Document:

exv10w2

GUARANTEE

     FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged, and in connection with
that certain funding agreement (the “Funding Agreement”), entered into by and between Principal
Life Insurance Company, an Iowa insurance company (“Principal Life”), and Principal Life Income
Fundings Trust 2008-77, a New York common law trust (the “Trust”), relating to the notes (the
“Notes”) issued by the Trust, Principal Financial Group, Inc., a Delaware corporation and the
indirect parent company of Principal Life (the “Guarantor”), hereby furnishes to the Trust its full
and unconditional guarantee of the Guaranteed Amounts (as hereinafter defined) as follows:

     1. Guarantee.

          (a) The Guarantor hereby fully, irrevocably, absolutely and unconditionally guarantees, as a
guarantee of payment and not merely as a guarantee of collection, immediate payment when due to the
Trust any payments required to be made by Principal Life to the Trust under the Funding Agreement
which shall become due and payable regardless of whether such payment is due at maturity, on an
interest payment date or as a result of redemption or otherwise (the “Scheduled Payments”) but
shall be unpaid by Principal Life (the “Guaranteed Amounts”). Notwithstanding anything to the
contrary contained herein, in no event shall the Guaranteed Amounts exceed the Deposit (as defined
in the Funding Agreement) of the Funding Agreement, plus accrued but unpaid interest and any other
amounts due and owing under the Funding Agreement, less any amounts paid by Principal Life to the
Trust.

          (b) In the event that Principal Life fails to make a Scheduled Payment in full when due (the
“Payment Notice Date”), then the Trust or Citibank, N.A., as indenture trustee for the benefit of
the holders of the Notes (the “Indenture Trustee”), pursuant to the indenture (the “Indenture”)
between the Trust and the Indenture Trustee, may present the Guarantor with notice (each, a
“Payment Notice”) of such failure in writing on or after the Payment Notice Date. The Payment
Notice shall identify (1) the Funding Agreement, (2) the Trust, (3) the Payment Notice Date and (4)
the amount of the Scheduled Payments not paid by Principal Life to the Trust as of the Payment
Notice Date. Upon receipt of such Payment Notice, the Guarantor will immediately pay the
Guaranteed Amounts pursuant to Section 7.

          (c) In the event that, after receipt of a Payment Notice from the Trust, the Guarantor fails
to make immediate payment to the Trust or the Indenture Trustee of the Guaranteed Amounts, then
the Trust and the Indenture Trustee may enforce the obligations of the Guarantor under this
Guarantee, including by immediately bringing suit directly against the Guarantor (without first
bringing suit against Principal Life) for the Guaranteed Amounts not paid to the Trust as of the
Payment Notice Date.

          (d) This Guarantee is an unsecured, unsubordinated and contingent obligation of the Guarantor
and ranks equally with all other unsecured and unsubordinated obligations of the Guarantor.

1

 

     2. Termination. This Guarantee is a continuing and irrevocable guarantee of the Guaranteed
Amounts now or hereafter existing and shall terminate and be of no further force and effect with
respect to the Funding Agreement and the Notes upon the full payment of the Scheduled Payments or
upon the earlier extinguishment of the obligations of Principal Life under the Funding Agreement.

     3. Amendments. Subject to the trust agreement relating to the Trust and the Indenture, no
provision of this Guarantee may be waived, amended, supplemented or modified, except by a written
instrument executed by the Trust and the Guarantor.

     4. Assignment; Governing Law. This Guarantee shall inure to the benefit of the Trust and its
successors, assigns and pledgees. This Guarantee shall be governed by, and construed in accordance
with, the laws of the State of New York without regard to conflict of law principles.

     5. Notices. All notices given pursuant to this Guarantee shall be in writing, and shall
either be delivered, mailed or telecopied to the locations listed below or at such other address or
to the attention of such other persons as such party shall have designated for such purpose in a
written notice complying as to delivery with the terms of this Section 5. Each such notice shall
be effective (i) if given by telecopy, when transmitted to the applicable number so specified in
this Section 5 (such notice shall also be sent by mail, with first class postage prepaid), (ii) if
given by mail, three days after deposit in the mails with first class postage prepaid, or (iii) if
given by any other means, when actually delivered at such address.

If to the Guarantor:

Principal Financial Group, Inc.

711 High Street

Des Moines, Iowa 50392

Attention: General Counsel

Telephone: (515) 247-5111

Facsimile: (515) 248-3011

With a copy to:

Principal Life Insurance Company

711 High Street

Des Moines, Iowa 50392

Attention: Jim Fifield

Telephone: (515) 248-9196

Facsimile: (866) 496-6527

If to the Trust:

Principal Life Income Fundings Trust (followed by the number of the Trust specified in this Guarantee)

2

 

c/o U.S. Bank Trust National Association

100 Wall Street, 16th Floor

New York, New York 10005

Attention: Janet P. O’Hara

Telephone: (212) 361-2527

Facsimile: (212) 809-5459

With a copy to:

Citibank, N.A.

Corporate and Investment Banking

388 Greenwich Street, 14th Floor

New York, New York 10013

Attention: Jennifer H. McCourt

Telephone: (212) 816-5680

Facsimile: (212) 816-5527

     6. Representations and Warranties. The Guarantor represents and warrants that: (i) it is duly
organized and in good standing under the laws of the jurisdiction of its organization and has full
capacity and right to make and perform this Guarantee, and all necessary authority has been
obtained; (ii) this Guarantee constitutes a legal, valid and binding obligation of the Guarantor
enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors’ rights and general principles of equity, regardless of whether
enforcement is sought in a proceeding in equity or at law; (iii) the making and performance of this
Guarantee does not and will not violate the provisions of any applicable law, regulation or order,
and does not and will not result in the breach of, or constitute a default under, any material
agreement, instrument or document to which it is a party or by which it or any of its property may
be bound or affected, except to the extent disclosed in the registration statement registering the
issuance of this Guarantee and the Funding Agreement, as amended, supplemented or modified from
time to time (the “Registration Statement”), and to the extent that any such violation, breach or
default does not result in a material adverse effect on the Guarantor; and (iv) all consents,
approvals, licenses and authorizations of, and filings and registrations with, any governmental
authority required under applicable law and regulations for the making and performance of this
Guarantee have been obtained or made and are in full force and effect, except to the extent
disclosed in the Registration Statement and to the extent that the failure to acquire any such
consent, approval, license, authorization, filing or registration does not result in a material
adverse effect on the Guarantor.

     7. Notice of, and Consent to, Security Interest. The Trust hereby notifies the Guarantor that
it has granted to the Indenture Trustee, on behalf of the holders of the Notes, a security interest
in the Collateral (as defined in the Indenture), including, but not limited to, any and all payment
to be made by the Guarantor to the Trust under this Guarantee. The Trust hereby notifies the
Guarantor that it has collaterally assigned to the Indenture Trustee, for the benefit of the
holders of the Notes, this Guarantee. The Guarantor, by executing this Guarantee, hereby (i)
affirms that it has made or simultaneously will make changes to its books and records to reflect
such security interest and collateral assignment, (ii) consents to the security interest

3

 

granted, and collateral assignment made, by the Trust to the Indenture Trustee of this Guarantee,
(iii) agrees to make all payments due under this Guarantee to the Collection Account (as defined in
the Indenture) or any other account designated in writing to the Guarantor by the Indenture Trustee
and (iv) agrees to comply with all orders of the Indenture Trustee with respect to this Guarantee
without any further consent from the Trust.

     8. WAIVER OF JURY TRIAL; FINAL AGREEMENT. TO THE EXTENT ALLOWED BY APPLICABLE LAW, THE
GUARANTOR WAIVES TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING ON OR ARISING
OUT OF THIS GUARANTEE. THIS GUARANTEE REPRESENTS THE FINAL AGREEMENT BETWEEN THE GUARANTOR AND THE
TRUST AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS AMONG SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.

	 	 	 	 	 
	 	PRINCIPAL FINANCIAL GROUP, INC.

 	 
	 	By:  	/s/ Elizabeth D. Swanson
 	 
	 	 	Name:  	Elizabeth D. Swanson 	 
	 	 	Title:  	Counsel 	 
	 	 	Date:  	The Effective Date (as defined in the Funding
Agreement) 	 
	 

Acknowledged and Agreed:

THE PRINCIPAL LIFE INCOME FUNDINGS

TRUST DESIGNATED IN THIS GUARANTEE

	By: 	 	U.S. Bank Trust National Association,

not in its individual capacity, but solely in its

capacity as trustee
	 
	By: 	 	Bankers Trust Company, N.A.,

under Limited Power of Attorney, dated November 21, 2007

	 	 	 	 	 
	By:  	                        /s/  Diana L. Cook
 	 	 
	 	Name:  	Diana L. Cook 	 	 
	 	Title:  	Vice President 	 	 
	 	Date:  	The Effective Date (as defined in the Funding
Agreement) 	 	 
	 

4exv10w23

Exhibit 10.23

CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Principal	 	Loan Date	 	Maturity	 	Loan No	 	Call / Coll	 	Account	 	Officer	 	Initials
	$2,000,000.00

	 	09-03-2008
	 	09-03-2009
	 	 	13017	 	 	 	 	 	 	10034	 	 

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.

