Document:

exhibit10k.htm

  

  

 

  

EXHIBIT 10(K)

SUMMARY OF DIRECTOR AND EXECUTIVE OFFICER NON-PLAN COMPENSATION

Non-Employee Directors

The current fees paid to non-employee directors are as follows:

Non-employee directors of the Company are each paid $24,000 per year for their services.  The Chairmen of the Board of Directors and of the Audit Committee each receive an additional $5,000 for their duties as such while the Chairmen of the Compensation Committee and the Nominating and Governance Committee each receive an additional $3,500 per year for their duties as such. Members of committees other than the Executive Committee, each receive an additional $1,000 for their duties as such.

Executive Officers

The current annual salaries of the executive officers are as follows:

Matthew Boyle, President and Chief Executive Officer

-- British Pounds 193,800

Paul N. Farquhar, Vice President, Treasurer and Chief Financial Officer

-- British Pounds 118,965

Annual cash bonuses will be determined at the end of the year.

* * * * *

Further information about compensation of directors and executive officers is found in the Company’s proxy statements on file with the Commission, as well as in periodic Form 8-K filings by the Company.exhibit10_l.htm

  

  

 

  

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT

(ALL ASSETS)

This Second Amendment to Loan and Security Agreement (All Assets) (the “Second Amendment”) is made as of the 30th  day of September, 2013 by and between RBS Citizens, National Association (the “Bank”), a national banking association with offices at 28 State Street, Boston, Massachusetts 02109 and Sevcon USA, Inc. (hereinafter, the “Borrower”), a Delaware corporation with its principal executive offices at 155 Northboro Road, Southbrough, Massachusetts 01772, with all representations, covenants, warranties, defaults, rights, remedies, powers, privileges, and discretions applicable to Borrower, in consideration of the mutual covenants contained herein and benefits to be derived herefrom:

W I T N E S S E T H

WHEREAS, the Bank and Borrower, have entered into a certain loan arrangement, which loan arrangement is evidenced by, among other documents and instruments, a certain Loan and Security Agreement (All Assets) dated as of June 15, 2011 as amended by a First Amendment to Loan and Security Agreement (All Assets) dated June 19, 2012  (the “Agreement”);

WHEREAS, Borrower and the Bank have agreed to extend the maturity date of the Agreement all as set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Bank and the Borrower hereby agree as follows:

1. All capitalized terms not otherwise defined herein shall have the same meaning as defined in the Agreement.

2. Section 21 (a) of the Agreement is hereby amended by deleting the date “June 14, 2014” and replacing with “June 14, 2017”.

3. Section 21 (g) of the Agreement is hereby amended by deleting the reference to David Nussbaum and his telephone and telecopier numbers from the Bank’s notice section and replacing it with “David A. Stachura, Telephone No. (781) 565-2248, Telecopier No. (781) 273-0542.

4. Except as expressly amended hereby, the remaining terms and conditions of the Agreement and all documents and instruments executed in connection therewith are hereby expressly ratified and confirmed.

5. Borrower and Sevcon, Inc. (“ Guarantor”) each acknowledges and agrees that as of the date hereof, each has no claims, counterclaims, off-sets, defenses or causes of action against the Bank with respect to amounts outstanding under the Agreement or otherwise.  To the extent such claims, counterclaims, off-sets, defenses and/or causes of action should exist, whether known or unknown, at law or in equity, Borrower and Guarantor each hereby WAIVES same and RELEASES the Bank from any and all liability in connection therewith.

6. Miscellaneous.

	
  

	
a.

	
Borrower and Guarantor shall execute and deliver to the Bank such additional documents, instruments, and agreements that the Bank may require in order to give effect to, and implement the terms and conditions of this Second Amendment.

	
  

	
b.

	
This Second Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original and all of which together shall constitute one instrument.

	
  

	
c.

	
This Second Amendment expresses the entire understanding of the parties with respect to the transactions contemplated hereby.  No prior negotiations or discussions shall limit, modify, or otherwise affect the provision hereof.

	
  

	
d.

