Exhibit 10.1


BUSINESS
LOAN AGREEMENT


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Principal

	
Loan Date

	
Maturity

	
Loan No

	
Call / Coll

	
Account

	
Officer

	
Initials


	
$1,287,244.73

	
05-06-2014

	
12-18-2018

	
15696

	
 

	
 

	
 

	
 


	
References
in the boxes above are for Lender’s use only and do not limit the applicability
of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length
limitations.








	
 

	
 

	
 

	
 

	
 


	
Borrower:

	
Electromed,
Inc.

	
 

	
Lender:

	
Venture
Bank


	
 

	
500 Sixth
Avenue NW

	
 

	
 

	
6210
Wayzata Boulevard


	
 

	
New
Prague, MN 56071

	
 

	
 

	
Golden
Valley, MN 55416


	
 

	
 

	
 

	
 

	
 





THIS
BUSINESS LOAN AGREEMENT dated May 6, 2014, is made and executed between Electromed,
Inc. (“Borrower”) and Venture Bank (“Lender”) on the following terms and
conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans or other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. Borrower understands and agrees that: (A)
in granting, renewing, or extending any Loan, Lender is relying upon Borrower’s
representations, warranties, and agreements as set forth in this Agreement; (B)
the granting, renewing, or extending of any Loan by Lender at all times shall
be subject to Lender’s sole judgment and discretion; and (C) all such Loans
shall be and remain subject to the terms and conditions of this Agreement.


TERM. This Agreement shall be effective as of May
6, 2014, and shall continue in full force and effect until such time as all of
Borrower’s Loans in favor of Lender have been paid in full, including
principal, interest, costs, expenses, attorneys’ fees, and other fees and
charges, or until such time as the parties may agree in writing to terminate
this Agreement.


CONDITIONS
PRECEDENT TO EACH ADVANCE. Lender’s obligation to make the initial Advance and each subsequent
Advance under this Agreement shall be subject to the fulfillment to Lender’s
satisfaction of all of the conditions set forth in this Agreement and in the
Related Documents.


	
 

	
 


	
 

	
Loan Documents. Borrower shall provide to Lender the
following documents for the Loan: (1) the Note; (2) Security Agreements
granting to Lender security interests in the Collateral; (3) financing
statements and all other documents perfecting Lender’s Security Interests;
(4) evidence of insurance as required below; (5) together with all such
Related Documents as Lender may require for the Loan; all in form and
substance satisfactory to Lender and Lender’s counsel.


	
 

	
 


	
 

	
Borrower’s Authorization. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and the
Related Documents. In addition, Borrower shall have provided such other
resolutions, authorizations, documents and instruments as Lender or its
counsel, may require.


	
 

	
 


	
 

	
Payment of Fees and Expenses. Borrower shall have paid to Lender all
fees, charges, and other expenses which are then due and payable as specified
in this Agreement or any Related Document.


	
 

	
 


	
 

	
Representations and Warranties. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.


	
 

	
 


	
 

	
No Event of Default. There shall not exist at the time of any
Advance a condition which would constitute an Event of Default under this
Agreement or under any Related Document.





REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender,
as of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:


	
 

	
 


	
 

	
Organization. Borrower is a corporation for profit which
is, and at all times shall be, duly organized, validly existing, and in good
standing under and by virtue of the laws of the State of Minnesota. Borrower
is duly authorized to transact business in all other states in which Borrower
is doing business, having obtained all necessary filings, governmental
licenses and approvals for each state in which Borrower is doing business.
Specifically, Borrower is, and at all times shall be, duly qualified as a
foreign corporation in all states in which the failure to so qualify would
have a material adverse effect on its business or financial condition.
Borrower has the full power and authority to own its properties and to
transact the business in which it is presently engaged or presently proposes
to engage. Borrower maintains an office at 500 Sixth Avenue NW, New Prague,
MN 56071. Unless Borrower has designated otherwise in writing, the principal
office is the office at which Borrower keeps its books and records including
its records concerning the Collateral. Borrower will notify Lender prior to
any change in the location of Borrower’s state of organization or any change
in Borrower’s name. Borrower shall do all things necessary to preserve and to
keep in full force and effect its existence, rights and privileges, and shall
comply with all regulations, rules, ordinances, statutes, orders and decrees
of any governmental or quasi-governmental authority or court applicable to
Borrower and Borrower’s business activities.


