Exhibit 10.8

MORTGAGE

RECORDATION REQUESTED BY:

Venture Bank

6210 Wayzata Boulevard
Golden Valley, MN 55416 

 

SEND TAX NOTICES TO:

Venture Bank

6210 Wayzata Boulevard
Golden Valley, MN 55416

 

 

MAXIMUM LIEN. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THE MAXIMUM
INDEBTEDNESS SECURED BY THIS MORTGAGE IS $1,300,000.00.

THIS MORTGAGE dated December 18, 2013, is made and executed between Electromed,
Inc., whose address is 500 Sixth Avenue NW, New Prague, MN 56071; a Minnesota
Corporation (referred to below as “Grantor”) and Venture Bank, whose address is
6210 Wayzata Boulevard, Golden Valley, MN 55416 (referred to below as “Lender”).

GRANT OF MORTGAGE. For valuable consideration, Grantor mortgages and conveys to
Lender, with power of sale, all of Grantor’s right, title, and interest in and
to the following described real property, together with all existing or
subsequently erected or affixed buildings, improvements and fixtures; all
easements, rights of way, and appurtenances; all water, water rights,
watercourses and ditch rights (including stock in utilities with ditch or
irrigation rights); and all other rights, royalties, and profits relating to the
real property, including without limitation all minerals, oil, gas, geothermal
and similar matters, (the “Real Property”) located in Scott County, State of
Minnesota:

Lot 1, Block 1, New Prague Business Park 9th Addition, Scott County, Minnesota
ABSTRACT

The Real Property or its address is commonly known as 500 and 502 Sixth Avenue
NW, New Prague, MN 56071. The Real Property tax identification number is
24-1170010.

CROSS-COLLATERALIZATION. In addition to the Note, this Mortgage secures all
obligations, debts and liabilities, plus interest thereon, of Grantor to Lender,
or any one or more of them, as well as all claims by Lender against Grantor or
any one or more of them, whether now existing or hereafter arising, whether
related or unrelated to the purpose of the Note, whether voluntary or otherwise,
whether due or not due, direct or indirect, determined or undetermined, absolute
or contingent, liquidated or unliquidated, whether Grantor may be liable
individually or jointly with others, whether obligated as guarantor, surety,
accommodation party or otherwise, and whether recovery upon such amounts may be
or hereafter may become barred by any

  

 

 

 

MORTGAGE

  Loan No:  15696 (Continued) Page 2      

 

statute of limitations, and whether the obligation to repay such amounts may be
or hereafter may become otherwise unenforceable.

Grantor presently assigns to Lender all of Grantor’s right, title, and interest
in and to all present and future leases of the Property and all Rents from the
Property. This shall constitute an actual and present assignment, provided that
the Grantor shall have a license to collect, but not prior to accrual, all of
the Rents and to retain, use and enjoy the same unless and until an Event of
Default as defined herein has occurred. In addition, Grantor grants to Lender a
Uniform Commercial Code security interest in the Personal Property and Rents.

THIS MORTGAGE, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST IN
THE RENTS AND PERSONAL PROPERTY, IS GIVEN TO SECURE (A) PAYMENT OF THE
INDEBTEDNESS AND (B) PERFORMANCE OF ANY AND ALL OBLIGATIONS UNDER THE NOTE AND
THIS MORTGAGE. THIS MORTGAGE IS GIVEN AND ACCEPTED ON THE FOLLOWING TERMS:

PAYMENT AND PERFORMANCE. Except as otherwise provided in this Mortgage, Grantor
shall pay to Lender all amounts secured by this Mortgage as they become due and
shall strictly perform all of Grantor’s obligations under this Mortgage.

POSSESSION AND MAINTENANCE OF THE PROPERTY. Grantor agrees that Grantor’s
possession and use of the Property shall be governed by the following
provisions:

Possession and Use. Until the occurrence of an Event of Default, Grantor may (1)
remain in possession and control of the Property; (2) use, operate or manage the
Property; and (3) collect the Rents from the Property.

Duty to Maintain. Grantor shall maintain the Property in tenantable condition
and promptly perform all repairs, replacements, and maintenance necessary to
preserve its value.

Compliance With Environmental Laws. Grantor represents and warrants to Lender
that: (1) During the period of Grantor’s ownership of the Property, there has
been no use, generation, manufacture, storage, treatment, disposal, release or
threatened release of any Hazardous Substance by any person on, under, about or
from the Property; (2) Grantor has no knowledge of, or reason to believe that
there has been, except as previously disclosed to and acknowledged by Lender in
writing, (a) any breach or violation of any Environmental Laws, (b) any use,
generation, manufacture, storage, treatment, disposal, release or threatened
release of any Hazardous Substance on, under, about or from the Property by any
prior owners or occupants of the Property, or (c) any actual or threatened
litigation or claims of any kind by any person relating to such matters; and (3)
Except as previously disclosed to and acknowledged by Lender in writing, (a)
neither Grantor nor any tenant, contractor, agent or other authorized user of
the Property shall use, generate, manufacture, store, treat, dispose of or
release any Hazardous Substance on, under, about or from the Property; and (b)
any such activity shall be conducted in compliance with all applicable federal,
state, and local laws, regulations and ordinances, including without limitation
all Environmental Laws. Grantor authorizes Lender and its agents to enter upon
the Property to make such inspections and tests, at Grantor’s expense, as Lender
may deem appropriate to determine compliance of the Property with this section
of the Mortgage. Any inspections or tests made by Lender shall be for Lender’s
purposes only and shall not be construed to create any responsibility or
liability on the part of Lender to Grantor or to any other person. The
representations and warranties contained herein are based on Grantor’s due
diligence in investigating the Property for Hazardous Substances. Grantor hereby
(1) releases and waives any future claims against Lender for indemnity or
contribution in the event Grantor becomes liable for cleanup or other costs
under any such laws; and (2) agrees to indemnify, defend, and hold harmless
Lender against any and all claims, losses, liabilities, damages, penalties, and
expenses, including attorneys’ fees, consultants’ fees, and costs which Lender
may directly or indirectly sustain or suffer resulting from a breach of this
section of the Mortgage or as a consequence of any use, generation, manufacture,
storage, disposal, release or threatened release occurring prior to Grantor’s
ownership or interest in the Property, whether or not the same was or should
have been known to Grantor. The provisions of this section of the Mortgage,
including the obligation to indemnify and defend, shall survive the payment of
the Indebtedness and the satisfaction and reconveyance of the lien of this
Mortgage and shall not be affected by Lender’s acquisition of any interest in
the Property, whether by foreclosure or otherwise.

Nuisance, Waste. Grantor shall not cause, conduct or permit any nuisance nor
commit, permit, or suffer any stripping of or waste on or to the Property or any
portion of the Property. Without limiting the generality of the foregoing,
Grantor will not remove, or grant to any other party the right to remove, any
timber, minerals (including oil and gas), coal, clay, scoria, soil, gravel or
rock products without Lender’s prior written consent.

Removal of Improvements. Grantor shall not demolish or remove any Improvements
from the Real Property without Lender’s prior written consent. As a condition to
the removal of any Improvements, Lender may require Grantor to make arrangements
satisfactory to Lender to replace such Improvements with Improvements of at
least equal value.

Lender’s Right to Enter. Lender and Lender’s agents and representatives may
enter upon the Real Property at all reasonable times to attend to Lender’s
interests and to inspect the Real Property for purposes of Grantor’s compliance
with the terms and conditions of this Mortgage.

Compliance with Governmental Requirements. Grantor shall promptly comply with
all laws, ordinances, and regulations, now or hereafter in effect, of all
governmental authorities applicable to the use or occupancy of the Property,

  

 

 

 

MORTGAGE

  Loan No:  15696 (Continued) Page 3      

 

including without limitation, the Americans With Disabilities Act. Grantor may
contest in good faith any such law, ordinance, or regulation and withhold
compliance during any proceeding, including appropriate appeals, so long as
Grantor has notified Lender in writing prior to doing so and so long as, in
Lender’s sole opinion, Lender’s interests in the Property are not jeopardized.
Lender may require Grantor to post adequate security or a surety bond,
reasonably satisfactory to Lender, to protect Lender’s interest.

Duty to Protect. Grantor agrees neither to abandon or leave unattended the
Property. Grantor shall do all other acts, in addition to those acts set forth
above in this section, which from the character and use of the Property are
reasonably necessary to protect and preserve the Property.

DUE ON SALE - CONSENT BY LENDER. Lender may, at Lender’s option, declare
immediately due and payable all sums secured by this Mortgage upon the sale or
transfer, without Lender’s prior written consent, of all or any part of the Real
Property, or any interest in the Real Property. A “sale or transfer” means the
conveyance of Real Property or any right, title or interest in the Real
Property; whether legal, beneficial or equitable; whether voluntary or
involuntary; whether by outright sale, deed, installment sale contract, land
contract, contract for deed, leasehold interest with a term greater than three
(3) years, lease-option contract, or by sale, assignment, or transfer of any
beneficial interest in or to any land trust holding title to the Real Property,
or by any other method of conveyance of an interest in the Real Property. If any
Grantor is a corporation, partnership or limited liability company, transfer
also includes any change in ownership of more than twenty-five percent (25%) of
the voting stock, partnership interests or limited liability company interests,
as the case may be, of such Grantor. However, this option shall not be exercised
by Lender if such exercise is prohibited by federal law or by Minnesota law.

TAXES AND LIENS. The following provisions relating to the taxes and liens on the
Property are part of this Mortgage:

Payment. Grantor shall pay when due (and in all events prior to delinquency) all
taxes, payroll taxes, special taxes, assessments, water charges and sewer
service charges levied against or on account of the Property, and shall pay when
due all claims for work done on or for services rendered or material furnished
to the Property. Grantor shall maintain the Property free of any liens having
priority over or equal to the interest of Lender under this Mortgage, except for
those liens specifically agreed to in writing by Lender, and except for the lien
of taxes and assessments not due as further specified in the Right to Contest
paragraph.

Right to Contest. Grantor may withhold payment of any tax, assessment, or claim
in connection with a good faith dispute over the obligation to pay, so long as
Lender’s interest in the Property is not jeopardized. If a lien arises or is
filed as a result of nonpayment, Grantor shall within fifteen (15) days after
the lien arises or, if a lien is filed, within fifteen (15) days after Grantor
has notice of the filing, secure the discharge of the lien, or if requested by
Lender, deposit with Lender cash or a sufficient corporate surety bond or other
security satisfactory to Lender in an amount sufficient to discharge the lien
plus any costs and reasonable attorneys’ fees, or other charges that could
accrue as a result of a foreclosure or sale under the lien. In any contest,
Grantor shall defend itself and Lender and shall satisfy any adverse judgment
before enforcement against the Property. Grantor shall name Lender as an
additional obligee under any surety bond furnished in the contest proceedings.

Evidence of Payment. Grantor shall upon demand furnish to Lender satisfactory
evidence of payment of the taxes or assessments and shall authorize the
appropriate governmental official to deliver to Lender at any time a written
statement of the taxes and assessments against the Property.

Notice of Construction. Grantor shall notify Lender at least fifteen (15) days
before any work is commenced, any services are furnished, or any materials are
supplied to the Property, if any mechanic’s lien, materialmen’s lien, or other
lien could be asserted on account of the work, services, or materials and the
cost exceeds $25,000.00. Grantor will upon request of Lender furnish to Lender
advance assurances satisfactory to Lender that Grantor can and will pay the cost
of such improvements.

