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                                                                    EXHIBIT 10.3

                               MANUEL A. VILLAFANA
                              CONSULTING AGREEMENT

      THIS AGREEMENT is made as of the 11th day of September, 2001 by and
between ATS Medical, Inc., a Minnesota corporation (the "Company") and Manuel A.
Villafana, a resident of the State of Minnesota ("MAV").

      WHEREAS, the parties entered into Agreements dated October 1994 and
January 1995 and April 1998 for the employment of MAV as Chairman and Chief
Executive Officer of the Company (the "October 1994 Agreement," the "January
1995 Agreement," and "April 1998 Agreement").

      WHEREAS, the Board of Directors and MAV desire to amend and restate the
October 1994, January 1995 and April 1998 Agreements to modify certain
provisions and to extend the term of the agreement.

      NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Company and MAV, each intending to be legally bound, agree to amend the
October 1994, January 1995 and April 1998 Agreements and restate them in their
entirety as follows:

      1.    Employment. Subject to all of the terms and conditions of this
            Agreement, the Company agrees to employ MAV on a "full-time" basis
            as its Chairman and Chief Executive Officer and MAV accepts this
            employment as Consultant.

      2.    Duties. MAV will make the best use of his energy, knowledge and
            training in advancing the Company's interests. He will diligently
            and conscientiously perform the duties of Chairman and Chief
            Executive Officer of the Company, as such duties may be defined by
            the Company's Board of Directors and such other tasks as may from
            time to time be reasonably required to further the growth of the
            Company. During the term of this Agreement, MAV may engage in any
            outside consulting activities which do not violate the provisions of
            Sections 7 and 8 of this Agreement, provided MAV continues to devote
            substantially all of MAV's full-time efforts to the Company.

      3.    Term. Unless terminated at an earlier date in accordance with the
            provisions of this Agreement, the term of MAV's services hereunder
            shall commence on the date of this Agreement and shall terminate on
            December 31, 2002. The Company may terminate the relationships
            created by this Agreement upon 60 days notice to MAV if such
            termination is without cause (as defined below), and with no notice
            if such termination is for Cause.

            As used in this Agreement, the term "Cause" shall be defined as (i)
            MAV's breach of any of his material duties or obligations under this
            Agreement, which breach is not corrected within 30 days of receipt
            of written notice thereof by MAV from the Company's Board of
            Directors, (ii) embezzlement or other misappropriation of property
            of the Company or (iii) conviction of a felony offense. No
            termination of the relationship created by this Agreement shall
            relieve MAV of his duties under Sections 5, 6 and 7 hereof.


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      4.    Compensation.

            (a)   Base Salary. The Compensation Committee of the Board of
                  Directors shall determine the base salary for MAV in
                  accordance with its compensation practices.

            (b)   Benefits. MAV shall be entitled to participate in any benefit
                  plans which may be established by the Board of Directors of
                  the Company for his benefit.

            (c)   Expenses. The Company shall reimburse MAV for all ordinary and
                  necessary business expenses MAV incurs while performing his
                  duties under this Agreement, provided that MAV accounts
                  properly for such expenses to the Company in accordance with
                  the general corporate policy of the Company as determined by
                  the Company's Board of Directors and in accordance with the
                  requirements of Internal Revenue Service regulations relating
                  to substantiation of expenses.

            (d)   Bonuses. MAV shall be eligible to receive discretionary
                  bonuses in addition to his base salary as and when determined
                  by the Compensation Committee of the Board of Directors of the
                  Company during the term of this Agreement.

      5.    Inventions.

            (a)   "Inventions," as used in this Section 5, means any
                  discoveries, designs, improvements or software (whether or not
                  they are in writing or reduced to practice) or works of
                  authorship (whether or not they can be patented or
                  copyrighted) that MAV makes, authors, or conceives (either
                  alone or with others) and that:

                  (i)   concerns directly the Company's products, research or
                        development; or

                  (ii)  results from any work MAV performs for the Company; or

                  (iii) uses the Company's equipment, facilities, or trade
                        secret information.