	
 

	
 


	
 

	
Assumed Business Names. Borrower has filed or recorded all
documents or filings required by law relating to all assumed business names
used by Borrower. Excluding the name of Borrower, the following is a complete
list of all assumed business names under which Borrower does business: None.















	
 

	
 

	
 


	
BUSINESS
LOAN AGREEMENT


	
Loan No:  15696

	
 (Continued)

	
Page 2


	
 

	
 

	
 








	
 

	
 


	
 

	
Authorization. Borrower’s execution, delivery, and
performance of this Agreement and all the Related Documents have been duly
authorized by all necessary action by Borrower and do not conflict with,
result in a violation of, or constitute a default under (1) any provision of
(a) Borrower’s articles of incorporation or organization, or bylaws, or (b)
any agreement or other instrument binding upon Borrower or (2) any law,
governmental regulation, court decree, or order applicable to Borrower or to
Borrower’s properties.


	
 

	
 


	
 

	
Financial Information. Each of Borrower’s financial statements
supplied to Lender truly and completely disclosed Borrower’s financial
condition as of the date of the statement, and there has been no material
adverse change in Borrower’s financial condition subsequent to the date of
the most recent financial statement supplied to Lender. Borrower has no
material contingent obligations except as disclosed in such financial
statements.


	
 

	
 


	
 

	
Legal Effect. This Agreement constitutes, and any
instrument or agreement Borrower is required to give under this Agreement
when delivered will constitute legal, valid, and binding obligations of
Borrower enforceable against Borrower in accordance with their respective
terms.


	
 

	
 


	
 

	
Properties. Except as contemplated by this Agreement
or as previously disclosed in Borrower’s financial statements or in writing
to Lender and as accepted by Lender, and except for property tax liens for
taxes not presently due and payable, Borrower owns and has good title to all
of Borrower’s properties free and clear of all Security Interests, and has
not executed any security documents or financing statements relating to such
properties. All of Borrower’s properties are titled in Borrower’s legal name,
and Borrower has not used or filed a financing statement under any other name
for at least the last five (5) years.


	
 

	
 


	
 

	
Hazardous Substances. Except as disclosed to and acknowledged by
Lender in writing, Borrower represents and warrants that: (1) During the
period of Borrower’s ownership of the Collateral, 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 any
of the Collateral. (2) Borrower has no knowledge of, or reason to believe
that there has been (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
Collateral by any prior owners or occupants of any of the Collateral; or (c)
any actual or threatened litigation or claims of any kind by any person
relating to such matters. (3) Neither Borrower nor any tenant, contractor,
agent or other authorized user of any of the Collateral shall use, generate,
manufacture, store, treat, dispose of or release any Hazardous Substance on,
under, about or from any of the Collateral; and 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. Borrower authorizes Lender and its agents to enter upon the Collateral
to make such inspections and tests as Lender may deem appropriate to
determine compliance of the Collateral with this section of the Agreement.
Any inspections or tests made by Lender shall be at Borrower’s expense and
for Lender’s purposes only and shall not be construed to create any responsibility
or liability on the part of Lender to Borrower or to any other person. The
representations and warranties contained herein are based on Borrower’s due
diligence in investigating the Collateral for hazardous waste and Hazardous
Substances. Borrower hereby (1) releases and waives any future claims against
Lender for indemnity or contribution in the event Borrower 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 Agreement or as a
consequence of any use, generation, manufacture, storage, disposal, release
or threatened release of a hazardous waste or substance on the Collateral.
The provisions of this section of the Agreement, including the obligation to
indemnify and defend, shall survive the payment of the Indebtedness and the
termination, expiration or satisfaction of this Agreement and shall not be
affected by Lender’s acquisition of any interest in any of the Collateral,
whether by foreclosure or otherwise.


	
 

	
 


	
 

	
Litigation and Claims. No litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid
taxes) against Borrower is pending or threatened, and no other event has
occurred which may materially adversely affect Borrower’s financial condition
or properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.


	
 

	
 


	
 

	
Taxes. To the best of Borrower’s knowledge, all
of Borrower’s tax returns and reports that are or were required to be filed,
have been filed, and all taxes, assessments and other governmental charges
have been paid in full, except those presently being or to be contested by
Borrower in good faith in the ordinary course of business and for which
adequate reserves have been provided.


