Exhibit 10.8

THIRD AMENDMENT

TO

LOAN AND SECURITY AGREEMENT

THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is
entered into as of November 4, 2010 by and between Silicon Valley Bank (“Bank”)
and Enteromedics Inc., a Delaware corporation (“Borrower”), whose address is
2800 Patton Road, Saint Paul, MN 55113.

RECITALS

A. Borrower, as borrower, and Bank, Compass Horizon Funding Company LLC and
Venture Lending & Leasing V, Inc., as lenders, entered into that certain Loan
and Security Agreement with an “Effective Date” of November 18, 2008,
Subsequently, in accordance with that certain First Amendment to Loan and
Security Agreement (the “First Amendment”), dated February 8, 2010, between
Borrower and Bank, the Borrower and Bank agreed to the terms of the Amended
SVB/Borrower Loan Agreement (as defined in the First Amendment and herein
referred to as 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, as herein set
forth, and Bank has agreed to the same, but only to the extent, in accordance
with the terms, subject to the conditions and in reliance upon the
representations and warranties set forth herein.

AGREEMENT

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. Amendments and Other Provisions.

2.1 Limited Waiver Regarding New Capital Transactions Covenant Defaults.
Borrower has failed to comply with the New Capital Transaction Covenant
requirements set forth in Section 6.12 of the Loan Agreement for the compliance
periods ending August 31, 2010 and October 31, 2010 (the “New Capital Covenant
Defaults”). Bank and Borrower agree that the Borrower’s New Capital Covenant
Defaults are hereby waived. It is understood by the parties hereto, however,
that such waiver does not constitute a waiver of any other provision or term of
the Loan Agreement or any related document, nor an agreement to waive in the
future this covenant or any other provision or term of the Loan Agreement or any
related document.

 

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2.2 Expiration of Forbearance Period. Borrower and Bank acknowledge and agree
that the Forbearance Period (as defined in that certain Forbearance to Loan and
Security Agreement by and between Borrower and Bank and dated October 5, 2010
(the “Forbearance Agreement”)) has expired. Bank further acknowledges and agrees
that the Existing Default (as defined in the Forbearance Agreement) is waived in
accordance with Section 2.1 hereof.

2.3 Cash Security for Term Loan. Concurrently herewith, Borrower shall provide
cash collateral to Bank in an amount equal to at least the outstanding principal
amount of the Term Loan. Such cash collateral shall be maintained in a blocked
Collateral Account maintained at Bank (the “Cash Security Account”) and
constitutes part of the Collateral. Borrower grants to Bank a security interest
in the Cash Security Account and the funds therein to secure the payment and
performance of all Obligations of Borrower to Bank, and Bank’s rights with
respect to such Collateral are as provided for in the Loan Agreement.

2.4 Release of Cash Security. The funds maintained in the Cash Security Account
will remain therein until all of the following have occurred (if ever):

(a) Borrower shall have received aggregate net proceeds from New Capital
Transactions of not less than $12,500,000 from the date of the Second Amendment
through January 31, 2011, and such proceeds shall be held in Collateral Accounts
of Borrower maintained with Bank or Bank’s Affiliates until used in the ordinary
course of Borrower’s business; and

(b) Bank shall have received a financial forecast of Borrower through
December 31, 2012 (the “Financial Forecast”) which Financial Forecast shall have
been approved by Borrower’s board of directors and which Financial Forecast must
demonstrate, in Bank’s good faith business judgment, that Borrower will be able
to timely repay the Term Loan and all of its other debts and obligations as they
become due; and

(c) Based upon such Financial Forecast, Bank and Borrower shall have agreed upon
new financial covenants and/or a new financial structure for Borrower’s
Obligations and shall have documented the same in form and substance reasonably
satisfactory to both Bank and Borrower.

Borrower acknowledges and agrees that if any of the foregoing conditions set
forth in this Section 2.4 is not met, the funds maintained in the Cash Security
Account shall remain therein until such time as the Obligations are paid in
full.

2.5 Suspension of Compliance with Liquidity Ratio Financial Covenant. The
requirement that Borrower comply with the Liquidity Ratio Financial Covenant set
forth in Section 6.7(a) of the Loan Agreement is hereby suspended through the
compliance period ending January 31, 2011.

 

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2.6 Modifications Regarding New Capital Transactions Requirements. Pursuant to
Section 6.12 of the Loan Agreement, Borrower is required to have received
aggregate net proceeds from New Capital Transactions of not less than
$15,000,000 from the date of the Second Amendment through January 31, 2011 (the
“January 2011 Requirement”) and $35,000,000 from the date of the Second
Amendment through June 30, 2011 (the “June 2011 Requirement”). Bank and Borrower
hereby agree that (i) the January 2011 Requirement is hereby amended from
“$15,000,000” to “$12,500,000” and (ii) the June 30, 2011 Requirement is hereby
deleted.

2.7 Addition of Definition. The following definition is hereby added to
Section 13.1 of the Loan Agreement in the appropriate alphabetical order:

“Third Amendment” is that certain Third Amendment to Loan and Security Agreement
dated November 4, 2010, between SVB and Borrower.

3. Limitation of Amendments.

3.1 The amendments set forth 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.

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 organizational documents of Borrower delivered to Bank on the Effective
Date (including the Fifth Amended and Restated Certificate of Incorporation
filed with the Delaware Secretary of State on November 20, 2007), as amended by
the Certificate of Amendment filed with the Delaware Secretary of State on July
2, 2009, remain true, accurate and complete and have not been amended,
supplemented or restated and are and continue to be in full force and effect;

 

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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
either 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. Effectiveness. This Amendment shall be deemed effective upon the execution
and delivery of this Amendment by each party hereto.

[Signature page follows]

 

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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

      

Enteromedics Inc.

By:

 

/s/    Benjaman Johnson        

       By:  

/s/    Greg S. Lea    

Name:

 

Benjaman Johnson

      

Name:

  Greg S. Lea

Title:

 

Deal Team Leader

      

Title:

 

Senior Vice President and Chief

Financial Officer

 

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