	 	 	 	 	 	 	 
	 

	 	 	 	Lender:
	 	Venture Bank
	Corporation:

	 	Uroplasty, Inc.
	 	 	 	5601 Green Valley Drive, Suite 120
	 

	 	5420 Feltl Road
	 	 	 	Bloomington, MN 55437
	 

	 	Minnetonka, MN 55343	 	 	 	 

I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

THE CORPORATION’S EXISTENCE. The complete and correct name of the Corporation is Uroplasty,
Inc. (“Corporation”). The Corporation 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. The Corporation is duly authorized to transact business in
all other states in which the Corporation is doing business, having obtained all necessary
filings, governmental licenses and approvals for each state in which the Corporation is doing
business. Specifically, the Corporation 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. The Corporation 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. The Corporation maintains an office at 5420 Feltl Road,
Minnetonka, MN 55343. Unless the Corporation has designated otherwise in writing, the
principal office is the office at which the Corporation keeps its books and records. The
Corporation will notify Lender prior to any change in the location of the Corporation’s state
of organization or any change in the Corporation’s name. The Corporation 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 the
Corporation and the Corporation’s business activities.

RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the Corporation
is a close corporation having no Board of Directors then at a meeting of the Corporation’s
shareholders, duly called and held on September 3, 2008, at which a quorum was present and
voting, or by other duly authorized action in lieu of a meeting, the resolutions set forth in
this Resolution were adopted.

OFFICER. The following named person is an officer of Uroplasty, Inc.:

	 	 	 	 	 	 	 	 	 
	NAMES	 	TITLES	 	AUTHORIZED	 	 	 	ACTUAL SIGNATURES
	Mahedi A. Jiwani

	 	CFO/Treasurer
	 	Y
	 	X
	/s/ Mahedi A. Jiwani

ACTIONS AUTHORIZED. The authorized person listed above may enter into any agreements of any
nature with Lender, and those agreements will bind the Corporation. Specifically, but without
limitation, the authorized person is authorized, empowered, and directed to do the following
for and on behalf of the Corporation:

Borrow Money. To borrow, as a cosigner or otherwise, from time to time from Lender, on
such terms as may be agreed upon between the Corporation and Lender, such sum or sums of
money as in his or her judgment should be borrowed, without limitation.

Execute Notes. To execute and deliver to Lender the promissory note or notes, or other
evidence of the Corporation’s credit accommodations, on Lender’s forms, at such rates of
interest and on such terms as may be agreed upon, evidencing the sums of money so
borrowed or any of the Corporation’s indebtedness to Lender, and also to execute and
deliver to Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, any portion of the notes,
or any other evidence of credit accommodations.

Grant
Security. To mortgage, pledge, transfer, endorse, hypothecate, or otherwise
encumber and deliver to Lender any property now or hereafter belonging to the Corporation
or in which the Corporation now or hereafter may have an interest, including without
limitation all of the Corporation’s real property and all of the Corporation’s personal
property (tangible or intangible), as security for the payment of any loans or credit
accommodations so obtained, any promissory notes so executed (including any amendments to
or modifications, renewals, and extensions of such promissory notes), or any other or
further indebtedness of the Corporation to Lender at any time owing, however the same may
be evidenced. Such property may be mortgaged, pledged, transferred, endorsed,
hypothecated or encumbered at the time such loans are obtained or such indebtedness is
incurred, or at any other time or times, and may be either in addition to or in lieu of
any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered.

Execute
Security Documents. To execute and deliver to Lender the forms of mortgage, deed
of trust, pledge agreement, hypothecation agreement, and other security agreements and
financing statements which Lender may require and which shall evidence the terms and
conditions under and pursuant to which such liens and encumbrances, or any of them, are
given; and also to execute and deliver to Lender any other written instruments, any
chattel paper, or any other collateral, of any kind or nature, which Lender may deem
necessary or proper in connection with or pertaining to the giving of the liens and
encumbrances.

Negotiate Items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or belonging
to the Corporation or in which the Corporation may have an interest, and either to
receive cash for the same or to cause such proceeds to be credited to the Corporation’s
account with Lender, or to cause such other disposition of the proceeds derived therefrom
as he or she may deem advisable.

Further Acts. In the case of lines of credit, to designate additional or alternate
individuals as being authorized to request advances under such lines, and in all cases,
to do and perform such other acts and things, to pay any and all fees and costs, and to
execute and deliver such other documents and agreements as the officer may in his or her
discretion deem reasonably necessary or proper in order to carry into effect the
provisions of this Resolution.

ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or filings
required by law relating to all assumed business names used by the Corporation. Excluding
the name of the Corporation, the following is a complete list of all assumed business names
under which the Corporation does business: None.

NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at Lender’s
address shown above (or such other addresses as Lender may designate from time to time)
prior to any (A) change in the Corporation’s name; (B) change in the Corporation’s assumed
business name(s); (C) change in the management of the Corporation; (D) change in the
authorized signer(s); (E) change in the Corporation’s principal office address; (F) change
in the Corporation’s state of organization; (G) conversion of the Corporation to a new or
different type of business entity; or (H) change in any other aspect of the Corporation that
directly or indirectly relates to any agreements between the Corporation and Lender. No
change in the Corporation’s name or state of organization will take effect until after
Lender has received notice.

 

 

					
	 
	 	CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL	 	 
	Loan No: 13017
	 	(Continued)
	 	Page 2

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officer named above is duly elected,
appointed, or employed by or for the Corporation, as the case may be, and occupies the position
set opposite his or her respective name. This Resolution now stands of record on the books of the
Corporation, is in full force and effect, and has not been modified or revoked in any manner
whatsoever.

NO
CORPORATE SEAL. The Corporation has no corporate seal, and therefore, no seal is affixed to
this Resolution.

CONTINUING
VALIDITY. Any and all acts authorized pursuant to this Resolution and performed prior
to the passage of this Resolution are hereby ratified and approved. This Resolution shall be
continuing, shall remain in full force and effect and Lender may rely on it until written notice
of its revocation shall have been delivered to and received by Lender at Lender’s address shown
above (or such addresses as Lender may designate from time to time). Any such notice shall not
affect any of the Corporation’s agreements or commitments in effect at the time notice is given.

IN TESTIMONY WHEREOF, I have hereunto set my hand and attest that the signature set opposite the
name listed above is his or her genuine signature.

I have read all the provisions of this Resolution, and I personally and on behalf of the
Corporation certify that all statements and representations made in this Resolution are true and
correct. This Corporate Resolution to Borrow / Grant Collateral is dated September 3, 2008.

	 	 	 	 	 
	CERTIFIED TO AND ATTESTED BY:

 	 
	X 	/s/
Mahedi A. Jiwani
 	 
	 	Mahedi A. Jiwani, CFO/Treasurer of Uroplasty, Inc. 	 
	 	 	 
	 

NOTE: If the officer signing this Resolution is designated by the foregoing document as one of the
officers authorized to act on the Corporation’s behalf, it is advisable to have this
Resolution signed by at least one non-authorized officer of the Corporation.

 LASER
PRO Lending, Ver.
5.38.10.001 Copr. Harland Financial Solutions, Inc. 1997, 2008.   All
Rights Reserved.    MN  c:\APPS\CFI\LPL\F10.FC TR-3378   PR-20  

 

 

PROMISSORY NOTE

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Principal	 	Loan Date	 	Maturity	 	Loan No	 	Call / Coll	 	Account	 	Officer	 	Initials
	$2,000,000.00

	 	09-03-2008
	 	09-03-2009
	 	 	13017	 	 	 	 	 	 	10034	 	 

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:

	 	Uroplasty, Inc.
	 	 	Lender: 	 Venture Bank
	 

	 	5420 Feltl Road
	 	 	 	5601 Green Valley Drive, Suite 120
	 

	 	Minnetonka, MN 55343
	 	 	 	Bloomington, MN 55437

					
	 	 	 	 	 
	Principal Amount: $2,000,000.00
	 	Initial Rate: 7.500%
	 	Date of Note: September 3, 2008

PROMISE TO PAY. Uroplasty, Inc. (“Borrower”) promises to pay to Venture Bank (“Lender”), or
order, in lawful money of the United States of America, the principal amount of Two Million &
00/100 Dollars ($2,000,000.00) or so much as may be outstanding, together with interest on the
unpaid outstanding principal balance of each advance. Interest shall be calculated from the date
of each advance until repayment of each advance.

PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued
unpaid interest on September 3, 2009. In addition, Borrower will pay regular monthly payments of
all accrued unpaid interest due as of each payment date, beginning October 3, 2008, with all
subsequent interest payments to be due on the same day of each month after that. Unless otherwise
agreed or required by applicable law, payments will be applied first to any accrued unpaid
interest; then to principal; then to any unpaid collection costs; and then to any late charges.
The annual interest rate for this Note is computed on a 365/360 basis; that is, by applying the
ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal balance is outstanding.
Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may
designate in writing.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time
based on changes in an independent index which is the Prime rate of interest as published each
business day in the money rates section of The Wall Street Journal (the “Index”). The Index is
not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after notifying Borrower.
Lender will tell Borrower the current Index rate upon Borrower’s request. The interest rate
change will not occur more often than each day. Borrower understands that Lender may make loans
based on other rates as well. The Index currently is 5.000% per annum. The interest rate to be
applied to the unpaid principal balance during this Note will be at a rate of 1.000 percentage
point over the Index, adjusted if necessary for any minimum and maximum rate limitations
described below, resulting in an initial rate of 7.500% per annum. NOTICE: Under no circumstances
will the interest rate on this Note be less than 7.500% per annum or more than the maximum rate
allowed by applicable law.

PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges are earned fully
as of the date of the loan and will not be subject to refund upon early payment (whether
voluntary or as a result of default), except as otherwise required by law. Except for the
foregoing, Borrower may pay without penalty all or a portion of the amount owed earlier than it
is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower’s obligation to continue to make payments of accrued unpaid interest. Rather, early
payments will reduce the principal balance due. Borrower agrees not to send Lender payments
marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment,
Lender may accept it without losing any of Lender’s rights under this Note, and Borrower will
remain obligated to pay any further amount owed to Lender. All written communications concerning
disputed amounts, including any check or other payment instrument that indicates that the payment
constitutes “payment in full” of the amount owed or that is tendered with other conditions or
limitations or as full satisfaction of a disputed amount must be mailed or delivered to; Venture
Bank, 5601 Green Valley Drive Bloomington, MN 55437.

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

INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the interest
rate on this Note shall be increased by adding a 4.000 percentage point margin (“Default Rate
Margin”). The Default Rate Margin shall also apply to each succeeding interest rate change that
would have applied had there been no default. However, in no event will the interest rate exceed
the maximum interest rate limitations under applicable law.

DEFAULT. Each of the following shall constitute an event of default
(“Event of Default”) under this Note:

Payment Default. Borrower
fails to make any payment when due under this Note.

Other Defaults. Borrower fails to comply with or to perform any other term, obligation,
covenant or condition contained in this Note 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 Note or the related documents is false or
misleading in any material respect, either now or at the time made or furnished or becomes
false or misleading at any time thereafter.

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

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings,
whether by judicial proceeding, self-help, repossession or any other method, by any creditor
of Borrower or by any governmental agency against any collateral securing the 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,
endorser, surety, or accommodation party of any of the indebtedness or any guarantor,
endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes
the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note.
In the event of a death, Lender, at its option, may, but shall not be required to, permit the
guarantor’s estate to assume unconditionally the obligations arising under the guaranty in a
manner satisfactory to Lender, and, in doing so, cure any Event of Default.

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

 

 

					
	 
	 	PROMISSORY NOTE	 	 
	Loan No: 13017
	 	(Continued)
	 	Page 2

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

Insecurity. Lender in good faith believes itself insecure.

Cure Provisions. If any default, other than a default in payment is curable and if
Borrower has not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured if Borrower, after receiving written
notice from Lender demanding cure of such default: (1) cures the default within fifteen
(15) days; or (2) if the cure requires more than fifteen
(15) days, immediately initiates
steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default
and thereafter continues and completes all reasonable and necessary steps sufficient to
produce compliance as soon as reasonably practical.

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

ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if
Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any
limits under applicable law, Lender’s reasonable attorneys’ fees and Lender’s legal expenses,
whether or not there is a lawsuit, including reasonable attorneys’ fees, expenses for bankruptcy
proceedings (including efforts to modify or
vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law,
Borrower also will pay any court costs, in addition to all other sums provided by law.

GOVERNING LAW. This Note 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 Note has been accepted by Lender in the State of Minnesota.

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

COLLATERAL. Borrower acknowledges this Note is secured by All Business Assets per Commercial
Security Agreement dated 9/3/08.

LINE OF
CREDIT. This Note evidences a revolving line of credit. Advances under this Note, as
well as directions for payment from Borrower’s accounts, may be requested orally or in writing by
Borrower or by an authorized person. Lender may, but need not, require that all oral requests be
confirmed in writing. Borrower agrees to be liable for all sums either: (A) advanced in
accordance with the instructions of an authorized person or (B) credited to any of Borrower’s
accounts with Lender. The unpaid principal balance owing on this Note at any time may be
evidenced by endorsements on this Note or by Lender’s internal records, including daily computer
print-outs. Lender will have no obligation to advance funds under this Note if: (A) Borrower
or any guarantor is in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the signing of this
Note; (B) Borrower or any guarantor ceases doing business or is
insolvent; (C) any
guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor’s guarantee
of this Note or any other loan with Lender; (D) Borrower has applied funds provided pursuant to
this Note for purposes other than those authorized by Lender; or (E) Lender in good faith
believes itself insecure.

LOAN AGREEMENT. A document titled, “Loan Agreement”, is attached to this Promissory Note.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower’s
heirs, personal representatives,
successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.

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

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

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING
THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

UROPLASTY, INC.

	 	 	 	 
	 	 
	By:  	/s/
Mahedi A.  Jiwani
 	 
	 	Mahedi A.  Jiwani, CFO/Treasurer of Uroplasty,  Inc. 	 

 LASER
PRO Lending, Ver.
5.38.10.001 Copr. Harland Financial Solutions, Inc. 1997, 2008.   All
Rights Reserved.    MN  c:\APPS\CFI\LPL\D20.FC TR-3378   PR-20  

 

 

COMMERCIAL SECURITY AGREEMENT

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Principal	 	Loan Date	 	Maturity	 	Loan No	 	Call / Coll	 	Account	 	Officer	 	Initials
	$2,000,000.00
	 	09-03-2008
	 	09-03-2009
	 	13017
	 	 	 	 	 	10034	 	 

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.

	 	 	 	 	 	 	 
	Grantor:

	 	Uroplasty, Inc.
	 	Lender:
	 	Venture Bank
	 

	 	5420 Feltl Road
	 	 	 	5601 Green Valley Drive, Suite 120
	 

	 	Minnetonka, MN 55343
	 	 	 	Bloomington, MN 55437

THIS COMMERCIAL SECURITY AGREEMENT dated September 3, 2008, is made and executed between
Uroplasty, Inc. (“Grantor”) and Venture Bank (“Lender”).

GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender a security
interest in the Collateral to secure the Indebtedness and agrees that Lender shall have the
rights stated in this Agreement with respect to the Collateral, in
addition to all other
rights which Lender may have by law.

COLLATERAL DESCRIPTION. The word “Collateral” as used in this Agreement means the following
described property, whether now owned or hereafter acquired, whether now existing or hereafter
arising, and wherever located, in which Grantor is giving to Lender a security interest for
the payment of the Indebtedness and performance of all other obligations under the Note and
this Agreement:

All inventory, equipment, accounts (including but not limited to all health-care-insurance
receivables), chattel paper, instruments (including but not limited to all promissory
notes), letter-of-credit rights, letters of credit, documents, deposit accounts, investment
property, money, other rights to payment and performance, and general intangibles
(including but not limited to all software and all payment intangibles); all oil, gas and
other minerals before extraction; all oil, gas, other minerals and accounts constituting
as-extracted collateral; all fixtures: all timber to be cut; all attachments, accessions,
accessories, fittings, increases, tools, parts, repairs, supplies, and commingled goods
relating to the foregoing property, and all additions, replacements of and substitutions
for all or any part of the foregoing property; all insurance refunds relating to the
foregoing property; all good will relating to the foregoing property; all records and data
and embedded software relating to the foregoing property, and all equipment, inventory and
software to utilize, create, maintain and process any such records and data on electronic
media; and all supporting obligations relating to the foregoing property; all whether now
existing or hereafter arising, whether now owned or hereafter acquired or whether now or
hereafter subject to any rights in the foregoing property; and all products and proceeds
(including but not limited to all insurance payments) of or relating to the foregoing
property.

In addition, the word “Collateral” also includes all the following, whether now owned or
hereafter acquired, whether now existing or hereafter arising, and wherever located:

(A) All accessions, attachments, accessories, tools, parts, supplies, replacements of and
additions to any of the collateral described herein, whether added now or later.

