EXHIBIT 10.1

This Subordinated Credit Agreement is subordinate (i) in the manner and to the
extent set forth in that certain Subordination Agreement (the “Subordination
Agreement”) dated concurrently herewith by and between Theodore C. Skokos, a
party to this Agreement, and Silicon Valley Bank (in such capacity, “First Lien
Holder”), a party to the Loan and Security Agreement dated as of July 28, 2004
by and among ATS Medical, Inc. and First Lien Holder, as amended, and (ii) to
the obligations of the Borrower to the holders of the Borrower’s 6% Convertible
Senior Notes due 2025 and issued pursuant to that certain Indenture dated as of
October 7, 2005, made by and between the Borrower and Wells Fargo Bank, National
Association, as trustee; and Theodore C. Skokos, by his acceptance hereof,
irrevocably agrees to be bound by the provisions of the Subordination Agreement.

SUBORDINATED CREDIT AGREEMENT

THIS SUBORDINATED CREDIT AGREEMENT (this “Agreement”), dated as of June 29,
2008, is by and between ATS MEDICAL, INC., a corporation organized under the
laws of the State of Minnesota (the “Borrower”), and THEODORE C. SKOKOS, an
individual (the “Lender”).

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

Section 1.1 Defined Terms. As used in this Agreement the following terms shall
have the following respective meanings:

“Advance”: As defined in Section 2.1.

“Bloomberg”: Bloomberg Financial Markets.

“Business Day”: Any day (other than a Saturday, Sunday or legal holiday in the
State of Minnesota) on which banks are permitted to be open at the location of
the Lender.

“Collateral”: As described in Exhibit B hereto.

“Commitment”: The obligation of the Lender to make Advances to the Borrower in
an aggregate principal amount outstanding at any time not to exceed the
Commitment Amount upon the terms and subject to the conditions and limitations
of this Agreement.

“Commitment Amount”: As defined in Section 2.1.

“Commitment Fees”: As defined in Section 2.7.

“Common Stock”: The common stock, $0.01 per share, of the Borrower.

“Default”: Any event which, with the giving of notice (whether such notice is
required under Section 7.1, or under some other provision of this Agreement, or
otherwise) or lapse of time, or both, would constitute an Event of Default.

“Effective Date”: The date on which all the conditions precedent to the
effectiveness of this Agreement, as set forth in Article III, have been or, on
such date, will be, satisfied.

“Effective Date Warrant”: A Warrant dated as of the Effective Date to purchase
up to 245,098 shares of Common Stock.

“Event of Default”: Any event described in Section 7.1.

“Fair Market Value”: The value of a share of Common Stock as of the Effective
Date, which shall be equal to the closing price of the Common Stock on the
Nasdaq Stock Market on the trading day immediately prior to the Effective Date
as reported by Bloomberg (or a comparable reporting service of national
reputation selected by the Company and reasonably acceptable to the Lender if
Bloomberg is not then reporting sales prices of such security) (collectively,
“Bloomberg”).

“GAAP”: Generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of any date of determination.

“Lien”: With respect to any Person, any security interest, mortgage, pledge,
lien, charge, encumbrance, title retention agreement or analogous instrument or
device (including the interest of each lessor under any capitalized lease), in,
of or on any assets or properties of such Person, now owned or hereafter
acquired, whether arising by agreement or operation of law.

“Loan Documents”: This Agreement, the Subordinated Security Agreement, and the
Note.

“Maturity Date”: As defined in Section 2.1.

“Maximum Total Outstanding Revolver Amount”: The amount of the highest Total
Outstanding Revolver Amount at any time prior to the date of any Advance.

“Note”: As defined in Section 2.3.

“Person”: Any natural person, corporation, partnership, limited partnership,
joint venture, firm, association, trust, unincorporated organization, government
or governmental agency or political subdivision or any other entity, whether
acting in an individual, fiduciary or other capacity.

“Required Warrant”: Any Warrant required to be issued pursuant to Section 2.10.

“Senior Lender”: Silicon Valley Bank.

“Shareholder Approval”: Such approval as may be required by the applicable rules
and regulations of the Nasdaq Stock Market (or any successor entity) from the
shareholders of the Borrower in order to enable the Borrower to issue common
stock in connection with the exercise of the Warrants.

“Subordinated Security Agreement”: The Subordinated Security Agreement dated as
of June 29, 2008, executed by the Borrower in favor of the Lender, as the same
may be amended, restated or otherwise modified in the form of Exhibit C attached
hereto.

“Subordination Agreement”: The Subordination Agreement dated as of June 29,
2008, by and between the Senior Lender and the Lender, as the same may be
amended, restated or otherwise modified.

“Total Outstanding Revolver Amount”: The aggregate unpaid principal amount of
all Advances.

“Warrant”: Any Warrant issued by the Borrower in favor of the Lender, including
the Effective Date Warrant and any Required Warrant, in the form of Exhibit D
attached hereto, as the same may be amended, restated or otherwise modified from
time to time.

Section 1.2 Accounting Terms and Calculations. Except as may be expressly
provided to the contrary herein, all accounting terms used herein shall be
interpreted and all accounting determinations hereunder shall be made in
accordance with GAAP.

Section 1.3 Other Definitional Terms, Terms of Construction. The words “hereof,”
“herein” and “hereunder” and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. References to Sections, Exhibits, Schedules and the like
references are to Sections, Exhibits, Schedules and the like of this Agreement
unless otherwise expressly provided. The words “include,” “includes” and
“including” shall be deemed to be followed by the phrase “without limitation.”
Unless the context in which used herein otherwise clearly requires, “or” has the
inclusive meaning represented by the phrase “and/or.” All incorporations by
reference of covenants, terms, definitions or other provisions from other
agreements are incorporated into this Agreement as if such provisions were fully
set forth herein, and include all necessary definitions and related provisions
from such other agreements. All covenants, terms, definitions and other
provisions from other agreements incorporated into this Agreement by reference
shall survive any termination of such other agreements until the obligations of
the Borrower under this Agreement and the Note are irrevocably paid in full and
the Commitment is terminated.

ARTICLE II

TERMS OF LENDING

Section 2.1 The Revolving Commitment. On the terms and subject to the conditions
hereof, the Lender agrees to make advances (each an “Advance”) to the Borrower
on a revolving basis at any time and from time to time from the Effective Date
to June 29, 2010 (the “Maturity Date”), during which period the Borrower may
borrow, repay and reborrow in accordance with the provisions hereof, provided,
that the unpaid principal amount of outstanding Advances shall not at any time
exceed $5,000,000 (the “Commitment Amount”).

Section 2.2 Procedure for Advances. Any request by the Borrower for an Advance
shall be in writing or by telephone and must be given so as to be received by
the Lender not later than 1:00 p.m. central standard time on the Business Day
prior to the requested Advance date. Each request for an Advance shall be
irrevocable and shall be deemed a representation by the Borrower that on the
requested Advance date and after giving effect to such Advance the applicable
conditions specified in Article III have been and will continue be satisfied.
Each request for an Advance shall specify (i) the requested Advance date (which
must be a Business Day) and (ii) the amount of such Advance. Unless the Lender
determines that any applicable condition specified in Article III has not been
satisfied, the Lender will make available to the Borrower at the Borrower’s
principal office in immediately available funds not later than 1:00 p.m. central
standard time on the requested Advance date the amount of the requested Advance.

