Document:

CREDIT AGREEMENT

          THIS CREDIT
AGREEMENT, dated as of December 21, 2009, is by and between Vascular Solutions,
Inc., a Minnesota corporation (the “Borrower”), and U.S. Bank National
Association, a national banking association (the “Bank”).

RECITALS:

          A.          The
Borrower has requested that the Bank make available to the Borrower the
Revolving Credit Facility (defined below). 

          B.          The
Borrower will use the proceeds of advances under the Revolving Credit Facility
for the Borrower’s general working capital purposes.

AGREEMENTS:

          IN
CONSIDERATION of the foregoing premises, and the mutual covenants set forth
herein, the parties agree as follows:

ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS

          Section 1.1     Defined Terms. In addition to the terms
defined elsewhere in this Agreement, the following terms shall have the
meanings set out respectively after each (and such meanings shall be equally
applicable to both the singular and plural form of the terms defined, as the
context may require):

          Advance(s):
Any advance(s) of loan proceeds made by Bank to the Borrower in accordance with
the terms of this Agreement.

          Adverse
Effect: A negative event related to the business, operations, property,
assets or financial condition of the Borrower that depletes 50% of the
Borrower’s current cash and cash equivalents (as determined by the most recent
publicly-available financial statements). 

          Affiliate:
Any Person (i) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, the Borrower or
any of its Subsidiaries, or (ii) five percent (5%) or more of the equity
interest of which is held beneficially or of record by the Borrower or any of
its Subsidiaries. Control for purposes of this definition means the possession,
directly or indirectly, of the power to cause the direction of management and
policies of a Person, whether through the ownership of voting securities or
otherwise.

          Agreement:
This Credit Agreement, as it may be amended, modified, supplemented, restated
or replaced from time to time.

          Borrowing
Base: At any time an amount equal to the sum of:

	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 80% of Eligible Receivables; plus

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 the lesser of $5,000,000 or 50% of Eligible Inventory; plus

 
	
  

 	
  

 	
  

 
	
  

 	
 (c)

 	
 the lesser of $2,000,000 or 50% of Eligible Property and Equipment;

 

provided the foregoing Borrowing Base is subject to change from time to
time in the Banks’ discretion, including without limitation, following the
result of any collateral exam performed by the Bank in accordance with Section
8.6 hereof.

          Borrowing
Base Certificate: The borrowing base certificate in the form of Exhibit
B attached hereto, or such form as the Bank may require from time to time.

          Borrowing
Base Deficiency: At the time of any determination, the amount, if any, by
which the principal balance of the Revolving Credit Facility under this
Agreement exceeds the Borrowing Base.

          Business
Day: Any day (other than a Saturday, Sunday or legal holiday in the State
of New York) on which commercial banks are open for business in New York, New
York.

          Capitalized
Lease: Any lease which is or should be capitalized on the books of the
lessee in accordance with GAAP.

          Code:
The Internal Revenue Code of 1986, as amended, or any successor statute,
together with regulations thereunder.

          Commitment:
The commitment of the Bank to make Advances to the Borrower in accordance with
the terms of this Agreement and to issue Letters of Credit for the account of
the Borrower in an aggregate principal amount not to exceed the lesser of (i)
$10,000,000.00, and (ii) the Borrowing Base.

          Collateral:
As defined in Section 5.1.

          Compliance
Certificate: The compliance certificate in such form as the Bank may
require from time to time to be delivered by the Borrower to the Bank
demonstrating the Borrower’s compliance (or non-compliance) with Sections
8.2(a) and 8.2(b), and stating that as of the end of such period there did not
exist any Default or Event of Default.

          Credit
Party: The Borrower, any Subsidiary of the Borrower, any other Person who
at any time guaranties or pledges any assets to secure the Obligations, or any
one or more of them.

          Default:
Any event which, with the giving of notice to the Borrower or lapse of time, or
both, would constitute an Event of Default.

          EBITDA
[or Earnings Before Interest, Taxes, Depreciation, and Amortization]: For any period of determination, the net
income of a Person before deductions for Interest Expense, cash payment of
federal, state and local income taxes, depreciation, and amortization.

          EBITDAR:
EBITDA plus Operating Lease expense.

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          Eligible
Inventory: The dollar value of all raw materials and finished goods
inventory held for sale or lease which is merchantable, not unsaleable or
obsolete, owned solely by the Borrower that is at all times subject to a first
priority perfected security interest in favor of the Bank and is not subject to
any other Liens and which the Bank deems to be Eligible Inventory; provided,
that, without limiting the generality of the foregoing, Eligible
Inventory shall not include (i) work-in-process inventory, (ii) inventory
subject to consignment or otherwise in the possession of a third party,
(iii) inventory that is in-transit or not located within the United
States, (iv) inventory identified to be purchased under a contract under which
the Borrower has received, or is entitled to receive, an advance payment, (v)
inventory which is comprised of returns, rejected items, re-work items,
non-standard items, or odd-lots, (vi) supplies, packaging, maintenance parts or
sample inventory, and (vii) inventory that is located at any warehouse or other
premises and not covered by a landlord’s waiver and consent. Inventory which is
at any time Eligible Inventory but which subsequently fails to meet any of the
foregoing requirements shall forthwith cease to be Eligible Inventory. The
value of Eligible Inventory shall be the lower of the cost or market value of
the Eligible Inventory computed in accordance with GAAP on a first in, first
out basis and shall be determined from the Borrowing Base Certificate and
supporting reports delivered to the Bank pursuant to this Agreement. 

          Eligible
Property and Equipment: The net book value of all goods and equipment (as
such terms are defined in the Uniform Commercial Code as adopted in the State
of Minnesota) owned solely by the Borrower that is at all times subject to a
first priority perfected security interest in favor of the Bank and is not
subject to any other Liens, other than inventory, farm products, or consumer
goods.

          Eligible
Receivables: The dollar value of any account receivable owing to the
Borrower for services rendered or to be rendered or goods sold in the ordinary
course of business that has been invoiced to its customer by the Borrower, is
owned solely by the Borrower and is subject to a first priority perfected
security interest in favor of the Bank at the time it comes into existence and
continues to meet the same until it is collected in full and is not subject to
any other Liens. Without limiting the generality of the foregoing, a receivable
shall not be an Eligible Receivable if: 

	
  

 	
  

 
	
  

 	
             (a)          it
 has been unpaid more than 90 days past the invoice date thereof; 

 
	
  

 	
  

 
	
  

 	
             (b)          it
 is subject to any Lien, other than the security interest of the Bank; 

 
	
  

 	
  

 
	
  

 	
             (c)          it
 is not a valid, legally enforceable obligation of the account debtor to the
 full extent of its amount; 

 
	
  

 	
  

 
	
  

 	
             (d)          it
 is subject to any setoff, counterclaim, credit allowance, retainage, current
 claim against the warranty or adjustment by the account debtor thereunder, or
 to any claim by such account debtor denying liability thereunder in whole or
 in part, or such account debtor has refused to accept or has returned or
 offered to return any of the goods which are subject to such receivable; 

 
	
  

 	
  

 
	
  

 	
             (e)          the
 account debtor is also a supplier or creditor of the Borrower, to the extent
 of any contra account; 

 
	
  

 	
  

 
	
  

 	
             (f)          it
 did not arise in the ordinary course of the Borrower’s business; 

 

3

	
  

 	
  

 
	
  

 	
             (g)          any
 notice of the bankruptcy, insolvency or financial impairment of the account
 debtor thereunder has been received by the Borrower; 

 
	
  

 	
  

 
	
  

 	
             (h)          it
 arose out of any contract or order which by its terms, forbids or makes void
 or unenforceable its assignment by the Borrower to the Bank; 

 
	
  

 	
  

 
	
  

 	
             (i)          it
 is a receivable owing by (1) the United States government or any department,
 agency or other subdivision thereof (except to the extent that the Borrower
 complies with the Federal Assignment of Claims Act of 1940, as amended); (2)
 a Person located in any jurisdiction outside the United States; or (3) any
 Affiliate, shareholder or employee of the Borrower; 

 
	
  

 	
  

 
	
  

 	
             (j)          it
 relates to accounts that have been extended, restructured, amended or
 modified; or

 
	
  

 	
  

 
	
  

 	
             (k)          it
 relates to retainages or progress billings. 

 

A receivable which is at any time an Eligible Receivable but which
subsequently fails to meet any of the foregoing requirements shall forthwith
cease to be an Eligible Receivable. Further, (1) if 10% or more of the
receivables are from the same or related account debtor, the portion of the
obligations from such account debtor in excess of 10% shall be excluded from
Eligible Receivables, and (2) if 10% or more of the receivables from any
account debtor are more than 90 days past the invoice date, all obligations
owed by the account debtor shall be excluded from Eligible Receivables. The
amount of Eligible Receivables shall be determined from the Borrowing Base
Certificate and supporting reports delivered to the Bank pursuant to the terms
of this Agreement. 

          ERISA:
The Employee Retirement Income Security Act of 1974, as amended, and any
successor statute, together with regulations thereunder.

          ERISA
Affiliate: Any trade or business (whether or not incorporated) that is a
member of a group of which the Borrower is a member and which is treated as a
single employer under Section 414 of the Code.

          Event of
Default: Any event described in Section 10.1.

          GAAP:
Generally accepted accounting principles as in effect from time to time in the
United States, consistently applied.

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          Indebtedness:
Without duplication, all indebtedness for borrowed money or credit extended to
or for the account of the Borrower or any Subsidiary, including without
limitation, (a) obligations secured by any mortgage, pledge, security interest,
lien, charge or other encumbrance existing on property owned or acquired
subject thereto, whether or not the obligation secured thereby shall have been
assumed and whether or not the obligation secured is the obligation of the
owner or another party; (b) any obligation on account of deposits or advances;
(c) any obligation for the deferred purchase price of any property or services;
(d) any obligation as lessee under any Capitalized Lease; (e) all
guaranties, endorsements and other contingent obligations respecting
Indebtedness of others; and (f) undertakings or agreements to reimburse or indemnify
issuers of letters of credit. Notwithstanding the foregoing, “Indebtedness”
shall not include Trade Accounts Payable. For all purposes of this Agreement
(i) the Indebtedness of any Person shall include the Indebtedness of any
partnership in which such Person is a general partner, and (ii) the
Indebtedness of any Person shall include the Indebtedness of any joint venture
in which such Person is a joint venturer. 

          Interest
Expense: For any period of determination, the aggregate amount, without
duplication, of interest paid, accrued or scheduled to be paid in respect of
any Liabilities of a Person, including (a) all but the principal component of
payments in respect of conditional sale contracts, Capitalized Leases and other
title retention agreements of such Person, (b) commissions, discounts and other
fees and charges with respect to letters of credit and bankers’ acceptance
financings and (c) net costs under interest rate protection agreements, in each
case determined in accordance with GAAP.

          Investment:
The acquisition, purchase, making or holding of any stock or other security,
any loan, advance, contribution to capital, extension of credit (except for
trade and customer accounts receivable for inventory sold or services rendered
in the ordinary course of business and payable in accordance with customary
trade terms), any acquisitions of real or personal property (other than real
and personal property acquired in the ordinary course of business) and any
purchase or commitment or option to purchase stock or other debt or equity
securities of or any interest in another Person or any integral part of any
business or the assets comprising such business or part thereof. Investments do
not include advances or loans, which in the aggregate do not exceed
$1,000,000.00, made to vendors who will ultimately provide products to
Borrower.

          Letters
of Credit: Any letters of credit issued by Bank, and subject to Bank’s
approval, for the account of Borrower, each of which is herein sometimes individually called a “Letter of
Credit”, as the same may be amended, supplemented, extended or confirmed
from time to time.

          Letter
of Credit Obligations: The aggregate amount of all possible drawings
under all Letters of Credit plus all amounts drawn under any Letter of Credit
and not reimbursed by the Borrower hereunder.

          LIBOR
Rate: The one-month LIBOR rate quoted by Lender from Reuters Screen LIBOR01
Page or any successor thereto, which shall be that one-month LIBOR rate in
effect and reset each New York Banking Day, adjusted for any reserve
requirement and any subsequent costs arising from a change in government
regulation, such rate rounded up to the nearest one-sixteenth percent. The term
“New York Banking Day” means any date (other than a Saturday or Sunday) on
which commercial banks are open for business in New York, New York.

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          Liabilities:
Means with respect to any Person (1) indebtedness or liability for borrowed
money; (2) obligations evidenced by bonds, debentures, notes, or other
similar instruments; (3) obligations for the deferred purchase price of
property or services (including trade obligations); (4) obligations as lessee
under Capital Leases and Operating Leases; (5) current liabilities in respect
of unfunded vested benefits under Plans covered by ERISA; (6) obligations under
letters of credit; (7) obligations under acceptance facilities; (8) all
guaranties, endorsements (other than for collection or deposit in the ordinary
course of business), and other contingent obligations to purchase, to provide
funds for payment, to supply funds to invest in any Person or entity, or
otherwise to assure a creditor against loss; and (9) obligations secured by any
Liens, whether or not the obligations have been assumed.

          Lien:
Any security interest, mortgage, pledge, lien, hypothecation, judgment lien or
similar legal process, charge, encumbrance, title retention agreement or
analogous instrument or device (including, without limitation, the interest of
the lessors under Capitalized Leases and the interest of a vendor under any
conditional sale or other title retention agreement).

          Loan(s):
Any loan(s) made by the Bank to the Borrower under the Revolving Credit
Facility.

          Loan
Documents: This Agreement, the Note, the Security Agreement, and each other
instrument, document, financing statement, guaranty, security agreement, pledge
agreement, mortgage, or other agreement executed and delivered by the Borrower
or any guarantor or party granting security interests in connection with this
Agreement, the Loans or any collateral for the Loans.

          Maturity
Date: The Revolving Credit Expiration Date.

          Note:
That certain Revolving Promissory Note, dated the date hereof, executed by the
Borrower and made payable to the order of the Bank in the original principal
amount of Ten Million and 00/100 Dollars ($10,000,000), as it may be amended,
modified, supplemented, restated or replaced from time to time.

          Obligations:
The obligation of the Borrower: (a) to pay the principal of and interest on the
Note in accordance with the terms hereof and thereof, and to satisfy all of the
Borrower’s other obligations to the Bank, whether hereunder or otherwise,
whether now existing or hereafter incurred, whether matured or unmatured,
whether direct or contingent, whether joint, several or joint and several,
including without limitation the Letter of Credit Obligations, obligations with
respect to any interest rate swaps, caps, collars or other derivative or
hedging products, including without limitation, any obligations to or credit
from others in which the Bank has a direct or indirect interest (including
without limitation participations), including any extensions, modifications,
renewals thereof and substitutions therefor; (b) to repay to the Bank all
amounts advanced by the Bank hereunder or otherwise on behalf of the Borrower,
including, but without limitation, advances for principal or interest payments
to prior secured parties, mortgagees or lienors, or for taxes, levies,
insurance, rent, repairs to or maintenance or storage of any of the Collateral;
and (c) to pay all of the Bank’s expenses and costs, together with the fees and
expenses of its counsel in connection with this Agreement or any other Loan
Document(s), and any amendments thereto, and the documents required hereunder
or thereunder, excluding costs and attorneys’ fees incurred in the negotiation
and preparation of this Agreement and the other initial Loan Documents, or any
proceedings brought or threatened to enforce payment of any of the Obligations
described in clauses (a) or (b) above.