	
 

	
 


	
 

	
Lien Priority. Unless otherwise previously disclosed to
Lender in writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security Interests
on or affecting any of the Collateral directly or indirectly securing
repayment of Borrower’s Loan and Note, that would be prior or that may in any
way be superior to Lender’s Security Interests and rights in and to such
Collateral.


	
 

	
 


	
 

	
Binding Effect. This Agreement, the Note, all Security
Agreements (if any), and all Related Documents are binding upon the signers
thereof, as well as upon their successors, representatives and assigns, and
are legally enforceable in accordance with their respective terms.





AFFIRMATIVE
COVENANTS. Borrower
covenants and agrees with Lender that, so long as this Agreement remains in
effect, Borrower will:


	
 

	
 


	
 

	
Notices of Claims and Litigation. Promptly inform Lender in writing of (1)
all material adverse changes in Borrower’s financial condition, and (2) all
existing and all threatened litigation, claims, investigations,
administrative proceedings or similar actions affecting Borrower or any
Guarantor which could materially affect the financial condition of Borrower
or the financial condition of any Guarantor.


	
 

	
 


	
 

	
Financial Records. Maintain its books and records in
accordance with GAAP, applied on a consistent basis, and permit Lender to
examine and audit Borrower’s books and records at all reasonable times.















	
 

	
 

	
 


	
BUSINESS
LOAN AGREEMENT


	
Loan No:  15696

	
 (Continued)

	
Page 3


	
 

	
 

	
 








	
 

	
 

	
 


	
 

	
Financial Statements. Furnish Lender with the following:


	
 

	
 

	
 


	
 

	
 

	
Interim Statements. As soon as available, but in no event
later than 45 days after the end of each month, Borrower’s balance sheet and
profit and loss statement for the period ended, prepared by Borrower.


	
 

	
 

	
 


	
 

	
 

	
Tax Returns. As soon as available, but in no event
later than 45 days after the applicable filing date for the tax reporting
period ended, Borrower’s Federal and other governmental tax returns, prepared
by a tax professional satisfactory to Lender.


	
 

	
 

	
 


	
 

	
All
financial reports required to be provided under this Agreement shall be
prepared in accordance with GAAP, applied on a consistent basis, and
certified by Borrower as being true and correct.


	
 

	
 

	
 


	
 

	
Additional Information. Furnish such additional information and
statements, as Lender may request from time to time. 


	
 

	
 

	
 


	
 

	
Additional Requirements.


	
 

	
 

	
 


	
 

	
1.
Borrower must maintain a Minimum Tangible Net Worth of not less than
$10,125,000.00. Tangible Net Worth is defined as total capital plus debt
subordinated to Venture Bank less intangible assets. Intangible assets
include but are not limited to goodwill, non-compete agreements, trademarks,
notes due from related parties and employee advances. Tangible Net Worth will
be calculated quarterly based on SEC filed financial statements.


	
 

	
 

	
 


	
 

	
2.
Borrower will maintain their primary deposit accounts with Venture Bank.


	
 

	
 

	
 


	
 

	
Insurance. Maintain fire and other risk insurance,
public liability insurance, and such other insurance as Lender may require
with respect to Borrower’s properties and operations, in form, amounts,
coverages and with insurance companies acceptable to Lender. Borrower, upon
request of Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at
least ten (10) days prior written notice to Lender. 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 Borrower
or any other person. In connection with all policies covering assets in which
Lender holds or is offered a security interest for the Loans, Borrower will
provide Lender with such lender’s loss payable or other endorsements as
Lender may require.


	
 

	
 

	
 


	
 

	
Insurance Reports. Furnish to Lender, upon request of Lender,
reports on each existing insurance policy showing such information as Lender
may reasonably request, including without limitation the following: (1) the
name of the insurer; (2) the risks insured; (3) the amount of the policy; (4)
the properties insured; (5) the then current property values on the basis of
which insurance has been obtained, and the manner of determining those
values; and (6) the expiration date of the policy. In addition, upon request
of Lender (however not more often than annually), Borrower will have an
independent appraiser satisfactory to Lender determine, as applicable, the
actual cash value or replacement cost of any Collateral. The cost of such
appraisal shall be paid by Borrower.