Section 2.3 The Note. The Advances shall be evidenced by a single promissory
note of the Borrower (as the same may be amended, restated or otherwise
modified, the “Note”), substantially in the form of Exhibit A hereto, in the
amount of the Commitment Amount originally in effect. The Lender shall enter in
its ledgers and records the amount of each Advance made and the payments made
thereon.

Section 2.4 Interest Rates, Interest Payments and Default Interest. Interest
shall accrue and be payable on the unpaid balance of the Note at a fixed rate of
15% per annum (the “Interest Rate”). Interest shall be payable quarterly in
arrears on the last day of each calendar quarter and upon final payment of the
Note.

Section 2.5 Repayment and Prepayment. Principal of the Note shall be payable in
full on the Maturity Date. The Borrower may prepay the Note, in whole or in
part, at any time, without premium or penalty. Any such prepayment must be
accompanied by accrued and unpaid interest on the amount prepaid. Amounts
prepaid under this Section may be reborrowed upon the terms and subject to the
conditions and limitations of this Agreement.

Section 2.6 Optional Reduction of Commitment Amount or Termination of
Commitment. The Borrower may, at any time, upon not less than 20 Business Days
prior written notice to the Lender, reduce the Commitment Amount, with any such
reduction in a minimum amount of $1,000,000. Upon any reduction in the
Commitment Amount pursuant to this Section, the Borrower shall pay to the Lender
the amount, if any, by which the aggregate unpaid principal amount of the Note
exceeds the Commitment Amount as so reduced. Amounts so paid cannot be
reborrowed. The Borrower may, at any time, upon not less than 40 Business Days
prior written notice to the Lender, terminate the Commitment in its entirety.
Upon termination of the Commitment pursuant to this Section, the Borrower shall
pay to the Lender all unpaid obligations of the Borrower to the Lender
hereunder.

Section 2.7 Commitment Fee. The Borrower shall pay to the Lender fees (the
“Commitment Fees”) in an amount determined by applying a rate of 1% per annum to
the average daily unused Revolving Commitment Amount for the period from the
date of this Agreement to the Maturity Date. Such Commitment Fees are payable in
arrears annually on the anniversary of the Effective Date and on the Maturity
Date.

Section 2.8 Computation. Commitment Fees and interest on the Note shall be
computed on the basis of actual days elapsed and a year of 360 days.

Section 2.9 Use of Proceeds. The proceeds of each Advance shall be used for the
Borrower’s general business purposes in a manner not in conflict with any of the
Borrower’s covenants in this Agreement.

Section 2.10 Warrants. The Borrower shall issue a Warrant in connection with
each Advance subject to the terms and conditions:

(a) If the Total Outstanding Revolver Amount after giving effect to the Advance
is less than or equal to the Maximum Total Outstanding Revolver Amount, no
Warrant shall be issued.

(b) If the Total Outstanding Revolver Amount after giving effect to the Advance
is greater than the Maximum Total Outstanding Revolver Amount, the Borrower
shall issue a Warrant to the Lender for a number of shares of Common Stock equal
to twenty percent (20%) of the difference between (i) such Total Outstanding
Revolver Amount less (ii) the Maximum Total Outstanding Revolver Amount, divided
by $2.04.

ARTICLE III

CONDITIONS PRECEDENT

Section 3.1 Conditions to Effectiveness. The obligations of the Lender hereunder
shall be subject to the fulfillment of each of the following conditions on or
prior to the Effective Date:

(a) Documents. The Lender shall have received the following:

(i) This Agreement executed by a duly authorized officer (or officers) of the
Borrower and dated the Effective Date.

(ii) The Note executed by a duly authorized officer (or officers) of the
Borrower and dated the Effective Date.

(iii) A copy of the corporate resolutions of the Borrower authorizing the
execution, delivery and performance of this Agreement and the Note and
containing an incumbency certificate showing the names and titles, and bearing
the signatures of, the officers of the Borrower authorized to execute this
Agreement and the Note, certified as of the Effective Date by the Secretary or
an Assistant Secretary of the Borrower.

(iv) The Subordinated Security Agreement executed by a duly authorized officer
(or officers) of the Borrower in favor of the Lender and dated the Effective
Date.

(v) The Subordination Agreement executed by a duly authorized officer (or
officers) of the Lender and the Senior Lender and dated the Effective Date.

(vi) The Effective Date Warrant executed by a duly authorized officer (or
officers) of the Borrower in favor of the Lender and dated the Effective Date.

(vii) Evidence of the cash exercise by Alta Partners VIII, L.P. (“Alta”) of
warrants to purchase 1,960,000 shares of the Borrower’s common stock issued to
Alta in June, 2007.

(b) Other Matters. All organizational and legal proceedings relating to the
Borrower and all instruments and agreements in connection with the transactions
contemplated by this Agreement shall be satisfactory in scope, form and
substance to the Lender and its counsel, and the Lender shall have received all
information and copies of all documents, including records of corporate
proceedings, which it may reasonably have requested in connection therewith,
such documents where appropriate to be certified by proper Borrower or
governmental authorities.

(c) Perfection. A financing statement with respect to the Collateral shall have
been appropriately filed or recorded to the satisfaction of the Lender.

Section 3.2 Conditions Precedent to all Advances. The Lender shall not have any
obligation to make any Advance hereunder unless:

(a) all representations and warranties of the Borrower made in this Agreement
remain true and correct in all material respects;

(b) no Default or Event of Default exists; and

(c) if a Required Warrant is required under Section 2.10, the Borrower has
delivered to Lender a Required Warrant executed by a duly authorized officer (or
officers) of the Borrower in favor of the Lender; provided that, if a
Shareholder Approval of such Required Warrant is necessary, no Advance shall be
required unless and until such Shareholder Approval has been obtained.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lender:

Section 4.1 Organization, Standing, Etc. The Borrower is a corporation duly
incorporated and validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now conducted, to enter into the Loan
Documents to which it is a party and to issue the Note and to perform its
obligations hereunder and thereunder. The Loan Documents to which the Borrower
is a party have been duly authorized by all necessary corporate action and when
executed and delivered will be the legal and binding obligations of the
Borrower. The execution and delivery of the Loan Documents to which the Borrower
is a party will not violate the Borrower’s Articles of Incorporation or bylaws
or any law applicable to the Borrower. No governmental consent or exemption is
required in connection with the Borrower’s execution and delivery of the Loan
Documents to which it is a party.

Section 4.2 Litigation. Except as disclosed in the Company’s periodic reports
filed with the U.S. Securities and Exchange Commission, there are no actions,
suits or proceedings pending or, to the knowledge of the Borrower, threatened
against or affecting the Borrower which, if determined adversely to the
Borrower, would have, a material adverse effect on the condition of the
Borrower. The Borrower is not in violation of any law or regulation (including
environmental laws and regulations and laws relating to employee benefit plans)
where such violation could reasonably be expected to impose a material liability
on the Borrower.