6

          Operating
Accounts: All operating and depositary accounts of Borrower (whether one or
more), including all accounts for depositing revenues and paying expenses
relating to Borrower’s operations.

          Operating
Lease: A lease agreement, rental agreement or similar agreement for the use
of real or personal property (tangible or intangible) which are not required to
be classified and accounted for as a Capitalized Lease

          Organizational
Documents: The following documents each of which shall be in form and
substance acceptable to the Lender:

	
  

 	
  

 	
  

 
	
  

 	
 (i)

 	
 a copy of the Borrower’s Articles of Incorporation, duly certified as
 of a current date by the Minnesota Secretary of State, along with any
 amendments to the same;

 
	
  

 	
  

 	
  

 
	
  

 	
 (ii)

 	
 a copy of the Borrower’s Bylaws;

 
	
  

 	
  

 	
  

 
	
  

 	
 (iii)

 	
 a Certificate of Good Standing of the Borrower, duly issued as of a
 current date by the Minnesota Secretary of State; and

 
	
  

 	
  

 	
  

 
	
  

 	
 (iv)

 	
 a copy of the resolutions of the Borrower’s board of directors
 authorizing execution, delivery and performance of the Loan Documents and the
 transactions contemplated thereby.

 

          PBGC:
The Pension Benefit Guaranty Corporation, established pursuant to Subtitle A of
Title IV of ERISA, and any successor thereto or to the functions thereof.

          Permitted
Lien: Any Lien of a kind specified in paragraphs (a)-(d) of Section 9.11.

          Person:
Any natural person, corporation, partnership, joint venture, firm, association,
trust, unincorporated organization, government or governmental agency or
political subdivision or any other entity, whether acting in an individual,
fiduciary or other capacity.

          Plan:
An employee benefit plan or other plan, maintained for employees of the
Borrower or of any ERISA Affiliate, and subject to Title IV of ERISA or Section
412 of the Code.

          Prohibited Transaction: A transaction
prohibited by either Section 4975 of the Code or Section 406 of ERISA, but
excluding any exempt transactions as provided thereunder.

          Reportable
Event: A reportable event as defined in Section 4043 of ERISA and the
regulations issued under such Section, with respect to a Plan, excluding,
however, such events as to which the PBGC by regulation has waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided that a failure to meet the minimum
funding standard of Section 412 of the Code and Section 302 of ERISA shall be a
reportable event regardless of the issuance of any such waivers in accordance
with Section 412(d) of the Code.

7

          Revolving
Credit Expiration Date: The date that first occurs: (i) December 21, 2010,
or (ii) the date on which the Revolving Credit Facility is terminated
pursuant to Section 10.2.

          Revolving
Credit Facility: The revolving credit facility under which the Bank may
issue Letters of Credit and make Loans to the Borrower in accordance with Article
2 and the Note up to an aggregate principal amount at any one time
outstanding not to exceed the Commitment.

          Revolving
Interest Rate: The annual rate of interest that shall at all times be equal
to the LIBOR Rate plus one and sixty-hundredths percent (1.60%). The
Revolving Interest Rate shall change on the effective date of any change in the
LIBOR Rate. Notwithstanding the foregoing, from and after the occurrence of any
Default or Event of Default and continuing thereafter until such Default or
Event of Default shall be remedied to the written satisfaction of the Bank, the
Revolving Interest Rate shall, at the election of the Bank, be that rate of
interest that would otherwise be then in effect plus 5.0%. The Bank may
lend to its customers at rates that are at, above, or below the Revolving
Interest Rate.

          Security
Agreement: That certain Security Agreement, dated the date hereof, executed
by the Borrower and delivered to the Bank, as it may be amended, modified,
supplemented, restated or replaced from time to time pursuant to which Borrower
grants a security interest to Bank in all of Borrower’s property.

          Subsidiary:
Any Person of which or in which the Borrower and its other Subsidiaries own
directly or indirectly 50% or more of: (a) the combined voting power of all
classes of stock having general voting power under ordinary circumstances to
elect a majority of the board of directors of such Person, if it is a
corporation, (b) the capital interest or profit interest of such Person, if it
is a partnership, joint venture or similar entity, or (c) the beneficial
interest of such Person, if it is a trust, association or other unincorporated
organization.

          Total
Cash Flow Leverage Ratio: For any specified period, the ratio of Person’s
(a) Total Funded Indebtedness to (b) EBITDAR. Each
component of the Total Cash Flow Leverage Ratio shall be determined for
or as of any period in accordance with GAAP, unless this Agreement specifically
references a cash payment as part of the calculation. The Total Cash Flow Leverage Ratio shall be
tested as of the last day of each fiscal
quarterly period, with Total Funded Indebtedness calculated as of each such
date, and with EBITDAR calculated on an aggregate basis covering the prior
twelve (12) consecutive months ending on each such date.

          Total
Funded Indebtedness: At the time of any determination (without duplication)
with respect to any Person, the sum of the outstanding principal balance and
capitalized balance of the following Liabilities of such Person, (a) six times
the prior twelve consecutive months rent and lease expense under Operating
Leases, plus (b) the Loans under this Agreement, plus (c) any other interest
bearing indebtedness or liability for borrowed money (other than Trade Accounts
Payable).

          Trade
Accounts Payable: The trade accounts payable of any Person with a maturity
of not greater than 90 days (or such longer period of time as may be permitted
by the terms of such payable) incurred in the ordinary course of such Person’s
business.

8

          Section 1.2     Accounting Terms and Calculations. Except
as may be expressly provided to the contrary herein, all accounting terms used
herein shall be interpreted and all accounting determinations hereunder
(including, without limitation, determination of compliance with financial
ratios and restrictions in Articles 8 and 9 hereof) shall be made
in accordance with GAAP consistently applied.

          Section 1.3     Other Definitional Terms. The words “hereof,”
“herein” and “hereunder” and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. References to Sections, Exhibits,
Schedules and like references are to this Agreement unless otherwise expressly
provided.

ARTICLE 2 TERMS OF
LENDING

          Section 2.1     Revolving Credit Facility. Subject to
and upon the terms and conditions hereof and in reliance upon the
representations and warranties of the Borrower herein, the Bank agrees to make
advances (the “Advances”) to the Borrower under this Section 2.1 from
time to time from the date hereof until the Revolving Credit Expiration Date,
during which period the Borrower may repay and reborrow in accordance with the
provisions hereof, provided, that the aggregate unpaid principal amount of all
outstanding Advances under this Section 2.1 plus the Letter of Credit
Obligations shall not exceed the Commitment at any time. If, at any time, or
for any reason, the principal amount outstanding under the Loan pursuant to
Advances and all Letter of Credit Obligations exceeds the Commitment, the
Borrower shall immediately pay to the Bank, in cash, the amount of such excess.

          Section 2.2     Borrowing Procedures for Revolving Loan. Each
time the Borrower desires an Advance under the Revolving Credit Facility
pursuant to Section 2.1, such request shall be in writing (which may be
by telecopy) or by telephone, and must be given so as to be received by the
Bank not later than 11:00 a.m., Minneapolis time, on the date of the requested
advance. Each request for an Advance shall specify (i) the borrowing date
(which shall be a Business Day), and (ii) the amount of such Advance, (iii) the
purpose of such Advance, and (iv) any additional information required by
this Agreement or reasonably requested by Bank. Any request for an Advance
shall be deemed to be a representation that no event has occurred and is
continuing, or will result from such Advance, which constitutes a Default or an
Event of Default, and that the Borrower’s representations and warranties
contained in Article 7 are true and correct as of the date of the
Advance as though made on and as of such date. Unless the Bank determines that
any applicable condition specified in Article 6 has not been satisfied,
the Bank will agree to make the amount of the requested Advance available to
the Borrower at the Bank’s office located in Minneapolis, Minnesota, or such
other location as the Bank may designate from time to time, in immediately
available funds not later than 5:00 p.m., Minneapolis time, on the date
requested. The Borrower shall be obligated to repay all Advances the Bank
reasonably determines were requested on behalf of the Borrower notwithstanding
the fact that the person requesting the same was not in fact authorized to do
so.

9

          Section
2.3     The Note. The
obligation of the Borrower to repay any and all Advances made under Section
2.1, shall be evidenced by the Note. The Bank shall enter in its records
the amount of each advance under, and the payments made on, the Revolving
Credit Facility, and such records shall be deemed conclusive evidence of the
subject matter thereof, absent manifest error. 

          Section 2.4     Use of
Proceeds. The proceeds of the Advances from the Bank shall be
used for working capital purposes or general corporate purposes. 

          Section 2.5     Letters of
Credit. The Bank shall have no obligation to issue Letters of
Credit exceeding an aggregate limit of $4,750,000.00. The Bank’s
issuance of each Letter of Credit shall, in addition to the terms and
conditions of this facility, be subject to the conditions precedent that the
Borrower shall have executed and delivered such applications and other
instruments and agreements relating to such Letter of Credit as the Bank shall
have reasonably requested. Borrower hereby indemnifies and holds harmless the
Bank from and against any and all claims and damages, losses, liabilities,
costs or expenses which the Bank may incur (or which may be claimed against the
Bank by any person whatsoever), in connection with the execution and delivery
of any Letter of Credit or transfer of or payment or failure to pay under any
Letter of Credit; provided that the Borrower shall not be required to indemnify
any party seeking indemnification for any claims, damages, losses, liabilities,
costs or expenses to the extent, but only to the extent, caused by the
negligence, gross negligence or willful misconduct of the party seeking
indemnification. 

ARTICLE 3 INTEREST AND COSTS 

          Section 3.1     Interest
on Revolving Loan. The unpaid principal amount of the Loan shall
bear interest at the Revolving Interest Rate. 

          Section 3.2     Computation.
Interest on the Note shall be computed on the basis of a year consisting of 360
days, but charged for the actual days the principal remains outstanding. 

          Section 3.3     Payment
Dates. Interest accruing on the Loan shall be due and payable as
specified in the Note. Interest will accrue on any Advance beginning on the
date of such Advance and continuing up to and including the date that such
Advance is repaid. 

          Section 3.4     Late Fees.
In the event that any interest is not paid within 10 days after the due date
thereof, the Borrower shall pay to the Bank upon demand a late charge equal to
5% of such overdue interest amount or $5.00, whichever is greater. This late
charge is in addition to any default rate of interest that may be imposed. 

          Section 3.5     Non-Use Fee. On
the tenth (10th) day of the first month following the end of each quarter
during the term of the Loan commencing April 10, 2010 and continuing every
three months thereafter (July 10, October 10, January 10, April 10) until the
Obligations are satisfied in full, and on the Maturity Date, Borrower shall pay
Bank a fee (the “Unused Revolving Credit Fee”) in an amount equal to
one-eighth of one percent (0.125%) per annum multiplied by the difference
between the maximum Commitment and the average daily outstanding principal
balance of the Revolving Credit Facility for the immediately preceding calendar
quarter, as calculated by Bank. If applicable, the first and last payment of
the Unused Revolving Credit Fee shall be prorated if the period of time between
the date of this Agreement and the first payment date or the period of time
between the most recent payment date and the Revolving Credit Expiration Date
is more or less than a full calendar quarter.

10

          Section
3.6     Fees and Expenses.
On the date of this Agreement, the Borrower shall pay to the Bank all of the
Bank’s reasonable fees and expenses, including reasonable legal fees. The
Borrower shall pay to Bank an annual letter of credit fee of equal to the
Revolving Interest Rate for each Letter of Credit the Bank issues pursuant to
this Agreement. 

ARTICLE 4 PAYMENTS
AND PREPAYMENTS

          Section
4.1     Repayment.
Principal of the Loan shall be due and payable as specified in the Note and
herein. 

          Section
4.2     Accelerated Payments.
Upon the occurrence of an Event of Default and the acceleration of any Note,
pursuant to and as permitted by Section 10.2, the Note and all other
Obligations, shall be immediately due and payable as provided in Section
10.2 and in the Note. 

          Section
4.3     Payments.
Payments and prepayments of principal of, and interest on, the Note and all
fees, expenses and other obligations under the Loan Documents shall be made
without set-off or counterclaim in immediately available funds not later than
2:00 p.m., Minneapolis time, on the dates due at the Bank’s office as specified
in the Note or pursuant to other written instructions from the Bank. Funds
received on any day after such time shall be deemed to have been received on
the next Business Day. Whenever any payment to be made hereunder or on any Note
shall be stated to be due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and such extension of time
shall be included in the computation of any interest or fees. 

          Section
4.4     Debits; Advances.
The Bank is hereby authorized to pay accrued interest on the Note, the
principal of the Note, any and all other amounts when they become due and
payable under the Loan Documents, and any checks presented for payment, by
debiting any account of the Borrower at the Bank or by making one or more
advances under the Loan, all without further authorization of the Borrower. 

          Section
4.5     Application of the Payments.
Any voluntary prepayment shall be applied first to the payment of accrued
interest and then to the reduction of principal of such Note in inverse order
of maturity. Any prepayment resulting from an acceleration of the Note shall be
applied to any and all of the Note in such order and such amounts as the Bank
may from time to time determine and direct, notwithstanding any contrary
instructions or directions of the Borrower. 

          Section
4.6     Optional Prepayments. The
Borrower may, upon notice to the Bank, prepay the Note in whole or in part with
accrued interest to the date of such prepayment on the amount prepaid, without
premium or penalty.

11

          Section
4.7     Mandatory Prepayment.
In the event of a Borrowing Base Deficiency or in the event that the aggregate
outstanding principal amount of all Advances plus all Letter of Credit Obligations
shall at any time exceed the Commitment, the Borrower shall within 5 days
following notice from the Bank pay to the Bank the amount of such excess
together with the amount of accrued interest to the date of such prepayment on
the amount prepaid. 

ARTICLE 5 COLLATERAL
SECURITY

          Section
5.1     Composition of the Collateral.
The property in which a security interest is, or is intended to be, granted
pursuant to this Agreement, the Security Agreement, or any other Loan Document
and the provisions of Section 5.2 is herein collectively called the
“Collateral.” The Collateral, together with all the Borrower’s other property
of any kind held by the Bank, shall stand as one general, continuing collateral
security for all of the Obligations, and may be retained by the Bank until all
Obligations have been indefeasibly satisfied in full, and the Revolving Credit
Facility has terminated. 

          Section
5.2     Rights in Property Held by the Bank.
As security for the prompt satisfaction of all Obligations, the Borrower hereby
assigns, transfers and sets over to the Bank all of its right, title and
interest in and to, and grants to the Bank a lien on and a present and
continuing security interest in, any amounts which may be owing from time to
time by the Bank to the Borrower in any capacity, including, but without
limitation, (a) the Operating Accounts, (b) all other contract rights, claims
and privileges in respect of such accounts, and (c) all cash, checks, money
orders and other items of value of Borrower now or hereafter deposited in such
accounts, and all proceeds of the foregoing, which lien and security interest
shall be independent of any right of setoff which the Bank may have. Borrower
represents and warrants that there are no perfected liens or encumbrances with
respect to the accounts described in items (a) through (c) above, except for
the rights of Bank, and covenants with Bank that it shall not enter into any
acknowledgment or agreement that gives any other person or entity except Bank control
over, or any other security interest, lien or title in, such accounts. Bank
shall hold such accounts as additional security for all of Borrower’s
obligations under the Loan Documents. At any such time that no Event of Default
is continuing, Borrower shall have the right to use the Operating Accounts and
may withdraw funds from the Operating Accounts as the Borrower deems necessary
in the conduct of its normal business operations. Following the occurrence of
an Event of Default, and while an Event of Default is continuing, neither
Borrower nor any other person or entity, acting through or under Borrower,
shall have any control over the use of, or have any right to withdraw any
amount from, such accounts, without the prior written consent of Bank, except
as provided herein. 