PROPERTY DAMAGE INSURANCE. The following provisions relating to insuring the
Property are a part of this Mortgage:

Maintenance of Insurance. Grantor shall procure and maintain policies of fire
insurance with standard extended coverage endorsements on a replacement basis
for the full insurable value covering all Improvements on the Real Property in
an amount sufficient to avoid application of any coinsurance clause, and with a
standard mortgagee clause in favor of Lender. Grantor shall also procure and
maintain comprehensive general liability insurance in such coverage amounts as
Lender may request with Lender being named as additional insureds in such
liability insurance policies. Additionally, Grantor shall maintain such other
insurance, including but not limited to hazard, business interruption and boiler
insurance as Lender may require. Policies shall be written by such insurance
companies and in such form as may be reasonably acceptable to Lender. Grantor
shall deliver to Lender certificates of coverage from each insurer containing a
stipulation that coverage will not be cancelled or diminished without a minimum
of ten (10) days’ prior written notice to Lender and not containing any
disclaimer of the insurer’s liability for failure to give such notice. Each
insurance policy also shall include an endorsement providing that coverage in
favor of Lender will not be impaired in any way by any act, omission or default
of Grantor or any other person. Should the Real Property be located in an area
designated by the Director of the Federal Emergency Management Agency as a
special flood hazard area, Grantor agrees to obtain and maintain Federal Flood
Insurance, if available, for the full unpaid principal balance of the loan and
any prior liens on the property securing the loan, up to the

  

 

 

 

MORTGAGE

  Loan No:  15696 (Continued) Page 4      

 

maximum policy limits set under the National Flood Insurance Program, or as
otherwise required by Lender, and to maintain such insurance for the term of the
loan.

Application of Proceeds. Grantor shall promptly notify Lender of any loss or
damage to the Property if the estimated cost of repair or replacement exceeds
$1,000.00. Lender may make proof of loss if Grantor fails to do so within
fifteen (15) days of the casualty. Whether or not Lender’s security is impaired,
Lender may, at Lender’s election, receive and retain the proceeds of any
insurance and apply the proceeds to the reduction of the Indebtedness, payment
of any lien affecting the Property, or the restoration and repair of the
Property. If Lender elects to apply the proceeds to restoration and repair,
Grantor shall repair or replace the damaged or destroyed Improvements in a
manner satisfactory to Lender. Lender shall, upon satisfactory proof of such
expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost
of repair or restoration if Grantor is not in default under this Mortgage. Any
proceeds which have not been disbursed within 180 days after their receipt and
which Lender has not committed to the repair or restoration of the Property
shall be used first to pay any amount owing to Lender under this Mortgage, then
to pay accrued interest, and the remainder, if any, shall be applied to the
principal balance of the Indebtedness. If Lender holds any proceeds after
payment in full of the Indebtedness, such proceeds shall be paid to Grantor as
Grantor’s interests may appear.

Grantor’s Report on Insurance. Upon request of Lender, however not more than
once a year, Grantor shall furnish to Lender a report on each existing policy of
insurance showing: (1) the name of the insurer; (2) the risks insured; (3) the
amount of the policy; (4) the property insured, the then current replacement
value of such property, and the manner of determining that value; and (5) the
expiration date of the policy. Grantor shall, upon request of Lender, have an
independent appraiser satisfactory to Lender determine the cash value
replacement cost of the Property.

TAX AND INSURANCE RESERVES. Subject to any limitations and consistent with any
requirements set by applicable law, Lender may require Grantor to maintain with
Lender reserves for payment of annual taxes, assessments, and insurance
premiums, which reserves shall be created by an initial deposit and subsequent
monthly payments, or payments at such other interval as payments under the Note
may be due, of a sum estimated by Lender to be sufficient to pay the total
annual taxes, assessments, and insurance premiums Lender reasonably anticipates
to be paid from these reserves. The reserve funds shall be held by Lender as a
general deposit from Grantor, which Lender may satisfy by payment of the taxes,
assessments, and insurance premiums required to be paid by Grantor as they
become due. Lender shall have the right to draw upon the reserve funds to pay
such items, and Lender shall not be required to determine the validity or
accuracy of any item before paying it. Nothing in the Mortgage shall be
construed as requiring Lender to advance other monies for such purposes, but
Lender may at its sole option pay such amounts as they become due, even if the
reserve funds are deficient. Subject to any limitations set by applicable law,
if the reserve funds disclose a shortage or deficiency, Grantor shall pay such
shortage or deficiency as required by Lender. All amounts in the reserve account
are hereby pledged to further secure the Indebtedness, and Lender is hereby
authorized to withdraw and apply such amounts on the Indebtedness upon the
occurrence of an Event of Default. Lender shall not be required to pay any
interest or earnings on the reserve funds unless required by law or agreed to by
Lender in writing. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not Grantor’s agent for payment of the taxes and assessments
required to be paid by Grantor.

LENDER’S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender’s interest in the Property or if Grantor fails to
comply with any provision of this Mortgage or any Related Documents, including
but not limited to Grantor’s failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Mortgage or any Related
Documents, Lender on Grantor’s behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Property and paying all costs
for insuring, maintaining and preserving the Property. All such expenditures
incurred or paid by Lender for such purposes will then bear interest at the rate
charged under the Note from the date incurred or paid by Lender to the date of
repayment by Grantor. All such expenses will become a part of the Indebtedness
and, at Lender’s option, will (A) be payable on demand; (B) be added to the
balance of the Note and be apportioned among and be payable with any installment
payments to become due during either (1) the term of any applicable insurance
policy; or (2) the remaining term of the Note; or (C) be treated as a balloon
payment which will be due and payable at the Note’s maturity. The Mortgage also
will secure payment of these amounts. Such right shall be in addition to all
other rights and remedies to which Lender may be entitled upon Default.