(B) All products and produce of any of the property described in this Collateral section.

(C) All accounts, general intangibles, instruments, rents, monies, payments, and all other
rights, arising out of a sale, lease, consignment or other disposition of any of the
property described in this Collateral section.

(D) All proceeds (including insurance proceeds) from the sale, destruction, loss, or other
disposition of any of the property described in this Collateral section, and sums due from
a third party who has damaged or destroyed the Collateral or from that party’s insurer,
whether due to judgment, settlement or other process.

(E) All records and data relating to any of the property described in this Collateral
section, whether in the form of a writing, photograph, microfilm, microfiche, or electronic
media, together with all of Grantor’s right, title, and interest in and to all computer
software required to utilize, create, maintain, and process any such records or data on
electronic media.

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

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff
in all Grantor’s accounts with Lender (whether checking, savings, or some other account). This
includes all accounts Grantor holds jointly with someone else and all accounts Grantor 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. Grantor authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts, and, at Lender’s option, to
administratively freeze all such
accounts to allow Lender to protect Lender’s charge and setoff rights provided in this
paragraph.

GRANTOR’S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With respect to the
Collateral, Grantor represents and promises to Lender that:

Perfection of Security Interest. Grantor agrees to take whatever actions are requested by
Lender to perfect and continue Lender’s security interest in the
Collateral. Upon request
of Lender, Grantor will deliver to Lender any and all of the documents evidencing or
constituting the Collateral, and Grantor will note Lender’s interest upon any and all
chattel paper and instruments if not delivered to Lender for possession by Lender. This is
a continuing Security Agreement and will continue in effect even though all or any part of
the Indebtedness is paid in full and even though for a period of time Grantor may not be
indebted to Lender.

Notices to Lender. Grantor will promptly notify Lender in writing at Lender’s address shown
above (or such other addresses as Lender may designate from time to time) prior to any (1)
change in Grantor’s name; (2) change in Grantor’s assumed business name(s); (3) change in
the management of the Corporation Grantor; (4) change in the authorized signer(s); (5)
change in Grantor’s principal office address; (6) change in Grantor’s state of
organization; (7) conversion of Grantor to a new or different type of business entity; or
(8) change in any other aspect of Grantor that directly or indirectly relates to any
agreements between Grantor and Lender. No change in Grantor’s name or state of organization
will take effect until after Lender has received notice.

No Violation. The execution and delivery of this Agreement will not violate any law or
agreement governing Grantor or to which Grantor is

 

 

COMMERCIAL SECURITY AGREEMENT

					
	Loan No: 13017
	 	(Continued)
	 	Page 2

a party, and its certificate or articles of incorporation and bylaws do not prohibit any term or
condition of this Agreement.

Enforceability
of Collateral. To the extent the Collateral consists of accounts, chattel paper,
or general intangibles, as defined by the Uniform Commercial Code, the Collateral is enforceable
in accordance with its terms, is genuine, and fully complies with all applicable laws and
regulations concerning form, content and manner of preparation and execution, and all persons
appearing to be obligated on the Collateral have authority and capacity to contract and are in
fact obligated as they appear to be on the Collateral. At the time any account becomes subject
to a security interest in favor of Lender, the account shall be a good and valid account
representing an undisputed, bona fide Indebtedness incurred by the account debtor, for
merchandise held subject to delivery instructions or previously shipped or delivered pursuant to
a contract of sale, or for services previously performed by Grantor with or for the account
debtor. So long as this Agreement remains in effect, Grantor shall not, without Lender’s prior
written consent, compromise, settle, adjust, or extend payment under or with regard to any such
Accounts. There shall be no setoffs or counterclaims against any of the Collateral, and no
agreement shall have been made under which any deductions or discounts may be claimed concerning
the Collateral except those disclosed to Lender in writing.

Location
of the Collateral. Except in the ordinary course of Grantor’s business, Grantor
agrees to keep the Collateral (or to the extent the Collateral consists of intangible
property such as accounts or general intangibles, the records concerning the Collateral)
at Grantor’s address shown above or at such other locations as are acceptable to Lender.
Upon Lender’s request, Grantor will deliver to Lender in form satisfactory to Lender a
schedule of real properties and Collateral locations relating to Grantor’s operations,
including without limitation the following: (1) all real property Grantor owns or is
purchasing; (2) all real property Grantor is renting or leasing; (3) all storage
facilities Grantor owns, rents, leases, or uses; and (4) all other properties where
Collateral is or may be located.

Removal
of the Collateral. Except in the ordinary course of Grantor’s business, including
the sales of inventory, Grantor shall not remove the Collateral from its existing location
without Lender’s prior written consent. To the extent that the Collateral consists of
vehicles, or other titled property, Grantor shall not take or permit any action which
would require application for certificates of title for the vehicles outside the State of
Minnesota, without Lender’s prior written consent. Grantor shall, whenever requested,
advise Lender of the exact location of the Collateral.

Transactions Involving Collateral. Except for inventory sold or accounts collected in the
ordinary course of Grantor’s business, or as otherwise provided for in this Agreement, Grantor
shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral. While Grantor
is not in default under this Agreement, Grantor may sell inventory, but only in the ordinary
course of its business and only to buyers who qualify as a buyer in the ordinary course of
business. A sale in the ordinary course of Grantor’s business does not include a transfer in
partial or total satisfaction of a debt or any bulk sale. Grantor shall not pledge, mortgage,
encumber or otherwise permit the Collateral to be subject to any lien, security interest,
encumbrance, or charge, other than the security interest provided for in this Agreement, without
the prior written consent of Lender. This includes security interests even if junior in right
to the security interests granted under this Agreement. Unless waived by Lender, all proceeds
from any disposition of the Collateral (for whatever reason) shall be held in trust for Lender
and shall not be commingled with any other funds; provided however, this requirement shall not
constitute consent by Lender to any sale or other disposition. Upon receipt, Grantor shall
immediately deliver any such proceeds to Lender.

Title. Grantor represents and warrants to Lender that Grantor holds good and marketable
title to the Collateral, free and clear of all liens and encumbrances except for the lien
of this Agreement. No financing statement covering any of the Collateral is on file in any
public office other than those which reflect the security interest created by this
Agreement or to which Lender has specifically consented. Grantor shall defend Lender’s
rights in the Collateral against the claims and demands of all other
persons.

Repairs and Maintenance. Grantor agrees to keep and maintain, and to cause others to keep and
maintain, the Collateral in good order, repair and condition at all times while this Agreement
remains in effect. Grantor further agrees to pay when due all claims for work done on, or
services rendered or material furnished in connection with the Collateral so that no lien or
encumbrance may ever attach to or be filed against the Collateral.

Inspection of Collateral. Lender and Lender’s designated representatives and agents shall have
the right at all reasonable times to examine and inspect the Collateral wherever located.

Taxes, Assessments and Liens. Grantor will pay when due all taxes, assessments and liens upon
the Collateral, its use or operation, upon this Agreement, upon any promissory note or notes
evidencing the Indebtedness, or upon any of the other Related Documents. Grantor may withhold
any such payment or may elect to contest any lien if Grantor is in good faith conducting an
appropriate proceeding to contest the obligation to pay and so long as Lender’s interest in
the Collateral is not jeopardized in
Lender’s sole opinion. If the Collateral is subjected to a lien which is not discharged
within fifteen (15) days, Grantor shall deposit with Lender cash, a sufficient corporate surety
bond or other security satisfactory to Lender in an amount adequate to provide for the discharge
of the lien plus any interest, costs, reasonable attorneys’ fees or other charges that could
accrue as a result of foreclosure or sale of the Collateral. In any contest Grantor
shall defend itself and Lender and shall satisfy any final adverse judgment before enforcement
against the Collateral. Grantor shall name Lender as an additional obligee under any surety
bond furnished in the contest proceedings. Grantor further agrees to furnish Lender with
evidence that such taxes, assessments, and governmental and other charges have been paid in full
and in a timely manner. Grantor may withhold any such payment or may elect to contest any lien
if Grantor is in good faith conducting an appropriate proceeding to contest the obligation to
pay and so long as Lender’s interest in the Collateral is not jeopardized.

Compliance with Governmental Requirements. Grantor shall comply promptly with all laws,
ordinances, rules and regulations of all governmental authorities, now or hereafter in effect,
applicable to the ownership, production, disposition, or use of the Collateral, including all
laws or regulations relating to the undue erosion of highly-erodible land or relating to the
conversion of wetlands for the production of an agricultural product or commodity. Grantor
may contest in good faith any such law, ordinance or regulation and withhold compliance during
any proceeding, including appropriate appeals, so long as Lender’s interest in the Collateral,
in Lender’s opinion, is not jeopardized.