          Section
5.3     Priority of Liens.
The liens as provided for under this Agreement, the Security Agreement and the
other Loan Documents shall be first and prior liens, except that Borrower may
have first and prior liens for specific items of equipment separate from the
Agreement, the Security Agreement, and other Loan Documents, the aggregate of
which will not exceed $250,000 at any given time. 

          Section
5.4     Financing Statements.
The Borrower will authorize, execute and deliver such security agreements,
assignments, and UCC financing statements (including amendments thereto and
continuation statements thereof) in form satisfactory to the Bank as the Bank
may specify and will pay or reimburse the Bank for all costs of filing or
recording the same in such public offices as the Bank may designate, and take
such other steps as the Bank shall direct, including the noting of the Bank’s
lien on the chattel paper or any vehicle certificates of title, in order to
perfect the Bank’s interest in the Collateral.

12

ARTICLE 6 CONDITIONS
PRECEDENT

          Section
6.1     Conditions of Initial Loan.
The obligation of the Bank to make the initial Advance hereunder shall be
subject to the satisfaction of the conditions precedent, in addition to the
conditions precedent set forth in Section 6.2 below, that the Bank shall have
received all of the items set forth on Exhibit A attached hereto, in form and
substance satisfactory to the Bank, each duly executed and certified or dated the
date hereof or such other date as is satisfactory to the Bank.  

          Section
6.2     Conditions Precedent to all Loans.
The obligation of the Bank to make any Advance hereunder shall be subject to
the satisfaction of the following conditions precedent (and any request for an
Advance) shall be deemed a written certification that such conditions precedent
have been satisfied): 

	
  

 	
  

 
	
  

 	
           (a)     Before
and after giving effect to such Advance, the representations and warranties
contained in Article 7 shall be true and correct, as though made on the date
of such Advance.  

 
	
  

 	
  

 
	
  

 	
           (b)     Before
 and after giving effect to such Advance, no Default or Event of Default shall
 have occurred and be continuing. 

 
	
  

 	
  

 
	
  

 	
           (c)     Before
 and after giving effect to such Advance, the Borrower shall be in compliance
 with all conditions set forth in Section 6.1. 

 
	
  

 	
  

 
	
  

 	
           (d)     No
 license, permit or other governmental consent material to the operation of
 Borrower’s business shall have been revoked or the issuance thereof subjected
 to challenge before any court or other governing authority. 

 

          Section
6.3     No Waiver. The
making of any Advance prior to fulfillment of any condition thereof shall not
be construed as a waiver of such condition, and the Bank reserves the right to
require fulfillment of any and all such conditions prior to making any
subsequent Advances.

13

ARTICLE 7
REPRESENTATIONS AND WARRANTIES

          To
induce the Bank to enter into this Agreement, and to grant the Revolving Credit
Facility and to make Advances hereunder, the Borrower represents and warrants
to the Bank: 

          Section
7.1     Organization, Standing, Etc of Borrower.
The Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of Minnesota, and has all requisite
corporate power and authority to carry on its businesses as now conducted and
as proposed to be conducted, to enter into the Loan Documents and to perform
its obligations under the Loan Documents. The Borrower is duly qualified and in
good standing as a foreign corporation in each jurisdiction in which the
character of the properties owned, leased or operated by it or the business
conducted and as proposed to be conducted by it makes such qualification
necessary, and where the failure to so qualify could reasonably be expected to
have a material adverse effect on the business. The Borrower holds all
certificates of authority, licenses and permits reasonably necessary to carry
on its business as presently conducted and as proposed to be conducted in each
jurisdiction in which it carries or proposes to carry on such business. 

          Section
7.2     Authorization and Validity.
The execution, delivery and performance by the Borrower of the Loan Documents
have been duly authorized by all necessary corporate action by the Borrower,
and the Loan Documents constitute the legal, valid and binding obligations of
the Borrower, enforceable against the Borrower in accordance with their
respective terms, subject to limitations as to enforceability which might
result from bankruptcy, insolvency, moratorium and other similar laws affecting
creditors’ rights generally and subject to limitations on the availability of
equitable remedies. 

          Section
7.3     No Conflict; No Default.
The execution, delivery and performance by the Borrower of the Loan Documents
will not (a) violate any provision of any law, statute, rule or regulation or
any order, writ, judgment, injunction, decree, determination or award of any
court, governmental agency or arbitrator presently in effect having
applicability to the Borrower, (b) violate or contravene any provisions of the
Borrower’s Articles of Incorporation or the Borrower’s Bylaws or Shareholder
Control Agreement (as applicable), or (c) result in a breach of or constitute a
default under any indenture, loan or credit agreement or any other license,
permit, agreement, lease or instrument to which the Borrower is a party or by
which it or any of its properties may be bound or result in the creation of any
Lien on any asset of the Borrower, other than Permitted Liens. The Borrower is
not in default under or in violation of any such law, statute, rule or
regulation, order, writ, judgment, injunction, decree, determination or award
or any such indenture, loan or credit agreement or other agreement, lease or
instrument in any case in which the consequences of such default or violation
could reasonably be expected to have an Adverse Effect. 

          Section
7.4     Government Consent.
No order, consent, approval, license, authorization or validation of, or
filing, recording or registration with, or exemption by, any governmental or
public body or authority is required on the part of the Borrower to authorize,
or is required in connection with the execution, delivery and performance of,
or the legality, validity, binding effect or enforceability of, the Loan
Documents. 

          Section
7.5     Financial Statements and Condition.
The financial statements of the Borrower, as heretofore furnished to the Bank
by the Borrower, fairly present in all material respects the financial
condition of the Borrower as at the dates specified therein and the results of
its operations and changes in financial position for the periods ended as of the
dates specified therein. As of the dates of such financial statements, the
Borrower has not had any material obligation, contingent liability, liability
for taxes or long-term lease obligation which is not reflected in such
financial statements or in the notes thereto. The Borrower is not aware of any
fact which casts doubt on the material accuracy or completeness thereof. 

14

          Section
7.6     Litigation.
There are no actions, suits or proceedings pending or threatened against or
affecting the Borrower or any of their properties before any court or
arbitrator, or any governmental department, board, agency or other
instrumentality which, if determined adversely to the Borrower could reasonably
be expected to have an Adverse Effect. 

          Section
7.7     Compliance.
The Borrower is in material compliance with all licenses, permits, statutes and
governmental rules and regulations applicable to it. 

          Section
7.8     Environmental, Health and Safety Laws.
There does not exist any violation by the Borrower of any applicable federal,
state or local law, rule or regulation or order of any government, governmental
department, board, agency or other instrumentality relating to environmental,
pollution, health or safety matters which will or threatens to impose a
material liability on the Borrower or which would require a material
expenditure by the Borrower to cure. The Borrower has not received, any notice
to the effect that any part of its operations or properties is not in material
compliance with any such law, rule, regulation or order or notice that it or
its property is the subject of any governmental investigation evaluating
whether any remedial action is needed to respond to any release of any toxic or
hazardous waste or substance into the environment, the consequences of which
non-compliance or remedial action could reasonably be expected to have an
Adverse Effect. 

          Section
7.9     ERISA. Each
Plan complies with all material applicable requirements of ERISA and the Code
and with all material applicable rulings and regulations issued under the
provisions of ERISA and the Code setting forth those requirements. No
Reportable Event, other than a Reportable Event for which the reporting
requirements have been waived by regulations of the PBGC, has occurred and is
continuing with respect to any Plan. All of the minimum funding standards
applicable to such Plans have been satisfied and there exists no event or
condition which would permit the institution of proceedings to terminate any
Plan under Section 4042 of ERISA. The current value of the Plans’ benefits
guaranteed under Title IV of ERISA does not exceed the current value of the
Plans’ assets allocable to such benefits. 

          Section
7.10     Margin Stock.
The Borrower is not engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock (as defined in Regulation U of the
Federal Reserve Board) and no part of the proceeds of any Loan will be used to
purchase or carry margin stock or for any other purpose which would violate any
of the margin requirements of the Federal Reserve Board. 

          Section
7.11     Ownership of Property: Liens.
The Borrower has good and sufficient title to its properties, including all
properties and assets referred to as owned by the Borrower in the financial
statements of the Borrower referred to in Section 7.5 (other than property
disposed of since the date of such financial statement in the ordinary course
of business), except that Borrower may have property subject to Permitted
Liens. None of the properties, revenues or assets of the Borrower is subject to
a Lien, except for Permitted Liens.  

15

          Section
7.12     Taxes. The
Borrower has filed all federal, state and local tax returns required to be filed
by it and its Subsidiaries and has paid or made provision for the payment of
all taxes due and payable pursuant to such returns and pursuant to any
assessments made against it or any of its property and all other taxes, fees
and other charges imposed on it or any of its property by any governmental
authority (other than taxes, fees or charges the amount or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in accordance with GAAP have been provided on the
books of the Borrower). No tax Liens have been filed and no material claims are
being asserted with respect to any such taxes, fees or charges. The charges,
accruals and reserves on the books of the Borrower in respect of taxes and
other governmental charges are adequate. 

          Section
7.13     Licenses and Infringement.
The Borrower possesses adequate licenses, agreements, permits, franchises,
patents, copyrights, trademarks and trade names, or rights thereto, to conduct
its business substantially as now conducted and as presently proposed to be
conducted. Borrower has not been notified of another party’s assertion that
Borrower is or may be liable with respect to any claim of infringement
regarding any franchise, patent, copyright, trademark or trade name possessed
or used by the Borrower, except as listed on Schedule 7.13. 

          Section
7.14     Investment Company Act.
The Borrower is not an “investment company” or a company “controlled” by an
investment company within the meaning of the Investment Company Act of 1940, as
amended. 

          Section
7.15     Subsidiaries.
The Borrower does not have any Subsidiaries, except a wholly-owned subsidiary Vascular Solutions, GmbH. 

          Section
7.16     Partnerships and Joint Ventures.
The Borrower is not a partner (limited or general) in any partnerships and the
Borrower is not a joint venturer in any joint ventures. 

          Section
7.17     Use of Proceeds.
The Borrower will use the proceeds as set forth in Section 2.4 above. 

          Section
7.18     Completeness of Disclosures.
No representation or warranty by the Borrower contained herein or in any other
Loan Document, or in any certificate or other document furnished heretofore or
concurrently with the signing of this Agreement or any other Loan Document by
the Borrower to the Bank in connection with the transactions contemplated
hereunder or under any other Loan Document, contains any untrue statement of a
material fact or omits to state a material fact which would prevent or
materially inhibit the Borrower from performing this Agreement or any other
Loan Document according to its terms. 

          Section
7.19     Survival of Representations.
All of the representations and warranties set forth in the immediately preceding
subsections shall survive until all the Obligations shall have been
indefeasibly satisfied in full, and the Revolving Credit Facility has been
terminated. 

Each of the
foregoing warranties and representations shall be deemed to be repeated and
reaffirmed on and as of the date any Advance is made hereunder by the Bank to
the Borrower. 

16

ARTICLE 8
AFFIRMATIVE COVENANTS

          From the
date of this Agreement and thereafter until the Revolving Credit Facility is
terminated or expires and the Obligations have been paid in full, unless the
Bank shall otherwise expressly consent in writing, the Borrower agrees that the
Borrower will do all of the following and will cause each Subsidiary, if any,
to do all of the following: 

          Section
8.1     Financial Statements and Reports.
Furnish to the Bank: 

	
  

 	
  

 
	
  

 	
           (a)     As
 soon as available and in any event within 90 days after the end of each
 fiscal year of the Borrower, the consolidated annual report of the Borrower
 and its Subsidiaries, prepared and audited by a certified public accounting
 firm in conformity with GAAP, consisting of at least statements of income,
 cash flow and members’ equity for such year, and a balance sheet as at the
 end of such year, all in reasonable detail as required by Bank. 

 
	
  

 	
  

 
	
  

 	
           (b)     As
 soon as available and in any event within 45 days after the end of each
 fiscal quarter, a copy of the company-prepared consolidated financial
 statements of the Borrower and its Subsidiaries prepared in the same manner
 as the financial statements referred to in Section 8.1(a), signed by the
 Borrower’s Chief Financial Officer, consisting of at least statements of
 income, cash flow and members’ equity for such fiscal quarter, and a balance
 sheet as at the end of such fiscal quarter. 

 
	
  

 	
  

 
	
  

 	
           (c)     As
 soon as available and in any event within 45 days after the end of each
 fiscal quarter a Compliance Certificate signed by the Borrower’s Chief
 Financial Officer, and such other supporting documentation as may be
 requested by Bank to support the information contained in the Compliance
 Certificate. 

 
	
  

 	
  

 
	
  

 	
           (d)     While
 any portion of the Revolving Credit Facility remains outstanding, as soon as
 available and in any event within 30 days after the end of each calendar month
 a Borrowing Base Certificate signed by the Borrower’s Chief Financial
 Officer, and such other supporting documentation as may be requested by Bank
 to support the information contained in the Borrowing Base Certificate. 

 
	
  

 	
  

 
	
  

 	
           (e)     While
 any portion of the Revolving Credit Facility remains outstanding, as soon as
 available and in any event within 30 days after the end of each calendar
 month, a detailed accounts receivable aging report in form and substance
 acceptable to Bank. 

 
	
  

 	
  

 
	
  

 	
           (f)     Promptly
 upon becoming aware of the occurrence, with respect to any Plan, of any
 Reportable Event (other than a Reportable Event for which the reporting
 requirements have been waived by PBGC regulations) or any “prohibited
 transaction” (as defined in Section 4975 of the Code), a notice specifying
 the nature thereof and what action the Borrower proposes to take with respect
 thereto, and, when received, copies of any notice from PBGC of intention to
 terminate or have a trustee appointed for any Plan.

 

17

	
  

 	
  

 
	
  

 	
           (g)     Promptly
 upon becoming aware of the occurrence thereof, notice of the commencement of
 any judicial or administrative proceeding (i) related to permits or licenses
 that are material to the operations of the Borrower in which an adverse
 determination or result could reasonably be expected to result in the
 revocation of or have a material adverse effect on the permits or licenses,
 or (ii) which reasonably alleges a material liability on the Borrower to any
 Person and an adverse determination could have an Adverse Effect.

 
	
  

 	
  

 
	
  

 	
           (h)     From
 time to time, such other information regarding the Collateral and the
 business, operation and financial condition of the Borrower and the other
 Credit Parties as the Bank may reasonably request.

 

          Section
8.2     Total Cash Flow Leverage Ratio.
The Borrower will not permit the Borrower’s Total Cash Flow Leverage Ratio to
be greater than 2.50 to 1.0. 

          Section
8.3     Corporate Existence.
Maintain its corporate existence and the corporate or limited liability company
existence of its Subsidiaries in good standing under the laws of its
jurisdiction of formation and its qualification to transact business in each
jurisdiction in which the character of the properties owned, leased or operated
by it or the business conducted by it makes such qualification necessary.
Without limiting the generality of the foregoing, the Borrower will maintain,
and cause its Subsidiaries to maintain, all of its certificates, permits,
licenses and agreements of any kind or nature necessary to the operation of its
business in full force an effect and in good standing. 