WARRANTY; DEFENSE OF TITLE. The following provisions relating to ownership of
the Property are a part of this Mortgage:

Title. Grantor warrants that: (a) Grantor holds good and marketable title of
record to the Property in fee simple, free and clear of all liens and
encumbrances other than those set forth in the Real Property description or in
any title insurance policy, title report, or final title opinion issued in favor
of, and accepted by, Lender in connection with this Mortgage, and (b) Grantor
has the full right, power, and authority to execute and deliver this Mortgage to
Lender.

Defense of Title. Subject to the exception in the paragraph above, Grantor
warrants and will forever defend the title to the Property against the lawful
claims of all persons. In the event any action or proceeding is commenced that
questions Grantor’s title or the interest of Lender under this Mortgage, Grantor
shall defend the action at Grantor’s expense. Grantor may be the nominal party
in such proceeding, but Lender shall be entitled to participate in the
proceeding and to be

  

 

 

 

MORTGAGE

  Loan No:  15696 (Continued) Page 5      

 

represented in the proceeding by counsel of Lender’s own choice, and Grantor
will deliver, or cause to be delivered, to Lender such instruments as Lender may
request from time to time to permit such participation.

Compliance With Laws. Grantor warrants that the Property and Grantor’s use of
the Property complies with all existing applicable laws, ordinances, and
regulations of governmental authorities.

Survival of Representations and Warranties. All representations, warranties, and
agreements made by Grantor in this Mortgage shall survive the execution and
delivery of this Mortgage, shall be continuing in nature, and shall remain in
full force and effect until such time as Grantor’s Indebtedness shall be paid in
full.

CONDEMNATION. The following provisions relating to condemnation proceedings are
a part of this Mortgage:

Proceedings. If any proceeding in condemnation is filed, Grantor shall promptly
notify Lender in writing, and Grantor shall promptly take such steps as may be
necessary to defend the action and obtain the award. Grantor may be the nominal
party in such proceeding, but Lender shall be entitled to participate in the
proceeding and to be represented in the proceeding by counsel of its own choice,
and Grantor will deliver or cause to be delivered to Lender such instruments and
documentation as may be requested by Lender from time to time to permit such
participation.

Application of Net Proceeds. If all or any part of the Property is condemned by
eminent domain proceedings or by any proceeding or purchase in lieu of
condemnation, Lender may at its election require that all or any portion of the
net proceeds of the award be applied to the Indebtedness or the repair or
restoration of the Property. The net proceeds of the award shall mean the award
after payment of all reasonable costs, expenses, and attorneys’ fees incurred by
Lender in connection with the condemnation.

IMPOSITION OF TAXES, FEES AND CHARGES BY GOVERNMENTAL AUTHORITIES. The following
provisions relating to governmental taxes, fees and charges are a part of this
Mortgage:

Current Taxes, Fees and Charges. Upon request by Lender, Grantor shall execute
such documents in addition to this Mortgage and take whatever other action is
requested by Lender to perfect and continue Lender’s lien on the Real Property.
Grantor shall reimburse Lender for all taxes, as described below, together with
all expenses incurred in recording, perfecting or continuing this Mortgage,
including without limitation all taxes, fees, documentary stamps, and other
charges for recording or registering this Mortgage.

Taxes. The following shall constitute taxes to which this section applies: (1) a
specific tax upon this type of Mortgage or upon all or any part of the
Indebtedness secured by this Mortgage; (2) a specific tax on Grantor which
Grantor is authorized or required to deduct from payments on the Indebtedness
secured by this type of Mortgage; (3) a tax on this type of Mortgage chargeable
against the Lender or the holder of the Note; and (4) a specific tax on all or
any portion of the Indebtedness or on payments of principal and interest made by
Grantor.

Subsequent Taxes. If any tax to which this section applies is enacted subsequent
to the date of this Mortgage, this event shall have the same effect as an Event
of Default, and Lender may exercise any or all of its available remedies for an
Event of Default as provided below unless Grantor either (1) pays the tax before
it becomes delinquent, or (2) contests the tax as provided above in the Taxes
and Liens section and deposits with Lender cash or a sufficient corporate surety
bond or other security satisfactory to Lender.

SECURITY AGREEMENT; FINANCING STATEMENTS. The following provisions relating to
this Mortgage as a security agreement are a part of this Mortgage:

Security Agreement. This instrument shall constitute a Security Agreement to the
extent any of the Property constitutes fixtures, and Lender shall have all of
the rights of a secured party under the Uniform Commercial Code as amended from
time to time.

Security Interest. Upon request by Lender, Grantor shall take whatever action is
requested by Lender to perfect and continue Lender’s security interest in the
Rents and Personal Property. In addition to recording this Mortgage in the real
property records, Lender may, at any time and without further authorization from
Grantor, file executed counterparts, copies or reproductions of this Mortgage as
a financing statement. Grantor shall reimburse Lender for all expenses incurred
in perfecting or continuing this security interest. Upon default, Grantor shall
not remove, sever or detach the Personal Property from the Property. Upon
default, Grantor shall assemble any Personal Property not affixed to the
Property in a manner and at a place reasonably convenient to Grantor and Lender
and make it available to Lender within three (3) days after receipt of written
demand from Lender to the extent permitted by applicable law.

Addresses. The mailing addresses of Grantor (debtor) and Lender (secured party)
from which information concerning the security interest granted by this Mortgage
may be obtained (each as required by the Uniform Commercial Code) are as stated
on the first page of this Mortgage.