	
 

	
 

	
 


	
 

	
Other Agreements. Comply with all terms and conditions of
all other agreements, whether now or hereafter existing, between Borrower and
any other party and notify Lender immediately in writing of any default in
connection with any other such agreements.


	
 

	
 

	
 


	
 

	
Loan Proceeds. Use all Loan proceeds solely for
Borrower’s business operations, unless specifically consented to the contrary
by Lender in writing.


	
 

	
 

	
 


	
 

	
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if unpaid,
might become a lien or charge upon any of Borrower’s properties, income, or
profits. Provided however, Borrower will not be required to pay and discharge
any such assessment, tax, charge, levy, lien or claim so long as (1) the
legality of the same shall be contested in good faith by appropriate
proceedings, and (2) Borrower shall have established on Borrower’s books
adequate reserves with respect to such contested assessment, tax, charge,
levy, lien, or claim in accordance with GAAP.


	
 

	
 

	
 


	
 

	
Performance. Perform and comply, in a timely manner,
with all terms, conditions, and provisions set forth in this Agreement, in
the Related Documents, and in all other instruments and agreements between
Borrower and Lender. Borrower shall notify Lender immediately in writing of
any default in connection with any agreement.


	
 

	
 

	
 


	
 

	
Operations. Maintain executive and management
personnel with substantially the same qualifications and experience as the
present executive and management personnel; provide written notice to Lender
of any change in executive and management personnel; conduct its business
affairs in a reasonable and prudent manner.


	
 

	
 

	
 


	
 

	
Environmental Studies. Promptly conduct and complete, at
Borrower’s expense, all such investigations, studies, samplings and testings
as may be requested by Lender or any governmental authority relative to any
substance, or any waste or by-product of any substance defined as toxic or a
hazardous substance under applicable federal, state, or local law, rule,
regulation, order or directive, at or affecting any property or any facility
owned, leased or used by Borrower.


	
 

	
 

	
 


	
 

	
Compliance with Governmental Requirements. Comply with all laws, ordinances, and
regulations, now or hereafter in effect, of all governmental authorities
applicable to the conduct of Borrower’s properties, businesses and
operations, and to the use or occupancy of the Collateral, including without
limitation, the Americans With Disabilities Act. Borrower may contest in good
faith any such law, ordinance, or regulation and withhold compliance during
any proceeding, including appropriate appeals, so long as Borrower has
notified Lender in writing 















	
 

	
 

	
 


	
BUSINESS
LOAN AGREEMENT


	
Loan No:  15696

	
 (Continued)

	
Page 4


	
 

	
 

	
 








	
 

	
 

	
 


	
 

	
prior
to doing so and so long as, in Lender’s sole opinion, Lender’s interests in
the Collateral are not jeopardized. Lender may require Borrower to post
adequate security or a surety bond, reasonably satisfactory to Lender, to
protect Lender’s interest.


	
 

	
 

	
 


	
 

	
Inspection. Permit employees or agents of Lender at
any reasonable time to inspect any and all Collateral for the Loan or Loans
and Borrower’s other properties and to examine or audit Borrower’s books,
accounts, and records and to make copies and memoranda of Borrower’s books,
accounts, and records. If Borrower now or at any time hereafter maintains any
records (including without limitation computer generated records and computer
software programs for the generation of such records) in the possession of a
third party, Borrower, upon request of Lender, shall notify such party to
permit Lender free access to such records at all reasonable times and to
provide Lender with copies of any records it may request, all at Borrower’s
expense.


	
 

	
 

	
 


	
 

	
Compliance Certificates. Unless waived in writing by Lender,
provide Lender at least annually, with a certificate executed by Borrower’s
chief financial officer, or other officer or person acceptable to Lender,
certifying that the representations and warranties set forth in this
Agreement are true and correct as of the date of the certificate and further
certifying that, as of the date of the certificate, no Event of Default
exists under this Agreement.


	
 

	
 

	
 


	
 

	
Environmental Compliance and
Reports. Borrower
shall comply in all respects with any and all Environmental Laws; not cause
or permit to exist, as a result of an intentional or unintentional action or
omission on Borrower’s part or on the part of any third party, on property
owned and/or occupied by Borrower, any environmental activity where damage
may result to the environment, unless such environmental activity is pursuant
to and in compliance with the conditions of a permit issued by the
appropriate federal, state or local governmental authorities; shall furnish
to Lender promptly and in any event within thirty (30) days after receipt
thereof a copy of any notice, summons, lien, citation, directive, letter or
other communication from any governmental agency or instrumentality
concerning any intentional or unintentional action or omission on Borrower’s
part in connection with any environmental activity whether or not there is
damage to the environment and/or other natural resources.