          Section
8.4     Insurance.
Maintain with financially sound and reputable insurance companies such
insurance in such amounts and against such risks as is reasonably requested by
the Bank or as may be required by law or as may be customary in the case of
reputable corporations engaged in the same or similar business and similarly
situated, including, without limitation, property, hazard, fire, wind, hail,
theft, collapse, comprehensive general public liability, and business
interruption insurance, and worker’s compensation or similar insurance. The
Borrower shall furnish to the Bank full information and written evidence as to
the insurance maintained by the Borrower or any Subsidiary. All policies shall
contain the insurer’s promise not to cancel the policy without 30 days prior
written notice to the Bank at its address set forth below. All policies shall
name the Bank as an additional insured or lender loss payee, as appropriate, as
its interests may appear. 

          Section
8.5     Payment of Taxes and Claims.
File all tax returns and reports which are required by law to be filed by it
and pay before they become delinquent all taxes, assessments and governmental
charges and levies imposed upon it or its property and all claims or demands of
any kind (including, without limitation, those of suppliers, mechanics,
carriers, warehouses, landlords and other like Persons) which, if unpaid, might
result in the creation of a Lien upon its property; provided that the
foregoing items need not be paid if they are being contested in good faith by
appropriate proceedings, and as long as its title to its property is not
materially adversely affected, its use of such property in the ordinary course
of its business is not materially interfered with and adequate reserves with
respect thereto have been set aside on its books in accordance with GAAP. In
addition, and without limitation, promptly pay all Trade Accounts Payable. 

18

          Section
8.6     Inspection; Collateral Audits. Permit
any Person designated by the Bank to visit and inspect any of its properties,
corporate books and financial records, to examine and to make copies of its
books of accounts and other financial records, to discuss its affairs, finances
and accounts with, and to be advised as to the same by, its officers, and to
conduct such collateral audits and appraisals, at such times and intervals as
the Bank may reasonably designate, which may be at annual or shorter intervals.
The expenses of the Bank for such visits, inspections, examinations, audits and
appraisals shall be at the expense of the Borrower during any period while a
Default or Event of Default exists and is continuing, otherwise the same shall
be at the Bank’s expense. Bank may also perform a collateral exam if Borrower’s
aggregate balance of unrestricted cash in Operating Accounts with the Bank is
less than $10,000,000 at any time, the cost of which exam shall be at
Borrower’s sole cost and expense once in any 12 month period.

          Section
8.7     Maintenance of Properties.
Maintain its properties used or useful in the conduct of its business in good
condition, repair and working order, and supplied with all necessary equipment,
and make all necessary repairs, renewals, replacements, betterments and
improvements thereto, all as may be necessary so that the business carried on
in connection therewith may be properly and advantageously conducted at all
times.

          Section
8.8     Books and Records.
Keep adequate and proper records and books of account in which full and correct
entries will be made of its dealings, business and affairs.

          Section
8.9     Compliance.
Comply with the requirements of all applicable state and federal laws, and of
all rules, regulations, orders, writs, judgments, injunctions, decrees or
awards, the failure to comply with which would have a material adverse effect
on the business of Borrower.

          Section
8.10     ERISA.
Maintain each Plan in compliance with all material applicable requirements of
ERISA and of the Code and with all material applicable rulings and regulations
issued under the provisions of ERISA and of the Code.

          Section
8.11     Environmental Matters.
Observe and comply with all laws, rules, regulations and orders of any
government or government agency relating to health, safety, pollution,
hazardous materials or other environmental matters to the extent non-compliance
could reasonably be likely to result in a material liability or otherwise have
an Adverse Effect.

          Section
8.12     Notice of Litigation.
Promptly provide written notice to the Bank of all litigation, arbitration or
mediation proceedings, and of all proceedings by or before any court or
governmental or regulatory agency affecting the Borrower, which alone or in the
aggregate seeks in excess of $1,500,000, describing the nature thereof and the
steps being taken with respect to such proceeding.

          Section
8.13     Notice of Default.
Promptly provide written notice to the Bank of any Default or Event of Default,
describing the nature thereof and what action the Borrower proposes to take
with respect thereto.

19

          Section
8.14     Accounts.
Maintain the Borrower’s primary depository accounts at the Bank, including
without limitation, the Operating Accounts.

          Section
8.15     Letters of Credit. If a draft is submitted under a Letter of Credit, the Borrower shall
pay to Bank on demand and in immediately available funds the amount of the draft
together with interest accrued from the date of the draft until payment in full
at the rate of interest specified in the Note. In its sole discretion Bank may,
and it is irrevocably authorized to,
make an Advance in an amount sufficient to discharge the Borrower’s obligation
to make payment to Bank under this paragraph.

ARTICLE 9 NEGATIVE COVENANTS

          From the
date of this Agreement and thereafter until the Revolving Credit Facility is
terminated or expires and the Obligations have been paid in full and all
outstanding Letters of Credit shall have expired or the liability of the Bank
thereon shall have been discharged, unless the Bank shall otherwise expressly
consent in writing, the Borrower agrees that the Borrower will not do any of
the following and the Borrower will not cause or allow any of its Subsidiaries,
if any, to do any of the following:

          Section
9.1      Indebtedness.
Create, incur, issue, assume or suffer to exist any Indebtedness, except the
Obligations, and except for equipment financing or leasing separate from the
Obligations not to exceed $250,000.00 in the aggregate.

          Section
9.2     Merger. Merge
or consolidate or enter into any analogous reorganization or transaction with
any Person. 

          Section
9.3     Sale of Assets.
Sell, transfer, assign, lease or otherwise convey all or any part of its assets
(whether in one transaction or in a series of related transactions) to any
Person other than in the ordinary course of business if the value of the assets
meets or exceeds 50% of the Borrower’s current cash and cash equivalents (as
determined by the most recent publicly-available financial statements).

          Section
9.4     Purchase of Assets.
Purchase or acquire any right, title or interest in or to, any real or personal
property not directly related to or necessary in connection with its present
operations if the value of the real or personal property meets or exceeds 50%
of the Borrower’s current cash and cash equivalents (as determined by the most
recent publicly-available financial statements)..

          Section
9.5     Change in Nature of Business.
Make any material change in the nature of its business as carried on by the
Borrower prior to the date hereof, and as proposed as of the date hereof to be
carried on by the Borrower after the date hereof.

          Section
9.6     Subsidiaries, Partnerships, Joint Ventures.
Do any of the following: (a) form or acquire any entity which would
thereby become a Subsidiary; or (b) form or enter into any partnership as a
limited or general partner or into any joint venture.

20

          Section
9.7     Other Agreements.
Enter into any agreement, bond, note or other instrument with or for the
benefit of any Person other than the Bank, the value of which meets or exceeds
50% of the Borrower’s current cash and cash equivalents (as determined by the
most recent publicly-available financial statements), (a) which would prohibit
the Borrower from granting, or otherwise limit its ability to grant, to the
Bank any Lien on any of its assets or properties; or (b) be violated or
breached by its performance of its obligations under the Loan Documents.
Notwithstanding the foregoing, the Borrower may only lease an aggregate of
$250,000 of equipment without the Lender’s prior consent.

          Section
9.8     Restricted Payments.
Either: (a) purchase or redeem or otherwise acquire for value any outstanding
equity ownership interests of the Borrower, declare or pay any dividends or
distributions, or make any distribution on, or payment on account of the
purchase, redemption, defeasance or other acquisition or retirement for value
of, any outstanding equity ownership interests of the Borrower or set aside any
funds for any such purpose, if after giving effect thereto, the Borrower would
violate any of the covenants set forth in Section 8.2; or
(b) directly or indirectly make any payment on, or redeem, repurchase,
defease, or make any sinking fund payment on account of, or any other provision
for, or otherwise pay, acquire or retire for value, any of its Indebtedness
that is subordinated in right of payment to the Loans (whether pursuant to its
terms or by operation of law), except for regularly-scheduled payments of
interest and principal (which shall not include payments contingently required
upon occurrence of a change of control or other event) that are not otherwise
prohibited hereunder or under the document or agreement stating the terms of
such subordination; or (c) directly or indirectly make any payment or
distribution of proceeds of any Loan or Collateral to any Subsidiary or
Affiliate. 

          Section
9.9     Investments.
Acquire for value, make, have or hold any Investments except:

	
  

 	
  

 	
  

 
	
  

 	
           (a)        direct
 obligations of the United States of America;

 
	
  

 	
  

 	
  

 
	
  

 	
           (b)        extensions
 of credit in the nature of accounts receivable or notes receivable arising
 from the sale of goods and services in the ordinary course of business; 

 
	
  

 	
  

 	
  

 
	
  

 	
           (c)        commercial
 paper issued by U.S. corporations rated “A-1” by Standard & Poor
 Corporation or “P-1” by Moody’s Investors Service or certificates of deposit
 or bankers’ acceptances having a maturity of one year or less issued by
 members of the Federal Reserve System having deposits in excess of
 $100,000,000 (which certificates of deposit or bankers’ acceptances are fully
 insured by the Federal Deposit Insurance Corporation); or

 
	
  

 	
  

 	
  

 
	
  

 	
           (d)        Investments,
 the aggregate of which do not exceed 50% of the Borrower’s current cash and
 cash equivalents (as determine by the most recent publicly-available
 financial statements). If Borrower’s current cash basis declines during a
 fiscal quarter, Borrower will have one fiscal quarter to remedy the
 deficiency by increasing available cash, decreasing the outstanding
 investments, or obtaining consent from the Lender to maintain the
 Investments. 

 

21

          Section
9.10     Plans. Permit
any condition to exist which causes the PBGC to institute proceedings to have
such Plan terminated or a trustee appointed to administer such Plan, permit any
Plan to terminate under any circumstances which would cause the lien provided
for in Section 4068 of ERISA to attach to any of its properties, revenues or
assets or permit the underfunded amount of Plan benefits guaranteed under Title
IV of ERISA to exceed $250,000.

           Section 9.11    Liens.
Create, incur, assume or suffer to exist any Lien with respect to any property,
revenues or assets now owned or hereafter arising or acquired, except:

	
  

 	
  

 	
  

 
	
  

 	
           (a)           Liens
 in favor of the Bank;

 
	
  

 	
  

 	
  

 
	
  

 	
           (b)           Deposits
 or pledges to secure payment of workers’ compensation, unemployment
 insurance, old age pensions or other social security obligations, in the
 ordinary course of its business;

 
	
  

 	
  

 	
  

 
	
  

 	
           (c)           Liens
 for taxes, fees, assessments and governmental charges not delinquent or to
 the extent that payments therefor shall not at the time be required to be
 made in accordance with the provisions of Section 8.5; 

 
	
  

 	
  

 	
  

 
	
  

 	
           (d)           Liens
 of carriers, warehousemen, mechanics and materialmen, and other like Liens
 arising in the ordinary course of business, for sums not due or to the extent
 that payment therefor shall not at the time be required to be made in
 accordance with the provisions of Section 8.5;

 
	
  

 	
  

 	
  

 
	
  

 	
           (e)           Liens
 for specific items of equipment separate from the Agreement, the Security
 Agreement, and other Loan Documents, the aggregate of which will not exceed
 $250,000 at any given time, and all of which may have Liens that take
 priority over the Bank’s liens.

 

          Section
9.12     Contingent Payments or Liabilities.
Either: (i) endorse, guarantee, contingently agree to purchase or to provide
funds for the payment of, or otherwise become contingently liable upon, any
obligation of any other Person, except by the endorsement of negotiable
instruments for deposit or collection (or similar transactions) in the ordinary
course of business, or (ii) agree to maintain the net worth or working capital
of, or provide funds to satisfy any other financial test applicable to, any
other Person.

          Section
9.13     Unconditional Purchase Obligations.
Enter into or be a party to any contract for the purchase or lease of
materials, supplies or other property or services if such contract requires
that payment be made by it regardless of whether or not delivery is ever made
of such materials, supplies or other property or services.

          Section
9.14     Transactions with Affiliates.
Enter into or be a party to any transaction or arrangement, including, without
limitation, the purchase, sale, lease or exchange of property or the rendering
of any service, with any Affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of its business and upon fair and
reasonable terms no less favorable to it than would be obtained in a comparable
arm’s-length transaction with a Person not an Affiliate.

22

          Section
9.15     Use of Proceeds.
Permit any proceeds of the Loans to be used, either directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of “purchasing or
carrying any margin stock” within the meaning of Regulation U of the Federal
Reserve Board, as amended from time to time, and furnish to the Bank, upon its
request, a statement in conformity with the requirements of Federal Reserve
Form U-1 referred to in Regulation U.

          Section
9.16     Government Regulation. The
Borrower shall not (a) be or become subject at any time to any law, regulation,
or list of any government agency (including, without limitation, the U.S.
Office of Foreign Asset Control list) that prohibits or limits the Bank from
making any advance or extension of credit to the Borrower or from otherwise
conducting business with the Borrower, or (b) fail to provide documentary and
other evidence of the Borrower’s identity as may be requested by the Bank at
any time to enable the Bank to verify the Borrower’s identity or to comply with
any applicable law or regulation, including, without limitation, Section 326 of
the USA Patriot Act of 2001, 31 U.S.C. Section 5318.

          Section
9.17     Amendments or Modifications.
Amend or modify any agreement material to the Borrower in any way that affects
the Collateral or the Borrower’s ability to repay the Loans.

          Section
9.18     Accounts. Voluntarily,
involuntarily or by operation of law agree to, cause, suffer or permit any
assignment, pledge, lien, sale, or other transfer or conveyance of any interest
of the Borrower in the Operating Accounts.

          Section
9.19     Transfers of Shares. Except
in accordance with a Plan, Employee Stock Purchase Plan (or any similar future
plan), or Board-approved stock and option grants, Borrower shall not
voluntarily, involuntarily, or by operation of law agree to, cause, suffer or
permit any sale, transfer, pledge or encumbrance of any of the shares in
the Borrower without, in each instance, the prior written consent of the
Lender. Nothing in this provision is intended to restrict the purchase or sale
of shares of stock by shareholders.