FURTHER ASSURANCES; ATTORNEY-IN-FACT. The following provisions relating to
further assurances and attorney-in-fact are a part of this Mortgage:

Further Assurances. At any time, and from time to time, upon request of Lender,
Grantor will make, execute and deliver, or will cause to be made, executed or
delivered, to Lender or to Lender’s designee, and when requested by Lender,
cause to

  

 

 

 

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  Loan No:  15696 (Continued) Page 6      

 

be filed, recorded, refiled, or rerecorded, as the case may be, at such times
and in such offices and places as Lender may deem appropriate, any and all such
mortgages, deeds of trust, security deeds, security agreements, financing
statements, continuation statements, instruments of further assurance,
certificates, and other documents as may, in the sole opinion of Lender, be
necessary or desirable in order to effectuate, complete, perfect, continue, or
preserve (1) Grantor’s obligations under the Note, this Mortgage, and the
Related Documents, and (2) the liens and security interests created by this
Mortgage as first and prior liens on the Property, whether now owned or
hereafter acquired by Grantor. Unless prohibited by law or Lender agrees to the
contrary in writing, Grantor shall reimburse Lender for all costs and expenses
incurred in connection with the matters referred to in this paragraph.

Attorney-in-Fact. If Grantor fails to do any of the things referred to in the
preceding paragraph, Lender may do so for and in the name of Grantor and at
Grantor’s expense. For such purposes, Grantor hereby irrevocably appoints Lender
as Grantor’s attorney-in-fact for the purpose of making, executing, delivering,
filing, recording, and doing all other things as may be necessary or desirable,
in Lender’s sole opinion, to accomplish the matters referred to in the preceding
paragraph.

FULL PERFORMANCE. If Grantor pays all the Indebtedness when due, and otherwise
performs all the obligations imposed upon Grantor under this Mortgage, Lender
shall execute and deliver to Grantor a suitable satisfaction of this Mortgage
and suitable statements of termination of any financing statement on file
evidencing Lender’s security interest in the Rents and the Personal Property.
Grantor will pay, if permitted by applicable law, any reasonable termination fee
as determined by Lender from time to time.

EVENTS OF DEFAULT. Each of the following, at Lender’s option, shall constitute
an Event of Default under this Mortgage:

Payment Default. Grantor fails to make any payment when due under the
Indebtedness.

Default on Other Payments. Failure of Grantor within the time required by this
Mortgage to make any payment for taxes or insurance, or any other payment
necessary to prevent filing of or to effect discharge of any lien.

Other Defaults. Grantor fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Mortgage or in any of the
Related Documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Grantor.

False Statements. Any warranty, representation or statement made or furnished to
Lender by Grantor or on Grantor’s behalf under this Mortgage or the Related
Documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time thereafter.

Defective Collateralization. This Mortgage or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
document to create a valid and perfected security interest or lien) at any time
and for any reason.

Insolvency. The dissolution or termination of Grantor’s existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any part
of Grantor’s property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Grantor.

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency against
any property securing the Indebtedness. This includes a garnishment of any of
Grantor’s accounts, including deposit accounts, with Lender. However, this Event
of Default shall not apply if there is a good faith dispute by Grantor as to the
validity or reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Grantor gives Lender written notice of the creditor
or forfeiture proceeding and deposits with Lender monies or a surety bond for
the creditor or forfeiture proceeding, in an amount determined by Lender, in its
sole discretion, as being an adequate reserve or bond for the dispute.

Breach of Other Agreement. Any breach by Grantor under the terms of any other
agreement between Grantor and Lender that is not remedied within any grace
period provided therein, including without limitation any agreement concerning
any indebtedness or other obligation of Grantor to Lender, whether existing now
or later.

Events Affecting Guarantor. Any of the preceding events occurs with respect to
any guarantor, endorser, surety, or accommodation party of any of the
Indebtedness or any guarantor, endorser, surety, or accommodation party dies or
becomes incompetent, or revokes or disputes the validity of, or liability under,
any Guaranty of the Indebtedness.

Adverse Change. A material adverse change occurs in Grantor’s financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.

Insecurity. Lender in good faith believes itself insecure.

Right to Cure. If any default, other than a default in payment is curable and if
Grantor has not been given a notice of a breach of the same provision of this
Mortgage within the preceding twelve (12) months, it may be cured if Grantor,
after Lender sends written notice to Grantor demanding cure of such default: (1)
cures the default within fifteen (15) days; or (2) if the cure requires more
than fifteen (15) days, immediately initiates steps which Lender deems in
Lender’s sole discretion

  

 

 

 

MORTGAGE

  Loan No:  15696 (Continued) Page 7      

 

to be sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.

RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of an Event of Default and
at any time thereafter, Lender, at Lender’s option, may exercise any one or more
of the following rights and remedies, in addition to any other rights or
remedies provided by law:

Accelerate Indebtedness. Lender shall have the right at its option without
notice to Grantor to declare the entire Indebtedness immediately due and
payable, including any prepayment penalty that Grantor would be required to pay.

UCC Remedies. With respect to all or any part of the Personal Property, Lender
shall have all the rights and remedies of a secured party under the Uniform
Commercial Code. If notice to Grantor of the intended disposition of the
Personal Property is required by law in a particular instance, such notice shall
be deemed commercially reasonable if given to Grantor at least ten (10) calendar
days prior to the date of intended disposition. Grantor shall pay on demand all
costs and expenses, including but not limited to reasonable attorneys’ fees and
legal expenses, incurred by Lender in exercising these rights and remedies.

Collect Rents. Lender shall have the right to take possession of the Property
and to collect and apply Rents, including amounts past due and unpaid, in
accordance with applicable law and this Mortgage, including during the entire
redemption period after foreclosure of this Mortgage. If the Rents are collected
by Lender, then Grantor irrevocably designates Lender as Grantor’s
attorney-in-fact to endorse instruments received in payment thereof in the name
of Grantor and to negotiate the same and collect the proceeds. Payments by
tenants or other users to Lender in response to Lender’s demand shall satisfy
the obligations for which the payments are made, whether or not any proper
grounds for the demand existed. Lender may exercise its rights under this
subparagraph either in person, by agent, or through a receiver.

