EX-10.3






EXHIBIT 10.3



Amendment

to

Loan and Security Agreement




THIS AMENDMENT to Loan and Security Agreement (this “Amendment”) is entered as of June
30, 2008 by and between Silicon Valley Bank (“Bank”) and ATS Medical, Inc., a Minnesota corporation
(the “Borrower”) whose address is 3905 Annapolis Lane, Suite 105, Minneapolis, Minnesota 55447.



Recitals




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



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



C. Borrower has requested that Bank amend the Loan Agreement to (i) modify the Liquidity Ratio
Financial Covenant and (ii) make certain other revisions to the Loan Agreement, as more fully set
forth herein.



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



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 to Loan Agreement.



2.1 Modified Liquidity Ratio Financial Covenant. Section 6.7 of the Loan Agreement currently
reads as follows:



Borrower will maintain at all times, on a consolidated basis:



(i) Liquidity Ratio. A ratio of (y) the sum of (1) unrestricted
cash (and equivalents) of Borrower on deposit with Bank plus (2)
50% of Borrower’s accounts receivable arising from the sale or
lease of goods, or provision of services, in the ordinary course
of business, (z) divided by Indebtedness of Borrower to Bank for
borrowed money, of equal to or greater than 1.40 to 1.00.
Notwithstanding the foregoing, if the amount of Borrower’s
Eligible Accounts ever becomes less than 50% of Borrower’s
accounts receivable arising from the sale or lease of goods, or
provision of services, in the ordinary course of business, then
part “2” above shall be deemed to read “(2) the lesser of the
amount of Borrower’s Eligible Accounts or 50% of Borrower’s
accounts receivable arising from the sale or lease of goods, or
provision of services, in the ordinary course of business”,
unless the Bank shall consent in writing otherwise.”



Said Section 6.7 is amended to read as follows:



Borrower will maintain at all times, on a consolidated basis:



(i) Liquidity Ratio.



Commencing with the month ending June 30, 2008 and each
month ending thereafter through December 31, 2008:



(A) As of the end of each of the first two months of each
fiscal quarter, a ratio of (y) the sum of (1) unrestricted cash
(and equivalents) of Borrower on deposit with Bank plus (2) 50%
of Borrower’s accounts receivable arising from the sale or lease
of goods, or provision of services, in the ordinary course of
business, (z) divided by Indebtedness of Borrower to Bank for
borrowed money, of equal to or greater than 1.10 to 1.00; and



(B) As of the end of the third month of each fiscal quarter,
a ratio of (y) the sum of (1) unrestricted cash (and equivalents)
of Borrower on deposit with Bank plus (2) 50% of Borrower’s
accounts receivable arising from the sale or lease of goods, or
provision of services, in the ordinary course of business, (z)
divided by Indebtedness of Borrower to Bank for borrowed money,
of equal to or greater than 1.40 to 1.00.



Notwithstanding the foregoing, if the amount of Borrower’s
Eligible Accounts ever becomes less than 50% of Borrower’s
accounts receivable arising from the sale or lease of goods, or
provision of services, in the ordinary course of business, then
part “2” above (of each of clause (A) and (B)) shall be deemed to
read “(2) the lesser of the amount of Borrower’s Eligible
Accounts or 50% of Borrower’s accounts receivable arising from
the sale or lease of goods, or provision of services, in the
ordinary course of business”, unless the Bank shall consent in
writing otherwise.



Commencing January 1, 2009 and each month ending thereafter:



A ratio of (y) the sum of (1) unrestricted cash (and
equivalents) of Borrower on deposit with Bank plus (2) 50% of
Borrower’s accounts receivable arising from the sale or lease of
goods, or provision of services, in the ordinary course of
business, (z) divided by Indebtedness of Borrower to Bank for
borrowed money, of equal to or greater than 1.40 to 1.00.
Notwithstanding the foregoing, if the amount of Borrower’s
Eligible Accounts ever becomes less than 50% of Borrower’s
accounts receivable arising from the sale or lease of goods, or
provision of services, in the ordinary course of business, then
part “2” above shall be deemed to read “(2) the lesser of the
amount of Borrower’s Eligible Accounts or 50% of Borrower’s
accounts receivable arising from the sale or lease of goods, or
provision of services, in the ordinary course of business”,
unless the Bank shall consent in writing otherwise.”




3. Limitation of Amendments.



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



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



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



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



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



4.3 The Third Restated Articles of Incorporation of ATS Medical, Inc. filed with the Minnesota
Secretary of State on June 11, 2008, a copy of which was provided to Bank via email on June 18,
2008, remain true, accurate and complete and have not been amended, supplemented or restated and
are and continue to be in full force and effect;



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



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



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



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



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



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



7. Effectiveness. This Amendment shall be deemed effective upon (a) the due execution and
delivery to Bank of this Amendment by each party hereto and (b) Bank’s receipt of the
Acknowledgment of Amendment and Reaffirmation of Guaranty substantially in the form attached hereto
as Schedule 1, duly executed and delivered by each Guarantor.



[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

By:  /s/ Nick Honigman

	 	ATS Medical, Inc.

By:  /s/ Michael Kramer
	 

	 	 
	Name:  Nick Honigman

	 	Name:  Michael Kramer
	 

	 	 
	Title:   Relationship Manager

	 	Title:   Chief Financial Officer
	 

	 	 






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Schedule 1




ACKNOWLEDGMENT OF AMENDMENT

AND REAFFIRMATION OF GUARANTY




Section 1. Guarantor hereby acknowledges and confirms that it has reviewed and approved
the terms and conditions of the Amendment to Loan and Security Agreement dated as of even date
herewith (the “Amendment”).



Section 2. Guarantor hereby consents to the Amendment and agrees that the Guaranty relating to
the Obligations of Borrower under the Loan Agreement shall continue in full force and effect, shall
be valid and enforceable and shall not be impaired or otherwise affected by the execution of the
Amendment or any other document or instrument delivered in connection herewith.



Section 3. Guarantor represents and warrants that, after giving effect to the Amendment, all
representations and warranties contained in the Guaranty are true, accurate and complete as if made
the date hereof.



Dated as of June 30, 2008



GUARANTOR: 3F Therapeutics, Inc.




By:  /s/ Michael Dale

Name:  Michael Dale

Title:   Director




GUARANTOR: ATS Acquisition Corp.




By:  /s/ Michael Dale

Name:  Michael Dale

Title:   Director





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