Section 4.3 Taxes. The Borrower has filed all federal, state and local tax
returns required to be filed and has paid or made provision for the payment of
all taxes due and payable pursuant to such returns and pursuant to any
assessments made against it or any of its property (other than taxes, fees or
charges the amount or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which reserves in
accordance with GAAP have been provided on the books of the Borrower).

ARTICLE V

AFFIRMATIVE COVENANTS

Until the Commitment shall have expired or been terminated and the Note and all
of the Borrower’s other obligations to the Lender under this Agreement shall
have been paid in full, unless the Lender shall otherwise consent in writing:

Section 5.1 Financial Statements and Reports. The Borrower will furnish to the
Lender:

(a) As soon as available and in any event within 45 days after the end of each
fiscal quarter and 90 days after the end of each fiscal year of the Borrower as
filed with the U.S. Securities and Exchange Commission.

(b) From time to time, such other information regarding the business, operation
and financial condition of the Borrower as the Lender may reasonably request.

Section 5.2 Corporate Existence. The Borrower will maintain its corporate
existence in good standing under the laws of its jurisdiction of incorporation
and its qualification to transact business in each jurisdiction where failure so
to qualify would permanently preclude the Borrower from enforcing its rights
with respect to any material asset or would expose the Borrower to any material
liability.

Section 5.3 Insurance. The Borrower will maintain with financially sound and
reputable insurance companies such insurance as may be required by law and such
other insurance in such amounts and against such hazards as is customary in the
case of reputable corporations engaged in the same or similar business and
similarly situated.

Section 5.4 Payment of Taxes and Claims. The Borrower will file all tax returns
and reports which are required by law to be filed by it and will pay before they
become delinquent, all taxes, assessments and governmental charges and levies
imposed upon it or its property and all claims or demands of any kind (including
those of suppliers, mechanics, carriers, warehousemen, landlords and other like
Persons) which, if unpaid, would result in the creation of a Lien upon its
property.

Section 5.5 Inspection. The Borrower will permit any Person designated by the
Lender to visit and inspect any of the properties, books and financial records
of the Borrower, to examine and to make copies of the books of accounts and
other financial records of the Borrower, and to discuss the affairs, finances
and accounts of the Borrower with its officers at such reasonable times and
intervals as the Lender may designate.

Section 5.6 Maintenance of Properties. The Borrower will maintain its properties
in good condition, repair and working order, and supplied with all necessary
equipment, and make all necessary repairs, renewals, replacements, betterments
and improvements thereto, all as may be necessary so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times.

Section 5.7 Books and Records. The Borrower will keep adequate and proper
records and books of account in which full and correct entries will be made of
its dealings, business and affairs.

ARTICLE VI

NEGATIVE COVENANTS

Until the Commitment shall have expired or been terminated and the Note and all
of the Borrower’s other obligations to the Lender under this Agreement shall
have been paid in full, unless the Lender shall otherwise consent in writing:

Section 6.1 Merger. The Borrower will not merge or consolidate or enter into any
analogous reorganization or transaction with any Person, except where the
Borrower is the surviving Person, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution)

Section 6.2 Liens. The Borrower will not create, incur, assume or suffer to
exist any Lien, or enter into any arrangement for the acquisition of any
property through conditional sale, lease-purchase or other title retention
agreements except:

(a) Liens granted to the Lender and the Senior Lender;

(b) Liens existing on the Effective Date and shown on the Schedule 6.2 hereto;

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

(d) Purchase money Liens (i) on equipment acquired or held by the Borrower
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;

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

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

(g) Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (b) through (d), 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;

(h) Liens in respect of property or assets of the Borrower 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 the
Borrower and (z) which are not delinquent;

(i) 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 the Borrower;

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

(k) Liens arising from (i) judgments or attachments (or securing of appeal bonds
with respect thereto) in an aggregate amount of less than $500,000 provided that
the same have no priority over any of the security interests of the Lender in
any of the Collateral (including, without limitation, with respect to future
advances) as determined by the Lender 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 7.1(g),
provided that no cash or property (other than proceeds of insurance payable by
reason of such judgments, decrees or attachments) is deposited or delivered to
secure any such judgment, or any appeal bond in respect thereof, the fair market
value of which exceeds $500,000 and provided further that the same have no
priority over any of the security interests of the Lender in any of the
Collateral (including, without limitation, with respect to future advances) as
determined by the Lender in its commercially reasonable discretion; and

(l) 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 the Lender in any of the Collateral (including, without limitation,
with respect to future advances).

ARTICLE VII

EVENTS OF DEFAULT AND REMEDIES

Section 7.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default:

(a) The Borrower shall fail to make when due, whether by acceleration or
otherwise, any payment of principal of or interest on the Note or any other
obligations of the Borrower to the Lender pursuant to this Agreement and such
failure shall continue for ten (10) Business Days.

(b) Any representation or warranty made by or on behalf of the Borrower in this
Agreement or by or on behalf of the Borrower in any certificate, statement,
report or document herewith or hereafter furnished to the Lender pursuant to
this Agreement shall prove to have been false or misleading in any material
respect on the date as of which the facts set forth are stated or certified.

(c) The Borrower shall fail to comply with any agreement, covenant, condition,
provision or term contained in this Agreement (other than those hereinabove set
forth in this Section 7.1) or any other Loan Document and such failure to comply
shall continue for 30 calendar days after the date the Lender gives notice of
such failure to the Borrower.

(d) The Borrower shall become insolvent or shall generally not pay its debts as
they mature or shall apply for, shall consent to, or shall acquiesce in the
appointment of a custodian, trustee or receiver of the Borrower or for a
substantial part of the property thereof or, in the absence of such application,
consent or acquiescence, a custodian, trustee or receiver shall be appointed for
the Borrower or for a substantial part of the property thereof and shall not be
discharged within 45 days, or the Borrower shall make an assignment for the
benefit of creditors.

(e) Any bankruptcy, reorganization, debt arrangement or other proceedings under
any bankruptcy or insolvency law shall be instituted by or against the Borrower
and, if instituted against the Borrower, shall have been consented to or
acquiesced in by the Borrower or shall remain undismissed for 60 days, or an
order for relief shall have been entered against the Borrower.

(f) Any dissolution or liquidation proceeding shall be instituted by or against
the Borrower and, if instituted against the Borrower, shall be consented to or
acquiesced in by the Borrower or shall remain for 45 days undismissed.

(g) Any execution or attachment shall be issued whereby any substantial part of
the property of the Borrower shall be taken or attempted to be taken and the
same shall not have been vacated or stayed within 30 days after the issuance
thereof.

Section 7.2 Remedies. If (a) any Event of Default described in Sections 7.1(d),
(e), or (f) shall occur with respect to the Borrower, the Commitment shall
automatically terminate and the Note and all other obligations of the Borrower
to the Lender under this Agreement shall automatically become immediately due
and payable, or (b) any other Event of Default shall occur and be continuing,
then the Lender may by written Notice to the Borrower (i) declare the Commitment
terminated, whereupon the Commitment shall terminate, and (ii) declare the Note
and all other obligations of the Borrower to the Lender under this Agreement to
be forthwith due and payable, whereupon the same shall immediately become due
and payable, in each case without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived, anything in this
Agreement or in the Note to the contrary notwithstanding. Upon the occurrence of
any of the events described in clauses (a) or (b) of the preceding sentence the
Lender may exercise all rights and remedies under this Agreement, the Note and
any related agreements and under any applicable law.

