Exhibit 10.3


 


 


*009600000015695*


 


CHANGE
IN TERMS AGREEMENT


 


	Principal	Loan Date	Maturity	Loan No	Call
    / Coll	Account	Officer	Initials
	$2,500,000.00	12-18-2016	12-18-2017	15695	5200	107560-1	10070	 
	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.

500 Sixth Avenue Northwest
    

New Prague, MN 56071	Lender:	Venture Bank 

Golden Valley Office 

6210 Wayzata
    Boulevard 

Golden Valley, MN 55416
	 	 	 	 


 


	Principal Amount:  $2,500,000.00	Date of Agreement:  December 18, 2016


 


DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note #15695 dated 12/18/2013,
in the original amount of $2,500,000.00 from Borrower to Lender.


 


DESCRIPTION OF COLLATERAL. All Business Assets per Commercial Security Agreement
dated 12/18/2013.


 


DESCRIPTION OF CHANGE IN TERMS. Extend Maturity Date to 12/18/2017.


 


PROMISE TO PAY. Electromed, 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 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 one payment of all outstanding principal
plus all accrued unpaid interest on December 18, 2017. In addition, Borrower will pay regular monthly payments of all accrued unpaid
interest due as of each payment date, beginning January 18, 2017, 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. 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 of interest as published each business day by 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 3.500% 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 equal to the Index, resulting in an initial rate of 3.500% per annum based on a year of 360 days. 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. This calculation method results in a higher effective interest rate than the numeric interest rate stated in the loan documents.


 





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 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: Venture Bank, P.O. Box 9180 Minneapolis, MN 55480-9180.


 


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.


 


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.


 


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,


 






    	



     


    

 


	Loan No: 15695	CHANGE
    IN TERMS AGREEMENT

    (Continued)	Page 2
	 	 	 


 


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.


 


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.


 


DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $32.00 if Borrower
makes a payment on Borrower’s loan and the check or preauthorized charge with which Borrower pays is later dishonored.


 


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.


 


LOAN AGREEMENT. A document titled, “Business Loan Agreement (Asset Based)”,
is attached to this Promissory Note.


 


CREDIT LINE NON-USAGE FEE. A pro-rated non-usage fee of 0.120% based on the average
unused portion of the line of credit will be assessed annually at loan maturity.


 


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.


 


MISCELLANEOUS PROVISIONS. 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


 






    	



     


    

 











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


 


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
THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS 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:	 	 
	 	 	 	 
	VENTURE
    BANK	 	 
	 	 	 	 
	X	/s/
    Kevin P. Doyle	 	 
	 	Authorized Signer	 	 
	 	 	 	 


 LaserPro,
Ver. 16.3.10.005 Copr. D+H USA Corporation 1997, 2016. All Rights Reserved. - MN c:\APPS\CFI\CFI\LPL\D20C.FC TR-6872 PR-39