Hazardous Substances. Grantor represents and warrants that the Collateral never has been, and
never will be so long as this Agreement remains a lien on the Collateral, used in violation
of any Environmental Laws or for the generation, manufacture, storage, transportation,
treatment, disposal, release or threatened release of any Hazardous Substance. The
representations and warranties contained herein are based on Grantor’s due diligence in
investigating the Collateral for Hazardous Substances. Grantor hereby (1) releases and
waives any future claims against Lender for indemnity or contribution in the event Grantor
becomes liable for cleanup or other costs under any Environmental Laws, and (2) agrees to
indemnify, defend, and hold harmless Lender against any and all claims and losses resulting from
a breach of this provision of this Agreement. This obligation to indemnify and defend shall
survive the payment of the Indebtedness and the satisfaction of this Agreement.

Maintenance of Casualty Insurance. Grantor shall procure and maintain all risks insurance,
including without limitation fire, theft and liability coverage together with such other
insurance as Lender may require with respect to the Collateral, in form, amounts, coverages and
basis reasonably acceptable to Lender and issued by a company or companies reasonably acceptable
to Lender. Grantor, 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 and not including any disclaimer of the insurer’s liability for failure to
give such a notice. Each insurance policy also shall include an endorsement providing that

 

 

COMMERCIAL SECURITY AGREEMENT

					
	Loan No: 13017
	 	(Continued)
	 	Page 3

coverage in favor of Lender will not be impaired in any way by any act, omission or default of
Grantor or any other person. In connection with all policies covering assets in which Lender
holds or is offered a security interest, Grantor will provide Lender with such loss payable or
other endorsements as Lender may require. If Grantor at any time fails to obtain or maintain
any insurance as required under this Agreement, Lender may (but shall not be obligated to)
obtain such insurance as Lender deems appropriate, including if Lender so chooses “single
interest insurance,” which will cover only Lender’s
interest in the Collateral.

Application of Insurance Proceeds. Grantor shall promptly notify Lender of any loss or damage
to the Collateral if the estimated cost of repair or replacement exceeds $1,000.00, whether or
not such casualty or loss is covered by insurance. Lender may make proof of loss if Grantor
fails to do so within fifteen (15) days of the casualty. All proceeds of any insurance on the
Collateral, including accrued proceeds thereon, shall be held by Lender as part of the
Collateral. If Lender consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall, upon satisfactory proof of expenditure, pay or reimburse Grantor from the
proceeds for the reasonable cost of repair or restoration. If Lender does not consent to repair
or replacement of the Collateral, Lender shall retain a sufficient amount of the proceeds to
pay all of the Indebtedness, and shall pay the balance to Grantor. Any proceeds which have not
been disbursed within six (6) months after their receipt and which Grantor has not committed to
the repair or restoration of the Collateral shall be used to prepay the Indebtedness.

Insurance Reserves. Lender may require Grantor to maintain with Lender reserves for payment of
insurance premiums, which reserves shall be created by monthly payments from Grantor of a sum
estimated by Lender to be sufficient to produce, at least fifteen (15) days before the premium
due date, amounts at least equal to the insurance premiums to be paid. If fifteen (15) days
before payment is due, the reserve funds are insufficient, Grantor shall upon demand pay any
deficiency to Lender. The reserve funds shall be held by Lender as a
general deposit and shall
constitute a non-interest-bearing account which Lender may satisfy by payment of the insurance
premiums required to be paid by Grantor as they become due. Lender does not hold the reserve
funds in trust for Grantor, and Lender is not the agent of Grantor for payment of the insurance
premiums required to be paid by Grantor. The responsibility for the payment of premiums shall
remain Grantor’s sole responsibility.

Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender reports on each
existing policy of insurance showing such information as Lender may reasonably request
including the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of
the policy; (4) the property insured; (5) the then current value on the basis of which
insurance has been obtained and the manner of determining that value; and (6) the expiration
date of the policy. In addition, Grantor shall upon request by Lender (however not more often
than annually) have an independent appraiser satisfactory to Lender determine, as applicable,
the cash value or replacement cost of the Collateral.

Financing Statements. Grantor authorizes Lender to file a UCC financing statement, or
alternatively, a copy of this Agreement to perfect Lender’s security interest. At Lender’s
request, Grantor additionally agrees to sign all other documents that are necessary to perfect,
protect, and continue Lender’s security interest in the Property. Grantor will pay all filing
fees, title transfer fees, and other fees and costs involved unless prohibited by law or unless
Lender is required by law to pay such fees and costs. Grantor irrevocably appoints Lender to
execute documents necessary to transfer title if there is a default. Lender may file a copy of
this Agreement as a financing statement. If Grantor changes Grantor’s name or address, or the
name or address of any person granting a security interest under this Agreement changes,
Grantor will promptly notify the Lender of such change.

GRANTOR’S
RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except as otherwise
provided below with respect to accounts, Grantor may have possession of the tangible personal
property and beneficial use of all the Collateral and may use it in any lawful manner not
inconsistent with this Agreement or the Related Documents, provided that Grantor’s right to
possession and beneficial use shall not apply to any Collateral where possession of the Collateral
by Lender is required by law to perfect Lender’s security
interest in such Collateral. Until otherwise notified by Lender, Grantor may collect any of the Collateral consisting of accounts. At
any time and even though no Event of Default exists, Lender may exercise its rights to collect the
accounts and to notify account debtors to make payments directly to Lender for application to the
Indebtedness. If Lender at any time has possession of any Collateral, whether before or after an
Event of Default, Lender shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral if Lender takes such action for that purpose as Grantor shall
request or as Lender, in Lender’s sole discretion, shall deem appropriate under the circumstances,
but failure to honor any request by Grantor shall not of itself be deemed to be a failure to
exercise reasonable care. Lender shall not be required to take any steps necessary to preserve any
rights in the Collateral against prior parties, nor to protect, preserve or maintain any security
interest given to secure the Indebtedness.

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

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

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

Other Defaults. Grantor 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 Grantor.

False Statements. Any warranty, representation or statement made or furnished to Lender by
Grantor or on Grantor’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.

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.

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

 

 

COMMERCIAL SECURITY AGREEMENT

					
	Loan No: 13017
	 	(Continued)
	 	Page 4

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

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

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

Insecurity. Lender in good faith believes itself insecure.

Cure Provisions. If any default, other than a default in payment is curable and if
Grantor has not been given a notice of a breach of the same provision of this Agreement
within the preceding twelve (12) months, it may be cured if Grantor, after receiving
written notice from Lender demanding cure of such default: (1) cures the default within
fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure
the default and thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.

RIGHTS
AND REMEDIES ON DEFAULT. If an Event of Default occurs under this Agreement, at any time
thereafter, Lender shall have all the rights of a secured party under the Minnesota Uniform
Commercial Code. In addition and without limitation, Lender may exercise any one or more of the
following rights and remedies:

Accelerate Indebtedness. Lender may declare the entire Indebtedness, including any
prepayment penalty which Grantor would be required to pay, immediately due and payable,
without notice of any kind to Grantor.

Assemble Collateral. Lender may require Grantor to deliver to Lender all or any portion of
the Collateral and any and all certificates of title and other documents relating to the
Collateral. Lender may require Grantor to assemble the Collateral and make it available to
Lender at a place to be designated by Lender. Lender also shall have full power to enter
upon the property of Grantor to take possession of and remove the Collateral. If the
Collateral contains other goods not covered by this Agreement at the time of repossession,
Grantor agrees Lender may take such other goods, provided that Lender makes reasonable
efforts to return them to Grantor after repossession.

Sell the Collateral. Lender shall have full power to sell, lease, transfer, or otherwise deal
with the Collateral or proceeds thereof in Lender’s own name or that of Grantor. Lender may
sell the Collateral at public auction or private sale. Unless the Collateral threatens to
decline speedily in value or is of a type customarily sold on a recognized market, Lender will
give Grantor, and other persons as required by law, reasonable notice of the time and place of
any public sale, or the time after which any private sale or any other disposition of the
Collateral is to be made. However, no notice need be provided to any person who, after Event
of Default occurs, enters into and authenticates an agreement waiving that person’s right to
notification of sale. The requirements of reasonable notice shall be met if such notice is
given at least ten (10) days before the time of the sale or
disposition. All expenses
relating to the disposition of the Collateral, including without
limitation the expenses of retaking, holding, insuring, preparing for sale and selling the
Collateral, shall become a part of the Indebtedness secured by this Agreement and shall be
payable on demand, with interest at the Note rate from date of expenditure until repaid.

Appoint Receiver. Lender shall have the right to have a receiver appointed to take possession
of all or any part of the Collateral, with the power to protect and preserve the Collateral,
to operate the Collateral preceding foreclosure or sale, and to collect the Rents from the
Collateral and apply the proceeds, over and above the cost of the receivership, against the
Indebtedness. The receiver may serve without bond if permitted by law. Lender’s right to the
appointment of a receiver shall exist whether or not the apparent value of the Collateral
exceeds the Indebtedness by a substantial amount. Employment by Lender shall not disqualify a
person from serving as a receiver.