ARTICLE
10 EVENTS OF DEFAULT AND REMEDIES

          Section
10.1     Events of Default.
The occurrence of any one or more of the following events shall constitute an
Event of Default:

	
  

 	
  

 	
  

 
	
  

 	
           (a)           The
 Borrower shall fail to make when due, whether by acceleration or otherwise,
 any payment of principal of the Note, or any interest on the Note, or any fee
 or other amount required to be made to the Bank pursuant to the Loan
 Documents, and such failure continues uncured for ten (10) days; or

 
	
  

 	
  

 	
  

 
	
  

 	
           (b)           Any
 representation or warranty made or deemed to have been made by or on behalf
 of the Borrower or any other Credit Party in the Loan Documents or on behalf
 of the Borrower or any other Credit Party in any certificate, statement,
 report or other writing furnished by or on behalf of the Borrower or any
 other Credit Party to the Bank pursuant to the Loan Documents or any other
 instrument, document or agreement shall prove to have been false or
 misleading in any material respect on the date as of which the facts set forth are stated or certified or deemed to have been stated
 or certified, and such false or misleading representations and warranties are
 not corrected or remedied to the satisfaction of the Lender within thirty
 (30) days of their discovery; or

 

23

	
  

 	
  

 	
  

 
	
  

 	
           (c)           The
 Borrower shall fail to comply with Section 8.1, Section 8.2 or Section 8.4
 hereof or any Section of Article 9 hereof; or

 
	
  

 	
  

 	
  

 
	
  

 	
           (d)           The
 Borrower or any other Credit Party shall fail to comply with any agreement,
 covenant, condition, provision or term contained in the Loan Documents (and
 such failure shall not constitute an Event of Default under any of the other
 provisions of this Section 10.1) and such failure to comply shall continue
 for a period of thirty (30) days after the earlier of: (i) the date the
 Borrower gives notice of such failure to the Bank, (ii) the date the Borrower
 should have given notice of such failure to the Bank pursuant to Section
 8.13, or (iii) the date the Bank gives notice of such failure to the
 Borrower; or

 
	
  

 	
  

 	
  

 
	
  

 	
           (e)           The
 Borrower or any other Credit Party, or any one or more of them shall (1) be
 or become insolvent, or (2) apply for or consent to the appointment of, or
 the taking of possession by, a receiver, custodian, trustee, liquidator or
 the like of the Borrower or any other Credit Party or of all or a substantial
 part of the Borrower or any other Credit Party’s property, or (3) commence a
 voluntary case under any bankruptcy, insolvency, reorganization, arrangement,
 readjustment of debt, dissolution, liquidation or similar proceeding under
 the laws of any jurisdiction, or (4) file a petition seeking to take
 advantage of any other law relating to bankruptcy, insolvency,
 reorganization, winding up or composition or adjustment of debts, or (5)
 admit in writing the Borrower or any other Credit Party’s inability to pay
 its debts as they mature, or (6) make an assignment for the benefit of its
 creditors; or (ii) a proceeding or case shall be commenced, without the
 application or consent of the Borrower or any other Credit Party, in any
 court of competent jurisdiction, and such proceeding or case shall not be
 dismissed within 60 days after commencement, seeking (1) the liquidation,
 reorganization, dissolution, winding up or the composition or adjustment of
 debts of the Borrower or any other Credit Party, (2) the appointment of
 a trustee, receiver, custodian or liquidator or the like of the Borrower or
 any other Credit Party or of all or any substantial part of its property, or
 (3) similar relief in respect of the Borrower or any other Credit Party under
 any law relating to bankruptcy, insolvency, reorganization, winding up or
 composition or adjustment of debts

 
	
  

 	
  

 	
  

 
	
  

 	
           (f)           A
 judgment or judgments for the payment of money in excess of 50% of the
 Borrower’s current cash and cash equivalents (as determined by the most
 recent publicly-available financial statements) is rendered against the
 Borrower or any other Credit Party and the Borrower or such other Credit
 Party does not, within thirty (30) days of the date of the entry of judgment
 or such longer period during which execution of such judgment is stayed: (i)
 pay, (ii) discharge, (iii) provide for its discharge in accordance with its
 terms, (iv) procure a stay of execution thereof, prior to any execution on
 such judgments by such judgment creditor, or (v) appeal and cause the
 execution thereof to be stayed during such appeal; or

 

24

	
  

 	
  

 	
  

 
	
  

 	
           (g)           Any
 property of the Borrower or any other Credit Party (including, without
 limitation, the Collateral) shall be garnished or attached in any proceeding
 and such garnishment or attachment shall remain undischarged for a period of
 30 days during which execution is not effectively stayed; or

 
	
  

 	
  

 	
  

 
	
  

 	
           (h)           The
 termination of any Plan, if as a result of the termination the Borrower or
 any ERISA Affiliate would be required to make a contribution to such Plan, or
 would incur a liability or obligation to such Plan, in excess of $250,000, or
 the institution by the PBGC of steps to terminate any Plan; or

 
	
  

 	
  

 	
  

 
	
  

 	
           (i)           The
 maturity of any Indebtedness of the Borrower or any other Credit Party (other
 than Indebtedness under this Agreement) owed to the Bank, or the maturity of
 any Indebtedness of the Borrower or any other Credit Party in an aggregate
 amount equal to or greater than $250,000 owed to others, shall be
 accelerated, or the Borrower or any other Credit Party shall fail to pay any
 such Indebtedness when due or, in the case of such Indebtedness payable on
 demand, when demanded, and all cure periods related thereto have expired and
 such debt has been accelerated, or any event shall occur or condition shall
 exist and shall continue for more than the period of grace, if any, applicable
 thereto and shall have the effect of causing or permitting (any required
 notice having been given and grace period having expired) the Bank or the
 holder of any such Indebtedness in such aggregate amount or any trustee or
 other Person acting on behalf of such holder to cause, such Indebtedness to
 become due prior to its stated maturity or to realize upon any collateral
 given as security therefor; or

 
	
  

 	
  

 	
  

 
	
  

 	
           (j)           The
 Borrower or any other Credit Party shall fail to pay, withhold, collect or remit
 any tax or tax deficiency when assessed or due in an amount greater than or
 equal to $250,000, unless contested in good faith pursuant to Section 8.5,
 or notice of any state or federal tax lien shall be filed or issued; or

 
	
  

 	
  

 	
  

 
	
  

 	
           (k)           Any
 event of default (as defined therein) shall occur under any other Loan
 Document and not be cured within any applicable cure period; 

 
	
  

 	
  

 	
  

 
	
  

 	
           (l)           There
 shall be a draw made against a Letter of Credit and Borrower fails to
 reimburse Bank the amount of such draw within 5 days after written notice
 from Bank; or all Letters of Credit shall not be released by the holders
 thereof and returned to Bank cancelled and undrawn (or the outstanding Letter
 of Credit Obligations otherwise satisfied) on or before the Revolving Credit
 Expiration Date; 

 
	
  

 	
  

 	
  

 
	
  

 	
           (m)           Bank
 shall receive any written notice from Borrower’s landlord that such landlord
 is repossessing any premises in which the Collateral is held and
 Borrower has not, within 30 days thereafter, reached agreement with such
 landlord on retaining possession of such premises or taken such other action
 to protect the Collateral reasonably acceptable to Bank; or 

 
	
  

 	
  

 	
  

 
	
  

 	
           (n)           The
 occurrence of any event that has an Adverse Effect which is not cured within
 thirty (30) days after discovery by Borrower.

 

25

          Section
10.2     Remedies. If
(a) any Event of Default described in Section 10.1(e) shall occur, the
Revolving Credit Facility shall automatically terminate and the outstanding
unpaid principal balance of the Note, the accrued interest thereon and all
other obligations of the Borrower to the Bank under the Loan Documents shall
automatically become immediately due and payable; or (b) any other Event of
Default shall occur and be continuing, then the Bank may take any or all of the
following actions: (i) declare the Revolving Credit Facility to be terminated,
whereupon the Revolving Credit Facility shall terminate, and (ii) declare that
the outstanding unpaid principal balance of the Note, the accrued and unpaid
interest thereon and all other obligations of the Borrower to the Bank under
the Loan Documents to be forthwith due and payable, whereupon such Notes, all
accrued and unpaid interest thereon and all such obligations shall immediately
become due and payable, in each case without further demand or notice of any
kind, all of which are hereby expressly waived, anything in this Agreement or
in the Notes to the contrary notwithstanding. In addition, upon any Event of
Default, the Bank may exercise all rights and remedies under any other
instrument, document or agreement between the Borrower or any other Credit
Party and the Bank, and enforce all rights and remedies under any applicable
law, including without limitation the rights and remedies available upon
default to a secured party under the Uniform Commercial Code as adopted in the
State of Minnesota, including, without limitation, the right to take possession
of the Collateral, or any evidence thereof, proceeding without judicial process
or by judicial process (without a prior hearing or notice thereof, which the
Borrower hereby expressly waives) and the right to sell, lease or otherwise
dispose of any or all of the Collateral, and, in connection therewith, the
Borrower will on demand assemble the Collateral and make it available to the
Bank at a place to be designated by the Bank.

          Section
10.3     Offset. In
addition to the remedies set forth in Section 10.2, the Bank or any
other holder of any Note may offset any and all balances, credits, deposits
(general or special, time or demand, provisional or final), accounts or monies
of the Borrower then or thereafter with the Bank or such other holder, or any
obligations of the Bank or such other holder of such Note, against the
Indebtedness then owed by the Borrower to the Bank. Nothing in this Agreement
shall be deemed a waiver or prohibition of the Bank’s rights of banker’s lien,
offset, or counterclaim, which right the Borrower hereby grants to the Bank.

          Section
10.4     Letter of Credit Reimbursement.
In addition to the remedies set forth in Section 10.2 and Section
10.3, immediately upon
the commencement of any proceeding under any bankruptcy law by or against the
Borrower, and at Bank’s option upon the occurrence of any other Event of
Default, within 5 days of receiving notice, the Borrower shall pay to Bank a
sum equal to the then outstanding amount of the Letters of Credit.. The
Borrower grants Bank a first lien and security interest in all such funds paid
to Bank, including without limitation all instruments evidencing such funds,
and all products and proceeds of the foregoing, as security for all now
existing and hereafter arising debts, obligations and liabilities of the
Borrower to Bank in connection with the Revolving Credit Facility.

26

ARTICLE
11 MISCELLANEOUS

          Section
11.1     Waiver and Amendment.
No failure on the part of the Bank or the holder of any Note to exercise and no
delay in exercising any power or right hereunder or under any other Loan
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any power or right preclude any other or further exercise thereof
or the exercise of any other power or right. The remedies herein and in any
other instrument, document or agreement delivered or to be delivered to the
Bank hereunder or in connection herewith are cumulative and not exclusive of
any remedies provided by law or in equity. No notice to or demand on the
Borrower not required hereunder or under any Note shall in any event entitle
the Borrower to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the right of the Bank or the holder of
any Note to any other or further action in any circumstances without notice or
demand. No amendment, modification or waiver of any provision of this Agreement
or consent to any departure by the Borrower therefrom shall be effective unless
the same shall be in writing and signed by the Bank, and then such amendment,
modification, waiver or consent shall be effective only in the specific
instances and for the specific purpose for which given.

          Section
11.2     Expenses and Indemnities.
The Borrower agrees to reimburse the Bank upon demand for all reasonable
expenses paid or incurred by the Bank (including any reasonable fees and
expenses of legal counsel) in connection with the transactions contemplated by
this Agreement, and the preparation and negotiation of this Agreement or any
amendment, or any modification, interpretation, collection and enforcement of
the Loan Documents, excluding costs and attorneys’ fees incurred in the
negotiation and preparation of this Agreement and the other initial Loan
Documents. The Borrower agrees to indemnify and hold the Bank harmless from any
loss or expense claimed by a third party which may arise or be created by the
acceptance of instructions for making Loans or disbursing the proceeds thereof.
The obligations of the Borrower under this Section 11.2 shall survive
any termination or expiration of the Revolving Credit Facility and payment in
full of the Obligations.

          Section
11.3     Notices. Except when
telephonic notice is expressly authorized by this Agreement, any notice or
other communication to any party in connection with this Agreement shall be in
writing and shall be sent by manual delivery, facsimile transmission or
overnight courier for next Business Day delivery addressed to such party at the
address specified on the signature page hereof, or at such other address as
such party shall have specified to the other party hereto in writing. All periods
of notice shall be measured from the date of delivery thereof if manually
delivered, from the date of sending thereof if sent by facsimile transmission,
or from a first Business Day after the date of sending if sent by overnight
courier for next Business Day delivery; provided, however, that
any notice to the Bank under Article 2 hereof shall be deemed to have
been given only when received by the Bank. If notice to the Borrower of any
intended disposition of the Collateral or any other intended action is required
by law in a particular instance, such notice shall be deemed commercially
reasonable if given at least ten calendar days prior to the date of intended
disposition or other action.

          Section
11.4     Successors.
This Agreement shall be binding on the Borrower and the Bank and their
respective successors and assigns, and shall inure to the benefit of the
Borrower and the Bank, and the successors and assigns of the Bank. The Borrower
shall not assign its rights or duties hereunder without the written consent of
the Bank.

27

          Section
11.5     Severability.
Any provision of the Agreement which is prohibited or unenforceable in any
jurisdiction shall, in such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction.

          Section
11.6     Captions. The
captions or headings herein are for convenience only and in no way define,
limit or describe the scope or intent of any provision of this Agreement.

          Section
11.7     Entire Agreement.
This Agreement and the Note, and the other Loan Documents, embody the entire
agreement and understanding between the Borrower and the Bank with respect to
the subject matter hereof and thereof. This Agreement supersedes all prior
agreements and understandings relating to the subject matter hereof, including
without limitation, any commitment letters from the Bank to the Borrower.

          Section
11.8     Counterparts.
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument, and either of the
parties hereto may execute this Agreement by signing any such counterpart.

          Section 11.9     Governing Law and Construction.
THE
VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT AND THE NOTES SHALL
BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING
EFFECT TO CONFLICTS OF LAWS PRINCIPLES THEREOF. Whenever possible,
each provision of this Agreement and the other Loan Documents and any other
statement, instrument or transaction contemplated hereby or thereby or relating
hereto or thereto shall be interpreted in such manner as to be effective and
valid under such applicable law, but, if any provision of this Agreement, the
other Loan Documents or any other statement, instrument or transaction
contemplated hereby or thereby or relating hereto or thereto shall be held to
be prohibited or invalid under such applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement, the other Loan Documents or any other statement, instrument or
transaction contemplated hereby or thereby or relating hereto or thereto.

          Section
11.10    Consent to Jurisdiction. AT THE OPTION OF
THE BANK, THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE ENFORCED IN ANY
FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY, MINNESOTA;
AND THE BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND
WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT
THE BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY
TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP
CREATED BY THIS AGREEMENT, THE BANK AT ITS OPTION SHALL BE ENTITLED TO HAVE THE
CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF
SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.

28

          Section
11.11     Waiver of Jury Trial. EACH OF THE
BORROWER AND THE BANK IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

          Section
11.12     USA Patriot Act Notification.
The following notification is provided to the Borrower pursuant to Section 326
of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:

	
  

 	
  

 	
  

 
	
  

 	
 IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To
 help the government fight the funding of terrorism and money laundering
 activities, Federal law requires all financial institutions to obtain,
 verify, and record information that identifies each person or entity that
 opens an account, including any deposit account, treasury management account,
 loan, other extension of credit, or other financial services product. What
 this means for the Borrower: When the Borrower opens an account, the Bank
 will ask for the Borrower’s name, taxpayer identification number, business
 address, and other information that will allow the Bank to identify the
 Borrower. The Bank may also ask to see the Borrower’s legal organizational
 documents or other identifying documents.

 	
  

 

          Section
11.13     Borrower Acknowledgments.
The Borrower hereby acknowledges that (a) it has been advised by counsel in the
negotiation, execution and delivery of this Agreement and the other Loan
Documents, (b) the Bank has no fiduciary relationship to the Borrower, the
relationship being solely that of debtor and creditor, (c) no joint venture
exists between the Borrower and the Bank, and (d) the Bank undertakes no
responsibility to the Borrower to review or inform the Borrower of any matter
in connection with any phase of the business or operations of the Borrower and
the Borrower shall rely entirely upon its own judgment with respect to its
business, and any review, inspection or supervision of, or information supplied
to, the Borrower by the Bank is for the protection of the Bank and neither the
Borrower nor any third party is entitled to rely thereon.

(The signature page follows.)

29

          THE
PARTIES HERETO have caused this Credit Agreement to be executed as of the date
first above written.

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 VASCULAR
 SOLUTIONS, INC.

