Document:

Exhibit 10.3

CHANGE IN TERMS 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

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Principal Amount: $1,287,244.73

	
Date of Agreement: May 6, 2014       

DESCRIPTION
OF EXISTING INDEBTEDNESS.
Promissory Note #15696 dated 12/18/2013, in the original amount of
$1,300,000.00 from Borrower to Lender.

DESCRIPTION
OF COLLATERAL:

-
Real Property located at 500 and 502 Sixth Avenue NW, New Prague, MN 56071 per
Mortgage dated 12/18/2013.

-
An Assignment of Rents on the Real Property located at 500 and 502 Sixth Avenue
NW, New Prague, MN 56071 dated 12/18/2013.

DESCRIPTION
OF CHANGE IN TERMS.
Amend Covenants in Loan Agreement.

PROMISE TO
PAY. Electromed, Inc.
(“Borrower”) promises to pay to Venture Bank (“Lender”), or order, in lawful
money of the United States of America, the principal amount of One Million Two
Hundred Eighty-seven Thousand Two Hundred Forty-four & 73/100 Dollars
($1,287,244.73), together with interest on the unpaid principal balance from
May 6, 2014, calculated as described in the “INTEREST CALCULATION METHOD”
paragraph using an interest rate of 5.000% per annum based on a year of 360
days, until paid in full. The interest rate may change under the terms and
conditions of the “INTEREST AFTER DEFAULT” section.

PAYMENT. Borrower will pay this loan in 55 regular
payments of $8,631.55 each and one irregular last payment estimated at
$1,090,857.33. Borrower’s first payment is due May 18, 2014, and all subsequent
payments are due on the same day of each month after that. Borrower’s final
payment will be due on December 18, 2018, and will be for all principal and all
accrued interest not yet paid. Payments include principal and interest. Unless
otherwise agreed or required by applicable law, payments will be applied first
to any accrued unpaid interest; then to principal; then to any unpaid collection
costs; and then to any late charges. Borrower will pay Lender at Lender’s
address shown above or at such other place as Lender may designate in writing.

INTEREST
CALCULATION METHOD.
Interest on this loan is computed on a 365/360 basis; that is, by applying the
ratio of the interest rate over a year of 360 days, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. All interest payable under this loan is
computed using this method. This calculation method results in a higher
effective interest rate than the numeric interest rate stated in the loan
documents.

PREPAYMENT
PENALTY. Upon
prepayment of this Agreement, Lender is entitled to the following prepayment
penalty: In the event of a prepayment of more than 20% of the original
principal amount of the loan within a twelve month period due to loan being
refinanced at another institution, a prepayment penalty shall be assessed as
follows:

1)
If the prepayment occurs on or before the first anniversary date of the loan
(12/18/2014), the prepayment penalty will equal five percent (5%) of the
principal amount prepaid.

2)
If the prepayment occurs after the first anniversary date, but on or before the
second anniversary date, the prepayment penalty will equal four percent (4%) of
the principal amount prepaid.

3)
If the prepayment occurs after the second anniversary date, but on or before
the third anniversary date, the prepayment penalty will equal three percent
(3%) of the principal amount prepaid.

4)
If the prepayment occurs after the third anniversary date, but on or before the
fourth anniversary date, the prepayment penalty will equal two percent (2%) of
the principal amount prepaid.

5)
If the prepayment occurs after the fourth anniversary date, but on or before
the fifth anniversary date, the prepayment penalty will equal one percent (1%)
of the principal amount prepaid.

*Prepayment
Penalty will be waived for the last 180 days of the 5 year term.