	
 

	
 

	
 


	
 

	
Additional Assurances. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
assignments, financing statements, instruments, documents and other
agreements as Lender or its attorneys may reasonably request to evidence and
secure the Loans and to perfect all Security Interests.





LENDER’S
EXPENDITURES. If any
action or proceeding is commenced that would materially affect Lender’s
interest in the Collateral or if Borrower fails to comply with any provision of
this Agreement or any Related Documents, including but not limited to
Borrower’s failure to discharge or pay when due any amounts Borrower is
required to discharge or pay under this Agreement or any Related Documents,
Lender on Borrower’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 any Collateral and paying all costs for insuring,
maintaining and preserving any Collateral. 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 Borrower. 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.


	
 

	
 


	
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender
that while this Agreement is in effect, Borrower shall not, without the prior
written consent of Lender:


	
 

	
 


	
 

	
Indebtedness and Liens. (1) Except for trade debt incurred in the
normal course of business and indebtedness to Lender contemplated by this Agreement,
create, incur or assume indebtedness for borrowed money, including capital
leases, (2) sell, transfer, mortgage, assign, pledge, lease, grant a security
interest in, or encumber any of Borrower’s assets (except as allowed as
Permitted Liens), or (3) sell with recourse any of Borrower’s accounts,
except to Lender.


	
 

	
 


	
 

	
Continuity of Operations. (1) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(2) cease operations, liquidate, merge, transfer, acquire or consolidate with
any other entity, change its name, dissolve or transfer or sell Collateral
out of the ordinary course of business, or (3) pay any dividends on
Borrower’s stock (other than dividends payable in its stock), provided, however
that notwithstanding the foregoing, but only so long as no Event of Default
has occurred and is continuing or would result from the payment of dividends,
if Borrower is a “Subchapter S Corporation” (as defined in the Internal
Revenue Code of 1986, as amended), Borrower may pay cash dividends on its
stock to its shareholders from time to time in amounts necessary to enable
the shareholders to pay income taxes and make estimated income tax payments
to satisfy their liabilities under federal and state law which arise solely
from their status as Shareholders of a Subchapter S Corporation because of
their ownership of shares of Borrower’s stock, or purchase or retire any of
Borrower’s outstanding shares or alter or amend Borrower’s capital structure.


	
 

	
 


	
 

	
Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance money or
assets to any other person, enterprise or entity, (2) purchase, create or
acquire any interest in any other enterprise or entity, or (3) incur any
obligation as surety or guarantor other than in the ordinary course of
business.


	
 

	
 


	
 

	
Agreements. Enter into any agreement containing any
provisions which would be violated or breached by the performance of
Borrower’s obligations under this Agreement or in connection herewith.















	
 

	
 

	
 


	
BUSINESS
LOAN AGREEMENT


	
Loan No:  15696

	
 (Continued)

	
Page 5


	
 

	
 

	
 





CESSATION OF
ADVANCES. If Lender
has made any commitment to make any Loan to Borrower, whether under this
Agreement or under any other agreement, Lender shall have no obligation to make
Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is
in default under the terms of this Agreement or any of the Related Documents or
any other agreement that Borrower or any Guarantor has with Lender; (B)
Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files
a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C)
there occurs a material adverse change in Borrower’s financial condition, in
the financial condition of any Guarantor, or in the value of any Collateral
securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to
limit, modify or revoke such Guarantor’s guaranty of the Loan or any other loan
with Lender; or (E) Lender in good faith deems itself insecure, even though no
Event of Default shall have occurred.


RIGHT OF
SETOFF. To the extent
permitted by applicable law, Lender reserves a right of setoff in all
Borrower’s accounts with Lender (whether checking, savings, or some other
account). This includes all accounts Borrower holds jointly with someone else
and all accounts Borrower may open in the future. However, this does not
include any IRA or Keogh accounts, or any trust accounts for which setoff would
be prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts, and, at Lender’s option, to administratively freeze
all such accounts to allow Lender to protect Lender’s charge and setoff rights
provided in this paragraph.