Section 7.3 Offset. In addition to the remedies set forth in Section 7.2, upon
the occurrence of any Event of Default and thereafter while the same be
continuing, the Borrower hereby irrevocably authorizes the Lender to set off all
sums owing by the Borrower to the Lender against all deposits and credits of the
Borrower with, and any and all claims of the Borrower against, the Lender.

ARTICLE VIII

MISCELLANEOUS

Section 8.1 Modifications. Notwithstanding any provisions to the contrary
herein, any term of this Agreement may be amended with the written consent of
the Borrower; provided that no amendment, modification or waiver of any
provision of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Lender, and then such amendment, modifications, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.

Section 8.2 Costs and Expenses. The Borrower agrees to reimburse the Lender upon
demand for all reasonable out-of-pocket expenses paid or incurred by the Lender
in connection with the collection and enforcement of this Agreement and the
Note. The obligations of the Borrower under this Section shall survive any
termination of this Agreement.

Section 8.3 Waivers, etc. No failure on the part of the Lender or the holder of
the Note to exercise and no delay in exercising any power or right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right preclude any other or further exercise thereof or the
exercise of any other power or right. The rights and remedies of the Lender
hereunder are cumulative and not exclusive of any right or remedy the Lender
otherwise has.

Section 8.4 Notices. Except when telephonic notice is expressly authorized by
this Agreement, any notice or other communication to any party in connection
with this Agreement shall be in writing and shall be sent by manual delivery,
telegram, telex, facsimile transmission, overnight courier or United States mail
(postage prepaid) addressed to such party at the address specified on the
signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed; provided, however, that
any notice to the Lender under Article II hereof shall be deemed to have been
given only when received by the Lender.

Section 8.5 Successors and Assigns; Disposition of Loans. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Borrower may not assign its
rights or delegate its obligations hereunder without the prior written consent
of the Lender. The Lender may at any time sell, assign, transfer, grant
participations in, or otherwise dispose of any portion of the Commitment and/or
Advances to banks or other financial institutions. The Lender may disclose any
information regarding the Borrower in the Lender’s possession to any prospective
buyer or participant.

Section 8.6 Governing Law and Construction. THE VALIDITY, CONSTRUCTION AND
ENFORCEABILITY OF THE LOAN DOCUMENTS SHALL BE GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES
THEREOF.

Section 8.7 Consent to Jurisdiction. AT THE OPTION OF THE LENDER, THE LOAN
DOCUMENTS MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING
IN HENNEPIN COUNTY, MINNESOTA; AND THE BORROWER CONSENTS TO THE JURISDICTION AND
VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT
CONVENIENT. IN THE EVENT THE BORROWER COMMENCES ANY ACTION IN ANOTHER
JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR
INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE LENDER AT ITS
OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE
JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.

Section 8.8 Captions. The captions or headings herein and any table of contents
hereto are for convenience only and in no way define, limit or describe the
scope or intent of any provision of this Agreement.

Section 8.9 Entire Agreement. This Agreement and the other Loan Documents embody
the entire agreement and understanding between the Borrower and the Lender with
respect to the subject matter hereof and thereof. This Agreement supersedes all
prior agreements and understandings relating to the subject matter hereof.

Section 8.10 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.

Section 8.11 Subordination. The Borrower’s obligations to the Lender hereunder
are subordinate to (i) the Borrower’s obligations to the holders of the
Borrower’s 6% Convertible Senior Notes due 2025 issued pursuant to that certain
Indenture dated as of October 7, 2005, made by and between the Borrower and
Wells Fargo Bank, National Association, as trustee, and (ii) as provided in the
Subordination Agreement.

1

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.

ATS MEDICAL, INC.

By /s/Michael Kramer

Print Name Michael Kramer
Title Chief Financial Officer

THEODORE C. SKOKOS

By /s/ Theodore C. Skokos

2

SCHEDULE 6.2 TO
CREDIT AGREEMENT

PERMITTED LIENS

              Jurisdiction   Secured Party   Date filed   Description of
Collateral
Minnesota
  IOS Capital   10/11/2004   All equipment leased
pursuant to Master Lease
Agreement No. 204841
 
           
Minnesota
  Key Equipment Finance   5/18/2005   Canon Image Runner C5800
 
           
Minnesota
  Northland Financial
Carlton Financial
Corporation   6/7/2005   All equipment leased
pursuant to Master Lease
Agreement dated May 26,
2005 by and between ATS
Medical, Inc. and Carlton
Financial Corporation.
 
           
Minnesota
  Northland Financial
Carlton Financial
Corporation   6/17/2005   All equipment leased
pursuant to Master Lease
Agreement dated May 26,
2005 by and between ATS
Medical, Inc. and Carlton
Financial Corporation.
 
           

3

EXHIBIT A TO
CREDIT AGREEMENT

This Revolving Note is subordinate (i) in the manner and to the extent set forth
in that certain Subordination Agreement (the “Subordination Agreement”) dated
concurrently herewith by and between Theodore C. Skokos, a party to the
Subordinated Credit Agreement dated concurrently herewith, and Silicon Valley
Bank (in such capacity, “First Lien Holder”), a party to the Loan and Security
Agreement dated as of July 28, 2004 by and among ATS Medical, Inc. and First
Lien Holder, as amended, and (ii) to the obligations of the Borrower to the
holders of the Borrower’s 6% Convertible Senior Notes due 2025 and issued
pursuant to that certain Indenture dated as of October 7, 2005, made by and
between the Borrower and Wells Fargo Bank, National Association, as trustee; and
Theodore C. Skokos, by his acceptance hereof, irrevocably agrees to be bound by
the provisions of the Subordination Agreement.

REVOLVING NOTE

$5,000,000

June 29, 2008
Minneapolis, Minnesota

FOR VALUE RECEIVED, ATS MEDICAL, INC., a corporation organized under the laws of
the State of Minnesota (the “Borrower”), hereby promises to pay to the order of
THEODORE C. SKOKOS (the “Lender”) at [Address] in lawful money of the United
States of America in immediately available funds on the Maturity Date (as such
term and each other capitalized term used herein are defined in the Credit
Agreement hereinafter referred to) the principal amount of FIVE MILLION DOLLARS
AND NO CENTS ($5,000,000) or, if less, the aggregate unpaid principal amount of
all Advances made by the Lender under the Credit Agreement, and to pay interest
(computed on the basis of actual days elapsed and a year of 360 days) in like
funds on the unpaid principal amount hereof from time to time outstanding at the
rates and times set forth in the Credit Agreement.

This note is the Note referred to in the Credit Agreement dated as of June 29,
2008 (as the same may be hereafter from time to time amended, restated or
modified, the “Credit Agreement”) between the undersigned and the Lender. This
note is secured, it is subject to certain permissive and mandatory prepayments
and its maturity is subject to acceleration, in each case upon the terms
provided in said Credit Agreement.

In the event of default hereunder, the undersigned agrees to pay all costs and
expenses of collection, including reasonable attorneys’ fees. The undersigned
waives demand, presentment, notice of nonpayment, protest, notice of protest and
notice of dishonor.