Except
for the foregoing, Borrower may pay all or a portion of the amount owed earlier
than it is due. Early payments will not, unless agreed to by Lender in writing,
relieve Borrower of Borrower’s obligation to continue to make payments under
the payment schedule. Rather, early payments will reduce the principal balance
due and may result in Borrower’s making fewer payments. Borrower agrees not to
send Lender payments marked “paid in full”, “without recourse”, or similar
language. If Borrower sends such a payment, Lender may accept it without losing
any of Lender’s rights under 

	
 

	
 

	
 

	
CHANGE IN TERMS AGREEMENT

	
Loan No:  15696

	
 (Continued)

	
Page 2

	
 

	
 

	
 

this
Agreement, and Borrower will remain obligated to pay any further amount owed to
Lender. All written communications concerning disputed amounts, including any
check or other payment instrument that indicates that the payment constitutes
“payment in full” of the amount owed or that is tendered with other conditions
or limitations or as full satisfaction of a disputed amount must be mailed or
delivered to: Venture Bank, P.O. Box 9180 Minneapolis, MN 55480-9180.

LATE CHARGE. If a payment is 10 days or more late,
Borrower will be charged 5.000% of the unpaid portion of the regularly
scheduled payment or $50.00, whichever is greater.

INTEREST
AFTER DEFAULT. Upon
default, including failure to pay upon final maturity, the interest rate on
this loan shall be increased by 6.000 percentage points. However, in no event
will the interest rate exceed the maximum interest rate limitations under
applicable law.

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 Indebtedness.

	
 

	
 

	
 

	
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.

	
 

	
 

	
 

	
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 Indebtedness. 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, 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 evidenced by this Note.

	
 

	
 

	
 

	
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 Indebtedness is impaired.

	
 

	
 

	
 

	
Insecurity. Lender in good faith believes itself
insecure.

	
 

	
 

	
 

	
Cure Provisions. If any default, other than a default in
payment is curable and if Borrower has not been given a notice of a breach of
the same provision of this Agreement within the preceding twelve (12) months,
it may be cured if Borrower, after Lender sends written notice to Borrower
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 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.

LENDER’S
RIGHTS. Upon default,
Lender may declare the entire unpaid principal balance under this Agreement and
all accrued unpaid interest immediately due, and then Borrower will pay that
amount.

ATTORNEYS’ FEES; EXPENSES. Lender
may hire or pay someone else to help collect this Agreement if Borrower does
not pay. Borrower will pay Lender that amount. This includes, 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, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law.

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.

DISHONORED
ITEM FEE. Borrower
will pay a fee to Lender of $32.00 if Borrower makes a payment on Borrower’s
loan and the check or preauthorized charge with which Borrower pays is later
dishonored.

	
 

	
 

	
 

	
CHANGE IN TERMS AGREEMENT

	
Loan No:  15696

	
 (Continued)

	
Page 3

	
 

	
 

	
 

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.

COLLATERAL. Borrower acknowledges this Agreement is secured
by:

-
Real Property located at 500 and 502 Sixth Avenue NW, New Prague, MN 56071 per
Mortgage dated 12/18/2013.

-
An Assignment of Rents on the Real Property located at 500 and 502 Sixth Avenue
NW, New Prague, MN 56071 dated 12/18/2013.

CONTINUING
VALIDITY. Except as
expressly changed by this Agreement, the terms of the original obligation or
obligations, including all agreements evidenced or securing the obligation(s),
remain unchanged and in full force and effect. Consent by Lender to this
Agreement does not waive Lender’s right to strict performance of the
obligation(s) as changed, nor obligate Lender to make any future change in
terms. Nothing in this Agreement will constitute a satisfaction of the
obligation(s). It is the intention of Lender to retain as liable parties all
makers and endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in writing. Any maker
or endorser, including accommodation makers, will not be released by virtue of
this Agreement. If any person who signed the original obligation does not sign
this Agreement below, then all persons signing below acknowledge that this
Agreement is given conditionally, based on the representation to Lender that
the non-signing party consents to the changes and provisions of this Agreement
or otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent
actions.