            (b)   MAV agrees that all Inventions he makes during his employment
                  with the Company will be the sole and exclusive property of
                  the Company. MAV will, with respect to any such Invention:

                  (i)   keep current, accurate and complete records, which will
                        belong to the Company and be kept and stored on the
                        Company's premises while MAV is employed by the Company;

                  (ii)  promptly and fully disclose the existence and describe
                        the nature of the Invention to the Company in writing
                        (and without request);


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                  (iii) assign (and MAV does hereby assign) to the Company all
                        of his rights to the Invention, any applications he
                        makes for patents or copyrights in any country, and any
                        patents or copyrights granted to him in any country; and

                  (iv)  acknowledge and deliver promptly to the Company any
                        written instruments, and perform any other reasonable
                        acts necessary in the Company's opinion and at its
                        expense to preserve property rights in the Invention
                        against forfeiture, abandonment, or loss to obtain and
                        maintain letters, patents and/or copyrights on the
                        Invention and to vest the entire right and title to the
                        Invention in the Company, provided that, MAV makes no
                        warranty or representation to the Company as to rights
                        against third parties hereunder.

The requirements of this subsection 5(b) do not apply to an Invention for which
no equipment, facility, or trade secret information of the Company was used and
which was developed entirely on MAV's own time, and which (i) does not relate
directly to the Company's business to the Company's actual research or
development, or (ii) does not result from any work MAV performed for the
Company. Except as previously disclosed to the Company in writing, MAV does not
have and will not assert any claims to or rights under any Inventions as having
been made, conceived, authored, or acquired by MAV prior to his employment
hereunder.

      6.    Confidential Information.

      (a)   Confidential Information, as used in this Section 6, means
            information that is not generally known and that is proprietary to
            the Company or that the Company is obligated to treat as
            proprietary. This information includes, without limitation:

                  (i)   trade secret information about the Company and its
                        products or services;

                  (ii)  "Inventions," as defined in subsection 5(a) above;

                  (iii) information concerning the Company's business, as the
                        Company has conducted it or as it may conduct it in the
                        future; and

                  (iv)  information concerning any of the Company's past,
                        current, or possible future products, including (without
                        limitation) information about the Company's research,
                        development, engineering, purchasing, manufacturing,
                        servicing, finances, marketing or selling.

Any information that reasonably can be expected to be treated as Confidential
Information will be presumed to be Confidential Information (whether MAV or
others originated it and regardless of how he obtained it).


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      (b)   Except as required in his duties to the Company, MAV will not,
            during his employment or for a period of five (5) years after
            termination of his employment with the Company, use or disclose
            Confidential Information to any person not authorized by the Company
            to receive it, excluding Confidential Information (i) which becomes
            publicly available by a source other than MAV, or (ii) which is
            received by MAV after termination of his employment hereunder from a
            source who did not obtain the information directly or indirectly
            from employees or agents of the Company or (iii) for which
            disclosure thereof the Company has consented in writing. When MAV's
            employment with the Company ends, he will promptly turn over to the
            Company all records and any compositions, articles, devices, or
            embody Confidential Information, including all copies,
            reproductions, and specimens of the Confidential Information in his
            possession, regardless of who prepared them.

      7.    Post-employment, Consulting and Competitive Activities. MAV agrees
            that during his employment with the Company and for a minimum period
            of two (2) years, extendable automatically up to five (5) years in
            one (1) year increments unless terminated by ATS with a sixty (60)
            day notice prior to end of current consulting year, after his
            employment with the Company ends:

      (a)   He will not alone, or in any capacity with another firm, (i)
            directly or indirectly engage in any commercial activity that is
            competitive with any of the Company's business in which MAV
            participated while he was employed by the Company or any affiliate
            thereof, nor will he participate in the management or operation of,
            or become a significant investor in, any venture or enterprise of
            whatever kind as a principal, officer, director, employee,
            representative, agent or shareholder of any entity whose business is
            the design, development, production, marketing, or servicing of any
            product or service competitive with the business of the Company as
            it exists at the time his employment with the Company or any
            affiliate thereof is terminated, (ii) solicit or in any way
            interfere or attempt to interfere with the Company's relationships
            with any of its current or potential customers; or (iii) employ or
            attempt to employ any of the Company's employees on behalf of any
            other entity competing with the Company provided that, nothing in
            this Section 7 shall restrict MAV's employment by or association
            with any entity, venture or enterprise which engages in a business
            with a product or service competitive with any product or service of
            the Company so long as the following conditions are complied with:
            (A) MAV's employment or association with such entity, venture or
            enterprise is limited to work which does not involve or relate to
            the design, development, production, marketing or servicing of a
            product or service which is directly competitive with any product or
            service of the Company; and (B) MAV's employer takes reasonable
            measures to ensure that MAV is not involved with or consulted in any
            aspect of the design, development, production, marketing or
            servicing of such competitive product or service and, provided
            further, that if the Company is purchased or acquired in a merger or
            similar transaction, the provisions of this Section 7 (a) shall
            apply only to MAV's engaging in activities competitive with the
            business in which the Company was engaged prior to any such purchase
            or merger and such provisions shall not be deemed to prohibit MAV
            from competing with any other aspects of the business of any
            purchasing or acquiring person.