	
 

	
 


	
DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement: Payment Default. Borrower fails to
make any payment when due under the Loan.


	
 

	
 


	
 

	
Other Defaults. Borrower fails to comply with or to
perform any other term, obligation, covenant or condition contained in this
Agreement 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 Borrower.


	
 

	
 


	
 

	
False Statements. Any warranty, representation or statement
made or furnished to Lender by Borrower or on Borrower’s behalf under this
Agreement 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.


	
 

	
 


	
 

	
Insolvency. The dissolution or termination of
Borrower’s existence as a going business, the insolvency of Borrower, the
appointment of a receiver for any part of Borrower’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 Borrower.


	
 

	
 


	
 

	
Defective Collateralization. This Agreement 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.


	
 

	
 


	
 

	
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 Borrower or by any governmental agency
against any collateral securing the Loan. This includes a garnishment of any
of Borrower’s accounts, including deposit accounts, with Lender. However,
this Event of Default shall not apply if there is a good faith dispute by
Borrower as to the validity or reasonableness of the claim which is the basis
of the creditor or forfeiture proceeding and if Borrower 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.


	
 

	
 


	
 

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


	
 

	
 


	
 

	
Change in Ownership. Any change in ownership of twenty-five
percent (25%) or more of the common stock of Borrower.


	
 

	
 


	
 

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


	
 

	
 


	
 

	
Insecurity. Lender in good faith believes itself
insecure.


	
 

	
 


	
 

	
Right to Cure. If any default, other than a default on
Indebtedness, is curable and if Borrower or Grantor, as the case may be, has not
been given a notice of a similar default within the preceding twelve (12)
months, it may be cured if Borrower or Grantor, as the case may be, after
Lender sends written notice to Borrower or Grantor, as the case may be,
demanding cure of such default: (1) cure the default within fifteen (15)
days; or (2) if the cure requires more than fifteen (15) days, immediately
initiate steps which Lender deems in Lender’s sole discretion to be
sufficient to cure the default and thereafter continue and complete all reasonable
and necessary steps sufficient to produce compliance as soon as reasonably
practical.





EFFECT OF AN
EVENT OF DEFAULT. If
any Event of Default shall occur, except where otherwise provided in this
Agreement or the Related Documents, all commitments and obligations of Lender
under this Agreement or the Related Documents or any other agreement
immediately will terminate (including any obligation to make further Loan
Advances or disbursements), and, at Lender’s option, all Indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the “Insolvency” subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender’s rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit 









	
 

	
 

	
 


	
BUSINESS
LOAN AGREEMENT


	
Loan No:  15696

	
 (Continued)

	
Page 6


	
 

	
 

	
 





of
any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender’s
right to declare a default and to exercise its rights and remedies.


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


	
 

	
 


	
 

	
Amendments. This Agreement, together with any Related
Documents, constitutes the entire understanding and agreement of the parties
as to the matters set forth in this Agreement. No alteration of or amendment
to this Agreement 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.


	
 

	
 


	
 

	
Attorneys’ Fees; Expenses. Borrower agrees to pay upon demand all of
Lender’s costs and expenses, including Lender’s reasonable attorneys’ fees
and Lender’s legal expenses, incurred in connection with the enforcement of
this Agreement. Lender may hire or pay someone else to help enforce this
Agreement, and Borrower shall pay the costs and expenses of such enforcement.
Costs and expenses include Lender’s reasonable attorneys’ fees and legal
expenses whether or not there is a lawsuit, including reasonable attorneys’
fees and legal expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. Borrower also shall pay all
court costs and such additional fees as may be directed by the court.


	
 

	
 


	
 

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


	
 

	
 


	
 

	
Consent to Loan Participation. Borrower agrees and consents to Lender’s
sale or transfer, whether now or later, of one or more participation
interests in the Loan to one or more purchasers, whether related or unrelated
to Lender. Lender may provide, without any limitation whatsoever, to any one
or more purchasers, or potential purchasers, any information or knowledge
Lender may have about Borrower or about any other matter relating to the
Loan, and Borrower hereby waives any rights to privacy Borrower may have with
respect to such matters. Borrower additionally waives any and all notices of
sale of participation interests, as well as all notices of any repurchase of
such participation interests. Borrower also agrees that the purchasers of any
such participation interests will be considered as the absolute owners of
such interests in the Loan and will have all the rights granted under the
participation agreement or agreements governing the sale of such
participation interests. Borrower further waives all rights of offset or
counterclaim that it may have now or later against Lender or against any
purchaser of such a participation interest and unconditionally agrees that
either Lender or such purchaser may enforce Borrower’s obligation under the
Loan irrespective of the failure or insolvency of any holder of any interest
in the Loan. Borrower further agrees that the purchaser of any such
participation interests may enforce its interests irrespective of any
personal claims or defenses that Borrower may have against Lender.