Application of Rents. Lender will first apply any Rents Lender receives in the
order prescribed by Minn. Stat. Section 576.25, Subd. 2, as amended, including
expenses for the Property’s normal maintenance, and then, at Lender’s sole
discretion, to the Indebtedness and any other costs of managing, protecting and
preserving the Property. All costs and expenses incurred by Lender in connection
with the Property shall be for Grantor’s account and Lender may pay such costs
and expenses from the Rents. Lender, in its sole discretion, shall determine the
application of any and all Rents received by it after payment of the foregoing
expenses. All expenditures made by Lender under this Mortgage and not reimbursed
from the Rents shall become a part of the Indebtedness secured by this Mortgage,
and shall be payable on demand, with interest at the interest rate set forth in
the Note from date of expenditure until paid.

Appoint Receiver. Lender, to the maximum extent permitted by law, shall be
entitled, as a matter of right, to the appointment of a receiver of the
Property, without notice or demand, and without regard to the adequacy of the
security for the Indebtedness or the solvency of the Grantor, by an action
separate from any foreclosure of this Mortgage pursuant to Minnesota Statutes
Chapter 580 or pursuant to Minnesota Statutes Chapter 581, or as a part of the
foreclosure action under said Chapter 581 (it being agreed that the existence of
a foreclosure pursuant to said Chapter 580 or a foreclosure action pursuant to
said Chapter 581 is not a prerequisite to any action for a receiver hereunder).
The receiver, who shall be an experienced property manager, shall collect (until
the Indebtedness is fully paid and satisfied and, in the case of a foreclosure
sale, during the entire redemption period) the Rents, and shall manage the
Property, execute leases within or beyond the period of the receivership if
approved by the court and apply all rents, profits and other income collected by
him in the order specified below. Notwithstanding the appointment of any
receiver, Lender shall be entitled as pledgee to the possession and control of
any cash, deposits or instruments at the time held by or payable or deliverable
under the terms of any Related Documents to Lender. Lender shall have the right,
at any time and without limitation, as provided in Minnesota Statutes, Section
582.03, to advance money to the receiver to pay any part or all of the items
which the receiver should otherwise pay if cash were available from the Property
and sums so advanced, with interest at the highest default rate set forth in the
Note, shall be secured hereby, or if advanced during the period of redemption
shall be part of the sum required to be paid to redeem from the sale. Any Rents
received by the receiver hereunder shall be applied in the order prescribed by
Minn. Stat. Section 576.25, Subd. 2, as amended, including but not limited to
expenses for the Property’s normal maintenance and reasonable receivership fees,
and then against the Indebtedness if received prior to the commencement of a
foreclosure, to be in such order as Lender may elect, and if received after the
commencement of a foreclosure, to be applied to the amount required to be paid
to effect a reinstatement prior to foreclosure sale, or, after a foreclosure
sale to any deficiency and thereafter to the amount required to be paid to
effect a redemption, all pursuant to Minnesota Statutes, Sections 580.30, 580.23
and 581.10, with any excess to be paid to Grantor. Provided, that if this
Mortgage is not reinstated nor the Property redeemed as provided by said
Sections 580.30, 580.23 or 581.10, the entire amount paid to Lender pursuant
hereto shall be the property of Lender together with all or any part of the
Property acquired through foreclosure.

Foreclosure and Sale. Lender may, and is hereby authorized and empowered to,
foreclose this Mortgage by action or advertisement pursuant to the statutes of
the State of Minnesota providing for such foreclosure. Power is expressly
granted to Lender (1) to sell the Property at public auction and to convey the
Property, in fee simple, to the purchasers at such sale, and (2) to pay, out of
the proceeds of the sale, all of the Indebtedness secured by this Mortgage, with
interest, and all legal costs and charges of the foreclosure including the
maximum attorneys’ fees permitted by law and Grantor agrees to pay all such
costs, and charges and fees.

  

 

 

 

MORTGAGE

  Loan No:  15696 (Continued) Page 8      

 

Other Remedies. Lender shall have all other rights and remedies provided in this
Mortgage or the Note or available at law or in equity.

Sale of the Property. To the extent permitted by applicable law, Grantor hereby
waives any and all right to have the Property marshalled. In exercising its
rights and remedies, Lender shall be free to sell all or any part of the
Property together or separately, in one sale or by separate sales. Lender shall
be entitled to bid at any public sale on all or any portion of the Property.

Notice of Sale. Lender shall give Grantor reasonable notice of the time and
place of any public sale of the Personal Property or of the time after which any
private sale or other intended disposition of the Personal Property is to be
made. Reasonable notice shall mean notice given at least ten (10) days before
the time of the sale or disposition. Any sale of the Personal Property may be
made in conjunction with any sale of the Real Property.

Election of Remedies. Election by Lender to pursue any remedy shall not exclude
pursuit of any other remedy, and an election to make expenditures or to take
action to perform an obligation of Grantor under this Mortgage, after Grantor’s
failure to perform, shall not affect Lender’s right to declare a default and
exercise its remedies. Nothing under this Mortgage or otherwise shall be
construed so as to limit or restrict the rights and remedies available to Lender
following an Event of Default, or in any way to limit or restrict the rights and
ability of Lender to proceed directly against Grantor and/or against any other
co-maker, guarantor, surety or endorser and/or to proceed against any other
collateral directly or indirectly securing the Indebtedness.