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
  

 	
 /s/ James
 Hennen

 
	
  

 	
 Its:

 	
           Chief
 Financial Officer

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 6464
 Sycamore Court

 
	
  

 	
 Minneapolis,
 MN 55369

 
	
  

 	
 Attention: 

 	
 CEO and General Counsel

 
	
  

 	
 Telephone:

 	
           (763)
 656-4300

 

	
  

 	
  

 	
  

 	
  

 
	
  

 	
   Fax:

 	
                   (763)
 656-4250

 
	
  

 	
  

 	
  

 
	
  

 	
   U.S. BANK
 NATIONAL ASSOCIATION

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
   By:

 	
 /s/ Greg
 Guttormsson

 
	
  

 	
   Its:

 	
   Vice
 President

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
   800 Nicollet
 Mall, Third Floor

 
	
  

 	
   BC-MN-HO3W

 
	
  

 	
   Minneapolis,
 MN 55402

 
	
  

 	
   Attention:
 Gregory Guttormsson

 

30

EXHIBIT
A

CONDITIONS
PRECEDENT

	
  

 	
  

 
	
 1.

 	
 The Note,
 duly executed by the Borrower.

 
	
  

 	
  

 
	
 2.

 	
 The Security
 Agreement, duly executed by the Borrower.

 
	
  

 	
  

 
	
 3.

 	
 Certificate
 of Good Standing respecting the Borrower, as of a recent date and issued by
 the Secretary of State of Minnesota.

 
	
  

 	
  

 
	
 4.

 	
 The
 Organizational Documents of the Borrower.

 
	
  

 	
  

 
	
 5.

 	
 A
 Secretary’s Certificate of the Borrower certifying (1) a copy of any Bylaws
 or Shareholder Control Agreement (as applicable), (2) a copy of its
 resolutions authorizing the execution, delivery and performance of the Loan
 Documents to which it is a party, and (3) the names, titles, and signatures
 of its managers/officers authorized to execute and perform the Loan Documents
 to which it is a party.

 
	
  

 	
  

 
	
 6.

 	
 Legal
 opinion of Borrower’s counsel.

 
	
  

 	
  

 
	
 7.

 	
 Evidence
 acceptable to the Bank in its discretion showing that the insurance required
 by the Loan Documents is in full force and effect and that the Bank is listed
 as “additional insured” and “lender loss payee” (as applicable).

 
	
  

 	
  

 
	
 8.

 	
 UCC lien,
 tax lien, judgment litigation and bankruptcy searches (against Borrower, and
 any other names used within the past five years in all relevant
 jurisdictions).

 
	
  

 	
  

 
	
 9.

 	
 Payoff letter from each of the Borrower’s
 current lenders.

 
	
  

 	
  

 
	
 10.

 	
 Such termination statements
 and releases as the Bank requires.

 
	
  

 	
  

 
	
 11.

 	
 Payment of
 the Bank’s legal fees and expenses.

 
	
  

 	
  

 
	
 12.

 	
 Such other
 documents or instruments as the Bank may request to consummate the
 transaction contemplated hereby.

 

A-1

EXHIBIT
B

BORROWING
BASE CERTIFICATE

[See attached]

B-1

BORROWING
BASE CERTIFICATE

          The
undersigned officer of VASCULAR SOLUTIONS, INC., a Minnesota
corporation (the “Borrower”), pursuant to and in accordance with that
certain Loan Agreement dated December ___, 2009, as amended (as so amended, the
“Loan Agreement”), hereby certifies to and U.S. BANK, NATIONAL ASSOCIATION, a national banking
association under the laws of the United States of America (the “Bank”),
as follows:

          As
of the close of business on _____________________, ____________, the Borrowing
Base and the unpaid principal balance of the Revolving Note were as follows:

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 1.

 	
 Total
 Accounts Receivable

 	
  

 	
  

 	
  

 	
 $_____________________
 (1)

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 2a.

 	
 Less
 Ineligible Accounts Receivable:

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Over 90 days (past invoice date)

 	
  

 	
  

 	
 $____________________

 
	
  

 	
 Disputed Accounts; Setoffs

 	
  

 	
  

 	
 $____________________

 
	
  

 	
 Contra Accounts

 	
  

 	
 $____________________

 
	
  

 	
 Bankrupt, Insolvent, Impaired Debtor

 	
  

 	
  

 	
 $____________________

 
	
  

 	
 Restructured Accounts

 	
  

 	
  

 	
 $____________________

 
	
  

 	
 Progress Billings, (Retainage)

 	
  

 	
  

 	
 $____________________

 
	
  

 	
 Concentrations1

 	
  

 	
  

 	
 $____________________

 
	
  

 	
 10% Rule – Cross Agings2

 	
  

 	
 $____________________

 
	
  

 	
 Receivables from Affiliates

 	
  

 	
  

 	
 $____________________

 
	
  

 	
 Receivables from Officers/Employees

 	
  

 	
  

 	
 $____________________

 
	
  

 	
 Receivables from Foreign Entities

 	
  

 	
 $____________________

 
	
  

 	
 Receivables from Government

 	
  

 	
  

 	
 $____________________

 
	
  

 	
 Other Ineligibles (as determined by Bank)

 	
  

 	
 $____________________

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 2b.

 	
 Total
 Ineligible Receivables

 	
  

 	
  

 	
  

 	
 $_____________________
 (2)

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 3.

 	
 Eligible
 Accounts Receivable (Line 1 minus Line 2)

 	
  

 	
  

 	
  

 	
 $_____________________
 (3)

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 4.

 	
 80% of Line
 3

 	
  

 	
  

 	
  

 	
 $_____________________
 (4)

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 5.

 	
 Total
 Inventory

 	
  

 	
  

 	
  

 	
 $_____________________
 (5)

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 6a.

 	
 Less
 Ineligible Inventory:

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Work in Process

 	
  

 	
 $____________________

 
	
  

 	
 Consigned; 3rd Party Possession

 	
  

 	
  

 	
 $____________________

 
	
  

 	
 Advance payments Inventory

 	
  

 	
  

 	
 $____________________

 
	
  

 	
 No Landlord Waiver

 	
  

 	
  

 	
 $____________________

 
	
  

 	
 Other Ineligibles (as determined by Bank)

 	
  

 	
 $____________________

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 6b.

 	
 Total
 Ineligible Inventory

 	
  

 	
  

 	
  

 	
 $_____________________
 (6)

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 7.

 	
 Eligible
 Inventory (Line 5 minus Line 6)

 	
  

 	
  

 	
  

 	
 $_____________________
 (7)

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 8.

 	
 The lesser
 of $5,000,000 or 50% of Line 7

 	
  

 	
  

 	
  

 	
 $_____________________
 (8)

 

	
  

 	
  

 	
  

 
	
  

 	
  

 
	
 1

 	
 If 10% or
 more of the receivables are from the same or related account debtor, the
 portion of the obligations from such account debtor in excess of 10% shall be
 excluded from Eligible Receivables.

 
	
  

 	
  

 
	
 2

 	
 If 10% or
 more of the receivables from any account debtor are more than 90 days past
 the invoice date, all obligations owed by the account debtor shall be
 excluded from Eligible Receivables.

 

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 9.

 	
 Eligible
 Property and Equipment

 	
  

 	
  

 	
  

 	
 $_____________________
 (9)

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 10.

 	
 The lesser
 of $2,000,000 or 50% of Line 9

 	
  

 	
  

 	
  

 	
 $_____________________
 (10)

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 11.

 	
 The lesser
 of $10,000,000 or total of

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Line 4 plus
 Line 8 plus Line 10 (the “Borrowing Base”)

 	
 $_____________________
 (11)

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 12.

 	
 Unpaid
 Principal Balance of Revolving Note

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 plus Letter
 of Credit Obligations

 	
  

 	
  

 	
  

 	
 $_____________________
 (12)

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 13.

 	
 Availability
 or (Shortfall) (Line 11 minus Line 12)

 	
  

 	
  

 	
  

 	
 $_____________________
 (13)

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Date of
 Certificate: _______________________, 20___

 	
  

 	
  

 	
  

 	
  

 

	
  

 	
  

 
	
 BORROWER:

 
	
  

 
	
 Vascular Solutions, Inc.,

 
	
 a Minnesota corporation

 
	
  

 	
  

 
	
 By:

 	
  

 
	
  

 	
  

 
	
 Its:

 	
  

 

SCHEDULE
7.13

LICENSES
AND INFRINGEMENT

On July 29, 2009 AngioDynamics, Inc. (“AngioDynamics”) filed a lawsuit
against Vascular Solutions, Inc. (“Vascular Solutions”) in the United States
District Court for the District of Delaware, alleging that Vascular Solutions
has infringed U.S. Patent No 7,273,498 and U.S. patent No. 7,559,329 by making,
using and selling Vari-Lase® products, including its Bright Tip fibers and
procedure kits. AngioDynamics has requested injunctive relief and compensatory
damages. Vascular Solutions believes that its Vari-Lase products do not
infringe any valid AngioDynamics patent.SECURITY AGREEMENT

          This
Security Agreement (this “Agreement”)
is made as of December 21, 2009, by and between Vascular Solutions, Inc., a
Minnesota corporation (the “Debtor”)
and U.S. Bank, National Association, a national banking association (the “Secured Party”).

RECITALS:

          A.          The
Borrower and the Secured Party have entered into a Credit Agreement of even
date herewith (as the same may hereinafter be amended or restated from time to
time, the “Credit Agreement”),
setting forth the terms on which the Secured Party may make certain loans or
other financial accommodations to or for the benefit of the Borrower.

          B.          The Debtor desires to grant to the Secured
Party a security interest in all of the Debtor’s property, all as provided
herein.

          NOW,
THEREFORE, in consideration of the mutual covenants contained in the Credit
Agreement and herein, the parties hereby agree as follows:

          1.          Grant of
Security Interest and Collateral. In order to secure payment and
performance of each and every debt, liability and obligation of every type and
description which Debtor may now or at any time hereafter owe to the Secured
Party under or pursuant to the Credit Agreement or any promissory note issued
pursuant thereto, whether it is or may be direct or indirect, due or to become
due, absolute or contingent, primary or secondary, liquidated or unliquidated,
or sole, joint, several or joint and several (all such debts, liabilities and
obligations and any amendments, extensions, renewals or replacements thereof
are herein collectively referred to as the “Obligations”), Debtor hereby grants the Secured Party a
security interest (the “Security Interest”)
in all of Debtor’s property other than Excluded Assets (the “Collateral”), including without
limitation the following:

	
  

 	
  

 
	
  

 	
             (a)          Inventory
 and Goods: All inventory of Debtor, whether now owned or hereafter
 acquired and wherever located and other tangible personal property held for
 sale or lease or furnished or to be furnished under contracts of service or
 consumed in Debtor’s business, and all goods of Debtor, whether now owned or
 hereafter acquired and wherever located, including without limitation all
 computer programs embedded in goods, and all other Inventory (“Inventory”) and Goods (“Goods”), as each such term may be
 defined in the Uniform Commercial Code as in effect in the state of Minnesota
 from time to time (the “UCC”), of the Debtor, whether now owned or
 hereafter acquired;

 
	
  

 	
  

 
	
  

 	
             (b)          Equipment:
 All equipment of Debtor, whether now owned or hereafter acquired and wherever
 located, including but not limited to all present and future equipment,
 machinery, tools, motor vehicles, trade fixtures, furniture, furnishings,
 office and recordkeeping equipment and all goods for use in Debtor’s
 business, and all other Equipment (as such term may be defined in the UCC) of
 the Debtor, whether now owned or hereafter acquired, together with all parts,
 equipment and attachments relating to any of the foregoing (“Equipment”);

 

	
  

 	
  

 
	
  

 	
             (c)          Accounts,
 Contract Rights and Other Rights to Payment: Each and every right of
 Debtor to the payment of money, whether such right to payment now exists or
 hereafter arises, whether such right to payment arises out of a sale, lease,
 license, assignment or other disposition of goods or other property by
 Debtor, out of a rendering of services by Debtor, out of a loan by Debtor,
 out of the overpayment of taxes or other liabilities of Debtor, or otherwise
 arises under any contract or agreement, whether such right to payment is or
 is not already earned by performance, and howsoever such right to payment may
 be evidenced, together with all other rights and interests (including all
 liens and security interests) which Debtor may at any time have by law or
 agreement against any account debtor or other obligor obligated to make any
 such payment or against any of the property of such account debtor or other
 obligor; all including but not limited to all present and future debt
 instruments, chattel papers, accounts, license fees, contract rights, loans
 and obligations receivable and tax refunds, and all other Accounts (as such
 term may be defined in the UCC) of the Debtor, whether now owned or hereafter
 acquired (“Accounts”); 

 
	
  

 	
  

 
	
  

 	
             (d)          Instruments:
 All instruments, chattel paper, letters of credit or other documents of
 Debtor, whether now owned or hereafter acquired, including but not limited to
 promissory notes, drafts, bills of exchange and trade acceptances; all rights
 and interests of Debtor, whether now existing or hereafter created or
 arising, under leases, licenses or other contracts, and all other Instruments
 (as such term may be defined in the UCC) of the Debtor, whether now owned or
 hereafter acquired (“Instruments”);

 
	
  

 	
  

 
	
  

 	
             (e)          Deposit
 Accounts and Investment Property: All right, title and interest of Debtor
 in all deposit and investment accounts maintained with any bank, savings and
 loan association, broker, brokerage, or any other financial institution,
 together with all monies and other property deposited or held therein,
 including, without limitation, any checking account, savings account, escrow
 account, savings certificate and margin account, and all securities, whether
 certificated or uncertificated, security entitlements, securities accounts,
 commodity contracts, and commodity accounts, and all other Deposit Accounts
 (“Deposit Accounts”) and
 Investment Property (“Investment
 Property”) (as each such terms may be defined in the UCC) of
 the Debtor, whether now owned or hereafter acquired;

 
	
  

 	
  

 
	
  

 	
             (f)          General
 Intangibles: All general intangibles of Debtor, whether now owned or
 hereafter acquired, including, but not limited to, applications for patents, patents,
 copyrights, trademarks, trade secrets, good will, tradenames, customer lists,
 permits and franchises, software, and the right to use Debtor’s name, and any
 and all membership interests, governance rights, and financial rights in each
 and every limited liability company, and all payment intangibles, and all
 other General Intangibles (as such term may be defined in the UCC) of the
 Debtor, whether now owned or hereafter acquired (“General Intangibles”);

 
	
  

 	
  

 
	
  

 	
             (g)          Chattel
 Paper: All Chattel Paper (as such term may be defined in the UCC) of the
 Debtor, whether tangible or electronic, and whether now owned or hereafter
 acquired (“Chattel Paper”);
 and

 
	
  

 	
  

 
	
  

 	
             (h)          Documents,
 Embedded Software, Etc.: All of Debtor’s rights in promissory notes,
 documents, embedded software, letter of credit rights and supporting
 obligations (and security interests and liens securing them) (as any such
 term may be defined in the UCC) whether now owned or hereafter acquired;

 
	
  

 	
  

 
	
 together with all substitutions and replacements for and products of
 any of the foregoing property and proceeds of any and all of the foregoing
 property and, in the case of all tangible Collateral, together with
 (i) all accessories, attachments, parts, equipment, accessions, repairs
 and embedded software, now or hereafter attached or affixed to or used in
 connection with any such goods, (ii) all warehouse receipts, bills of
 lading and other documents of title now or hereafter covering such goods, and
 (iii) all books and records of Debtor.

