Document:

ex_10-3.htm

PROMISSORY NOTE

 

	 $37,151.59	 Louisville, Kentucky 

 February 20, 2012

 

FOR VALUE RECEIVED, NTS/VIRGINIA DEVELOPMENT COMPANY, a Virginia corporation (the “Borrower”), with an address at 10172 Linn Station Road, Louisville, Kentucky 40223, promises to pay to the order of NTS FINANCIAL PARTNERSHIP, a Kentucky general partnership (the “Lender”), in lawful money of the United States of America in immediately available funds at its offices located at 10172 Linn Station Road, Louisville, Kentucky 40223, or at such other location as the Lender may designate from time to time, the principal sum of THIRTY SEVEN THOUSAND ONE HUNDRED FIFTY ONE DOLLARS AND FIFTY NINE CENTS ($37,151.59) (the “Loan”), together with interest accruing on the outstanding principal balance from the date hereof, as provided below:

1.           Interest Rate.  The principal balance of the Loan will bear interest at a fixed rate per annum (calculated on the basis of the actual number of days that principal is outstanding over a year of 360 days) equal to five and thirty-four one-hundredths percent (5.34%) per annum (the “Fixed Rate”).

In no event will the rate of interest hereunder exceed the maximum rate allowed by law.

2.           Payment Terms.  Interest shall be due and payable commencing on the first day of each month beginning March 1, 2012 until April 30, 2012 on which date all outstanding principal and accrued interest shall be due and payable in full (the “Maturity Date”).  Payments received will be applied to charges, fees and expenses (including attorneys’ fees), accrued interest and principal in any order the Lender may choose, in its sole discretion.

3.           Late Payments; