EX-10.3






EXHIBIT 10.3



UNCONDITIONAL GUARANTY




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



Recitals




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



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



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



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



Section 1. Guaranty.



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



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



Section 2. Representations and Warranties.



Each Guarantor hereby represents and warrants that:



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



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



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



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



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



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



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



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



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



Section 3. General Waivers. Each Guarantor waives:



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



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



(c) Any setoff, defense or counterclaim against Bank.



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



(e) Any right to enforce any remedy that Bank has against Borrower.



(f) Any rights to participate in any security held by Bank.



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



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



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



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



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



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



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



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



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






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



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



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



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



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



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



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



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



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



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



GUARANTORS:



	 	 	 
	3F THERAPEUTICS, INC.

By: /s/ Michael Dale

	 	ATS ACQUISITION CORP.

By: /s/ Michael Dale
	 

	 	 
	Name: Michael Dale

	 	Name: Michael Dale
	 

	 	 
	Title: CEO

	 	Title: CEO