 

2

	
  

 	
  

 
	
           For
 purposes of this Agreement, “Excluded Assets” shall mean (a) Equipment
 subject to a purchase money lien or capital lease to the extent that the
 instrument or other agreement evidencing the purchase money indebtedness
 or capital lease obligation, as the case may be, secured by
 such lien or capital lease on such Equipment limits a Debtor’s
 ability to grant a security interest therein to the Secured Party;
 provided however, that such Equipment shall be excluded from the Collateral
 only to the extent of $250,000 in the aggregate and only for so long as such
 purchase money indebtedness or capital lease obligation,
 as the case may be, remains outstanding and upon the earlier of the
 termination of such limitation or the satisfaction of such indebtedness,
 such Equipment shall be included in the term “Collateral” without any further
 action on the part of Debtor or the Secured Party, and (b) that
 certain License Agreement effective as of January 7, 2009, by and between
 Debtor and King Pharmaceuticals Research and Development, Inc., as amended.

 
	
  

 
	
           2.          Representations,
 Warranties and Agreements. Debtor represents, warrants and agrees that:

 
	
  

 	
  

 
	
  

 	
             (a)          Debtor
 is a corporation duly incorporated, validly existing and in good standing
 under the laws of the state of Minnesota. This Agreement has been duly and
 validly authorized by all necessary corporate action. Debtor has the
 requisite corporate power and authority to execute this Agreement, to perform
 Debtor’s obligations hereunder and to subject the Collateral to the Security
 Interest. Debtor’s organizational charter number is 9L-421.

 
	
  

 	
  

 
	
  

 	
             (b)          The
 Collateral is used primarily for business purposes outlined in the Credit
 Agreement.

 
	
  

 	
  

 
	
  

 	
             (c)          Debtor’s
 chief place of business is: 6464 Sycamore Court, Minneapolis, Minnesota
 55369. Debtor’s records concerning the Collateral are kept at such
 address and the Collateral is located at such address, except when being
 transported in the ordinary course of business. Debtor will give at least 30
 days’ advance written notice to Secured Party of any change in Debtor’s name
 or jurisdiction of organization or chief place of business and any change in
 or addition of any Collateral location (except for Collateral being
 transported in the ordinary course of business) or any change in the location
 of Debtor’s records concerning the Collateral.

 
	
  

 	
  

 
	
  

 	
             (d)          Debtor
 has (or will have at the time Debtor acquires rights in Collateral hereafter
 arising) and will maintain marketable title to each item of Collateral free
 and clear of all security interests, liens and encumbrances, except the
 Security Interest and any lien filed by a third party for equipment as
 permitted in the Credit Agreement, and will defend the Collateral against all
 claims or demands of all persons other than Secured Party and any permitted
 lien filed by a third party.

 
	
  

 	
  

 
	
  

 	
             (e)          Except
 as otherwise provided in the Credit Agreement, Debtor will not sell or
 otherwise transfer or dispose of the Collateral or any interest therein.

 
	
  

 	
  

 
	
  

 	
             (f)          Debtor
 will not permit any tangible Collateral to be located in any state (and, if a
 county filing is required, in any county) in which a financing statement
 covering such Collateral is required to be, but has not in fact been, filed.

 

3

	
  

 	
  

 
	
  

 	
             (g)          All
 rights to payment and all instruments, documents, chattel papers and other
 agreements constituting or evidencing Collateral are (or will be when arising
 or issued) the valid, genuine and legally enforceable obligation, subject to
 no defense, set-off or counterclaim (other than those arising in the ordinary
 course of business) of each account debtor or other obligor named therein or in
 Debtor’s records pertaining thereto as being obligated to pay such
 obligation. Debtor will not agree to any modification, amendment or
 cancellation of any such obligation without Secured Party’s prior written
 consent except discounts provided by Debtor in the ordinary course of
 business, and will not subordinate any such right to payment to claims of
 other creditors of such account debtor or other obligor.

 
	
  

 	
  

 
	
  

 	
             (h)          Debtor
 will keep all tangible Collateral in good repair, working order and
 condition, normal depreciation excepted, and will, from time to time, replace
 any worn, broken or defective parts thereof.

 
	
  

 	
  

 
	
  

 	
             (i)          Except
 as otherwise provided in the Credit Agreement, Debtor will promptly pay all
 taxes and other governmental charges levied or assessed upon or against any
 Collateral or upon or against the creation, perfection or continuance of the
 Security Interest.

 
	
  

 	
  

 
	
  

 	
             (j)          Debtor
 will promptly notify Secured Party of any material loss of or damage to any
 Collateral or of any adverse change in the prospect of payment of any
 material sums due on or under any instrument, chattel paper, account or
 contract right constituting Collateral.

 
	
  

 	
  

 
	
  

 	
             (k)          Debtor
 will if Secured Party at any time so requests (whether the request is made
 before or after the occurrence of an Event of Default), promptly deliver to
 Secured Party any instrument, document or chattel paper constituting
 Collateral, duly endorsed or assigned by Debtor to Secured Party.

 
	
  

 	
  

 
	
  

 	
             (l)          Debtor
 will at all times keep all tangible Collateral insured against risks of fire
 (including so-called extended coverage), theft, and such other risks and in
 such amounts as Secured Party may reasonably request, with any loss payable
 to Secured Party to the extent of its interest.

 
	
  

 	
  

 
	
  

 	
             (m)          Debtor
 hereby authorizes the filing of such financing statements as Secured Party
 may deem necessary or useful to be filed in order to perfect the Security
 Interest and, if any Collateral is covered by a certificate of title, Debtor
 will from time to time execute such documents as may be required to have the
 Security Interest properly noted on a certificate of title. In addition,
 Debtor authorizes Secured Party to file from time to time such financing
 statements against the Collateral described as “all personal property” or
 “all assets” or the like as Secured Party deems necessary or useful to
 perfect the Security Interest.

 
	
  

 	
  

 
	
  

 	
             (n)          Debtor
 will pay when due or reimburse Secured Party on demand for all reasonable
 costs of collection of any of the Obligations and all other reasonable
 out-of-pocket expenses (including in each case all reasonable attorneys’
 fees) incurred by Secured Party in connection with the creation, perfection,
 satisfaction or enforcement of the Security Interest or the execution or
 creation, continuance or enforcement of this Security Agreement or any or all
 of the Obligations.

 
	
  

 	
  

 
	
  

 	
             (o)          Debtor
 will take all such actions as Secured Party may reasonably request to permit
 the Secured Party to establish and perfect the Security Interest in all
 jurisdictions Secured Party deems necessary. Without in any way limiting the
 generality of the foregoing, Debtor will execute, deliver or endorse any and
 all instruments, documents, assignments, security agreements and other
 agreements and writings which Secured Party may at any time reasonably
 request in order to secure, protect, perfect or enforce the Security Interest
 and Secured Party’s rights under this Agreement.

 

4

	
  

 	
  

 
	
  

 	
             (p)          Debtor
 will not knowingly use or keep any Collateral, or permit it to be used or
 kept, for any unlawful purpose or in violation of any federal, state or local
 law, statute or ordinance.

 
	
  

 	
  

 
	
  

 	
             (q)          All items of Equipment and Inventory existing
on the date of this Agreement are located at the places specified on Schedule I
hereto. The Debtor will immediately notify the Secured Party of any
additional state or county in which any item of Inventory or Equipment is
hereafter located. The Debtor will from time to time at the request of the
Secured Party provide the Secured Party with current lists as to the
locations of the Equipment and Inventory. The Debtor will not permit any
Inventory, Equipment, Chattel Paper or Documents or any records pertaining to
Accounts and General Intangibles to be located in any state or county in
which, in the event of such location, a financing statement covering such
Collateral would be required to be, but has not in fact been, filed in order
to perfect the Security Interest. 

 
	
  

 	
  

 
	
 If Debtor at any time fails to perform or observe any of the
 foregoing agreements, immediately upon the occurrence of such failure,
 without notice or lapse of time, Secured Party may (but need not) perform or
 observe such agreement on behalf and in the name, place and stead of Debtor
 (or, at Secured Party’s option, in Secured Party’s own name) and may (but
 need not) take any and all other actions which Secured Party may reasonably deem
 necessary to cure or correct such failure (including, without limitation, the
 payment of taxes, the satisfaction of security interests, liens, or
 encumbrances, the performance of obligations under contracts or agreements
 with account debtors or other obligors, the procurement and maintenance of
 insurance, the execution of financing statements, the endorsement of
 instruments, and the procurement of repairs, transportation or insurance);
 and, except to the extent that the effect of such payment would be to render
 any loan or forbearance of money usurious or otherwise illegal under any
 applicable law, Debtor shall thereupon pay Secured Party on demand the amount
 of all reasonable moneys expended and all reasonable costs and expenses
 (including reasonable attorneys’ fees) incurred by Secured Party in
 connection with or as a result of Secured Party’s performing or observing
 such agreements or taking such actions, together with interest thereon from
 the date expended or incurred by Secured Party at the highest rate then
 applicable to any of the Obligations. To facilitate the performance or
 observance by Secured Party of such agreements of Debtor, Debtor hereby
 irrevocably appoints (which appointment is coupled with an interest) Secured
 Party, or its delegate, as the attorney-in-fact of Debtor with the right (but
 not the duty) from time to time to create, prepare, complete, execute,
 deliver, endorse or file, in the name and on behalf of Debtor, any and all
 instruments, documents, financing statements, applications for insurance and
 other agreements and writings required to be obtained, executed, delivered or
 endorsed by Debtor under this Section 2.

 
	
  

 
	
           3.          Lock
 Box; Collateral Account.
 If Secured Party so requests at any time after the occurrence and during the
 continuance of an Event of Default (as defined in Section 7 of this
 Agreement), Debtor will direct each of its account debtors to make payments
 due under the relevant account or chattel paper directly to a special lock
 box to be under the control of Secured Party (the “Lock Box”). Debtor hereby authorizes
 and directs Secured Party to deposit into a special collateral account to be
 established and maintained with Secured Party (the “Collateral Account”) all checks,
 drafts, and cash payments received in the Lock Box. All deposits in the
 Collateral Account shall constitute proceeds of Collateral and shall not
 constitute payment of any Obligation. Secured Party shall promptly apply
 finally collected funds on deposit in the Collateral Account to the payment
 of the Obligations in such order of application as Secured Party may
 determine, or permit Debtor to withdraw all or any part of the balance. If a
 Lock Box is so established, Debtor agrees that it will promptly deliver to
 Secured Party, for deposit into the Lock Box, all payments on accounts and
 chattel paper received by it. All such payments shall be delivered to Secured
 Party in the form received (except for Debtor’s endorsement where necessary).
 Until so deposited, all such payments on accounts and chattel paper received
 by Debtor shall be held in trust by Debtor for and as the property of Secured
 Party and shall not be commingled with any funds or property of Debtor. Once
 an Event of Default has been cured, Debtor will regain control over the Lock
 Box.

 

5

	
  

 	
  

 
	
           4.          Account
 Verification and Collection Rights of Secured Party. At any
 time after the occurrence and during the continuance of an Event of Default
 (as defined in the Credit Agreement), Secured Party shall have the right to
 verify any accounts in the name of Debtor or in Secured Party’s own name; and
 Debtor, whenever requested, shall furnish Secured Party with duplicate
 statements of the accounts, which statements may be mailed or delivered by
 Secured Party for that purpose. Whether or not Secured Party exercises its
 rights under Section 3 of this Agreement, after the occurrence and during the
 continuance of an Event of Default, Secured Party may at any time notify any
 account debtor or any other person obligated to pay any amount due, that such
 chattel paper, account or other right to payment has been assigned or
 transferred to Secured Party for security and shall be paid directly to
 Secured Party. If Secured Party so requests at any time (after the occurrence
 and during the continuance of an Event of Default), Debtor will so notify
 such account debtors and other obligors in writing and will indicate on all
 invoices to such account debtors or other obligors that the amount due is
 payable directly to Secured Party. At any time after Secured Party or Debtor
 gives such notice to an account debtor or other obligor, Secured Party may
 (but need not), in Secured Party’s own name or in Debtor’s name, demand, sue
 for, collect or receive any money or property at any time payable or receivable
 on account of, or securing, any such chattel paper, account or other right to
 payment, or grant any extension to, make any compromise or settlement with or
 otherwise agree to waive, modify, amend or change the obligations (including
 collateral obligations) of any such account debtor or other obligor.

 
	
  

 	
  

 
	
           5.          Assignment
 of Insurance.
 Debtor hereby assigns to Secured Party, as additional security for the
 payment of the Obligations, any and all moneys, to the extent of the
 Obligations (including but not limited to proceeds of insurance and refunds
 of unearned premiums) due or to become due under, and all other rights of
 Debtor under or with respect to, an interest in any and all policies of
 insurance covering the Collateral, and Debtor hereby directs the issuer of
 any such policy to pay any such moneys directly to Secured Party to the
 extent of the Obligations in an Event of Default. After the occurrence and
 during the continuance of an Event of Default, Secured Party may (but need
 not), in Secured Party’s own name or in Debtor’s name, execute and deliver
 proofs of claim, receive all such moneys (to the extent of the Obligations),
 endorse checks and other instruments representing payment of such moneys, and
 adjust, litigate, compromise or release any claim against the issuer of any
 such policy to the extent of the Obligations. Notwithstanding the foregoing,
 Debtor shall be entitled to use any such insurance proceeds to repair or
 replace any Collateral so long as no Event of Default then exists.

 
	
  

 	
  

 
	
           6.          Right
 to Offset.
 Nothing in this Agreement shall be deemed a waiver or prohibition of Secured
 Party’s right of banker’s lien, offset, or counterclaim, which right Debtor
 hereby grants to Secured Party.

 
	
  

 	
  

 
	
           7.          Events
 of Default. Any
 one or more of the following occurrences shall constitute an “Event of
 Default” under this Agreement:

 
	
  

 
	
  

 	
             (a)          the
 Debtor shall fail to observe or perform any representation, warranty,
 covenant or agreement applicable to the Debtor under this Agreement, subject
 to any applicable cure period as set forth in the Credit Agreement; or

 
	
  

 	
  

 
	
  

 	
             (b)          any
 Event of Default however denominated shall occur under the Credit Agreement
 or any agreement, document or instrument executed in connection therewith.

 

6

	
  

 	
  

 
	
           8.          Remedies
 Upon Event of Default.
 All rights and remedies of Secured Party shall be cumulative and may be
 exercised singularly or concurrently, at Secured Party’s option, and the exercise
 or enforcement of any one such right or remedy shall neither be a condition
 to nor bar the exercise or enforcement of any other. Upon the occurrence and continuance of an Event of Default, in
 addition to the remedies as afforded under the Credit Agreement (or any other
 agreement, document or instrument executed in connection with the Credit
 Agreement), the Secured Party shall have the following rights and remedies:

 
	
  

 	
  

 
	
  

 	
             (a)          The
 Secured Party may accelerate the payment of and declare that all Obligations
 are immediately due and payable, whether matured or unmatured, whereupon all
 of the Obligations shall be immediately due and payable, and the same shall
 thereafter be immediately due and payable, without presentment of other notice
 or demand.

 
	
  

 	
  

 
	
  

 	
             (b)          The
 Secured Party may exercise and enforce any and all rights and remedies
 available to a secured party under the UCC or as set forth or available to it
 under this Agreement, without limitation.

