Exhibit 10.5

RESTRICTED STOCK UNIT AGREEMENT

ELECTROMED, INC.
2014 EQUITY INCENTIVE PLAN

          THIS AGREEMENT, made effective as of this ___ day of ______________,
20___, by and between Electromed, Inc., a Minnesota corporation (the “Company”),
and _____________________ (“Participant”).

W I T N E S S E T H:

          WHEREAS, Participant on the date hereof is an Employee, Director of,
or Consultant to the Company or one of its Subsidiaries; and

          WHEREAS, the Company wishes to grant a restricted stock unit award to
Participant for shares of the Company’s Common Stock pursuant to the Company’s
2014 Equity Incentive Plan (the “Plan”); and

          WHEREAS, the Administrator of the Plan has authorized the grant of a
restricted stock unit award to Participant;

          NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:

        1.          Grant of Restricted Stock Unit Award; Term. The Company
hereby grants to Participant on the date set forth above a restricted stock unit
award (the “Award”) for ________ (_________) restricted stock units on the terms
and conditions set forth herein. Each restricted stock unit shall entitle the
Participant to receive either one share of the Company’s Common Stock or a cash
payment in accordance with Paragraph 3 below.

        2.          Vesting of Restricted Stock Units.

                     a.          General. The restricted stock units subject to
this Award shall vest according to the following schedule:

 

 

 

 

 

 

Specified Date or Achievement
(each, a “Vesting Time”)

 

Number of Units
that Vest

 

 

 

 

 

 

 

[Exact time/procedures for certifying achievement should be determined when
Award is approved and specified in this Section]

 

[To be completed]

 

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                         b.          Termination of Relationship. If Participant
ceases to be [an Employee] [a Consultant] [a Director] of the Company or any
Subsidiary at any time during the term of the Award, for any reason, this Award
shall terminate and all restricted stock units subject to this Award that have
not vested shall be forfeited by Participant.

          3.             Issuance of Shares or Payment. Upon each Vesting Time,
the Company shall cause to be issued and delivered to Participant a stock
certificate (or, upon request and if permitted in the Administrator’s
discretion, an entry to be made in the books of the Company or its designated
agent) representing that number of shares of Common Stock which is equivalent to
the number of restricted stock units that have vested, less any shares withheld
for payment of taxes as provided in Section 4(e) below, and shall deliver such
certificate to Participant. Until the Vesting Time, Participant shall not be
entitled to vote the shares of Common Stock represented by such restricted stock
units, shall not be entitled to receive dividends attributable to such shares of
Common Stock, and shall not have any other rights as a shareholder with respect
to such shares.

                          Alternatively, the Company may, in its sole
discretion, pay Participant a lump sum payment, in cash, equal to the Fair
Market Value of that number of shares of Common Stock which is equivalent to the
number of restricted stock units that have vested, subject to the withholding
provisions of Section 4(f) below. Such Fair Market Value shall be determined as
of each Vesting Time. If the Company makes such cash payment, the Participant
shall not be entitled to vote the shares of Common Stock represented by such
restricted stock units, shall not be entitled to receive dividends attributable
to such shares of Common Stock, and shall not have any other rights as a
shareholder with respect to such shares, whether before or after the Vesting
Time.

                          The Company will issue shares of Common Stock or make
a cash payment pursuant to this Award as soon as practicable following the
applicable Vesting Time, but in no event beyond 2 ½ months after the end of the
calendar year in which the Vesting Time occurs.

          4.          General Provisions.

                          a.          Employment or Other Relationship. This
Agreement shall not confer on Participant any right with respect to continuance
of employment or any other relationship by the Company or any of its Affiliates,
nor will it interfere in any way with the right of the Company to terminate such
employment or relationship. Nothing in this Agreement shall be construed as
creating an employment or service contract for any specified term between
Participant and the Company or any Affiliate.

                          b.          280G Limitations. Notwithstanding anything
in the Plan, this Agreement or in any other agreement, plan, contract or
understanding entered into from time to time between Participant and the Company
or any of its Subsidiaries to the contrary (except an agreement that expressly
modifies or excludes the application of this Paragraph 4(b)), the vesting of
this Award shall not be accelerated in connection with a Change of Control to
the extent that such acceleration, taking into account all other rights,
payments and benefits to which Participant is entitled under any other plan or
agreement, would constitute a “parachute payment” or an “excess parachute
payment” for purposes of Code Sections 280G and 4999, or any successor
provisions, and the regulations issued thereunder; provided, however, that the
Administrator, in its sole discretion and in accordance with applicable law, may
modify or exclude the application of this Paragraph 4(b).