The Borrower’s obligations to the Lender hereunder are subordinate to (i) the
Borrower’s obligations to the holders of the Borrower’s 6% Convertible Senior
Notes due 2025 issued pursuant to that certain Indenture dated as of October 7,
2005, made by and between the Borrower and Wells Fargo Bank, National
Association, as trustee, and (ii) as provided in the Subordination Agreement
dated as of June 29, 2008, by and between Silicon Valley Bank and the Lender, as
the same may be amended, restated or otherwise modified.

THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE GOVERNED BY
THE INTERNAL LAWS OF THE STATE OF MINNESOTA WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF.

ATS MEDICAL, INC.

By /s/ Michael Kramer
Title Chief Financial Officer

4

EXHIBIT B TO
CREDIT AGREEMENT

COLLATERAL

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

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 the Borrower’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 the Borrower arising out of the sale or lease of goods, the licensing of
technology or the rendering of services by the Borrower, 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 the Borrower;

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 the Borrower’s
books relating to the foregoing; and

All the Borrower’s books 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 Effective Date, include the Intellectual
Property only to the extent necessary to permit perfection of the Lender’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: the
Borrower’s right, title or interest, whether now owned or hereafter acquired, in
and to any intellectual property rights of the Borrower 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 the Borrower
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 the Borrower 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.

5

EXHIBIT C TO
CREDIT AGREEMENT

SUBORDINATED SECURITY AGREEMENT

This Subordinated Security Agreement and the security interest granted hereby
are subordinate in the manner and to the extent set forth in that certain
Subordination Agreement (the “Subordination Agreement”) dated concurrently
herewith by and between Theodore C. Skokos, a party to the Subordinated Credit
Agreement dated concurrently herewith, and Silicon Valley Bank (in such
capacity, “First Lien Holder”), a party to the Loan and Security Agreement dated
as of July 28, 2004 by and among ATS Medical, Inc. and First Lien Holder, as
amended; and Theodore C. Skokos, by his acceptance hereof, irrevocably agrees to
be bound by the provisions of the Subordination Agreement. Notwithstanding the
foregoing, the provisions of this Subordinated Security Agreement shall not be
enforced unless and until the obligations of the Borrower to the holders of the
Borrower’s 6% Convertible Senior Notes due 2025 and issued pursuant to that
certain Indenture dated as of October 7, 2005, made by and between the Borrower
and Wells Fargo Bank, National Association, as trustee, have been satisfied in
full.

SUBORDINATED SECURITY AGREEMENT

1. Parties. This Subordinated Security Agreement (the “Agreement”), dated as of
June 29, 2008, is made and given by ATS Medical, Inc., a corporation organized
under the laws of the State of Minnesota (“Grantor”) to Theodore C. Skokos an
individual (“Secured Party”) (together with Grantor, the “Parties”).

2. Grant of Security Interest. As security for any and all Indebtedness (as
defined below) of Grantor under the Subordinated Credit Agreement dated
concurrently herewith, by and between Grantor and Secured Party (as the same may
be amended, supplemented or modified from time to time, the “Subordinated Credit
Agreement), Grantor hereby irrevocably and unconditionally grants Secured Party
a security interest in all of Grantor’s right, title, and interest in and to the
Collateral as described on Exhibit A hereto, whether now or hereafter owned,
existing, arising or acquired and wherever located.

3. Indebtedness. “Indebtedness” means all debts, obligations or liabilities now
or hereafter

existing, absolute or contingent of Grantor to Secured Party under the
Subordinated Credit Agreement, whether due or not due.

4. No Other Security Interests. Grantor hereby represents and warrants to
Secured Party that it owns the Accounts free and clear of any and all liens,
encumbrances, or interests of any third parties other than (i) the security
interest of Secured Party and (ii) the secured interest in favor of Silicon
Valley Bank granted by Grantor under the Loan and Security Agreement dated
July 28, 2004, as the same may be amended, restated, modified, or supplemented
from time to time.

5. Costs. All advances, charges, costs and expenses, including reasonable
attorneys’ fees, incurred or paid by Secured Party enforcement of this Agreement
(collectively, the “Collateral Costs”), shall become a part of the Indebtedness
secured hereunder and shall be paid to Secured Party by Grantor and Grantor
immediately and without demand, with interest thereon at an annual rate equal to
the highest rate of interest of any Indebtedness secured by this Agreement.

6. Events of Default. To the extent permitted by law, at the option of Secured
Party without necessity of demand or notice, all or any part of the Indebtedness
of Grantor shall immediately become due and payable irrespective of any agreed
maturity upon the happening of any of the following events (“Events of
Default”); provided, however, that all Indebtedness of Grantor automatically
shall become immediately due and payable if a bankruptcy petition is filed with
respect to any Grantor: (a) failure to keep or perform any of the terms or
provisions of this Agreement, or (b) an Event of Default, as such term is
defined in the Subordinated Credit Agreement.

7. Remedies. Upon the happening and continuance of any Event of Default, Secured
Party may then exercise as to such collateral all the rights, powers and
remedies of an owner and all rights, powers and remedies of a secured party
under the Uniform Commercial Code and other laws.

8. Waivers. Grantor waives any right to require Secured Party to (a) proceed
against any person, (b) proceed against or exhaust any collateral, or (c) pursue
any other remedy in Secured Party’s power; and waive any defense arising by
reason of any disability or other defense of Grantor or any other person, or by
reason of the cessation from any cause whatsoever of the liability of Grantor or
any other person. Until the Indebtedness has been paid in full, Grantor waives
any right of subrogation, reimbursement, indemnification, and contribution
(contractual, statutory or otherwise), including without limitation, any claim
or right of subrogation under the Bankruptcy Code (Title 11, United States Code)
or any successor statute, arising from the existence or performance of this
Agreement, and Grantor waives any right to enforce any remedy which Secured
Party now has or may hereafter have against Grantor or against any other person,
and waive any benefit of, and any right to participate in, any security now or
hereafter held by Secured Party. Grantor authorizes Secured Party, without
notice or demand and without affecting Grantor’s liability hereunder, from time
to time to: (a) renew, compromise, extend, accelerate or otherwise change the
time for payment of, or otherwise change the terms of, such Indebtedness or any
part thereof, including increase or decrease of the rate of interest thereon;
(b) receive and hold security, other than the collateral herein described, for
the payment of such Indebtedness or any part thereof, and exchange, enforce,
waive, release, fail to perfect, sell, or otherwise dispose of the collateral
herein described or any part thereof or any such other security; and (c) release
or substitute Grantor, or any of the endorsers or guarantors of such
Indebtedness or any part thereof, or any other parties thereto.

9. Transfer of Collateral. Upon the transfer of all or any part of the
Indebtedness, Secured Party may transfer all or any part of the collateral and
shall be fully discharged thereafter from all liability and responsibility with
respect to such collateral so transferred, and the transferee shall be vested
with all the rights and powers of Secured Party hereunder with respect to such
collateral so transferred; but with respect to any collateral not so transferred
Secured Party shall retain all rights and powers hereby given.