 
	
  

 	
  

 
	
  

 	
             (c)          The
 Secured Party shall have the right to enter upon and into and take possession
 of all or such part or parts of the properties of the Debtor, including
 lands, plants, buildings, Equipment, Inventory and other property as may be
 necessary or appropriate in the judgment of the Secured Party to permit or
 enable the Secured Party to process, store or sell all or any part of the
 Collateral, as the Secured Party may elect, and to use and operate said
 properties for said purposes and for such length of time as the Secured Party
 may deem necessary or appropriate for said purposes without the payment of
 any compensation to Debtor therefor. The Secured Party may require the Debtor
 to, and the Debtor hereby agrees that it will, at its expense and upon request
 of the Secured Party forthwith, assemble all or part of the Collateral as
 directed by the Secured Party and make it available to the Secured Party at a
 place or places to be designated by the Secured Party.

 
	
  

 	
  

 
	
  

 	
             (d)          Any
 sale of Collateral may be in one or more parcels at public or private sale,
 at any of the Secured Party’s offices or elsewhere, for cash, on credit, or
 for future delivery, and upon such other terms as the Secured Party may
 reasonably believe are commercially reasonable. If notice to the Debtor of
 any intended disposition of Collateral or any other intended action is
 required by law in a particular instance, such notice shall be deemed
 commercially reasonable if given in the manner specified for the giving of
 notice in the Credit Agreement at least ten (10) calendar days prior to the
 date of intended disposition or other action, and the Secured Party may
 exercise or enforce any and all other rights or remedies available by law or
 agreement against the Collateral, against the Debtor, or against any other
 person or property. The Secured Party shall not be obligated to make any sale
 of Collateral regardless of notice of sale having been given, and the Secured
 Party may adjourn any public or private sale from time to time by announcement
 made at the time and place fixed therefor, and such sale may, without further
 notice, be made at the time and place to which it was so adjourned.

 
	
  

 	
  

 
	
  

 	
             (e)          The
 Secured Party is hereby granted a non-exclusive, worldwide license, or
 sub-license in the event such property is licensed to Debtor, or other right
 to use, without charge, all of the Debtor’s property, including, without
 limitation, all of the Debtor’s labels, trademarks, copyrights, patents and
 advertising matter, or any property of a similar nature, as it pertains to
 the Collateral, in completing sale and selling any Collateral, and the
 Debtor’s rights under all licenses and all franchise agreements shall inure
 to the Secured Party’s benefit until the Obligations are paid in full,
 provided that Secured Party may assign such rights in connection with the
 sale of the other Collateral. 

 

7

	
  

 	
  

 
	
  

 	
             (f)          At
 any time and from time to time, without notice to Debtor (any such notice
 being expressly waived by Debtor), to set off and apply any and all deposits
 (general or special, time or demand, provisional or final) at any time held
 and other indebtedness at any time owing by Secured Party to or for the
 credit or the account of Debtor against any and all of the Obligations,
 irrespective of whether or not the Secured Party shall have made demand under
 this Agreement or the Credit Agreement (or any agreement, document or
 instrument executed and delivered by Debtor in connection therewith) and
 although the Obligations may be unmatured. Secured Party agrees to promptly
 notify the Debtor after any such set off and application, provided that the
 failure to give such notice shall not affect the validity of such set off and
 application.

 
	
  

 	
  

 
	
  

 	
             (g)          The
 Secured Party may exercise or enforce any or all other rights or remedies
 available to Secured Party by law or agreement against the Collateral,
 against Debtor or against any other person or property.

 
	
  

 	
  

 
	
           9.          Other
 Personal Property. If at the time Secured Party takes
 possession of any tangible Collateral, any goods, papers or other properties
 of Debtor, not affixed to or constituting a part of such Collateral, are
 located or to be found upon or within such Collateral, Debtor agrees to
 notify Secured Party in writing of that fact, describing the property so
 located or to be found, within seven (7) calendar days after the date on
 which Secured Party took possession. Unless and until Secured Party receives
 such notice from Debtor, Secured Party shall not be responsible or liable to
 Debtor for any action taken or omitted by or on behalf of Secured Party with
 respect to such property without actual knowledge of the existence of any
 such property or without actual knowledge of the fact that it was located or
 to be found upon such Collateral. 

 
	
  

 
	
           10.          The Secured Party’s Duties. The powers conferred on the Secured Party
 under this Agreement are solely to protect its interest in the Collateral and
 shall not impose any duty upon it to exercise any such powers. Without
 limiting the generality of the foregoing, the Secured Party shall not be
 obligated to perfect or be liable for the failure to perfect the Security
 Interest, nor shall the Secured Party be obligated to seize or otherwise
 realize upon the Collateral or any part thereof or be bound to institute
 proceedings to seize, collect, realize or otherwise obtain possession of and
 sell the Collateral or any part thereof. The Secured Party shall be deemed to
 have exercised reasonable care in the safekeeping of any Collateral in its
 possession if such Collateral is accorded treatment substantially equal to
 the safekeeping which the Secured Party accords its own property of like
 kind. Except for the safekeeping of any Collateral in its possession and the
 accounting for monies and for other properties actually received by it
 hereunder, the Secured Party shall have no duty, as to any Collateral, as to
 ascertaining or taking action with respect to the taking of any necessary
 steps to preserve rights against any persons or any other rights pertaining
 to any Collateral.

 
	
  

 
	
           11.          Costs and Expenses; Indemnity. The Debtor will pay or reimburse the Secured
 Party on demand for all reasonable out-of-pocket expenses (including in each
 case all filing and recording fees and taxes and all reasonable fees and
 expenses of counsel and of any experts and agents) incurred by the Secured
 Party in connection with the creation, perfection, amendment, continuation,
 protection, satisfaction, defense, foreclosure or enforcement of the Security
 Interest and the creation, preparation, administration, continuance,
 protection, amendment, defense or enforcement of this Agreement, including
 expenses incurred in any litigation, bankruptcy, or insolvency proceedings,
 and all such costs and expenses shall be part of the Obligations secured by
 the Security Interest. The Debtor shall indemnify and hold the Secured Party
 harmless from and against any and all claims, losses and liabilities brought
 by third parties (including reasonable attorneys’ fees) arising out of or
 resulting from this Agreement and the Security Interest hereby created
 (including enforcement of this Agreement) or the Secured Party’s actions
 pursuant hereto, except claims, losses or liabilities resulting from the
 Secured Party’s bad faith, gross negligence or willful misconduct as
 determined by a final judgment of a court of competent jurisdiction. Any
 liability of the Debtor to indemnify and hold the Secured Party harmless
 pursuant to the preceding sentence shall be part of the Obligations secured
 by the Security Interest. The obligations of the Debtor under this Section
 shall survive any termination of this Agreement.

 

8

	
  

 
	
           12.          Waiver of Defenses. Except as otherwise described in the Credit
 Agreement, the Debtor waives the benefit of any and all defenses and
 discharges available to a guarantor, surety, endorser or accommodation party,
 dependent on its character as such. Without limiting the generality of the
 foregoing, the Debtor (in such capacity) waives presentment, demand for
 payment, and notice of nonpayment or protest of any note or any other
 instrument evidencing any of the Obligations; and the Debtor agrees that its
 liability hereunder and the Security Interest hereby created shall not be
 affected or impaired in any way by any of the following acts and things
 (which the Secured Party may do from time to time without notice to the
 Debtor): (a) by any sale, pledge, surrender, compromise, settlement, release,
 renewal, extension, indulgence, alteration, substitution, exchange, change
 in, modification, or other disposition of any of the Obligations or any
 evidence thereof or any collateral therefor, (b) by any acceptance or release
 of collateral for or guarantors of any of the Obligations, (c) by any
 failure, neglect or omission to realize upon or protect any of the
 Obligations, or to obtain, perfect, enforce or realize upon any collateral
 therefor, or to exercise any Lien upon or right of appropriation of any
 moneys, credits or property toward the liquidation of any of the Obligations,
 or (d) by any application of payments or credits upon any of the Obligations.
 The Secured Party shall not be required, before exercising its rights under
 this Agreement, to first resort for payment of any of the Obligations to the
 Debtor or any other persons, its or their properties or estates, or any
 collateral, property, Liens or other rights or remedies whatsoever. The
 Debtor agrees not to exercise any right of contribution, recourse,
 subrogation or reimbursement available to the Debtor against any other person
 or property, unless and until all Obligations and all other debts,
 liabilities and obligations owed by the Debtor to the Secured Party have been
 paid and discharged. The Debtor hereby waives any rights it may have at
 equity or in law to require the Secured Party to apply any rights of
 marshalling or other equitable doctrines in the circumstances. The Debtor
 expects to derive benefits from the transactions resulting in the creation of
 the Obligations. The Secured Party may rely conclusively on the continuing
 warranty, hereby made, that the Debtor continues to be benefitted by the
 Secured Party’s extension of credit accommodations to the Debtor and the
 Secured Party shall have no duty to inquire into or confirm the receipt of
 any such benefits, and this Agreement shall be effective and enforceable by
 the Secured Party without regard to the receipt, nature or value of any such
 benefits.

 
	
  

 
	
           13.          Amendment;
 Waivers. This Agreement can be waived, modified, amended,
 terminated or discharged, and the Security Interest can be released, only
 explicitly in a writing signed by Secured Party and Debtor. A waiver shall be
 effective only in the specific instance and for the specific purpose given.
 Mere delay or failure to act shall not preclude the exercise or enforcement
 of any of Secured Party’s rights or remedies.

 
	
  

 
	
           14.          Notices. All notices to be given to Debtor
 shall be deemed sufficiently given if given in the manner specified in the
 Credit Agreement.

 
	
  

 
	
           15.          Entire Agreement. This Agreement and the Credit Agreement (and
 the other agreements, documents and instruments executed and delivered in
 connection with the Credit Agreement) embody the entire agreement and
 understanding between the Debtor and Secured Party with respect to the
 subject matter hereof and thereof. Nothing contained in this Agreement or in
 the Credit Agreement, expressed or implied, is intended to confer upon any
 persons other than the parties hereto any rights, remedies, obligations or
 liabilities hereunder or thereunder.

 
	
  

 
	
           16.          Debtor Acknowledgements. The Debtor
 hereby acknowledges that (a) it has been advised by counsel in the
 negotiation, execution and delivery of this Agreement, (b) the Secured Party
 has no fiduciary relationship to the Debtor, the relationship being solely
 that of debtor and creditor, and (c) no joint venture exists between the
 Debtor and the Secured Party. 

 

9

	
  

 
	
           17.          Continuing Security Interest & Assignment.
 This Agreement shall (a) create a continuing security interest in the
 Collateral to secure repayment of the Obligations, (b) be binding upon the
 Debtor, its successors and permitted assigns, and (c) inure to the benefit
 of, and be enforceable by, the Secured Party and its successors, transferees,
 and assigns. Without limiting the generality of the foregoing clause (c), the
 Secured Party may assign or otherwise transfer all or any portion of its
 rights under this Agreement without the consent of the Debtor. The Debtor may
 not assign its rights or obligations, in whole or in part, under this
 Agreement without the prior express written consent of the Secured Party.

 
	
  

 
	
           18.          Governing Law and Construction. THE
 VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED
 BY THE LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF
 LAWS PRINCIPLES THEREOF, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION
 OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
 PARTICULAR COLLATERAL ARE MANDATORILY GOVERNED BY THE LAWS OF A JURISDICTION
 OTHER THAN THE STATE OF MINNESOTA. Whenever possible, each provision of this
 Agreement and any other statement, instrument or transaction contemplated
 hereby or relating hereto shall be interpreted in such manner as to be
 effective and valid under such applicable law, but, if any provision of this
 Agreement or any other statement, instrument or transaction contemplated
 hereby or relating hereto shall be held to be prohibited or invalid under
 such applicable law, such provision shall be ineffective only to the extent
 of such prohibition or invalidity, without invalidating the remainder of such
 provision or the remaining provisions of this Agreement or any other
 statement, instrument or transaction contemplated hereby or relating hereto.

 
	
  

 
	
           19.          Consent to Jurisdiction. AT THE
 OPTION OF THE SECURED PARTY, THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL
 COURT OR MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY, MINNESOTA; AND THE
 DEBTOR CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES
 ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE
 DEBTOR COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT
 OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP
 CREATED BY THIS AGREEMENT, THE SECURED PARTY AT ITS OPTION SHALL BE ENTITLED
 TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED,
 OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH
 CASE DISMISSED WITHOUT PREJUDICE.

 
	
  

 
	
           20.          Waiver of Notice and Hearing. THE
 DEBTOR HEREBY WAIVES ALL RIGHTS TO A JUDICIAL HEARING OF ANY KIND PRIOR TO THE
 EXERCISE BY THE SECURED PARTY OF ITS RIGHTS TO POSSESSION OF THE COLLATERAL
 WITHOUT JUDICIAL PROCESS OR OF ITS RIGHTS TO REPLEVY, ATTACH, OR LEVY UPON
 THE COLLATERAL WITHOUT PRIOR NOTICE OR HEARING. THE DEBTOR ACKNOWLEDGES THAT
 IT HAS BEEN ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO THIS PROVISION
 AND THIS AGREEMENT.

 
	
  

 
	
           21.          Survival of Representations and Warranties.
 All representations and warranties contained in this Agreement shall survive
 the execution, delivery and performance of this Agreement and the creation
 and payment of the Obligations.

 
	
  

 
	
           22.          Waiver of Acceptance. The Debtor
 waives notice of the acceptance of this Agreement by the Secured Party.

 
	
  

 
	
           23.          Captions and Headings. Captions in
 this Agreement are for reference and convenience only and shall not affect
 the interpretation or meaning of any provision of this Agreement.

 

10

SECURITY AGREEMENT

 [Signature Page]

          IN WITNESS
WHEREOF, Secured Party and Debtor have caused this Agreement to be duly
executed and delivered by their officers thereunto duly authorized as of the
date first written above.

	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 DEBTOR:

 
	
  

 	
  

 
	
  

 	
 VASCULAR SOLUTIONS, INC.,

 
	
  

 	
 a Minnesota
 corporation

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ James
 Hennen

 
	
  

 	
  

 	 

 
	
  

 	
 Name: 

 	
 James Hennen

 
	
  

 	
  

 	 

 
	
  

 	
 Its:

 	
 Chief
 Financial Officer

 
	
  

 	
  

 	 

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 SECURED PARTY:

 
	
  

 	
  

 
	
  

 	
 U.S. BANK, NATIONAL ASSOCIATION

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Greg
 Guttormsson

 
	
  

 	
  

 	 

 
	
  

 	
 Name: 

 	
 Greg
 Guttormsson

 
	
  

 	
  

 	 

 
	
  

 	
 Its:

 	
 Vice
 President

 
	
  

 	
  

 	 

 

EXHIBIT A

BORROWER INFORMATION

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Legal Name

 	
  

 	
 Jurisdiction of

 Organization

 	
  

 	
 Chief Executive Office

 	
  

 	
 Organizational

 Identification

 Number

 	
  

 	
 Federal Employer

 Identification

 Number

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Vascular
 Solutions, Inc.

 	
  

 	
 Minnesota

 	
  

 	
 6464
 Sycamore Court

 Minneapolis, MN 55369

 	
  

 	
 9L-421

 	
  

 	
 41-1859679

 

SCHEDULE 1

LOCATION OF EQUIPMENT
AND INVENTORY

Locations:

Vascular Solutions, Inc.

6464 Sycamore Court

Maple Grove, MN 55369

Vascular Solutions, Inc.

5025 Cheshire Lane

Plymouth, MN 55446

Debtor’s field representatives are provided with office Equipment in
connection with their job responsibilities

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