	
 

	
 


	
 

	
Governing Law. This Agreement 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 Agreement 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 Agreement 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 Agreement 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 Agreement. No prior waiver
by Lender, nor any course of dealing between Lender and Borrower, or between
Lender and any Grantor, shall constitute a waiver of any of Lender’s rights
or of any of Borrower’s or any Grantor’s obligations as to any future
transactions. Whenever the consent of Lender is required under this
Agreement, 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.


	
 

	
 


	
 

	
Notices. Any notice required to be given under this
Agreement 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 Agreement. Any party may change its address for
notices under this Agreement 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, Borrower agrees to keep Lender informed at all
times of Borrower’s current address. Unless otherwise provided or required by
law, if there is more than one Borrower, any notice given by Lender to any
Borrower is deemed to be notice given to all Borrowers.


	
 

	
 


	
 

	
Severability. If a court of competent jurisdiction finds
any provision of this Agreement 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 Agreement. Unless
otherwise required by law, the illegality, invalidity, or unenforceability of
any provision of this Agreement shall not affect the legality, validity or
enforceability of any other provision of this Agreement.


	
 

	
 


	
 

	
Subsidiaries and Affiliates of
Borrower. To the
extent the context of any provisions of this Agreement makes it appropriate,
including without limitation any representation, warranty or covenant, the
word “Borrower” as used in this Agreement shall include all of Borrower’s
subsidiaries and affiliates. Notwithstanding the foregoing however, under no
circumstances shall this Agreement be construed to require Lender to make any
Loan or other financial accommodation to any of Borrower’s subsidiaries or
affiliates.















	
 

	
 

	
 


	
BUSINESS
LOAN AGREEMENT


	
Loan No:  15696

	
 (Continued)

	
Page 7


	
 

	
 

	
 








	
 

	
 


	
 

	
Successors and Assigns. All covenants and agreements by or on
behalf of Borrower contained in this Agreement or any Related Documents shall
bind Borrower’s successors and assigns and shall inure to the benefit of
Lender and its successors and assigns. Borrower shall not, however, have the
right to assign Borrower’s rights under this Agreement or any interest
therein, without the prior written consent of Lender.


	
 

	
 


	
 

	
Survival of Representations and
Warranties. Borrower
understands and agrees that in making the Loan, Lender is relying on all
representations, warranties, and covenants made by Borrower in this Agreement
or in any certificate or other instrument delivered by Borrower to Lender
under this Agreement or the Related Documents. Borrower further agrees that
regardless of any investigation made by Lender, all such representations,
warranties and covenants will survive the making of the Loan and delivery to
Lender of the Related Documents, shall be continuing in nature, and shall
remain in full force and effect until such time as Borrower’s Indebtedness
shall be paid in full, or until this Agreement shall be terminated in the
manner provided above, whichever is the last to occur.


	
 

	
 


	
 

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





DEFINITIONS. The following capitalized words and terms
shall have the following meanings when used in this Agreement. 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 Agreement shall have the meanings attributed to such terms in the Uniform
Commercial Code. Accounting words and terms not otherwise defined in this
Agreement shall have the meanings assigned to them in accordance with generally
accepted accounting principles as in effect on the date of this Agreement:


	
 

	
 


	
 

	
Advance. The word “Advance” means a disbursement of
Loan funds made, or to be made, to Borrower or on Borrower’s behalf on a line
of credit or multiple advance basis under the terms and conditions of this
Agreement.


	
 

	
 


	
 

	
Agreement. The word “Agreement” means this Business
Loan Agreement, as this Business Loan Agreement may be amended or modified
from time to time, together with all exhibits and schedules attached to this
Business Loan Agreement from time to time.


