Document:

Exhibit
4.1

 

DESCRIPTION
OF SECURITIES

 

The
following description of the capital stock of Electromed, Inc., a Minnesota corporation (the “Company,”), does not
purport to be complete and is subject to and qualified by reference to the Company’s Articles of Incorporation, as amended
(the “Articles”), and Bylaws, as amended (the “Bylaws”), and applicable law, including the Minnesota Business
Corporation Act (“MBCA”).

 

Authorized
Capital

 

The
Company’s authorized capital stock consists of 15,000,000 shares of capital stock, consisting of 13,000,000 shares of common
stock and 2,000,000 shares of undesignated stock. The capital stock has no par value, except for the purpose of taxes or fees
based on par value, in which case it is equal to $0.01 per share. The Articles permit the Company’s Board of Directors (the
“Board”) to establish the rights, privileges, preferences and restrictions, including voting rights, of future series
of capital stock and to issue such shares without approval from the Company’s shareholders. The rights of holders of the
Company’s common stock may suffer as a result of the rights granted to holders of preferred stock that may be issued in
the future. In addition, the Board could issue shares of preferred stock to prevent a change in control of the Company, depriving
holders of common stock of an opportunity to sell such shares at a price in excess of the prevailing market price.

 

Common
Stock

 

No
outstanding share of common stock is entitled to preference over any other share, and each share is equal to any other share in
all respects. Holders of shares of common stock are entitled to one vote for each share held of record at each meeting of shareholders.
Holders of shares of common stock do not have cumulative voting rights. Holders of shares of common stock have no preemptive,
subscription, conversion, redemption or sinking fund rights. The absence of preemptive rights could result in a dilution of the
interest of investors should additional common shares be issued.

 

Holders
of common stock are entitled to receive dividends in the form of cash, property or shares of capital stock of the Company, when
and as declared by the Board, provided there are sufficient earnings or surplus legally available for that purpose. In any distribution
of capital assets, such as liquidation, whether voluntary or involuntary, holders of shares of common stock are entitled to receive
pro rata the assets remaining after creditors have been paid in full and after payment of the liquidation preference of all classes
and series of preferred stock then-outstanding. All of the issued and outstanding shares of common stock are non-assessable.

 

Undesignated
Shares

 

The
Board may, by resolution and without shareholder approval, establish from the undesignated shares different classes or series
of shares (including classes or series of preferred stock), with such designations, voting power, preferences, rights qualifications,
limitations, restrictions, dividends, time and prices of redemption, and conversion rights as the Board may determine. The issuance
of such shares of capital stock could adversely affect the rights and voting power of holders of shares of common stock, entitle
holders thereof to greater liquidation preferences or Board representation than holders of shares of common stock or prevent or
delay a change in control of the Company. No shares of any series of preferred stock are currently outstanding.

 

Anti-Takeover
Provisions

 

Several
provisions of the MBCA, the Articles and the Bylaws may have anti-takeover effects. These provisions are intended to avoid costly
takeover battles, lessen the Company’s vulnerability to a hostile change of control and enhance the ability of the Board
to maximize shareholder value in connection with any unsolicited offer to acquire the Company. However, these anti-takeover provisions,
which are summarized below, could also discourage, delay or prevent the merger or acquisition of the Company by means of a tender
offer, a proxy contest or otherwise, that a shareholder may consider in its best interest; and the removal of incumbent officers
and directors.

 

     

    

    

 

Issuance
of Preferred Stock

 

Under
the terms of the Articles, all authorized and unissued shares of capital stock of the Company are subject to redesignation by
the Board. The Board has the authority to establish the terms of authorized shares and issue such shares in one or more classes
or series of preferred or other capital stock. The Board could issue shares of preferred stock on terms calculated to discourage,
delay or prevent a change of control of the Company or the removal of management of the Company.

 

Prohibitions
on Business Combinations

 

The
MBCA prohibits certain “business combinations” between a Minnesota corporation with at least 100 shareholders, or
a publicly-held corporation that has at least 50 shareholders, and an “interested shareholder” for a four-year period
following the share acquisition date by the interested shareholder, unless certain conditions are satisfied or an exemption is
found. An “interested shareholder” is generally defined to include a person who beneficially owns at least 10% of
the votes that all shareholders would be entitled to cast in an election of directors of the corporation. The MBCA also limits
the ability of a shareholder who acquires beneficial ownership of more than certain thresholds of the percentage voting power
of a Minnesota corporation, starting at 20%, from voting those shares in excess of the threshold unless such acquisition has been
approved in advance by a majority of the voting power held by shareholders unaffiliated with such shareholder. The MBCA provides
that, during any tender offer, a publicly-held corporation may not enter into or amend an agreement, whether or not subject to
contingencies, that increases the current or future compensation of any officer or director. In addition, under the MBCA, a publicly-held
corporation is prohibited from purchasing any voting shares owned for less than two years from a 5% shareholder for more than
the market value of the shares unless the transaction has been approved by the affirmative vote of the holders of a majority of
the voting power of all shares entitled to vote or unless the corporation makes a comparable offer to all holders of shares of
the class or series of stock held by the 5% shareholder and to all holders of any class or series into which such securities may
be converted. The Company has not opted out of these provisions.

 

Election
and Removal of Directors

 

The
Articles do not provide for cumulative voting in the election of directors. The MBCA also provides that directors elected by shareholders
may be removed only upon the affirmative vote of the holders of at least a majority of the outstanding shares of common stock
entitled to vote for such directors. These provisions may discourage, delay or prevent the removal of incumbent officers and directors.

 

Restriction
on Control Share Acquisitions

 

The
MBCA contains a control share acquisition statute that requires disinterested shareholder approval for certain transactions. The
control share acquisition statute applies only if: the person acquiring the shares is an “acquiring person,” which
is a person (whether an individual or an entity) who acquires, owns or votes the “issuing public corporation’s”
stock; the acquisition constitutes a “control share acquisition,” which occurs when the “acquiring person’s”
ownership exceeds certain designated percentages; and the shares acquired are shares of any “issuing public corporation,”
which is a corporation organized under the laws of the State of Minnesota which has at least 100 shareholders of record, or public
reporting corporation which has at least 50 shareholders of record.

 

The
Minnesota control share acquisition statute applies unless the “issuing public corporation” opts out of the statute
in its articles of incorporation or bylaws which are approved by its shareholders. The Company has not opted out of such provisions.
Under Minnesota law, a “control share acquisition” does not include, among other things, the following: an acquisition
under Minnesota law relating to mergers, statutory share exchanges and sales of substantially all assets if the issuing public
corporation is a party to the transaction; an acquisition from the issuing public corporation; or an acquisition pursuant to a
cash offer for all of the issuing corporation’s voting stock which has been approved by a majority vote of the members of
a committee comprised of all of the disinterested members of the board of directors which was formed prior to the commencement
or public announcement of the intent to commence, of the tender offer and pursuant to which the acquiring persons will become
the owner of over 50% of the voting stock of the “issuing public corporation” outstanding at the time of the transaction.

 

     

    

    

 

Special
and Annual Meetings of Shareholders

 

A
special meeting of the shareholders may be called by one or more shareholders holding at least 10% of the voting power. But a
special meeting for the purpose of considering any action to directly or indirectly facilitate or effect a business combination,
including any action that would affect the composition of the Board for that purpose, can only be called by shareholders holding
at least 25% of the voting power of all shares.

 

The
Bylaws also include customary advance notice procedures for shareholder proposals to be brought before any meeting of shareholders,
including proposed nominations of candidates for election to the Board. Shareholder meetings may only act on the business items
specified in the notice of the meeting or proposals or nominations brought before the meeting by or at the direction of the Board,
or by a shareholder after delivering timely written notice in proper form to the Company’s secretary sufficiently in advance
of the meeting. These provisions could have the effect of delaying shareholder actions that may be favored by the holders of a
majority of the Company’s outstanding voting securities until the next shareholder meeting, or may discourage or deter a
potential acquirer from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempt to obtain
control of the Company.Exhibit
10.20

 

Fiscal
Year 2020 Officer Bonus Plan

 

The
Personnel and Compensation Committee of the Board of Directors of Electromed, Inc. (the “Company”) has established
the Fiscal Year 2020 Officer Bonus Plan (the “Bonus Plan”) for officers of the Company, including its named executive
officers. The Bonus Plan is effective for the fiscal year ending June 30, 2020 and provides an opportunity for each participant
to earn an annual cash bonus based on Company revenue growth versus the fiscal year ended June 30, 2019 (subject to achievement
of threshold earnings before interest and taxes (“EBIT”)). The committee has established target payouts of 50.0% and
30.0% of annual base salary for our Chief Executive Officer and Chief Financial Officer, respectively, under the Bonus Plan. The
following summarizes the potential payments under the Bonus Plan:

 

		●	Company
                                         revenue growth below minimum performance will not result in any payouts under the Bonus
                                         Plan.

		●	Company
                                         revenue growth between minimum and target performance will result in a potential bonus
                                         payout starting at 50.0% and increasing in increments of 25.0% of the participant’s
                                         respective target payout for every whole percent of revenue growth in excess of minimum
                                         performance.

		●	Company
                                         revenue growth equal to target performance will result in a potential bonus payout equal
                                         to 100.0% of the participant’s respective target payout.

		●	Company
                                         revenue growth above target performance will result a potential bonus payout equal to
                                         100.0% of the participant’s respective target payout, plus additional increments
                                         of 8.0% of their target payout for every whole percent of revenue growth in excess of
                                         target performance up to 200%, and additional increments of 5.0% of their target payout
                                         for every whole percent of revenue growth in excess of 200% of target performance.

 

Notwithstanding
the foregoing, Company revenue growth also will not result in any payout unless EBIT also exceeds an established threshold amount.
Company revenue growth above target performance will only increase the resulting payout as a percent of target if EBIT also exceeds
an amount equal to the threshold EBIT amount plus an additional increment of 30.0% of threshold EBIT for every whole percent of
revenue growth in excess of target performance.

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