Exhibit 10.3


CHANGE IN TERMS AGREEMENT


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Principal

	
Loan Date

	
Maturity

	
Loan No

	
Call / Coll

	
Account

	
Officer

	
Initials


	
$1,287,244.73

	
05-06-2014

	
12-18-2018

	
15696

	
 

	
 

	
 

	
 


	
References
in the boxes above are for Lender’s use only and do not limit the
applicability of this document to any particular loan or item. Any item above containing “***”has been omitted due to text length
limitations.








	
 

	
 

	
 

	
 

	
 


	
Borrower:

	
Electromed, Inc.

	
 

	
Lender:

	
Venture Bank


	
 

	
500 Sixth Avenue NW

	
 

	
 

	
6210 Wayzata Boulevard


	
 

	
New Prague, MN 56071

	
 

	
 

	
Golden Valley, MN 55416


	
 

	
 

	
 

	
 

	
 








	
 

	
 


	
Principal Amount: $1,287,244.73

	
Date of Agreement: May 6, 2014       





DESCRIPTION
OF EXISTING INDEBTEDNESS.
Promissory Note #15696 dated 12/18/2013, in the original amount of
$1,300,000.00 from Borrower to Lender.


DESCRIPTION
OF COLLATERAL:


-
Real Property located at 500 and 502 Sixth Avenue NW, New Prague, MN 56071 per
Mortgage dated 12/18/2013.


-
An Assignment of Rents on the Real Property located at 500 and 502 Sixth Avenue
NW, New Prague, MN 56071 dated 12/18/2013.


DESCRIPTION
OF CHANGE IN TERMS.
Amend Covenants in Loan Agreement.


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 One Million Two
Hundred Eighty-seven Thousand Two Hundred Forty-four & 73/100 Dollars
($1,287,244.73), together with interest on the unpaid principal balance from
May 6, 2014, calculated as described in the “INTEREST CALCULATION METHOD”
paragraph using an interest rate of 5.000% per annum based on a year of 360
days, until paid in full. The interest rate may change under the terms and
conditions of the “INTEREST AFTER DEFAULT” section.


PAYMENT. Borrower will pay this loan in 55 regular
payments of $8,631.55 each and one irregular last payment estimated at
$1,090,857.33. Borrower’s first payment is due May 18, 2014, and all subsequent
payments are due on the same day of each month after that. Borrower’s final
payment will be due on December 18, 2018, and will be for all principal and all
accrued interest not yet paid. Payments include principal and interest. 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.


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
PENALTY. Upon
prepayment of this Agreement, Lender is entitled to the following prepayment
penalty: In the event of a prepayment of more than 20% of the original
principal amount of the loan within a twelve month period due to loan being
refinanced at another institution, a prepayment penalty shall be assessed as
follows:


1)
If the prepayment occurs on or before the first anniversary date of the loan
(12/18/2014), the prepayment penalty will equal five percent (5%) of the
principal amount prepaid.


2)
If the prepayment occurs after the first anniversary date, but on or before the
second anniversary date, the prepayment penalty will equal four percent (4%) of
the principal amount prepaid.


3)
If the prepayment occurs after the second anniversary date, but on or before
the third anniversary date, the prepayment penalty will equal three percent
(3%) of the principal amount prepaid.


4)
If the prepayment occurs after the third anniversary date, but on or before the
fourth anniversary date, the prepayment penalty will equal two percent (2%) of
the principal amount prepaid.


5)
If the prepayment occurs after the fourth anniversary date, but on or before
the fifth anniversary date, the prepayment penalty will equal one percent (1%)
of the principal amount prepaid.


*Prepayment
Penalty will be waived for the last 180 days of the 5 year term.


Except
for the foregoing, Borrower may pay 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 under
the payment schedule. Rather, early payments will reduce the principal balance
due and may result in Borrower’s making fewer payments. 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 









	
 

	
 

	
 


	
CHANGE IN TERMS AGREEMENT


	
Loan No:  15696

	
 (Continued)

	
Page 2


	
 

	
 

	
 





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 6.000 percentage points. 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, 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.









	
 

	
 

	
 


	
CHANGE IN TERMS AGREEMENT


	
Loan No:  15696

	
 (Continued)

	
Page 3


	
 

	
 

	
 





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:


-
Real Property located at 500 and 502 Sixth Avenue NW, New Prague, MN 56071 per
Mortgage dated 12/18/2013.


-
An Assignment of Rents on the Real Property located at 500 and 502 Sixth Avenue
NW, New Prague, MN 56071 dated 12/18/2013.


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.


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 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. 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 Doyle

	
 


	
 

	
Authorized Signer