10. Continuing Agreement. This is a continuing Agreement and all the rights,
powers and remedies hereunder shall apply to all past, present and future
Indebtedness, including that arising under successive transactions which shall
either continue the Indebtedness, increase or decrease it, or from time to time
create new Indebtedness after all or any prior Indebtedness has been satisfied,
and notwithstanding the bankruptcy of Grantor, or any other event or proceeding
affecting Grantor.

11. Continuing Powers. Until all Indebtedness shall have been paid in full all
rights, powers and remedies granted to Secured Party hereunder shall continue to
exist and may be exercised by Secured Party at the time specified hereunder.

12. Other Rights. The rights, powers and remedies given to Secured Party by this
Agreement shall be in addition to all rights, powers and remedies given to
Secured Party by virtue of any statute or rule of law. Any forbearance or
failure or delay by Secured Party in exercising any right, power or remedy
hereunder shall not be deemed to be a waiver of such right, power or remedy, and
any single or partial exercise of any right, power or remedy hereunder shall not
preclude the further exercise thereof; and every right, power and remedy of
Secured Party shall continue in full force and effect until such right, power or
remedy is specifically waived by an instrument in writing executed by Secured
Party.

16. Grantor’s Residence. Grantor agrees to give Secured Party at least thirty
(30) days notice before changing its chief executive office or state of
organization.

17. Singular and Plural. All words used herein in the plural shall be deemed to
have been used in the singular where the context and construction so require,
and the obligations and undertakings hereunder are joint and several.

18. Termination. This Agreement shall remain in full force and effect until the
Indebtedness has been paid in full and all commitments of Secured Party to lend
have been terminated.

19. Governing Law and Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota.

6

THEODORE C. SKOKOS

By /s/ Theodore C. Skokos

ATS MEDICAL, INC.

By /s/ Michael Kramer
Title Chief Financial Officer

7

EXHIBIT D TO
CREDIT AGREEMENT

FORM OF WARRANT

THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE
SECURITIES LAWS. THIS WARRANT AND THE UNDERLYING SECURITIES MAY NOT BE
TRANSFERRED UNLESS (I) THIS WARRANT AND THE UNDERLYING SECURITIES HAVE BEEN
REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OR (II) THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER
MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR
QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.

WARRANT

THIS CERTIFIES THAT, for value received, Theodore C. Skokos (the “Holder”) is
entitled to subscribe for and purchase up to      fully paid and nonassessable
shares (the “Shares”) of common stock, par value $0.01 per share (the “Common
Stock”), of ATS Medical, Inc., a Minnesota corporation (the “Company”), at $2.04
per share (such price and such other price as shall result, from time to time,
from the adjustments specified in Section 4 hereof is herein referred to as the
“Warrant Price”), upon the terms and subject to the conditions hereinafter set
forth. This warrant is being issued on this      day of      ,       (the “Date
of Grant”).

This warrant is being issued in connection with that certain Subordinated Credit
Agreement, dated as of June 29, 2008 (the “Credit Agreement”), by and between
the Company and the Holder. Capitalized terms used and not defined herein shall
have the meanings set forth in the Credit Agreement.

1. Term. The right represented by this warrant is exercisable, in whole or in
part, at any time and from time to time from the earlier of the Date of Grant
(the “Initial Exercise Date”) until [insert seventh anniversary of Date of
Grant] (the “Termination Date”).

2. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section 1
hereof, the purchase right represented by this warrant may be exercised by the
Holder hereof, in whole or in part and from time to time, at the election of the
Holder hereof, as applicable, after the Initial Exercise Date. At the time
Holder elects to exercise this warrant, the Holder shall (i) surrender this
warrant (with the notice of exercise substantially in the form attached hereto
as Exhibit A-1 duly completed and executed) at the principal office of the
Company and by the payment to the Company, by certified or bank check, or by
wire transfer to an account designated by the Company (a “Wire Transfer”) of an
amount equal to the then applicable Warrant Price multiplied by the number of
Shares then being purchased; or (ii) exercise the “net issuance” right provided
for in Section 9 hereof. In the event of any exercise of the rights represented
by this warrant pursuant to this Section 2, certificates for the shares of stock
so purchased shall be delivered to the Holder hereof as soon as practicable and
in any event within three (3) business days after such exercise and, unless this
warrant has been fully exercised or expired, a new warrant representing the
portion of the Shares, if any, with respect to which this warrant shall not then
have been exercised shall also be issued to the Holder hereof as soon as
practicable and in any event within such thirty-day period; provided, however,
if requested by the Holder of this warrant, the Company shall use reasonable
efforts to cause its transfer agent to deliver the certificate representing
Shares issued upon exercise of this warrant to a broker or other person (as
directed by the Holder exercising this warrant) within the time period required
to settle any trade made by the Holder after exercise of this warrant.

The person or persons in whose name(s) any certificate(s) representing shares of
Common Stock shall be issuable upon exercise of this warrant shall be deemed to
have become the holder(s) of record of, and shall be treated for all purposes as
the record holder(s) of, the shares represented thereby (and such shares shall
be deemed to have been issued) immediately prior to the close of business on the
date or dates upon which this warrant is exercised.

3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued upon
the exercise of the rights represented by this warrant will, upon issuance
pursuant to the terms and conditions herein, be fully paid and nonassessable,
and free from all preemptive rights and taxes, liens and charges with respect to
the issue thereof. During the period within which the rights represented by this
warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this warrant, a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this warrant. If at any
time during the term of this warrant the number of authorized but unissued
shares of Common Stock shall not be sufficient to permit exercise of this
warrant, the Company will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purposes.

4. Adjustment of Warrant Price and Number of Shares. The number of shares of
Common Stock purchasable upon the exercise of this warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:

(a) Reclassification or Merger. In case of any reclassification or change of
securities of the class issuable upon exercise of this warrant (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or in case of any
merger of the Company with or into another corporation (other than a merger with
another corporation in which the Company is the acquiring and the surviving
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this warrant), the Company, or
such successor or purchasing corporation, as the case may be, shall (i) in the
case of a merger described above, execute and deliver to the Holder a new
warrant (in form and substance reasonably satisfactory to the Holder), so that
the Holder shall have the right to receive, upon exercise of this warrant, at a
total purchase price equal to that payable upon the exercise of the unexercised
portion of this warrant, and in lieu of the shares of Common Stock theretofore
issuable upon exercise of this warrant, the kind and amount of shares of stock,
other securities, money and property receivable upon such merger or sale by a
Holder of the number of shares of Common Stock then purchasable under this
warrant and (ii) in the case of a reclassification or change in the securities
issuable upon exercise of this warrant described above, the Holder shall have
the right to receive, upon exercise of this warrant, at a total purchase price
equal to that payable upon the exercise of the unexercised portion of this
warrant, and (A) in lieu of the shares of Common Stock theretofore issuable upon
exercise of this warrant, the number of shares of Common Stock then purchasable
under this warrant upon such reclassification or other change in the securities
issuable upon exercise of this warrant or (B) in lieu of cash theretofore
issuable upon exercise of this warrant, the amount of cash then issuable under
this warrant upon such reclassification or other change in the securities
issuable upon exercise of this warrant. Any new warrant shall provide for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4. The provisions of this Section 4(a)
shall similarly apply to successive reclassifications, changes, mergers and
sales.