Attorneys’ Fees; Expenses. If Lender institutes any suit or action to enforce
any of the terms of this Mortgage, Lender shall be entitled to recover such sum
as the court may adjudge reasonable as attorneys’ fees at trial and upon any
appeal. Whether or not any court action is involved, and to the extent not
prohibited by law, all reasonable expenses Lender incurs that in Lender’s
opinion are necessary at any time for the protection of its interest or the
enforcement of its rights shall become a part of the Indebtedness payable on
demand and shall bear interest at the Note rate from the date of the expenditure
until repaid. Expenses covered by this paragraph include, without limitation,
however subject to any limits under applicable law, Lender’s reasonable
attorneys’ fees and Lender’s legal expenses, whether or not there is a lawsuit,
including reasonable attorneys’ fees and expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services, the cost of
searching records, obtaining title reports (including foreclosure reports),
surveyors’ reports, and appraisal fees and title insurance, to the extent
permitted by applicable law. Grantor also will pay any court costs, in addition
to all other sums provided by law.

NOTICES. Any notice required to be given under this Mortgage, including without
limitation any notice of default and any notice of sale shall be given in
writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of this Mortgage.
All copies of notices of foreclosure from the holder of any lien which has
priority over this Mortgage shall be sent to Lender’s address, as shown near the
beginning of this Mortgage. Any party may change its address for notices under
this Mortgage by giving formal written notice to the other parties, specifying
that the purpose of the notice is to change the party’s address. For notice
purposes, Grantor agrees to keep Lender informed at all times of Grantor’s
current address. Unless otherwise provided or required by law, if there is more
than one Grantor, any notice given by Lender to any Grantor is deemed to be
notice given to all Grantors. Grantor understands that if Lender elects to
foreclose by advertisement, no personal notice is required to be served upon
Grantor. Grantor further understands that under the Constitution of the United
States and the Constitution of the State of Minnesota it may have the right to
notice and hearing before the Property may be sold and that the procedure for
foreclosure by advertisement described above does not ensure that notice will be
given to Grantor and neither said procedure for foreclosure by advertisement nor
the Code requires any hearing or other judicial proceeding. GRANTOR HEREBY
RELINQUISHES, WAIVES AND GIVES UP ANY CONSTITUTIONAL RIGHTS GRANTOR MAY HAVE TO
NOTICE AND HEARING BEFORE SALE OF THE PROPERTY AND EXPRESSLY CONSENTS AND AGREES
THAT THE PROPERTY MAY BE FORECLOSED BY ADVERTISEMENT AND THAT THE PROPERTY MAY
BE DISPOSED OF PURSUANT TO THE CODE, ALL AS DESCRIBED ABOVE. GRANTOR
ACKNOWLEDGES THAT GRANTOR IS REPRESENTED BY LEGAL COUNSEL; THAT BEFORE SIGNING
THIS DOCUMENT, THIS SECTION AND GRANTOR’S CONSTITUTIONAL RIGHTS WERE FULLY
EXPLAINED BY SUCH COUNSEL AND THAT GRANTOR UNDERSTANDS THE NATURE AND EXTENT OF
THE RIGHTS WAIVED HEREBY AND THE EFFECT OF SUCH WAIVER.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Mortgage:

Amendments. This Mortgage, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Mortgage. No alteration of or amendment to this Mortgage shall be effective
unless given in writing and signed by the party or parties sought to be charged
or bound by the alteration or amendment.

Annual Reports. If the Property is used for purposes other than Grantor’s
residence, Grantor shall furnish to Lender, upon request, a certified statement
of net operating income received from the Property during Grantor’s previous
fiscal year in such form and detail as Lender shall require. “Net operating
income” shall mean all cash receipts from the Property less all cash
expenditures made in connection with the operation of the Property.

  

 

 

 

MORTGAGE

  Loan No:  15696 (Continued) Page 9      

 

Caption Headings. Caption headings in this Mortgage are for convenience purposes
only and are not to be used to interpret or define the provisions of this
Mortgage.

Grantor’s Copy of Documents. Lender agrees to provide Grantor with a conformed
copy of both the Note and this Mortgage at the time they are executed or within
a reasonable time after request.

Governing Law. This Mortgage will be governed by federal law applicable to
Lender and, to the extent not preempted by federal law, the laws of the State of
Minnesota without regard to its conflicts of law provisions. This Mortgage has
been accepted by Lender in the State of Minnesota.

No Waiver by Lender. Lender shall not be deemed to have waived any rights under
this Mortgage unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate as
a waiver of such right or any other right. A waiver by Lender of a provision of
this Mortgage shall not prejudice or constitute a waiver of Lender’s right
otherwise to demand strict compliance with that provision or any other provision
of this Mortgage. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender’s rights or of
any of Grantor’s obligations as to any future transactions. Whenever the consent
of Lender is required under this Mortgage, the granting of such consent by
Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.

Severability. If a court of competent jurisdiction finds any provision of this
Mortgage to be illegal, invalid, or unenforceable as to any circumstance, that
finding shall not make the offending provision illegal, invalid, or
unenforceable as to any other circumstance. If feasible, the offending provision
shall be considered modified so that it becomes legal, valid and enforceable. If
the offending provision cannot be so modified, it shall be considered deleted
from this Mortgage. Unless otherwise required by law, the illegality,
invalidity, or unenforceability of any provision of this Mortgage shall not
affect the legality, validity or enforceability of any other provision of this
Mortgage.

Merger. There shall be no merger of the interest or estate created by this
Mortgage with any other interest or estate in the Property at any time held by
or for the benefit of Lender in any capacity, without the written consent of
Lender.

Successors and Assigns. Subject to any limitations stated in this Mortgage on
transfer of Grantor’s interest, this Mortgage shall be binding upon and inure to
the benefit of the parties, their successors and assigns. If ownership of the
Property becomes vested in a person other than Grantor, Lender, without notice
to Grantor, may deal with Grantor’s successors with reference to this Mortgage
and the Indebtedness by way of forbearance or extension without releasing
Grantor from the obligations of this Mortgage or liability under the
Indebtedness.

