Exhibit 10.3


NONQUALIFIED STOCK OPTION 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 nonqualified stock option to Participant to
purchase 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 nonqualified stock
option to Participant and has determined that, as of the effective date of this
Agreement, the fair market value of the Company’s Common Stock is $ _____per
share;


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


        1.          Grant of Option. The Company hereby
grants to Participant on the date set forth above (the “Date of Grant”), the
right and option (the “Option”) to purchase all or portions of an aggregate of
__________ (_______) shares of Common Stock at a per share price of $_______on
the terms and conditions set forth herein, and subject to adjustment pursuant
to Section 16 of the Plan. This Option is a nonqualified stock option and will
not be treated as an incentive stock option, as defined under Section 422, or
any successor provision, of the Internal Revenue Code of 1986, as amended (the
“Code”), and the regulations thereunder.





        2.          Duration and Exercisability.


                    a.          General. The term during which this
Option may be exercised shall terminate at the close of business on __________,
20__, except as otherwise provided in Paragraphs 2(b) through 2(e) below. This
Option shall become exercisable according to the following schedule:


[INSERT VESTING SCHEDULE]


Once the Option becomes exercisable to the extent of one hundred
percent (100%) of the aggregate number of shares specified in Paragraph 1,
Participant may continue to exercise this Option under the terms and conditions
of this Agreement until the termination of the Option as provided herein. If,
upon an exercise of this Option, Participant does not purchase the full number
of shares which Participant is then entitled to purchase, Participant may
purchase upon any subsequent exercise prior to this Option’s termination such
previously unpurchased shares in addition to those Participant is otherwise
entitled to purchase.


                    b.          Termination of Employment or Service Relationship for
Cause. If Participant ceases to be [an Employee] [a Consultant] [a Director] of the Company or
any Subsidiary for Cause, as defined below, the unexercised portion of this
Option shall immediately expire, and all rights of Participant under this
Option shall be forfeited. 


                    For
purposes of this Section 2, “Cause” shall mean (i) the conviction of
Participant for the commission of any felony, (ii) the commission by
Participant of any crime involving moral turpitude (e.g., larceny, embezzlement)
which results in harm to the business, reputation, prospects or financial
condition of the Company or any Affiliate, or (iii) a disciplinary discharge
pursuant to the terms of the Company’s management handbooks or policies as in
effect at the time. 


                    c.          Termination of Employment or Service Relationship
(other than for Cause, Disability or Death). If Participant
ceases to be [an Employee] [a Consultant] [a Director] of the Company or
any Subsidiary for any reason other than for Cause, disability or death, this
Option shall completely terminate on the earlier of: (i) the close of business
on the three-month anniversary date of the Participant’s termination; and (ii)
the expiration date of this Option stated in Paragraph 2(a) above. In such
period following the Participant’s termination, this Option shall be
exercisable only to the extent the Option was exercisable on the vesting date
immediately preceding such termination but had not previously been exercised.
To the extent this Option was not exercisable upon such termination, or if
Participant does not exercise the Option within the time specified in this
Paragraph 2(c), all rights of Participant under this Option shall be forfeited.



                    d.          Disability. If Participant ceases to be
[an
Employee] [a Consultant] [a Director] of the Company or any
Subsidiary because of disability (as defined in Code Section 22(e), or any
successor provision), this Option shall terminate on the earlier of: (i) the
close of business on the twelve-month anniversary date of the Participant’s
termination; and (ii) the expiration date of this Option stated in Paragraph
2(a) above. In such period following the Participant’s termination, this Option
shall be exercisable only to the extent the Option was exercisable on the
vesting date immediately preceding such termination but had not previously been
exercised. To the extent this Option was not exercisable upon such termination,
or if Participant does not exercise the Option within the time specified in
this Paragraph 2(d), all rights of Participant under this Option shall be
forfeited. 





                    e.          Death. In the event of Participant’s
death, this Option shall terminate on the earlier of: (i) the close of business
on the twelve-month anniversary of the date of Participant’s death; and (ii)
the expiration date of this Option stated in Paragraph 2(a) above. In such
period following Participant’s death, this Option may be exercised by the
person or persons to whom Participant’s rights under this Option shall have
passed by Participant’s will or by the laws of descent and distribution only to
the extent the Option was exercisable on the vesting date immediately preceding
the date of Participant’s death, but had not previously been exercised. To the
extent this Option was not exercisable upon the date of Participant’s death, or
if such person or persons fail to exercise this Option within the time
specified in this Paragraph 2(e), all rights under this Option shall be
forfeited. 


        3.          Manner of Exercise.


                    a.          General. The Option may be exercised
only by Participant (or other proper party in the event of death or
incapacity), subject to the conditions of the Plan and subject to such other
administrative rules as the Administrator may deem advisable, by delivering
within the option period written notice of exercise to the Company at its
principal office. The notice shall state the number of shares as to which the
Option is being exercised and shall be accompanied by payment in full of the
option price for all shares designated in the notice. The exercise of the
Option shall be deemed effective upon receipt of such notice by the Company and
upon payment that complies with the terms of the Plan and this Agreement. The
Option may be exercised with respect to any number or all of the shares as to
which it can then be exercised and, if partially exercised, may be so exercised
as to the unexercised shares any number of times during the option period as
provided herein.


