beneficiaries. No provision of this Agreement shall create
any third party beneficiary rights in any Person, including any employee of
Purchaser or employee of Seller or any Affiliate thereof (including any
beneficiary or dependent thereof).

8.14   Dispute Resolution. Any Dispute arising between the parties under this
Agreement, or in connection with the transactions contemplated hereunder, shall
be resolved pursuant to Article 9 of the Purchase Agreement.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.

ATS ACQUISITION CORP.

By: /s/ Rick Curtis
Name: Rick Curtis
Title: Vice President

CRYOCATH TECHNOLOGIES INC.

By: /s/ Jan Keltjens
Name: Jan Keltjens
Title: President & CEO

SIGNATURE PAGE TO
MANUFACTURING AGREEMENT

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EXHIBITS AND SCHEDULES

    Exhibit A – LIST OF PRODUCTS

    Exhibit B – FORECAST

    Exhibit C – EQUIPMENT TO REMAIN WITH SELLER DURING THE TERM

    Exhibit D – ESTIMATE OF SELLER’S DIRECT COSTS

    Schedule 1 – COST OF KITS

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