	
Borrower shall pay on demand all reasonable costs and expenses of the Bank including, without limitation, reasonable attorneys’ fees in connection with the preparation, negotiation, execution and delivery of the Second Amendment.

	
  

	
e.

	
Borrower shall pay to the Bank an extension fee of $7,500.00 upon execution by Bank and Borrower of this Second Amendment.

7. It is intended that this Second Amendment take effect as an instrument under seal as of the date first written above.

	
Witnessed by:

	
SEVCON USA, INC

 

By:__________________________________

Name:

Title:

 

 

RBS CITIZENS, NATIONAL ASSOCIATION

 

 

By:__________________________________

Name:

Title:

 

The undersigned as guarantor of the Obligations (as defined therein) of the Borrower to the Bank hereby acknowledges and consents to the foregoing Second Amendment and acknowledges that its guaranty remains in full force and effect.

                                                                                                                                                         SEVCON, INC.

                                                                                                                                                                                                                                                                      By:    ___________________________________                                                    

                                                                                                                                                                    Name:

                                                                                                                                                         Title:Exhibit
10.1

BUSINESS
LOAN AGREEMENT (ASSET BASED)

	
        Principal

        $2,500,000.00
	
        Loan Date

        12-18-2013
	
        Maturity

        12-18-2014
	
        Loan No

        15695
	Call / Coll	Account	Officer 	Initials
	References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.

Any item above containing “***” has been omitted due to text length limitations.

 

	Borrower:	Electromed, Inc.	Lender:	Venture Bank
	 	500 Sixth Avenue NW	 	6210 Wayzata Boulevard
	 	New Prague, MN 56071	 	Golden Valley, MN 55416
	 	 	 	 

 

THIS BUSINESS LOAN AGREEMENT (ASSET
BASED) dated December 18, 2013, is made and executed between Electromed, Inc. (“Borrower”) and Venture Bank (“Lender”)
on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a
commercial loan or loans or other financial accommodations, including those which may be described on any exhibit or schedule attached
to this Agreement. Borrower understands and agrees that: (A) in granting, renewing, or extending any Loan, Lender is relying upon
Borrower’s representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending
of any Loan by Lender at all times shall be subject to Lender’s sole judgment and discretion; and (C) all such Loans shall
be and remain subject to the terms and conditions of this Agreement.

TERM. This Agreement shall be effective
as of December 18, 2013, and shall continue in full force and effect until such time as all of Borrower’s Loans in favor
of Lender have been paid in full, including principal, interest, costs, expenses, attorneys’ fees, and other fees and charges,
or until such time as the parties may agree in writing to terminate this Agreement.

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

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

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

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

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

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

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

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

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

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

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

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

COLLATERAL. To secure payment of
the Primary Credit Facility and performance of all other Loans, obligations and duties owed by Borrower to Lender, Borrower (and
others, if required) shall grant to Lender Security Interests in such property and assets as Lender may require. Lender’s

    	 	 

    	 

    

 

	 	BUSINESS
    LOAN AGREEMENT (ASSET BASED)	 
	Loan No:  15695	(Continued)	Page 2
	 	 	 

 

Security Interests in the Collateral shall be continuing liens and shall include the proceeds and products of the Collateral, including
without limitation the proceeds of any insurance. With respect to the Collateral, Borrower agrees and represents and warrants to
Lender:

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

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

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

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

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

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

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

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

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

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

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

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

 

    	 	 

    	 

    

	 	BUSINESS
    LOAN AGREEMENT (ASSET BASED)	 
	Loan No:  15695	(Continued)	Page 3
	 	 	 

 

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

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

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

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

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

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

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

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

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

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

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

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

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

Financial Statements. Furnish
Lender with the following:

    	 	 

    	 

    

 

	 	BUSINESS
    LOAN AGREEMENT (ASSET BASED)	 
	Loan No:  15695	(Continued)	Page 4
	 	 	 

 

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

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

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

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

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

Additional Requirements.

