ATS MEDICAL INC
FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT
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<TYPE>EX-10.3
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<FILENAME>c89243exv10w3.txt
<DESCRIPTION>FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT
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                                                                    Exhibit 10.3

                                ATS Medical, Inc.

                      Non-Qualified Stock Option Agreement

         ATS Medical, Inc. (the "Company") has adopted the ATS Medical, Inc.
2000 Stock Incentive Plan (the "Plan"), which permits issuance of stock options
for the purchase of shares of Common Stock, $.01 par value, of the Company, and
the Company has taken all necessary actions to grant this option pursuant and
subject to the terms of the Plan, as follows:

         1. The Company grants as of the date of this Agreement, as a matter of
separate agreement and not in lieu of salary or other compensation for services
rendered, the right and option (hereinafter called the "Option") to purchase all
or any part of an aggregate number of shares of Common Stock, $.01 par value, at
the option price per share provided pursuant to the Notice of Grant of Stock
Options and Option Agreement (the "Notice"), which Notice constitutes the first
page of this Agreement, and on the terms and conditions herein set forth and
subject to all provisions of the Plan. It is understood and agreed that the
option price is not less than the per share fair market value of such shares on
the date this Option was granted. The Company intends that this Option shall not
be an Incentive Stock Option governed by the provisions of Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code"). The terms of the Plan
and the Option shall be interpreted and administered so as to satisfy the
requirements of Section 422 of the Code. A copy of the Plan will be furnished
upon request of the Optionee.

         2. This Option shall in all events terminate at the close of business
on the "Termination Date" contained in the Notice, or such shorter period as is
prescribed herein, and, further, may be exercised during the option period only
as described in the vesting schedule contained in the Notice.

         Such installments shall cumulate and, if in any year the full amount
purchasable in such year is not purchased, the shares not purchased shall be
purchasable in any subsequent year during the term of this Option. The Optionee
shall not have any of the rights of a shareholder with respect to the Common
Stock subject to this Option until such shares shall be issued to the Optionee
upon the due exercise of this Option.

         3. This Option shall terminate and may no longer be exercised if the
Optionee ceases to be employed by or be a full-time consultant to the Company or
its subsidiaries, if any, except that:

                  (a) In the event that the Optionee shall cease to be employed
         by or be a full-time consultant to the Company or its subsidiaries, if
         any, for any reason other than the Optionee's gross and willful
         misconduct or death or disability, the Optionee shall have the right to
         exercise this Option at any time within three months after such
         termination to the extent of the full number of shares the Optionee was
         entitled to purchase under this Option on the date of termination;

                  (b) In the event that the Optionee shall cease to be employed
         by or be a full-time consultant to the Company or its subsidiaries, if
         any, by reason of the Optionee's


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         gross and willful misconduct, including but not limited to wrongful
         appropriation of funds of the Company or the commission of a gross
         misdemeanor or felony; this Option shall be terminated as of the date
         of the misconduct; and

                  (c) In the event that the Optionee shall die while in the
         employ of or while providing full-time consulting to the Company or any
         subsidiary or within three (3) months after termination for any reason
         other than gross and willful misconduct, or become disabled (within the
         meaning of Section 22(e)(3) of the Code) while in the employ of or
         while providing full-time consulting to the Company or a subsidiary, if
         any, and the Optionee shall not have fully exercised this Option, this
         Option may be exercised at any time within twelve months after the
         Optionee's death or such disability by the personal representatives,
         administrators, or, if applicable, guardian of the Optionee or by any
         person or persons to whom this Option is transferred by will or the
         applicable laws of descent and distribution to the extent of the full
         number of shares the Optionee was entitled to purchase under this
         Option on the date of death, disability or termination of employment
         services, if earlier;

provided, however, that this Option may not be exercised to any extent by anyone
after the Termination Date.

         4. The exercise of this Option is contingent upon receipt from the
Optionee (or other person exercising this Option pursuant to Section 3(c) above)
of a representation that, at the time of such exercise, it is the Optionee's
intent to acquire the shares being purchased for investment and not with a view
to distribution thereof; provided however, that the receipt of this
representation shall not be required upon exercise of this Option in the event
that, at the time of such exercise, the shares subject to this Option shall have
been and shall continue to be registered under the Securities Act of 1933, as
amended (the "Securities Act"). The certificates for shares so issued for
investment may be restricted by the Company as to transfer unless such shares
are first registered under the Securities Act or the Company receives advice of
counsel satisfactory to it that registration under the Securities Act is not
required.

         This Option shall not be exercisable until and unless: (i) the Shares
underlying this Option have been registered under the Securities Act and
applicable state securities laws, or (ii) upon determination of the Board of
Directors of the Company that the shares can be issued to the Optionee upon
exercise in compliance with an available exemption from registration under
applicable federal and state securities laws.

         5. Subject to the foregoing, this Option may be exercised in whole or
in part from time to time by serving written notice of exercise on the Company
at its principal office, accompanied by payment of the purchase price. Payment
of the purchase price shall be made by certified or bank cashier's check payable
to the Company, or by tender of shares of the Company's Common Stock previously
owned by the Optionee, having a fair market value on the date of exercise equal
to the exercise price of this Option, or a combination of cash and shares equal
to such exercise price.

         6. This Agreement shall not confer on the Optionee any right with
respect to continuance of employment with or consulting to the Company or any
subsidiary of the



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Company, nor will it interfere in any way with the right of the Company to
terminate the Optionee at any time. Neither the Optionee nor the Optionee's
legal representative, legatees or distributees, as the case may be, wall be or
will be deemed to be the holder of any shares subject to this Option unless and
until this Option has been exercised and the purchase price of the shares
purchased has been paid.

         7. This Option may not be transferred, except by will or the laws of
descent and distribution to the extent provided in Section 3(c) or pursuant to a
qualified domestic relations order as defined by the Code.

         8. If there shall be any change in the stock subject to this Option
through merger, consolidation, reorganization, recapitalization, stock dividend,
stock split or other change in the corporate structure of the Company,
appropriate adjustments shall be made by the Company in the number of shares and
the price per share of the shares subject to this Option in order to prevent
dilution or enlargement of option rights granted hereunder.

         9. The Company shall at all times during the term of this option
reserve and keep available such number of shares in the Company as will be
sufficient to satisfy the requirements of this Agreement.

         10. This Agreement and the Plan contain all of the terms governing this
grant, and the Plan and this Agreement are intended to be completed, final and
conclusive.


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