EX-10.2






EXHIBIT 10.2



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, (II) THIS WARRANT AND THE UNDERLYING
SECURITIES MAY BE SOLD PURSUANT TO RULE 144 OR (III) 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,      (the “Holder”) is hereby
granted a warrant to purchase      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 a price per share equal to $2.35
plus (i) $0.125 if the warrant is being exercised within one year of the Date of Grant (as defined
below), (ii) $0.50 if the warrant is being exercised after the expiration of one year following the
Date of Grant but prior to the expiration of two (2) years following the Date of Grant, and (iii)
$0.75 if the warrant is being exercised after the expiration of two (2) years following the Date of
Grant (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
19th day of December, 2008 (the “Date of Grant”).



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 Date of Grant until the seven (7) year anniversary of the Date
of Grant.



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, after the Date of Grant, in the
manner described below:



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.






	 	(d)	 	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.





5. 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.



6. 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 on the date of exercise as determined in good faith by the Company’s Board of
Directors by such fraction.



7. 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, (II) SUCH SECURITIES
MAY BE SOLD PURSUANT TO RULE 144 OR (III) 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 cancelled 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.





8. 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.



9. 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 the Nasdaq Stock Market or other over-the-counter system, 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.





10. 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.





11. 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.



12. 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.



13. 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.



14. 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.



15. 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.



16. 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.



17. 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.



18. 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.



19. 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.



20. 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.



21. 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.



[Remainder of Page Intentionally Left Blank]






1






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



ATS MEDICAL, INC.



By: /s/ Michael R. Kramer

Name: Michael R. Kramer

Title: Chief Financial Officer

Address: 3905 Annapolis Lane North, Suite 105





Minneapolis, MN 55447



EXHIBIT A-1




NOTICE OF EXERCISE




To: ATS MEDICAL, INC. (the “Company”)



1. The undersigned hereby:




	 	(a)	 	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






	 	(b)	 	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.




By:


Date:




2