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

MISCELLANEOUS
PROVISIONS. If any
part of this Agreement cannot be enforced, this fact will not affect the rest
of the Agreement. Lender may delay or forgo enforcing any of its rights or
remedies under this Agreement without losing them. 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 of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Borrower shall not affect Lender’s
right to declare a default and to exercise its rights and remedies. Borrower
and any other person who signs, guarantees or endorses this Agreement, to the
extent allowed by law, waive presentment, demand for payment, and notice of
dishonor. Upon any change in the terms of this Agreement, and unless otherwise
expressly stated in writing, no party who signs this Agreement, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender’s security
interest in the collateral; and take any other action deemed necessary by
Lender without the consent of or notice to anyone. All such parties also agree
that Lender may modify this loan without the consent of or notice to anyone
other than the party with whom the modification is made. The obligations under
this Agreement are joint and several.

SECTION
DISCLOSURE. To the
extent not preempted by federal law, this loan is made under Minnesota
Statutes, Section 334.01.

PRIOR
TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS AGREEMENT. BORROWER AGREES TO THE TERMS OF THE AGREEMENT.

	
 

	
 

	
 

	
 

	
BORROWER:

	
 

	
 

	
 

	
ELECTROMED, INC.

	
 

	
 

	
 

	
By:

	
/s/ Jeremy Brock

	
 

	
 

	
Jeremy Brock, Chief
Financial Officer of Electromed, Inc.

	
 

	
 

	
 

	
LENDER:

	
 

	
 

	
 

	
VENTURE BANK

	
 

	
 

	
 

	
 

	
X

	
/s/ Kevin Doyle

	
 

	
 

	
Authorized SignerExhibit 10.4

BUSINESS LOAN AGREEMENT (ASSET BASED)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Principal

	
Loan Date

	
Maturity

	
Loan No

	
Call / Coll

	
Account

	
Officer

	
Initials

	
$2,500,000.00

	
05-06-2014

	
12-18-2014

	
15695

	
 

	
 

	
 

	
 

	
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
(ASSET BASED) 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.

LINE OF
CREDIT. Lender agrees
to make Advances to Borrower from time to time from the date of this Agreement
to the Expiration Date, provided the aggregate amount of such Advances
outstanding at any time does not exceed the Borrowing Base. Within the
foregoing limits, Borrower may borrow, partially or wholly prepay, and reborrow
under this Agreement as follows:

	
 

	
 

	
 

	
 

	
Conditions Precedent to Each
Advance. Lender’s
obligation to make any Advance to or for the account of Borrower under this
Agreement is subject to the following conditions precedent, with all documents,
instruments, opinions, reports, and other items required under this Agreement
to be in form and substance satisfactory to Lender:

	
 

	
 

	
 

	
 

	
(1)
Lender shall have received evidence that this Agreement and all Related
Documents have been duly authorized, executed, and delivered by Borrower to
Lender.

	
 

	
 

	
 

	
 

	
 

	
(2)
Lender shall have received such opinions of counsel, supplemental opinions,
and documents as Lender may request.

	
 

	
 

	
 

	
 

	
 

	
(3)
The security interests in the Collateral shall have been duly authorized, created,
and perfected with first lien priority and shall be in full force and effect.

	
 

	
 

	
 

	
 

	
 

	
(4)
All guaranties required by Lender for the credit facility(ies) shall have
been executed by each Guarantor, delivered to Lender, and be in full force
and effect.

	
 

	
 

	
 

	
 

	
 

	
(5)
Lender, at its option and for its sole benefit, shall have conducted an audit
of Borrower’s Accounts, books, records, and operations, and Lender shall be
satisfied as to their condition.

	
 

	
 

	
 

	
 

	
 

	
(6)
Borrower shall have paid to Lender all fees, costs, and expenses specified in
this Agreement and the Related Documents as are then due and payable.

	
 

	
 

	
 

	
 

	
 

	
(7)
There shall not exist at the time of any Advance a condition which would
constitute an Event of Default under this Agreement, and Borrower shall have
delivered to Lender the compliance certificate called for in the paragraph
below titled “Compliance Certificate.”