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                          c.          Securities Law Compliance. Participant
shall not transfer or otherwise dispose of the shares of Common Stock received
pursuant to this Award until such time as the Company and its counsel shall have
determined that such transfer or other disposition will not violate any state or
federal securities laws. Participant may be required by the Company, as a
condition of the effectiveness of this Award, to give any written assurances
that are necessary or desirable in the opinion of the Company and its counsel to
ensure the issuance complies with applicable securities laws, including that all
Common Stock subject to this Award shall be held, until such time that such
Common Stock is registered and freely tradable under applicable state and
federal securities laws, for Participant’s own account without a view to any
further distribution thereof; that the certificates (or, if permitted, book
entries) for such shares shall bear an appropriate legend or notation to that
effect; and that such shares will be not transferred or disposed of except in
compliance with applicable state and federal securities laws.

                          d.          Mergers, Recapitalizations, Stock Splits,
Etc. Except as otherwise specifically provided in any employment, change of
control, severance or similar agreement executed by Participant and the Company,
pursuant and subject to Section 13 of the Plan, certain changes in the number or
character of the shares of Common Stock of the Company (through merger,
consolidation, exchange, reorganization, divestiture (including a spin-off),
liquidation, recapitalization, stock split, stock dividend or otherwise) shall
result in an adjustment, reduction or enlargement, as appropriate, in
Participant’s rights with respect to any unvested restricted stock units subject
to this Award (i.e., Participant shall have such “anti-dilution” rights under
the Award with respect to such events, but shall not have “preemptive “ rights).

                          e.          Shares Reserved. The Company shall at all
times during the term of this Agreement reserve and keep available such number
of shares as will be sufficient to satisfy the requirements of this Agreement.

                          f.          Withholding Taxes. To permit the Company
to comply with all applicable federal and state income tax laws or regulations,
the Company may take such action as it deems appropriate to ensure that, if
necessary, all applicable federal and state payroll, income or other taxes
attributable to this Award are withheld from any amounts payable by the Company
to Participant. If the Company is unable to withhold such federal and state
taxes, for whatever reason, the Participant hereby agrees to pay to the Company
an amount equal to the amount the Company would otherwise be required to
withhold under federal or state law prior to the issuance of any certificates
(or, if permitted, book entries) for the shares of Common Stock subject to this
Award. Subject to such rules as the Administrator may adopt, the Administrator
may, in its sole discretion, permit Participant to satisfy such withholding tax
obligations, in whole or in part, by delivering shares of the Company’s Common
Stock, including shares of Common Stock received pursuant to this Award, having
a Fair Market Value, as of the date the amount of tax to be withheld is
determined under applicable tax law, equal to the statutory minimum amount
required to be withheld for tax purposes. In no event may Participant deliver
shares having a Fair Market Value in excess of such statutory minimum required
tax withholding. Participant’s election to deliver shares or to have shares
withheld for this purpose shall be made on or before the date that the amount of
tax to be withheld is determined under applicable tax law, and shall be
irrevocable as of such date if approved by the Administrator. Such election
shall comply with such rules as the Administrator may adopt to assure compliance
with Rule 16b-3, if applicable.

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                          g.          Nontransferability. No portion of this
Award that has not vested may be assigned or transferred, in whole or in part,
other than by will or by the laws of descent and distribution.

                          h.          2014 Equity Incentive Plan. The Award
evidenced by this Agreement is granted pursuant to the Plan, a copy of which
Plan has been made available to Participant and is hereby incorporated into this
Agreement. This Agreement is subject to and in all respects limited and
conditioned as provided in the Plan. All capitalized terms in this Agreement not
defined herein shall have the meanings ascribed to them in the Plan. The Plan
governs this Agreement and, in the event of any questions as to the construction
of this Agreement or in the event of a conflict between the Plan and this
Agreement, the Plan shall govern, except as the Plan otherwise provides.