	
 

	
 


	
 

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


	
 

	
 


	
 

	
Collateral. The word “Collateral” means all property
and assets granted as collateral security for a Loan, whether real or
personal property, whether granted directly or indirectly, whether granted
now or in the future, and whether granted in the form of a security interest,
mortgage, collateral mortgage, deed of trust, assignment, pledge, crop
pledge, chattel mortgage, collateral chattel mortgage, chattel trust,
factor’s lien, equipment trust, conditional sale, trust receipt, lien,
charge, lien or title retention contract, lease or consignment intended as a
security device, or any other security or lien interest whatsoever, whether
created by law, contract, or otherwise.


	
 

	
 


	
 

	
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 Agreement in the default section of
this Agreement.


	
 

	
 


	
 

	
GAAP. The word “GAAP” means generally accepted
accounting principles.


	
 

	
 


	
 

	
Grantor. The word “Grantor” means each and all of
the persons or entities granting a Security Interest in any Collateral for
the Loan, including without limitation all Borrowers granting such a Security
Interest.


	
 

	
 


	
 

	
Guarantor. The word “Guarantor” means any guarantor,
surety, or accommodation party of any or all of the Loan.


	
 

	
 


	
 

	
Guaranty. The word “Guaranty” means the guaranty
from Guarantor 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 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.


	
 

	
 


	
 

	
Indebtedness. The word “Indebtedness” means the
indebtedness evidenced by the Note or Related Documents, including all
principal and interest together with all other indebtedness and costs and
expenses for which Borrower is responsible under this Agreement or under any
of the Related Documents.















	
 

	
 

	
 


	
BUSINESS
LOAN AGREEMENT


	
Loan No:  15696

	
 (Continued)

	
Page 8


	
 

	
 

	
 








	
 

	
 


	
 

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


	
 

	
 


	
 

	
Loan. The word “Loan” means any and all loans
and financial accommodations from Lender to Borrower whether now or hereafter
existing, and however evidenced, including without limitation those loans and
financial accommodations described herein or described on any exhibit or
schedule attached to this Agreement from time to time.


	
 

	
 


	
 

	
Note. The word “Note” means the Note dated May
6, 2014 and executed by Electromed, Inc. in the principal amount of
$1,287,244.73, together with all renewals of, extensions of, modifications
of, refinancings of, consolidations of, and substitutions for the note or
credit agreement.


	
 

	
 


	
 

	
Permitted Liens. The words “Permitted Liens” mean (1) liens
and security interests securing Indebtedness owed by Borrower to Lender; (2)
liens for taxes, assessments, or similar charges either not yet due or being
contested in good faith; (3) liens of materialmen, mechanics, warehousemen,
or carriers, or other like liens arising in the ordinary course of business
and securing obligations which are not yet delinquent; (4) purchase money
liens or purchase money security interests upon or in any property acquired
or held by Borrower in the ordinary course of business to secure indebtedness
outstanding on the date of this Agreement or permitted to be incurred under
the paragraph of this Agreement titled “Indebtedness and Liens”; (5) liens
and security interests which, as of the date of this Agreement, have been
disclosed to and approved by the Lender in writing; and (6) those liens and
security interests which in the aggregate constitute an immaterial and
insignificant monetary amount with respect to the net value of Borrower’s
assets.


	
 

	
 


	
 

	
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 Loan.


	
 

	
 


	
 

	
Security Agreement. The words “Security Agreement” mean and
include without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.


	
 

	
 


	
 

	
Security Interest. The words “Security Interest” mean,
without limitation, any and all types of collateral security, present and
future, whether in the form of a lien, charge, encumbrance, mortgage, deed of
trust, security deed, assignment, pledge, crop pledge, chattel mortgage,
collateral chattel mortgage, chattel trust, factor’s lien, equipment trust,
conditional sale, trust receipt, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever whether created by law, contract, or otherwise.





BORROWER
ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND
BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED MAY 6,
2014.


	
 

	
 

	
 


	
BORROWER:


	
 

	
 

	
 


	
ELECTROMED, INC. By:


	
 

	
 

	
 


	
By:

	
/s/ Jeremy Brock

	
 


	
 

	
Jeremy Brock, Chief
Financial Officer of Electromed, Inc.


	
 

	
 

	
 


	
LENDER:


	
 

	
 

	
 


	
VENTURE BANK


	
 

	
 

	
 


	
By:

	
/s/ Kevin Doyle

	
 


	
 

	
Authorized Signer