	
 

	
 

	
 

	
 

	
Making Loan Advances. Advances under this credit facility, as
well as directions for payment from Borrower’s accounts, may be requested
orally or in writing by authorized persons. Lender may, but need not, require
that all oral requests be confirmed in writing. Each Advance shall be
conclusively deemed to have been made at the request of and for the benefit
of Borrower (1) when credited to any deposit account of Borrower maintained
with Lender or (2) when advanced in accordance with the instructions of an
authorized person. Lender, at its option, may set a cutoff time, after which
all requests for Advances will be treated as having been requested on the
next succeeding Business Day.

	
 

	
 

	
 

	
Mandatory Loan Repayments. If at any time the aggregate principal
amount of the outstanding Advances shall exceed the applicable Borrowing
Base, Borrower, immediately upon written or oral notice from Lender, shall
pay to Lender an amount equal to the difference between the outstanding
principal balance of the Advances and the Borrowing Base. On the Expiration
Date, Borrower shall pay to Lender in full the aggregate unpaid principal
amount of all Advances then outstanding and all accrued unpaid interest,
together with all other applicable fees, costs and charges, if any, not yet
paid.

	
 

	
 

	
 

	
BUSINESS LOAN AGREEMENT (ASSET
BASED)

	
Loan No:  15695

	
 (Continued)

	
Page 2

	
 

	
 

	
 

	
 

	
 

	
 

	
Loan Account. Lender shall maintain on its books a
record of account in which Lender shall make entries for each Advance and
such other debits and credits as shall be appropriate in connection with the
credit facility. Lender shall provide Borrower with periodic statements of
Borrower’s account, which statements shall be considered to be correct and
conclusively binding on Borrower unless Borrower notifies Lender to the
contrary within thirty (30) days after Borrower’s receipt of any such
statement which Borrower deems to be incorrect.

COLLATERAL. To secure payment of the Primary Credit
Facility and performance of all other Loans, obligations and duties owed by
Borrower to Lender, Borrower (and others, if required) shall grant to Lender
Security Interests in such property and assets as Lender may require. Lender’s
Security Interests in the Collateral shall be continuing liens and shall
include the proceeds and products of the Collateral, including without
limitation the proceeds of any insurance. With respect to the Collateral,
Borrower agrees and represents and warrants to Lender:

	
 

	
 

	
 

	
Perfection of Security Interests. Borrower agrees to execute all documents
perfecting Lender’s Security Interest and to take whatever actions are
requested by Lender to perfect and continue Lender’s Security Interests in
the Collateral. Upon request of Lender, Borrower will deliver to Lender any
and all of the documents evidencing or constituting the Collateral, and
Borrower will note Lender’s interest upon any and all chattel paper and
instruments if not delivered to Lender for possession by Lender.
Contemporaneous with the execution of this Agreement, Borrower will execute
one or more UCC financing statements and any similar statements as may be
required by applicable law, and Lender will file such financing statements
and all such similar statements in the appropriate location or locations.
Borrower hereby appoints Lender as its irrevocable attorney-in-fact for the
purpose of executing any documents necessary to perfect or to continue any
Security Interest. Lender may at any time, and without further authorization
from Borrower, file a carbon, photograph, facsimile, or other reproduction of
any financing statement for use as a financing statement. Borrower will
reimburse Lender for all expenses for the perfection, termination, and the
continuation of the perfection of Lender’s security interest in the
Collateral. Borrower promptly will notify Lender before any change in
Borrower’s name including any change to the assumed business names of
Borrower. Borrower also promptly will notify Lender before any change in
Borrower’s Social Security Number or Employer Identification Number. Borrower
further agrees to notify Lender in writing prior to any change in address or
location of Borrower’s principal governance office or should Borrower merge
or consolidate with any other entity.

	
 

	
 

	
 

	
Collateral Records. Borrower does now, and at all times
hereafter shall, keep correct and accurate records of the Collateral, all of
which records shall be available to Lender or Lender’s representative upon
demand for inspection and copying at any reasonable time. With respect to the
Accounts, Borrower agrees to keep and maintain such records as Lender may
require, including without limitation information concerning Eligible
Accounts and Account balances and agings. Records related to Accounts
(Receivables) are or will be located at the Borrower’s Corporate
Headquarters. The above is an accurate and complete list of all locations at
which Borrower keeps or maintains business records concerning Borrower’s
collateral.

