Exhibit 10.2 

CHANGE IN TERMS AGREEMENT

 

Principal Loan Date Maturity Loan No Call / Coll Account Officer Initials
$2,500,000.00 12-18-2018 12-18-2019 15695 4A/C49 *** KPD   References in the
boxes above are for Lender’s use only and do not limit the applicability of this
document to any particular loan or item. Any item above containing “***” has
been omitted due to text length limitations.

 

Borrower: Electromed, Inc.   Lender: Choice Financial Group   500 6th Ave NW    
Golden Valley   New Prague, MN   56071-1134     6210 Wayzata Boulevard        
Golden Valley, MN 55416         (763) 398-3333

 

    Principal Amount: $2,500,000.00 Date of Agreement: December 18, 2018   

  

DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note #15695 dated 12-18-2013 in
the original amount of $2,500,000.00 from Borrower to Choice Financial Group,
successor by acquisition and merger with Venture Bank.

 

DESCRIPTION OF COLLATERAL. :

 

- All Business Assets per Commercial Security Agreement dated 12-18-2013.

 

DESCRIPTION OF CHANGE IN TERMS.

 

1). Extend the Maturity Date to 12-18-2019.

 

2). Amend Interest Rate to be a variable rate equal to Wall Street Journal minus
1.00%.

 

3). Add the following financial requirement to the Business Loan Agreement
(Asset Based): 

-       Borrower will provide, as soon as available, but in no event later than
one-hundred twenty (120) days after the end of each fiscal year, a balance sheet
and income statement for the year ended, audited by a certified public
accountant satisfactory to Lender.

 

4). Amend the following financial requirements listed in the Business Loan
Agreement (Asset Based): 

-       Borrower will provide, as soon as available, but in no event later than
forty-five (45) days after the end of each quarter, Borrower’s balance sheet and
profit and loss statement for the period ended, prepared by Borrower. 

-       Borrower will provide, as soon as available, but in no event later than
forty-five (45) days after the end of each month, Borrower’s Accounts Receivable
Aging report, only when line is in use. 

-       Borrower will provide, as soon as available, but in no event later than
forty-five (45) days after the end of each month, Borrower’s Collateral
Schedule, only when line is in use.

 

5). Remove the following additional requirement from the Business Loan Agreement
(Asset Based): 

-       A pro-rated non-usage fee of 0.120% based on the average unused portion
of the line of credit or $3,000.00, whichever is less, will be assessed annually
at loan maturity.

 

PROMISE TO PAY. Electromed, Inc. (“Borrower”) promises to pay to Choice
Financial Group (“Lender”), or order, in lawful money of the United States of
America, the principal amount of Two Million Five Hundred Thousand & 00/100
Dollars ($2,500,000.00) 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 full immediately upon Lender’s demand.
If no demand is made, Borrower will pay this loan in one payment of all
outstanding principal plus all accrued unpaid interest on December 18, 2019. In
addition, Borrower will pay regular monthly payments of all accrued unpaid
interest due as of each payment date, beginning January 18, 2019, 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 escrow or
reserve account payments as required under any mortgage, deed of trust, or other
security instrument or security agreement securing this Note; and then to any
late charges. Borrower will pay Lender at Lender’s address shown above or at
such other place as Lender may designate in writing.

 

VARIABLE INTEREST RATE. The interest rate on this loan is subject to change from
time to time based on changes in an independent index which is the Prime Rate as
published in 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 5.250% per annum. Interest on the unpaid principal
balance of this loan will be calculated as described in the “INTEREST
CALCULATION METHOD” paragraph using a rate of 1.000 percentage point under the
Index, resulting in an initial rate of 4.250%. NOTICE: Under no circumstances
will the interest rate on this loan be more than the maximum rate allowed by
applicable law.

 

INTEREST CALCULATION METHOD. Interest on this loan is computed on a 365/360
basis; that is, by applying the ratio of the interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. All interest payable under
this loan is computed using this method.

 

PREPAYMENT. 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 Agreement,
and Borrower will remain obligated to pay any further amount owed to Lender. All
written communications concerning disputed amounts, including any check or other
payment instrument that indicates that the payment constitutes “payment in full”
of the amount owed or that is tendered with other conditions or limitations or
as full satisfaction of a disputed amount must be mailed or delivered to: Choice
Financial Group, Golden Valley, 6210 Wayzata Boulevard Golden Valley, MN 55416.

 

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

 

INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, the interest rate on this loan shall be increased by adding an
additional 6.000 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. 

 

 

 

 

CHANGE IN TERMS AGREEMENT Loan No: 15695 (Continued) Page 2      

 

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

 

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

 

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

 

Default in Favor of Third Parties. Borrower defaults under any loan, extension
of credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially affect
any of Borrower’s property or ability to perform Borrower’s obligations under
this Agreement or any of the Related Documents.

 

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

 

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

 

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

 

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

 

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

 

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

 

Insecurity. Lender in good faith believes itself insecure.

 

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

 

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

 

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

 

JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower against
the other.

 

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.

 

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

 

COLLATERAL. Borrower acknowledges this Agreement is secured by:

 

-  All Business Assets per Commercial Security Agreement dated 12-18-2013.

 

LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement, 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
Agreement at any time may be evidenced by endorsements on this Agreement or by
Lender’s internal records, including daily computer print-outs. Lender will have
no obligation to advance funds under this Agreement if: (A) Borrower or any
guarantor is in default under the terms of this Agreement or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (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
Agreement or any other loan with Lender; (D) Borrower has applied funds provided
pursuant to this Agreement for purposes other than those authorized by Lender;
or (E) Lender in good faith believes itself insecure.

 

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

 

 

 

 

  CHANGE IN TERMS AGREEMENT   Loan No: 15695 (Continued) Page 3      

 

LOAN AGREEMENT. A Loan Agreement is attached to this Promissory Note.

 

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

 

NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES.
Please notify us if we report any inaccurate information about your account(s)
to a consumer reporting agency. Your written notice describing the specific
inaccuracy(ies) should be sent to us at the following address: Choice Financial
Group, Golden Valley, 6210 Wayzata Boulevard, Golden Valley, MN 55416.

 

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

 

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

 

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

 

BORROWER:

 

ELECTROMED, INC.

      By:  /s/ Jeremy Brock     Jeremy Brock, Chief Financial Officer of
Electromed, Inc.         LENDER:         CHOICE FINANCIAL GROUP         X  /s/
Kevin P Doyle     Kevin P Doyle, VP Commercial Loan Officer        

LaserPro, Ver. 18.2.0.027 Copr. Finastra USA Corporation 1997, 2018.    All
Rights Reserved.   - MN   Z:\CFI\LPL\D20C.FC    TR-492   PR-2