Exhibit 10.3



CHANGES IN TERMS AGREEMENT


	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Principal

 	
 Loan Date

 	
 Maturity

 	
 Loan No

 	
 Call /
 Coll

 	
 Account

 	
 Officer

 	
 Initials

 
	
 $2,500,000.00

 	
 12-18-2014

 	
 12-18-2015

 	
 15695

 	
  

 	
  

 	
  

 	
  

 
	
 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 Northwest

 	
  

 	
 4470 W 78th St. Circle

 
	
  

 	
 New Prague, MN 56071

 	
  

 	
 Suite 100

 
	
  

 	
  

 	
  

 	
 Bloomington, MN 55435

 






	
  

 	
  

 
	
  

 	
  

 
	
 Principal
 Amount: $2,500,000.00

 	
 Date of
 Agreement: December 18, 2014

 





	
  

 	
  

 
	
 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. Decrease rate margin and extend
 maturity date to 12/18/2015.

 
	
  

 	
  

 
	
 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, 2015.
 In addition, Borrower will pay regular monthly payments of all accrued unpaid
 interest due as of each payment date, beginning January 18, 2015, 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 3.250% 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 over the
 Index, adjusted if necessary for any minimum and maximum rate limitations
 described below, resulting in an initial rate of 4.500% per annum based on a
 year of 360 days. NOTICE: Under no circumstances will the interest rate on
 this loan be less than 4.500% per annum or 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 fumished 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 fumished or becomes false or misleading at any time
 thereafter.

 













	
  

 	
  

 	
  

 
	
  

 	
 CHANGES IN TERMS AGREEMENT

 	
  

 
	
 Loan No: 15695

 	
 (Continued) 

 	
 Page 2

 
	
  

 	
  

 	
  

 






	
  

 	
  

 
	
  

 	
 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.

 
	
  

 	
  

 
	
 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 0.125% based on
 the average unused portion of the line of credit will be assessed up to the
 maturity date of 12/18/2015.

 
	
  

 	
  

 
	
 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.

 













	
  

 	
  

 	
  

 
	
  

 	
 CHANGES IN TERMS AGREEMENT

 	
  

 
	
 Loan No: 15695

 	
 (Continued) 

 	
 Page 3

 
	
  

 	
  

 	
  

 






	
  

 	
  

 
	
 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, 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 Doyle

 	
  

 
	
  

 	
 Authorized Signer

 	
  

 






	
  

 
	
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