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      (b)   He will, prior to accepting employment with any new employer, inform
            that employer of this Agreement and provide that employer with a
            copy of Section 7 of this Agreement, provided that he reasonably
            believes his new position is or may be contrary to this Agreement.

      (c)   To compensate for the restrictions and consulting contained in this
            Section 7, the Company will make a monthly payment to MAV commencing
            with the first month after termination of employment and continuing
            until such restrictions expire. The amount paid shall be MAV's
            monthly base salary at the time of any termination of MAV's
            employment with the Company adjusted annually to the CPI index.
            During the course of this Agreement, MAV shall remain a participant
            in the Company's medical benefits plan which premiums are paid by
            the Company except for the contribution required of the
            employee/consultant, which shall remain MAV's responsibility. MAV
            hereby agrees to accept such payment, and acknowledges that such
            payment, as well as other consideration received in the course of
            his employment, is sufficient consideration for the restrictions
            contained in this Section 7. MAV agrees that upon acceptance of such
            payment, the Company shall have no further liability to MAV and such
            payment shall, subject to the limitation described below, constitute
            a release by MAV of all claims and liabilities against the Company
            arising from his employment. The Company agrees that it shall make a
            good faith effort to settle any employment-related claims by MAV
            prior to making the first payment due under this Section 7 (c).

      (d)   He will consult on non-confidential ATS matters with the President
            and/or Board of Directors at their request on a limited time basis
            not to exceed 20 hours per month.

      8.    Conflicting Business. MAV agrees that he will not transact business
            with the Company personally, or as agent, owner, partner, or
            shareholder of any other entity, except as approved by the Board of
            Directors. MAV further agrees that he will not engage in any
            business activity or outside employment that may be in conflict with
            the Company's proprietary or business interests.

      9.    No Adequate Remedy. MAV understands that if he fails to fulfill his
            obligations under Section 5, 6, 7 or 8 of this Agreement, the
            damages to the Company would be very difficult to determine.
            Therefore, in addition to any other rights or remedies available to
            the Company at law, in equity or by statute, MAV hereby consents to
            the specific enforcement of Sections 5, 6, 7 or 8 of this Agreement
            by the Company through an injunction or restraining order issued by
            any appropriate court.

      10.   Miscellaneous

      (a)   Successors and Assigns. This Agreement may not be assigned by MAV.
            This Agreement may not be assigned by the Company without MAV's
            consent, which consent shall not be unreasonably withheld.

      (b)   Modification. This Agreement may be modified or amended only by a
            writing signed by each of the parties hereto.


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      (c)   Construction. Wherever possible, each provision of this Agreement
            shall be interpreted so that it is valid under applicable law. If
            any provision of this Agreement is to any extent invalid under
            applicable law in any jurisdiction, that provision shall still be
            effective to the extent it remain valid. The remainder of this
            Agreement also shall continue to be valid, and the entire Agreement
            shall continue to be valid in other jurisdictions.

      (d)   Non-Waiver. No failure or delay by any of the parties hereto in
            exercising any right or remedy under this Agreement shall waive any
            provision of the Agreement. Nor shall any single or partial exercise
            by any of the parties hereto of any right or remedy under this
            Agreement preclude any of them from otherwise or further exercising
            their rights or remedies, or any other rights or remedies granted by
            any law or any related document.

      (e)   Captions. The headings in this Agreement are for convenience only
            and shall not affect the interpretation of this Agreement.

      (f)   Notices. All notices and other communications required or permitted
            under this Agreement shall be in writing and hand delivered or sent
            by registered first-class mail, postage prepaid. Such notices and
            other communication shall be effective upon receipt if hand
            delivered and shall be effective five (5) business days after
            mailing if sent by mail to the following addresses, or such other
            addresses as either party shall have notified the other party:


                  If to the Company:      ATS Medical, Inc.
                                          3905 Annapolis Lane
                                          Suite 105
                                          Minnesota MN 55447

                  If to MAV:              Manuel A. Villafana
                                          1482 Hunter Drive
                                          Medina MN 55391


      IN WITNESS WHEREOF, the Company and MAV have executed this Agreement as of
      the date first above written.

                                          ATS MEDICAL, INC.


                                          By:  /s/ Charles F. Cuddihy
                                             --------------------------------
                                                      Director

                                              /s/  Manuel A. Villafana
                                             --------------------------------
                                                   Manuel A. Villafana


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