(b) Subdivision or Combination of Shares. If the Company at any time while this
warrant remains outstanding and unexpired shall subdivide or combine its
outstanding shares of Common Stock, the Warrant Price shall be proportionately
decreased and the number of Shares issuable hereunder shall be proportionately
increased in the case of a subdivision and the Warrant Price shall be
proportionately increased and the number of Shares issuable hereunder shall be
proportionately decreased in the case of a combination.

(c) Stock Dividends and Other Distributions. If the Company at any time while
this warrant is outstanding and unexpired shall (i) pay a dividend with respect
to Common Stock payable in Common Stock, then the Warrant Price shall be
adjusted, from and after the date of determination of shareholders entitled to
receive such dividend or distribution, to that price determined by multiplying
the Warrant Price in effect immediately prior to such date of determination by a
fraction (A) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution, and
(B) the denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution; or (ii) make any
other distribution with respect to Common Stock (except any distribution
specifically provided for in Sections 4(a) and 4(b)), then, in each such case,
provision shall be made by the Company such that the Holder of this warrant
shall receive upon exercise of this warrant a proportionate share of any such
dividend or distribution as though it were the holder of the Common Stock as of
the record date fixed for the determination of the shareholders of the Company
entitled to receive such dividend or distribution.

5. Adjustment of Number of Shares. Upon each adjustment in the Warrant Price,
the number of shares of Common Stock purchasable hereunder shall be adjusted,
rounded up to the nearest whole share, to the product obtained by multiplying
the number of Shares purchasable immediately prior to such adjustment in the
Warrant Price by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price immediately thereafter.

6. Notice of Adjustments. Whenever the Warrant Price or the number of Shares
purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its acting chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
and the Warrant Price and the number of Shares purchasable hereunder after
giving effect to such adjustment, and shall cause copies of such certificate to
be mailed to the Holder of this warrant.

7. Fractional Shares. No fractional shares of Common Stock will be issued in
connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor based on the product resulting
from multiplying the then fair market value of the Common Stock (as determined
pursuant to Section 9(c) below) on the date of exercise by such fraction.

8. Compliance with Act; Disposition of Warrant or Shares of Common Stock.

(a) Compliance with Act. The Holder of this warrant, by acceptance hereof,
agrees that this warrant, and the shares of Common Stock to be issued upon
exercise hereof are being acquired for investment and that such Holder will not
offer, sell or otherwise dispose of this warrant, or any shares of Common Stock
except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the “Securities Act”), or any applicable
state securities laws. Upon exercise of this warrant, unless the Shares being
acquired are registered under the Securities Act and any applicable state
securities laws or an exemption from such registration is available, the Holder
hereof shall confirm in writing that the shares of Common Stock so purchased are
being acquired for investment and not with a view toward distribution or resale
in violation of the Securities Act and shall confirm such other matters related
thereto as may be reasonably requested by the Company. This warrant and all
shares of Common Stock issued upon exercise of this warrant (unless registered
under the Securities Act and any applicable state securities laws) shall be
stamped or imprinted with a legend in substantially the following form:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS.
THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH
SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OR
(II) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.

Said legend shall be removed by the Company, upon the request of a Holder, at
such time as the restrictions on the transfer of the applicable security have
terminated.

(b) Disposition of Warrant or Shares. This warrant and any shares of Common
Stock acquired pursuant to the exercise or conversion of this warrant may be
transferred only pursuant to a registration statement filed under the Securities
Act or an exemption from such registration. Subject to such restrictions, the
Company shall transfer this warrant from time to time upon the books to be
maintained by the Company for that purpose, upon surrender thereof for transfer
properly endorsed or accompanied by appropriate instructions for transfer and
such other documents as may be reasonably required by the Company, including, if
required by the Company, an opinion of counsel to the effect that such transfer
is exempt from the registration requirements of the Securities Act to establish
that such transfer is being made in accordance with the terms hereof, and a new
warrant shall be issued to the transferee and the surrendered warrant shall be
canceled by the Company. Each certificate representing this warrant or the
shares of Common Stock thus transferred (except a transfer pursuant to Rule 144
or 144A) shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with such laws, unless such legend
is not required in order to ensure compliance with such laws. The Company may
issue stop transfer instructions to its transfer agent in connection with such
restrictions.

(c) Applicability of Restrictions. Neither any restrictions of any legend
described in this warrant nor the requirements of Section 7(b) above shall apply
to any transfer of, or grant of a security interest in, this warrant (or the
Common Stock obtainable upon exercise hereof) or any part hereof (i) to a
partner of the Holder if the Holder is a partnership or to a member of the
Holder if the Holder is a limited liability company, (ii) to a partnership of
which the Holder is a partner or to a limited liability company of which the
Holder is a member, or (iii) to any affiliate of the Holder if the Holder is a
corporation; provided, however, in any such transfer, if applicable, the
transferee shall on the Company’s request agree in writing to be bound by the
terms of this warrant as if an original Holder hereof.

9. Rights as Shareholders; Information. No Holder of this warrant, as such,
shall be entitled to vote or receive dividends or be deemed the holder of Common
Stock issuable upon the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the Holder of this warrant, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.

10. Right to Convert Warrant into Stock: Net Issuance.

(a) Right to Convert. In addition to and without limiting the rights of the
Holder under the terms of this warrant, the Holder shall have the right to
convert this warrant or any portion thereof (the “Conversion Right”) into shares
of Common Stock as provided in this Section 9 at any time or from time to time
during the term of this warrant. Upon exercise of the Conversion Right with
respect to a particular number of shares subject to this warrant (the “Converted
Warrant Shares”), the Company shall deliver to the Holder (without payment by
the Holder of any exercise price or any cash or other consideration) that number
of shares of fully paid and nonassessable Common Stock as is determined
according to the following formula:

X = (B – A) divided by Y

      Where: X = the number of shares of Common Stock that shall be issued to
Holder

      Y = the fair market value of one share of Common Stock

      A = the aggregate Warrant Price of the specified number of Converted
Warrant Shares immediately prior to the exercise of the Conversion Right (i.e.,
the number of Converted Warrant Shares multiplied by the Warrant Price)

      B = the aggregate fair market value of the specified number of Converted
Warrant Shares (i.e., the number of Converted Warrant Shares multiplied by the
fair market value of one Converted Warrant Share)

If shares of Common Stock are issuable pursuant to this Section 9, no fractional
shares shall be issuable upon exercise of the Conversion Right, and, if the
number of shares to be issued determined in accordance with the foregoing
formula is other than a whole number, the Company shall pay to the Holder an
amount in cash equal to the fair market value of the resulting fractional share
on the Conversion Date (as hereinafter defined).

(b) Method of Exercise. The Conversion Right may be exercised by the Holder by
the surrender of this warrant at the principal office of the Company together
with a written statement (which may be in the form of Exhibit A-1) specifying
that the Holder thereby intends to exercise the Conversion Right and indicating
the number of shares subject to this warrant which are being surrendered
(referred to in Section 9(a) hereof as the Converted Warrant Shares) in exercise
of the Conversion Right. Such conversion shall be effective upon receipt by the
Company of this warrant together with the aforesaid written statement, or on
such later date as is specified therein (the “Conversion Date”). Certificates
for the shares issuable upon exercise of the Conversion Right and, if
applicable, a new warrant evidencing the balance of the shares remaining subject
to this warrant, shall be issued as of the Conversion Date and shall be
delivered to the Holder within thirty (30) days following the Conversion Date.