                          i.          Lockup Period Limitation. Participant
agrees that in the event the Company advises Participant that it plans an
underwritten public offering of its Common Stock in compliance with the
Securities Act of 1933, as amended, Participant will execute any lock-up
agreement the Company and the underwriter(s) deem necessary or appropriate, in
their sole discretion, in connection with such public offering.

                          j.          Blue Sky Limitation. Notwithstanding
anything in this Agreement to the contrary, in the event the Company makes any
public offering of its securities and determines, in its sole discretion, that
it is necessary to reduce the number of issued but unvested restricted stock
units so as to comply with any state securities or Blue Sky law limitations with
respect thereto, the Board of Directors of the Company shall accelerate the
vesting of this restricted stock unit award, provided that the Company gives
Participant 15 days’ prior written notice of such acceleration. Notice shall be
deemed given when delivered personally or when deposited in the United States
mail, first class postage prepaid and addressed to Participant at the address of
Participant on file with the Company.

                          k.          Affiliates. Participant agrees that, if
Participant is an “affiliate” of the Company or any Affiliate (as defined in
applicable legal and accounting principles) at the time of a Change of Control
(as defined in Section 1(f) of the Plan), Participant will comply with all
requirements of Rule 145 of the Securities Act of 1933, as amended, and the
requirements of such other applicable legal or accounting principles, and will
execute any documents necessary to ensure such compliance.

                          l.          Stock Legend. The Administrator may
require that the certificates for any shares of Common Stock issued to
Participant (or, in the case of death, Participant’s successors) under this
Agreement shall bear an appropriate legend to reflect the restrictions of
Paragraph 4(c) and Paragraphs 4(i) through 4(k) of this Agreement; provided,
however, that failure to so endorse any of such certificates shall not render
invalid or inapplicable Paragraph 4(c) or Paragraphs 4(i) through 4(k).

                          m.          Scope of Agreement. This Agreement shall
bind and inure to the benefit of the Company and its successors and assigns and
Participant and any successor or successors of Participant permitted by this
Agreement. This Award is expressly subject to all terms and conditions contained
in the Plan and in this Agreement, and Participant’s failure to execute this
Agreement shall not relieve Participant from complying with such terms and
conditions.

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                          n.          Choice of Law. The law of the state of
Minnesota shall govern all questions concerning the construction, validity, and
interpretation of this Plan, without regard to that state’s conflict of laws
rules.

                          o.          Severability. In the event that any
provision of this Plan shall be held illegal or invalid for any reason, such
illegality or invalidity shall not affect the remaining provisions of this Plan,
and the Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.

                          p.          Arbitration. Any dispute arising out of or
relating to this Agreement or the alleged breach of it, or the making of this
Agreement, including claims of fraud in the inducement, shall be discussed
between the disputing parties in a good faith effort to arrive at a mutual
settlement of any such controversy. If, notwithstanding, such dispute cannot be
resolved, such dispute shall be settled by binding arbitration. Judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The arbitrator shall be a retired state or federal judge
or an attorney who has practiced securities or business litigation for at least
10 years. If the parties cannot agree on an arbitrator within 20 days, any party
may request that the chief judge of the District Court of Scott County, select
an arbitrator. Arbitration will be conducted pursuant to the provisions of this
Agreement, and the commercial arbitration rules of the American Arbitration
Association, unless such rules are inconsistent with the provisions of this
Agreement. Limited civil discovery shall be permitted for the production of
documents and taking of depositions. Unresolved discovery disputes may be
brought to the attention of the arbitrator who may dispose of such dispute. The
arbitrator shall have the authority to award any remedy or relief that a court
of this state could order or grant; provided, however, that punitive or
exemplary damages shall not be awarded. The arbitrator may award to the
prevailing party, if any, as determined by the arbitrator, all of its costs and
fees, including the arbitrator’s fees, administrative fees, travel expenses,
out-of-pocket expenses and reasonable attorneys’ fees. Unless otherwise agreed
by the parties, the place of any arbitration proceedings shall be Scott County,
Minnesota.

***Signature Page Follows***

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          ACCORDINGLY, the parties hereto have caused this Agreement to be
executed on the day and year first above written.

 

 

 

 

 

ELECTROMED, INC.

 

 

 

By:

 

 

 

Its:

 

 

 

 

 

 

Participant

[Signature Page to Restricted Stock Unit Agreement]

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