Time is of the Essence. Time is of the essence in the performance of this
Mortgage.

DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Mortgage. Unless specifically stated to the contrary,
all references to dollar amounts shall mean amounts in lawful money of the
United States of America. Words and terms used in the singular shall include the
plural, and the plural shall include the singular, as the context may require.
Words and terms not otherwise defined in this Mortgage shall have the meanings
attributed to such terms in the Uniform Commercial Code:

Borrower. The word “Borrower” means Electromed, Inc. and includes all co-signers
and co-makers signing the Note and all their successors and assigns.

Default. The word “Default” means the Default set forth in this Mortgage in the
section titled “Default”.

Environmental Laws. The words “Environmental Laws” mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments
and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or federal laws, rules, or regulations adopted pursuant
thereto, or common law, and shall also include pollutants, contaminants,
polychlorinated biphenyls, asbestos, urea formaldehyde, petroleum and petroleum
products, and agricultural chemicals.

Event of Default. The words “Event of Default” mean any of the events of default
set forth in this Mortgage in the events of default section of this Mortgage.

Grantor. The word “Grantor” means Electromed, Inc..

Guaranty. The word “Guaranty” means the guaranty from guarantor, endorser,
surety, or accommodation party to Lender, including without limitation a
guaranty of all or part of the Note.

Hazardous Substances. The words “Hazardous Substances” mean materials that,
because of their quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard to human health
or the environment when improperly used, treated, stored, disposed of,
generated, manufactured, transported or otherwise handled. The words “Hazardous
Substances” are used in their very broadest sense and include without limitation
any and all

  

 

 

 

MORTGAGE

  Loan No:  15696 (Continued) Page 10      

 

hazardous or toxic substances, materials or waste as defined by or listed under
the Environmental Laws. The term “Hazardous Substances” also includes, without
limitation, petroleum and petroleum by-products or any fraction thereof and
asbestos.

Improvements. The word “Improvements” means all existing and future
improvements, buildings, structures, mobile homes affixed on the Real Property,
facilities, additions, replacements and other construction on the Real Property.

Indebtedness. The word “Indebtedness” means all principal, interest, and other
amounts, costs and expenses payable under the Note or Related Documents,
together with all renewals of, extensions of, modifications of, consolidations
of and substitutions for the Note or Related Documents and any amounts expended
or advanced by Lender to discharge Grantor’s obligations or expenses incurred by
Lender to enforce Grantor’s obligations under this Mortgage, together with
interest on such amounts as provided in this Mortgage. Specifically, without
limitation, Indebtedness includes all amounts that may be indirectly secured by
the Cross-Collateralization provision of this Mortgage.

Lender. The word “Lender” means Venture Bank, its successors and assigns.

Mortgage. The word “Mortgage” means this Mortgage between Grantor and Lender.

Note. The word “Note” means the promissory note dated December 18, 2013, in the
original principal amount of $1,300,000.00 from Grantor to Lender, together with
all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the promissory note or agreement.

Personal Property. The words “Personal Property” mean all equipment, fixtures,
and other articles of personal property now or hereafter owned by Grantor, and
now or hereafter attached or affixed to the Real Property; together with all
accessions, parts, and additions to, all replacements of, and all substitutions
for, any of such property; and together with all proceeds (including without
limitation all insurance proceeds and refunds of premiums) from any sale or
other disposition of the Property.

Property. The word “Property” means collectively the Real Property and the
Personal Property.

Real Property. The words “Real Property” mean the real property, interests and
rights, as further described in this Mortgage.

Related Documents. The words “Related Documents” mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.

Rents. The word “Rents” means all present and future rents, revenues, income,
issues, royalties, profits, and other benefits derived from the Property.

NOTICE OF RIGHT TO DISCONTINUE ESCROW: IF GRANTOR’S MORTGAGE LOAN INVOLVES AN
ESCROW ACCOUNT FOR TAXES AND HOMEOWNER’S INSURANCE, GRANTOR MAY HAVE THE RIGHT
IN FIVE YEARS TO DISCONTINUE THE ACCOUNT AND PAY THEIR OWN TAXES AND HOMEOWNER’S
INSURANCE. IF GRANTOR IS ELIGIBLE TO DISCONTINUE THE ESCROW ACCOUNT, GRANTOR
WILL BE NOTIFIED IN FIVE YEARS. 

GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS MORTGAGE, AND
GRANTOR AGREES TO ITS TERMS.

GRANTOR:

ELECTROMED, INC.

 

By: /s/ Jeremy Brock     Jeremy Brock, Chief Financial Officer of Electromed,
Inc.        

This Mortgage was drafted by:

  Venture Bank
6210 Wayzata Boulevard
Golden Valley, MN 55416        

  

 

 

 

MORTGAGE

  Loan No:  15696 (Continued) Page 11      

 

CORPORATE ACKNOWLEDGMENT

STATE OF        Minnesota         )   ) SS COUNTY OF       Ramsey          )

 

On this    18th    day of      December      , 20  13  , before me, the
undersigned Notary Public, personally appeared Jeremy Brock, Chief Financial
Officer of Electromed, Inc., and known to me to be an authorized agent of the
corporation that executed the Mortgage and acknowledged the Mortgage to be the
free and voluntary act and deed of the corporation, by authority of its Bylaws
or by resolution of its board of directors, for the uses and purposes therein
mentioned, and on oath stated that he or she is authorized to execute this
Mortgage and in fact executed the Mortgage on behalf of the corporation.

              By  /s/ Mary C. Parnell     Residing at               Notary
Public in and for the State of   Minnesota   My commission expires    1/31/2015