1. Borrower must maintain a Minimum
Tangible Net Worth of not less than $12,000,000.00. Tangible Net Worth is defined as total capital plus debt subordinated to Venture
Bank less intangible assets. Intangible assets include but are not limited to goodwill, non-compete agreements, trademarks, notes
due from related parties and employee advances. Tangible Net Worth will be calculated quarterly based on SEC filed financial statements.

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

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

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

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

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

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

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

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

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

Compliance with Governmental
Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities
applicable to the conduct of Borrower’s properties, businesses and operations, and to the use or occupancy of the Collateral,
including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance,
or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender
in writing prior to doing so and so long as, in Lender’s sole opinion, Lender’s interests in the Collateral are not
jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect
Lender’s interest.

Inspection. Permit employees
or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower’s other properties
and to examine or audit Borrower’s books, accounts, and records and to make copies and memoranda of Borrower’s books,
accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated

    	 	 

    	 

    

 

	 	BUSINESS
    LOAN AGREEMENT (ASSET BASED)	 
	Loan No:  15695	(Continued)	Page 5
	 	 	 

 

records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request
of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with
copies of any records it may request, all at Borrower’s expense.

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

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

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

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

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

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

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

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

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

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

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

    	 	 

    	 

    

 

	 	BUSINESS
    LOAN AGREEMENT (ASSET BASED)	 
	Loan No:  15695	(Continued)	Page 6
	 	 	 

 

such accounts, and, at Lender’s option, to administratively freeze all such accounts
to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.

DEFAULT. Each of the following
shall constitute an Event of Default under this Agreement:

Payment Default. Borrower
fails to make any payment when due under the Loan.

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

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

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

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

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

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

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

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

Insecurity. Lender in good
faith believes itself insecure.

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

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

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

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

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

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

 

    	 	 

    	 

    

	 	BUSINESS
    LOAN AGREEMENT (ASSET BASED)	 
	Loan No:  15695	(Continued)	Page 7
	 	 	 

 

 

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

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

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

Notices. Any notice required
to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed,
when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses
shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal
written notice to the other parties, specifying that the purpose of the notice is to change the party’s address. For notice
purposes, Borrower agrees to keep Lender informed at all times of Borrower’s current address. Unless otherwise provided or
required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to
all Borrowers.

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

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

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

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

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

DEFINITIONS. The following capitalized
words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all
references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular
shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise
defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. Accounting words and
terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance with generally accepted accounting
principles as in effect on the date of this Agreement:

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

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

 

    	 	 

    	 

    

	 	BUSINESS
    LOAN AGREEMENT (ASSET BASED)	 
	Loan No:  15695	(Continued)	Page 8
	 	 	 

 

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

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

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

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

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

Collateral. The word “Collateral”
means all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly
or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral
mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s
lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended
as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. The word
Collateral also includes without limitation all collateral described in the Collateral section of this Agreement.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Guaranty. The word “Guaranty”
means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note.

    	 	 

    	 

    

 

	 	BUSINESS
    LOAN AGREEMENT (ASSET BASED)	 
	Loan No:  15695	(Continued)	Page 9
	 	 	 

 

Hazardous Substances.  The
words “Hazardous Substances” mean materials that, because of their quantity, concentration or physical, chemical or
infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly
used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words “Hazardous Substances”
are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste
as defined by or listed under the Environmental Laws. The term “Hazardous Substances” also includes, without limitation,
petroleum and petroleum by-products or any fraction thereof and asbestos.

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

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

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

Note. The word “Note”
means the Note dated December 18, 2013 and executed by Electromed, Inc. in the principal amount of $2,500,000.00, together with
all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit
agreement.

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

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

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

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

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

BORROWER ACKNOWLEDGES HAVING READ ALL
THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT (ASSET BASED) AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT (ASSET
BASED) IS DATED DECEMBER 18, 2013.

BORROWER:

ELECTROMED, INC.

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

Inc.	 

LENDER:

VENTURE BANK

	By:	/s/ Kevin Doyle	 
	 	Authorized Signer

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