(c) Determination of Fair Market Value. For purposes of this Section 9, “fair
market value” of a share of Common Stock as of a particular date (the
“Determination Date”) shall mean: (i) if traded on a securities exchange, the
fair market value of the Common Stock shall be deemed to be the average of the
closing prices of the Common Stock on such exchange over the five trading days
immediately prior to the Determination Date as reported by Bloomberg Financial
Markets (or a comparable reporting service of national reputation selected by
the Company and reasonably acceptable to the Holder if Bloomberg Financial
Markets is not then reporting sales prices of such security) (collectively,
“Bloomberg”); (ii) if traded on a market that is not a securities exchange, the
fair market value of the Common Stock shall be deemed to be the average of the
closing bid prices of the Common Stock over the five trading days immediately
prior to the Determination Date as reported by Bloomberg; and (iii) if there is
no public market for the Common Stock, then fair market value shall be
determined by the Board of Directors of the Company in good faith.

(d) Automatic Exercise: If this Warrant would terminate or expire but for the
application of this Section 9(d), then if the fair market value of one share of
Common Stock exceeds the Warrant Price this Warrant shall be deemed
automatically converted pursuant to this Section 9 immediately prior to such
termination or expiration.

11. Representations and Warranties. The Company represents and warrants to the
Holder of this warrant as follows:

(a) This warrant has been duly authorized and executed by the Company and is a
valid and binding obligation of the Company enforceable in accordance with its
terms, subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors and the rules of law or principles at equity governing
specific performance, injunctive relief and other equitable remedies.

(b) The Shares have been duly authorized and reserved for issuance by the
Company and, when issued in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable and free from preemptive rights.

(c) The execution and delivery of this warrant are not, and the issuance of the
Shares upon exercise of this warrant in accordance with the terms hereof will
not be, inconsistent with the Company’s articles of incorporation or bylaws, do
not and will not contravene any law, governmental rule or regulation, judgment
or order applicable to the Company, and do not and will not conflict with or
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument of which the Company is a party or by
which it is bound or require the consent or approval of, the giving of notice
to, the registration or filing with or the taking of any action in respect of or
by, any federal, state or local government authority or agency or other person,
except for the filing of notices pursuant to federal and state securities laws,
which filings will be effected by the time required thereby.

12. Registration Rights.

(a) If requested by the Holder (the “Demand Registration Right”), the Company
shall prepare and, as soon as practicable but in no event later than 30 calendar
days after receiving such a request from the Holder (the “Filing Deadline”),
file with the Commission a Registration Statement on Form S-3 (the “Registration
Statement”) covering the resale of all of the shares of Common Stock issuable
upon exercise of any Warrants issued to the Holder under the Credit Agreement on
or before the date of such demand (the “Registrable Securities”). The Holder
shall have only one Demand Registration Right, and such Demand Registration
Right shall apply to all Registrable Securities issuable to Holder on or before
the date of the demand upon the exercise of the Warrants issued by the Company
to the Holder in connection with the transactions contemplated by the Credit
Agreement.

(b) The Registration Statement prepared pursuant hereto shall register the
Registrable Securities for resale, including the number of shares of Common
Stock issuable upon exercise of the Warrants by the Holder from time to time in
accordance with the methods of distribution elected by such Holder. The Company
shall use its best efforts to have the Registration Statement declared effective
by the Commission as soon as practicable, but not later than 90 calendar days
after the Filing Deadline (the “Effectiveness Deadline”); provided, however,
that if the Commission reviews the Registration Statement and requires the
Company to make modifications thereto, then the Effectiveness Deadline shall be
extended to 120 calendar days after the Filing Deadline. In the event that,
before the Registration Statement is declared effective, the offices of the
Securities and Exchange Commission are closed due to acts of God, war or terror
(or similar circumstances), the Effectiveness Deadline will be extended by a
number of days equal to the days of any such closure.

13. Modification and Waiver. This warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.

14. Notices. Any notice, request, communication or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
delivered, or shall be sent by certified or registered mail, postage prepaid, to
each such Holder at its address as shown on the books of the Company or to the
Company at the address indicated therefore on the signature page of this
warrant.

15. Binding Effect on Successors. This warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company’s assets, and all of the obligations of
the Company relating to the Common Stock issuable upon the exercise or
conversion of this warrant shall survive the exercise, conversion and
termination of this warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the Holder
hereof.

16. Lost Warrants or Stock Certificates. The Company covenants to the Holder
hereof that, upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this warrant or any stock
certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such warrant or stock
certificate, the Company will make and deliver a new warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
warrant or stock certificate.

17. Descriptive Headings. The descriptive headings of the various sections of
this warrant are inserted for convenience only and do not constitute a part of
this warrant. The language in this warrant shall be construed as to its fair
meaning without regard to which party drafted this warrant.

18. Governing Law. This warrant shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the State
of Minnesota.

19. Remedies. In case any one or more of the covenants and agreements contained
in this warrant shall have been breached, the Holder hereof (in the case of a
breach by the Company), or the Company (in the case of a breach by the Holder),
may proceed to protect and enforce their or its rights either by suit in equity
and/or by action at law, including, but not limited to, an action for damages as
a result of any such breach and/or an action for specific performance of any
such covenant or agreement contained in this warrant.

20. No Impairment of Rights. The Company will not, by amendment of its articles
of incorporation or through any other means, avoid or seek to avoid the
observance or performance of any of the terms of this warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder of this warrant against impairment.

21. Severability. The invalidity or unenforceability of any provision of this
warrant in any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction, or affect any other provision of this
warrant, which shall remain in full force and effect.

22. Recovery of Litigation Costs. If any legal action or other proceeding is
brought for the enforcement of this warrant, or because of an alleged dispute,
breach, default, or misrepresentation in connection with any of the provisions
of this warrant, the successful or prevailing party or parties shall be entitled
to recover reasonable attorneys’ fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.

23. Entire Agreement; Modification. This warrant constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.

(Signature page follows)

8

The Company has caused this Warrant to be duly executed and delivered as of the
Date of Grant specified above.

ATS MEDICAL, INC.

By:
Name:
Title:

Address: 3905 Annapolis Lane North
Suite 105
Minneapolis, MN 55447

9

EXHIBIT A-1

NOTICE OF EXERCISE

To: ATS MEDICAL, INC. (the “Company”)

1. The undersigned hereby:

           elects to purchase     shares of common stock of the Company pursuant
to the terms of the attached warrant, and tenders herewith payment of the
purchase price of such shares in full, or

           elects to exercise its net issuance rights pursuant to Section 9 of
the attached warrant with respect to     shares of common stock.

2. Please issue a certificate or certificates representing      shares in the
name of the undersigned or in such other name or names as are specified below:

(Name)

(Address)

3. The undersigned represents that any aforesaid shares are being acquired for
the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares, all except as in
compliance with applicable securities laws.

(Signature)

(Date)

10