	
 

	
 

	
 

	
Collateral Schedules. Concurrently with the execution and
delivery of this Agreement, Borrower shall execute and deliver to Lender
schedules of Accounts and schedules of Eligible Accounts in form and
substance satisfactory to the Lender. Thereafter supplemental schedules shall
be delivered according to the following schedule: With respect to Eligible
Accounts, schedules shall be delivered according to the additional
requirements under the paragraph titled “Affirmative Covenants”.

	
 

	
 

	
 

	
Representations and Warranties
Concerning Accounts.
With respect to the Accounts, Borrower represents and warrants to Lender: (1)
Each Account represented by Borrower to be an Eligible Account for purposes
of this Agreement conforms to the requirements of the definition of an
Eligible Account; (2) All Account information listed on schedules delivered
to Lender will be true and correct, subject to immaterial variance; and (3)
Lender, its assigns, or agents shall have the right at any time and at
Borrower’s expense to inspect, examine, and audit Borrower’s records and to
confirm with Account Debtors the accuracy of such Accounts.

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.

	
 

	
 

	
 

	
Fees and Expenses Under This
Agreement. Borrower
shall have paid to Lender all fees, costs, and expenses specified in this
Agreement and the Related Documents as are then due and payable.

	
 

	
 

	
 

	
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:

	
 

	
 

	
 

	
BUSINESS LOAN AGREEMENT (ASSET
BASED)

	
Loan No:  15695

	
 (Continued)

	
Page 3

	
 

	
 

	
 

	
 

	
 

	
 

	
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.

	
 

	
 

	
 

	
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.

	
 

	
 

	
 

	
BUSINESS LOAN AGREEMENT (ASSET
BASED)

	
Loan No:  15695

	
 (Continued)

	
Page 4

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
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.

	
 

	
 

	
 

	
 

	
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.

	
 

	
 

	
 

	
 

	
 

	
Additional Requirements. Borrower will provide, as soon as
available, but in no event later than forty-five (45) days after the end of
each month, Borrower’s Accounts Receivable Aging and Collateral Schedule.

	
 

	
 

	
 

	
 

	
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

	
 

	
 

	
 

	
BUSINESS LOAN AGREEMENT (ASSET BASED)

	
Loan No:  15695

	
 (Continued)

	
Page 5

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
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 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:

	
 

	
 

	
 

	
BUSINESS LOAN AGREEMENT (ASSET
BASED)

	
Loan No:  15695

	
 (Continued)

	
Page 6

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
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.

	
 

	
 

	
 

	
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.

	
 

	
 

	
 

	
BUSINESS LOAN AGREEMENT (ASSET
BASED)

	
Loan No:  15695

	
 (Continued)

	
Page 7

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
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 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, 

	
 

	
 

	
 

	
BUSINESS LOAN AGREEMENT (ASSET
BASED)

	
Loan No:  15695

	
 (Continued)

	
Page 8

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
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.

	
 

	
 

	
 

	
 

	
 

	
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 extending Loan Advances, 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 extension of Loan
Advances and delivery to Lender of the Related Documents, shall be continuing
in nature, shall be deemed made and redated by Borrower at the time each Loan
Advance is made, 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:

	
 

	
 

	
 

	
 

	
 

	
Account. The word “Account” means a trade account,
account receivable, other receivable, or other right to payment for goods
sold or services rendered owing to Borrower (or to a third party grantor
acceptable to Lender).

	
 

	
 

	
 

	
 

	
 

	
Account Debtor. The words “Account Debtor” mean the person
or entity obligated upon an Account.