Collect Revenues, Apply Accounts. Lender, either itself or through a receiver, may collect the
payments, rents, income, and revenues from the Collateral. Lender may at any time in Lender’s
discretion transfer any Collateral into Lender’s own name or
that of Lender’s nominee and
receive the payments, rents, income, and revenues therefrom and hold the same as security for
the Indebtedness or apply it to payment of the Indebtedness in such order of preference as
Lender may determine. Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, choses in action, or similar property, Lender
may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose, or realize
on the Collateral as Lender may determine, whether or not Indebtedness or Collateral is then
due. For these purposes, Lender may, on behalf of and in the name of Grantor, receive, open
and dispose of mail addressed to Grantor; change any address to which mail and payments are to
be sent; and endorse notes, checks, drafts, money orders, documents of title, instruments and
items pertaining to payment, shipment, or storage of any Collateral. To facilitate collection.
Lender may notify account debtors and obligors on any Collateral to make payments directly to
Lender.

Obtain Deficiency. If Lender chooses to sell any or all of the Collateral, Lender may obtain a
judgment against Grantor for any deficiency remaining on the Indebtedness due to Lender after
application of all amounts received from the exercise of the rights provided in this
Agreement. Grantor shall be liable for a deficiency even if the transaction described in
this subsection is a sale of accounts or chattel paper.

Other Rights and Remedies. Lender shall have all the rights and remedies of a secured
creditor under the provisions of the Uniform Commercial Code, as may be amended from time to
time. In addition, Lender shall have and may exercise any or all other rights and remedies it
may have available at law, in equity, or otherwise.

Election
of Remedies. Except as may be prohibited by applicable law, all of Lender’s rights and
remedies, whether evidenced by this Agreement, the Related Documents, or by any other writing,
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 Grantor under this Agreement, after
Grantor’s failure to perform, shall not affect Lender’s right to declare a default and exercise
its 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. Grantor 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

 

 

					
	 	 	 	 	 
	 
	 	COMMERCIAL SECURITY AGREEMENT	 	 
	Loan No: 13017
	 	(Continued)
	 	Page 5

someone else to help enforce this Agreement, and Grantor 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. Grantor 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.

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
Grantor, shall constitute a waiver of any of Lender’s rights or of any of Grantor’s obligations
as to any future transactions. Whenever the consent of Lender is required under this 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, Grantor agrees to keep Lender informed at all times of Grantor’s
current address. Unless otherwise provided or required by law, if there is more than one
Grantor, any notice given by Lender to any Grantor is deemed to be notice given to all
Grantors.

Power of Attorney. Grantor hereby appoints Lender as Grantor’s irrevocable attorney-in-fact for
the purpose of executing any documents necessary to perfect, amend, or to continue the security
interest granted in this Agreement or to demand termination of filings of other secured
parties. Lender may at any time, and without further authorization from Grantor, file a carbon,
photographic or other reproduction of any financing statement or of this Agreement for use as a
financing statement. Grantor will reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender’s security interest in the Collateral.

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.

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

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

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:

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

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

Collateral. The word “Collateral” means all of Grantor’s right, title and interest in and to
all the Collateral as described in the Collateral Description section of this Agreement.

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

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

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

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

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

Hazardous Substances. The words “Hazardous Substances” mean materials that, because of their
quantity, concentration or physical, chemical or infectious characteristics, may cause or pose
a present or potential hazard to human health or the environment when

 

 

					
	 	 	 	 	 
	 
	 	COMMERCIAL SECURITY AGREEMENT	 	 
	Loan No: 13017
	 	(Continued)
	 	Page 6

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 Grantor is responsible under this Agreement or under any of the Related
Documents. Specifically, without limitation, Indebtedness includes all amounts that may be
indirectly secured by the Cross-Collateralization provision of this Agreement.

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

Note. The word “Note” means the Note executed by Uroplasty, Inc. in the principal amount of
$2,000,000.00 dated September 3, 2008, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of, and substitutions for the note or credit
agreement.

Property.
The word “Property” means all of Grantor’s right, title and interest in and to all
the Property as described in the “Collateral Description” 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 Indebtedness.

GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT AND AGREES
TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER 3, 2008.

GRANTOR:

UROPLASTY, INC.

	 	 	 	 	 
	By:

	 	/s/ Mahedi A. Jiwani
	 	 
	 

	 	 	 	 
	 

	 	Mahedi A. Jiwani, CFO/Treasurer of Uroplasty, Inc.	 	 

 LASER
PRO Lending, Ver.
5.38.10.001 Copr. Harland Financial Solutions, Inc. 1997, 2008.   All
Rights Reserved.    MN  c:\APPS\CFI\LPL\E40.FC TR-3378   PR-20  

 

 

COLLATERAL SCHEDULE

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Principal
	 	Loan Date
	 	Maturity
	 	Loan No
	 	Call / Coll
	 	Account
	 	Officer
	 	Initials
	 
	$2,000,000.00
	 	09-03-2008
	 	09-03-2009
	 	13017
	 	 	 	 	 	10034	 	 

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:

	 	Uroplasty, Inc.
	 	Lender:
	 	Venture Bank
	 

	 	5420 Feltl Road
	 	 	 	5601 Green Valley Drive, Suite 120
	 

	 	Minnetonka, MN 55343
	 	 	 	Bloomington, MN 55437

	 	 	 	 	 
	ACCOUNTS RECEIVABLE
	 	 	 	 
	1. Accounts Receivable Book Value as of                                         
	 	$	 	 
	 
	 	 	 
	2. Additions ( please explain on reverse )
	 	$	 	 
	 
	 	 	 
	3. TOTAL ACCOUNTS RECEIVABLE
	 	$	 	 
	 
	 	 	 
	DEDUCTIONS
	 	 	 	 
	4. Accounts 90 days or more from the invoice date
	 	$	 	 
	 
	 	 	 
	5. Accounts with offsetting claims
	 	$	 	 
	 
	 	 	 
	6. Other Deductions ( please explain on reverse )
	 	$	 	 
	 
	 	 	 
	7. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS
	 	$	 	 
	 
	 	 	 
	8. Eligible Accounts ( No. 3 - No. 7 )
	 	$	 	 
	 
	 	 	 
	9. LOAN
VALUE OF ACCOUNTS ( 80.000% of No. 8 )
	 	$	 	 
	 
	 	 	 
	INVENTORY
	 	 	 	 
	10. Inventory Book Value as of                                         
	 	$	 	 
	 
	 	 	 
	11. Additions ( please explain on reverse )
	 	$	 	 
	 
	 	 	 
	12. TOTAL INVENTORY
	 	$	 	 
	 
	 	 	 
	DEDUCTIONS
	 	 	 	 
	13. Obsolete Inventory
	 	$	 	 
	 
	 	 	 
	14. Inventory with offsetting claims
	 	$	 	 
	 
	 	 	 
	15. Other Deductions ( please explain on reverse )
	 	$	 	 
	 
	 	 	 
	16. TOTAL INVENTORY DEDUCTIONS
	 	$	 	 
	 
	 	 	 
	17. Eligible Inventory ( No. 12 - No. 16 )
	 	$	 	 
	 
	 	 	 
	18. LOAN VALUE OF INVENTORY ( 50.000% of No. 17 )
	 	$	 	 
	 
	 	 	 
	BALANCES
	 	 	 	 
	19. Maximum Loan Amount
	 	$	2,000,000.00	 
	20. Present balance owing Lender
	 	$	 	 
	 
	 	 	 
	21. Amount due

  ( larger of No. 20 minus No. 19 or No. 20 minus Nos. 9 + 18 )
	 	$	 	 
	 
	 	 	 
	22. Available unused loan value

  ( lesser of $2,000,000.00 minus No. 20 or Nos. 9 + 18 minus
No. 20 )
	 	$	 	 
	 
	 	 	 
	AMOUNT OF REQUESTED LOAN ADVANCE
	 	$	 	 
	 
	 	 	 

COMMENTS:

 

 

     The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Collateral Schedule complies with the
representations and warranties set forth in the Security Agreement and in the Loan
Agreement between the undersigned and Venture Bank dated September 3,
2008.