                    b.          Form of Payment. Subject to the
approval of the Administrator, payment of the exercise price by Participant may
be (i) in cash, or with a personal check or certified check, (ii) by the
transfer from the Participant to the Company of previously acquired
unencumbered shares of Common Stock, (iii) through the withholding of shares of
Common Stock from the number of shares otherwise issuable upon the exercise of
the Option (e.g., a net share
settlement), (iv) through broker-assisted cashless exercise if such exercise
complies with applicable securities laws and any insider trading policy of the
Company, (v) such other form of payment as may be authorized by the
Administrator, or (vi) by a combination thereof. In the event the Participant
elects to pay the exercise price in whole or in part with previously acquired
shares of Common Stock or through a net share settlement, the then-current Fair
Market Value of the Common Stock delivered or withheld shall equal the total
exercise price for the shares being purchased in such manner. For purposes of
this Agreement, “previously acquired shares of Common Stock” means shares of
Common Stock which the Participant has owned for at least six (6) months prior
to the exercise of the option (or for such period of time, if any, required by
applicable accounting principles). 


                    c.          Stock Transfer Records. As soon as
practicable after the effective exercise of all or any part of the Option,
Participant shall be recorded on the stock transfer books of the Company as the
owner of the shares purchased, and the Company shall deliver to Participant one
or more duly issued stock certificates evidencing such ownership, or, if
requested by the Participant and permitted by the Company’s governing
documents, its designated agent, and applicable law, shall cause the purchased
shares to be issued in book-entry form. All requisite original issue or
transfer documentary stamp taxes shall be paid by the Company. 





        4.          General Provisions.


                    a.          Employment
or Other Relationship; Rights as Shareholder. This Agreement
shall not confer on Participant any right with respect to the continuance of
employment or any other relationship with the Company or any of its
Subsidiaries, 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. Participant shall have no
rights as a shareholder with respect to shares subject to this Option until
such shares have been issued to Participant (or, if permitted, a book entry
made) upon exercise of this Option. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to the date
such shares are issued, except as provided in Section 13 of the Plan.


                    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 exercisability of this Option 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).


                    c.          Securities Law Compliance. The exercise
of all or any parts of this Option shall only be effective at such time the
Company and its counsel shall have determined that the issuance and delivery of
Common Stock pursuant to such exercise will not violate any state or federal
securities or other laws. If the issuance of such shares upon exercise is not
registered under a then-currently effective registration statement under the
Securities Act of 1933, as amended, the Participant may be required by the Company,
as a condition of the effectiveness of any exercise of this Option, 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 to be acquired pursuant to
such exercise 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.          Extension
of Expiration Date.
In the event that the exercise of this Option would be prohibited solely
because the issuance of shares of Common Stock pursuant to the Option would
violate applicable securities laws, the Administrator may, in its sole
discretion and in accordance with Code Section 409A and the regulations,
notices and other guidance of general applicability thereunder, permit the
expiration of the Option to be tolled during such time as its exercise is
so prohibited; provided, however, that the expiration date may not thereby
be extended more than 30 days after the date the exercise first would no longer
violate applicable securities laws.





                    e.          Mergers, Recapitalizations, Stock Splits, Etc.
Except as otherwise specifically provided in any employment, change of control,
severance or similar agreement executed by the Participant and the Company,
pursuant and subject to Section 13 of the Plan, certain changes in the number
or character of the Common Stock of the Company (through sale, 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 unexercised portion of the Option (i.e.,
Participant shall have such “anti-dilution” rights under the Option with
respect to such events, but, subject to the Administrator’s discretion, shall
not have “preemptive” rights).


                    f.          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. 


                    g.          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 are withheld from any amounts payable by the Company to the 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. 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: (i) delivering shares of
Common Stock, or (ii) electing to have the Company withhold shares of Common
Stock otherwise issuable to the Participant as a result of the exercise of the
Option. In either case, such shares shall have 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.
The Participant’s request to deliver shares or to have shares withheld for
purposes of such withholding tax obligations shall be made on or before the
date that triggers such obligations, or, if later, the date that the amount of
tax to be withheld is determined under applicable tax law, and shall be
irrevocable on such date if approved by the Administrator. Participant’s
request shall comply with such rules as the Administrator may adopt to assure
compliance with Rule 16b-3, if applicable.


                    h.         
Nontransferability. Unless otherwise permitted by the
Administrator in its sole discretion, during the lifetime of Participant, the
Option shall be exercisable only by Participant or by the Participant’s
guardian or other legal representative, and shall not be assignable or
transferable by Participant, in whole or in part, other than by will or by the
laws of descent and distribution.





                    i.          2014 Equity Incentive Plan. The Option
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 Option 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.


                    j.          Lockup Period Limitation. Participant
agrees that in the event the Company advises the Participant that it plans an
underwritten public offering of its Common Stock in compliance with the
Securities Act of 1933, as amended, the 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. 


                   k.          Blue Sky Limitation. Notwithstanding
anything in this Agreement to the contrary, in the event the Company makes any
public offering of its securities and it is determined that it is necessary to
reduce the number of issued but unexercised stock purchase rights so as to
comply with any state securities or Blue Sky law limitations with respect
thereto, and such determination is affirmed by the Board of Directors, unless
the Board of Directors determines otherwise, (i) the exercisability of this
Option and the date on which this Option must be exercised shall be
accelerated, provided that the Company agrees to give Participant 15 days’
prior written notice of such acceleration, and (ii) any portion of this Option
or any other option granted to Participant pursuant to the Plan which is not
exercised prior to or contemporaneously with such public offering shall be
canceled. 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.


                    l.          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.


                   m.          Stock Legend. The Administrator may
require that the certificates (or, if permitted, book entries) for any shares
of Common Stock purchased by Participant (or, in the case of death,
Participant’s successors) shall bear an appropriate legend or notation to
reflect the restrictions of Paragraph 4(c) and Paragraphs 4(j) through 4(l) 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(j) through 4(l).


                   n.          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 Paragraph 2 or Paragraph 4(h) above. 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. 





                    o.          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. 


                    p.          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. 


                    q.          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***





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


	
  

 	
  

 	
  

 	
  

 
	
  

 	
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 [Nonqualified Stock Option Agreement Signature Page]