	
 

	
 

	
 

	
 

	
 

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

	
 

	
 

	
 

	
 

	
 

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

	
 

	
 

	
 

	
 

	
 

	
Borrowing Base. The words “Borrowing Base” mean, as
determined by Lender from time to time, the lesser of (1) $2,500,000.00 or
(2) 57.750% of the aggregate amount of Eligible Accounts.

	
 

	
 

	
 

	
 

	
 

	
Business Day. The words “Business Day” mean a day on
which commercial banks are open in the State of Minnesota.

	
 

	
 

	
 

	
 

	
 

	
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,

 

	
 

	
 

	
 

	
BUSINESS LOAN AGREEMENT (ASSET BASED)

	
Loan No:  15695

	
 (Continued)

	
Page 9

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
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. The word Collateral also includes without limitation all
collateral described in the Collateral section of this Agreement.

	
 

	
 

	
 

	
 

	
 

	
Eligible Accounts. The words “Eligible Accounts” mean at any
time, all of Borrower’s Accounts which contain selling terms and conditions
acceptable to Lender. The net amount of any Eligible Account against which
Borrower may borrow shall exclude all returns, discounts, credits, and
offsets of any nature. Unless otherwise agreed to by Lender in writing,
Eligible Accounts do not include:

	
 

	
 

	
 

	
 

	
 

	
(1)
Accounts with respect to which the Account Debtor is employee or agent of
Borrower.

	
 

	
 

	
 

	
 

	
 

	
(2)
Accounts with respect to which the Account Debtor is a subsidiary of, or
affiliated with Borrower or its shareholders, officers, or directors.

	
 

	
 

	
 

	
 

	
 

	
(3)
Accounts with respect to which goods are placed on consignment, guaranteed
sale, or other terms by reason of which the payment by the Account Debtor may
be conditional.

	
 

	
 

	
 

	
 

	
 

	
(4)
Accounts with respect to which Borrower is or may become liable to the
Account Debtor for goods sold or services rendered by the Account Debtor to
Borrower.

	
 

	
 

	
 

	
 

	
 

	
(5)
Accounts which are subject to dispute, counterclaim, or setoff.

	
 

	
 

	
 

	
 

	
 

	
(6)
Accounts with respect to which the goods have not been shipped or delivered,
or the services have not been rendered, to the Account Debtor.

	
 

	
 

	
 

	
 

	
 

	
(7)
Accounts with respect to which Lender, in its sole discretion, deems the
creditworthiness or financial condition of the Account Debtor to be
unsatisfactory.

	
 

	
 

	
 

	
 

	
 

	
(8)
Accounts of any Account Debtor who has filed or has had filed against it a
petition in bankruptcy or an application for relief under any provision of
any state or federal bankruptcy, insolvency, or debtor-in-relief acts; or who
has had appointed a trustee, custodian, or receiver for the assets of such
Account Debtor; or who has made an assignment for the benefit of creditors or
has become insolvent or fails generally to pay its debts (including its
payrolls) as such debts become due.

	
 

	
 

	
 

	
 

	
 

	
(9)
Accounts which have not been paid in full within 90 Days from the invoice
date.

	
 

	
 

	
 

	
 

	
 

	
(10)
Contractor progress billings, foreign receivables, bonded receivables and
retainages.

	
 

	
 

	
 

	
 

	
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.

	
 

	
 

	
 

	
 

	
Expiration Date. The words “Expiration Date” mean the date
of termination of Lender’s commitment to lend under 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.

	
 

	
 

	
 

	
BUSINESS LOAN AGREEMENT (ASSET
BASED)

	
Loan No:  15695

	
 (Continued)

	
Page 10

	
 

	
 

	
 

	
 

	
 

	
 

	
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.

	
 

	
 

	
 

	
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
$2,500,000.00, 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.

	
 

	
 

	
 

	
Primary Credit Facility. The words “Primary Credit Facility” mean
the credit facility described in the Line of Credit section of this
Agreement.

	
 

	
 

	
 

	
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
(ASSET BASED) AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT
(ASSET BASED) 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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00231-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00231-of-00352.parquet"}]]