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Authorized Signer
	 	 

 LASER
PRO Lending, Ver.
5.38.10.001 Copr. Harland Financial Solutions, Inc. 1997, 2008.   All
Rights Reserved.    MN  c:\APPS\CFI\LPL\E401.FC TR-3378   PR-20  

 

 

BUSINESS LOAN AGREEMENT (ASSET BASED)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Principal	 	Loan Date	 	Maturity	 	Loan No	 	Call / Coll	 	Account	 	Officer	 	Initials
	$2,000,000.00	 	09-03-2008	 	09-03-2009	 	13017
	 	 	 	 	 	10034	 	 

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:

	 	Uroplasty, Inc.
	 	Lender:
	 	Venture Bank
	 

	 	5420 Feltl Road	 	 	 	5601 Green Valley Drive, Suite 120
	 

	 	Minnetonka, MN 55343
	 	 	 	Bloomington, MN 55437

THIS BUSINESS LOAN AGREEMENT (ASSET BASED) dated September 3, 2008, is made and executed
between Uroplasty, 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 (“Loan”). 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 September 3, 2008, 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, Inventory, 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 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

 

 

BUSINESS LOAN AGREEMENT (ASSET BASED)

					
	Loan No: 13017	 	(Continued)	 	Page 2

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. With
respect to the Inventory, Borrower agrees to keep and maintain such records as Lender may
require, including without limitation information concerning Eligible Inventory and records
itemizing and describing the kind, type, quality, and quantity of Inventory, Borrower’s
Inventory costs and selling prices, and the daily withdrawals and additions to Inventory.
Records related to Inventory are or will be located at . 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 Inventory and schedules of
Eligible Accounts and Eligible Inventory in form and substance satisfactory to the Lender.
Thereafter supplemental schedules shall be delivered according to the following schedule:

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.

Representations and Warranties Concerning Inventory. With respect to the Inventory, Borrower
represents and warrants to Lender: (1) All Inventory represented by Borrower to be Eligible
Inventory for purposes of this Agreement conforms to the requirements of the definition of
Eligible Inventory; (2) All Inventory values listed on schedules delivered to Lender will be
true and correct, subject to immaterial variance; (3) The value
of the Inventory will be
determined on a consistent accounting basis; (4) Except as agreed to the contrary by Lender in
writing, all Eligible Inventory is now and at all times hereafter will be in Borrower’s
physical possession and shall not be held by others on consignment, sale on approval, or sale
or return; (5) Except as reflected in the Inventory schedules delivered to Lender, all Eligible
Inventory is now and at all times hereafter will be of good and merchantable quality, free from
defects; (6) Eligible Inventory is not now and will not at any time hereafter be stored with a
bailee, warehouseman, or similar party without Lender’s prior written consent, and, in such
event. Borrower will concurrently at the time of bailment cause any such bailee, warehouseman,
or similar party to issue and deliver to Lender, in form acceptable to Lender, warehouse
receipts in Lender name evidencing the storage of Inventory; and (7) Lender, its assigns, or
agents shall have the right at any time and at Borrower’s expense to inspect and examine the
Inventory and to check and test the same as to quality, quantity, value, and condition.

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
5420 Feltl Road, Minnetonka, MN 55343. Unless Borrower has designated otherwise in writing, the
principal office is the office at which Borrower keeps its books and records including its
records concerning the Collateral. Borrower will notify Lender prior to any change in the
location of Borrower’s state of organization or any change in Borrower’s name. Borrower shall
do all things necessary to preserve and to keep in full force and effect its existence, rights
and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and
decrees of any
governmental or quasi-governmental authority or court applicable to Borrower
and Borrower’s business activities.

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

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

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

 

 

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	Loan No: 13017
	 	(Continued)
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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:

Additional Requirements.

1. As soon as available, but in no event later than thirty (30) days after the end of each
month, Borrower’s Accounts Receivable
Aging, and Borrowing Base Certificate. Accounts Receivable Aging (Domestic) and Borrowing
Base Certificate only required when
borrowing.

2.
As soon as available, but in no event later than one-hundred-thirty five (135) days after
the end of each fiscal year, Borrower’s 10-K
for the year ended.

3. As soon as available, but in no event later than sixty (60) days after the end of each
quarter, Borrower’s 10-Q for the period ended, prepared by Borrower.

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.

Financial Covenants and Ratios. Comply
with the following covenants and ratios:

Other Requirements.

1. Borrower’s primary deposit relationship is required to be maintained with Venture Bank.

2. Minimum Tangible Net Worth measured Quarterly of $5,000,000.00.

3.
Maximum Liabilities to Tangible Net Worth of 1:1 measured quarterly.

 

 

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LOAN AGREEMENT (ASSET BASED)

					
	Loan No: 13017
	 	(Continued)
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4. Inventory capped at $500,000.00.

Except as provided above, all computations made to determine compliance with the
requirements contained in this paragraph shall be made in accordance with generally accepted
accounting principles, applied on a consistent basis, and certified by Borrower as being
true and correct.

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.

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

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

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

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

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

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

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

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

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

 

 

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	Loan No: 13017
	 	(Continued)
	 	Page 5

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. Borrower will not enter into any agreement containing any provisions which would be
violated or breached by the performance of Borrower’s obligations under this Agreement or in
connection herewith.

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

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

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

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

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

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

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

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

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

Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of
any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes
the validity of, or liability under, any Guaranty of the Indebtedness. In the event of a death,
Lender, at its option, may, but shall not be required to, permit the Guarantor’s estate to
assume unconditionally the obligations arising under the guaranty in a manner satisfactory to
Lender, and, in doing so, cure any Event of Default.

Change
in Ownership. Any change in ownership of fifty percent (50%) 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
receiving written notice from Lender 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 tender’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

 

 

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	Loan No: 13017
	 	(Continued)
	 	Page 6

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 of parties sought to be charged or bound by the alteration or amendment.

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

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

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

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

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

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

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

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

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

 

 

BUSINESS LOAN AGREEMENT (ASSET BASED)

					
	Loan No: 13017
	 	(Continued)
	 	Page 7

terminated
in the manner provided above, whichever is the last to occur.

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

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

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

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

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

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

Borrower. The word “Borrower” means Uroplasty, 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) $2,000,000.00 or (2) the sum of (a) 80.000% of the aggregate amount of Eligible
Accounts, plus (b) 50.000% of the aggregate amount of Eligible Inventory.

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.

Eligible Inventory. The words “Eligible Inventory” mean, at any time, all of
Borrower’s Inventory as defined below, except:

(1) Inventory which is not owned by Borrower free and clear of all security interests, liens,
encumbrances, and claims of third parties.

(2) Inventory which Lender, in its sole discretion, deems to be obsolete, unsalable, damaged,
defective, or unfit for further processing.

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.

 

 

BUSINESS LOAN AGREEMENT (ASSET BASED)

					
	Loan No: 13017
	 	(Continued)
	 	Page 8

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

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

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

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

Inventory. The word “Inventory” means all of Borrower’s raw materials, work in process,
finished goods, merchandise, parts and supplies, of every kind and description, and goods held
for sale or lease or furnished under contracts of service in which Borrower now has or
hereafter acquires any right, whether held by Borrower or others, and all documents of title,
warehouse receipts, bills of lading, and all other documents of every type covering all or any
part of the foregoing. Inventory includes inventory temporarily out of Borrower’s custody or
possession and all returns on Accounts.

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 executed by Uroplasty, Inc. in the principal amount of
$2,000,000.00 dated September 3, 2008, 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 SEPTEMBER 3,
2008.

BORROWER:

	 	 	 	 	 
	UROPLASTY, INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Mahedi A. Jiwani	 	 
	 

	 	 

Mahedi A. Jiwani, CFO/Treasurer of Uroplasty, Inc.
	 	 

LENDER:

	 	 	 	 	 
	VENTURE BANK	 	 
	 
	 	 	 	 
	By:

	 	/s/ Kriss A. Griebenow	 	 
	 

	 	 

Kriss A. Griebenow, Vice President
	 	 

 LASER
PRO Lending, Ver.
5.38.10.001 Copr. Harland Financial Solutions, Inc. 1997, 2008.   All
Rights Reserved.    MN  c:\APPS\CFI\LPL\C40.FC TR-3378   PR-20  

 

 

DISBURSEMENT REQUEST AND AUTHORIZATION

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Principal	 	Loan Date	 	Maturity	 	Loan No	 	Call / Coll	 	Account	 	Officer	 	Initials
	$2,000,000.00
	 	09-03-2008
	 	09-03-2009
	 	13017
	 	 	 	 	 	10034

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:

	 	Uroplasty, Inc.
	 	Lender:
	 	Venture Bank
	 

	 	5420 Feltl Road
	 	 	 	5601 Green Valley Drive, Suite 120
	 

	 	Minnetonka, MN 55343
	 	 	 	Bloomington, MN 55437

LOAN TYPE. This is a Variable Rate Nondisclosable Revolving Line of Credit Loan to a
Corporation for $2,000,000.00 due on September 3,
2009. The reference rate (Prime rate of interest as published each business day in the money
rates section of The Wall Street Journal    ,
with an interest rate floor of 7.500% currently 5.000%) is added to the margin of 1.000%,
resulting in an initial rate of 7.500.

PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:

o Maintenance of Borrower’s Primary Residence.

o Personal, Family or Household Purposes or Personal Investment.

o Agricultural Purposes.

þ Business Purposes.

SPECIFIC PURPOSE. The specific purpose of this loan is: Working capital.

DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be disbursed until
all of Lender’s conditions for making the loan have been satisfied. Please disburse the loan
proceeds of $2,000,000.00 as follows:

	 	 	 	 	 
	Undisbursed Funds:
	 	$	2,000,000.00	 
	 
	 	 	 
	 
	 	 	 	 
	Note Principal:
	 	$	2,000,000.00	 

CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the following charges:

	 	 	 	 	 
	Prepaid Finance Charges Paid in Cash:
	 	$	7,000.00	 
	$7,000.00 Loan Origination Fee
	 	 	 	 
	Other Charges Paid in Cash:
	 	$	150.00	 
	$150.00 Loan Documentation Fee
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Total Charges Paid in Cash:
	 	$	7,150.00	 

AUTOMATIC PAYMENTS. Borrower hereby authorizes Lender automatically to deduct from
Borrower’s Demand Deposit - Checking account, numbered 9589, the amount of any loan payment.
If the funds in the account are insufficient to cover any payment, Lender shall not be
obligated to advance funds to cover the payment. At any time and for any reason, Borrower or
Lender may voluntarily terminate Automatic Payments.

FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND WARRANTS TO
LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND THAT THERE HAS BEEN NO
MATERIAL ADVERSE CHANGE IN BORROWER’S FINANCIAL CONDITION AS DISCLOSED IN BORROWER’S MOST
RECENT FINANCIAL STATEMENT TO LENDER. THIS AUTHORIZATION IS DATED SEPTEMBER 3, 2008.

BORROWER:

	 	 	 	 	 
	UROPLASTY, INC.

	 	 
	 
	 	 	 	 
	By:

	 	/s/ Mahedi A. Jiwani
 

Mahedi A. Jiwani, CFO/Treasurer of Uroplasty, Inc.
	 	 

 LASER
PRO Lending, Ver.
5.38.10.001 Copr. Harland Financial Solutions, Inc. 1997, 2008.   All
Rights Reserved.    MN  c:\APPS\CFI\LPL\F20.FC TR-3378   PR-20  

 

 

NOTICE OF INSURANCE REQUIREMENTS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Principal	 	Loan Date	 	Maturity	 	Loan No	 	Call / Coll	 	Account	 	Officer	 	Initials
	 
	 	09-03-2008
	 	 	 	13017
	 	 	 	 	 	10034	 	 

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.

	 	 	 	 	 	 	 
	Grantor:

	 	Uroplasty, Inc.
	 	Lender:
	 	Venture Bank
	 

	 	5420 Feltl Road
	 	 	 	5601 Green Valley Drive, Suite 120
	 

	 	Minnetonka, MN 55343
	 	 	 	Bloomington, MN 55437

	 	 	 	 	 
	TO:

	 	ATTN: Insurance Agent
	 	DATE: September 3, 2008

			
	RE:	 	Policy Number (s):

Insurance Companies/Company:

Dear Insurance Agent:

Grantor,
Uroplasty, Inc. (“Grantor”) is obtaining a loan from
Venture Bank. Please send
appropriate evidence of insurance to Venture Bank, together with the requested endorsements, on
the following property, which Grantor is giving as security for the loan.

	 	 	 	 	 
	 

	 	Collateral:
	 	All Inventory, Equipment, Fixtures, Timber and Minerals, Oil and Gas.
	 

	 	 	 	Type: All risks, including fire, theft and liability.
	 

	 	 	 	Amount: Full Insurable Value.
	 

	 	 	 	Basis: Replacement value.
	 

	 	 	 	Endorsements: Lender loss payable clause with stipulation that coverage will not be
cancelled or diminished without a minimum of 10 days prior written notice to Lender.
	 

	 	 	 	Deductibles: $5,000.00.
	 

	 	 	 	Latest Delivery Date: By the loan closing date.

GRANTOR:

	 	 	 	 	 
	UROPLASTY, INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Mahedi A. Jiwani
 

Mahedi A. Jiwani, CFO/Treasurer of Uroplasty, Inc.
	 	 

RETURN TO:

Venture Bank

5601 Green Valley Drive

Bloomington, MN 55437

 LASER
PRO Lending, Ver.
5.38.10.001 Copr. Harland Financial Solutions, Inc. 1997, 2008.   All
Rights Reserved.    MN  c:\APPS\CFI\LPL\F11.FC TR-3378   PR-20  

 

 

AGREEMENT TO PROVIDE INSURANCE

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Principal	 	Loan Date	 	Maturity	 	Loan No	 	Call / Coll	 	Account	 	Officer	 	Initials
	$2,000,000.00
	 	09-03-2008
	 	09-03-2009
	 	13017
	 	 	 	 	 	10034

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.

	 	 	 	 	 	 	 
	Grantor:

	 	Uroplasty, Inc.
	 	Lender:
	 	Venture Bank
	 

	 	5420 Feltl Road
	 	 	 	5601 Green Valley Drive, Suite 120
	 

	 	Minnetonka, MN 55343
	 	 	 	Bloomington, MN 55437

INSURANCE REQUIREMENTS. Grantor, Uroplasty, Inc. (“Grantor”), understands that insurance coverage
is required in connection with the
extending of a loan or the providing of other financial accommodations to Grantor by Lender.
These requirements are set forth in the security
documents for the loan. The following minimum insurance coverages must be provided on the
following described collateral (the “Collateral”):

	 	 	 	 	 
	 

	 	Collateral:
	 	All Inventory, Equipment,
Fixtures, Timber and Minerals, Oil and Gas.
	 

	 	 	 	Type: All risks, including fire, theft and liability.
	 

	 	 	 	Amount: Full Insurable Value.
	 

	 	 	 	Basis: Replacement value.
	 

	 	 	 	Endorsements: Lender loss payable clause with stipulation that coverage will not be
cancelled or diminished without a minimum of 10 days prior written notice to Lender.
	 

	 	 	 	Deductibles: $5,000.00.
	 

	 	 	 	Latest Delivery Date: By the loan closing date.

INSURANCE COMPANY. Grantor may obtain insurance from any insurance company Grantor may choose
that is reasonably acceptable to
Lender. Grantor understands that credit may not be denied solely because insurance was not
purchased through Lender.

INSURANCE MAILING ADDRESS. All documents and other materials relating to insurance for this loan
should be mailed, delivered or directed to
the following address:

Venture Bank

5601 Green Valley Drive

Bloomington, MN 55437

FAILURE
TO PROVIDE INSURANCE. Grantor agrees to deliver to Lender, on the latest delivery date
stated above, proof of the required
insurance as provided above, with an effective date of September 3, 2008, or earlier. Grantor
acknowledges and agrees that if Grantor fails to
provide any required insurance or fails to continue such insurance in force, Lender may do so at
Grantor’s expense as provided in the applicable
security document. The cost of any such insurance, at the option of Lender, shall be added to the
indebtedness as provided in the security
document. GRANTOR ACKNOWLEDGES THAT IF LENDER SO PURCHASES ANY SUCH INSURANCE,
THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO AN AMOUNT EQUAL TO THE LESSER
OF (1) THE UNPAID BALANCE OF THE DEBT, EXCLUDING ANY UNEARNED FINANCE CHARGES, OR (2) THE
VALUE OF THE COLLATERAL; HOWEVER, GRANTOR’S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE
MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY
FINANCIAL RESPONSIBILITY LAWS.

AUTHORIZATION. For purposes of insurance coverage on the Collateral, Grantor authorizes
Lender to provide to any person (including any insurance agent or company) all information
Lender deems appropriate, whether regarding the Collateral, the loan or other financial
accommodations, or both.

GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO PROVIDE INSURANCE
AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER 3, 2008.

GRANTOR:

	 	 	 	 	 
	UROPLASTY, INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Mahedi A. Jiwani
 

Mahedi A. Jiwani, CFO/Treasurer of Uroplasty, Inc.
	 	 

FOR LENDER USE ONLY

INSURANCE VERIFICATION

	 	 	 	 	 	 	 	 	 
	DATE:

	 	 	 	 	 	PHONE	 	 
	 

	 	 
	 	 	 	 	 	 

                         

AGENT’S NAME:        
    
                   
                   
           

AGENCY:            
                     
                     
       

ADDRESS:          
                    
                    
                     
                    
                    
                    
                    
                    

INSURANCE COMPANY:         
                    
                    
            

POLICY NUMBER:         
                   
                   
              

EFFECTIVE DATES:        
                   
                   
                   
                   
                   
                   
                       
                     
                    
                    
                     
                     
                     
                     
                     

COMMENTS:

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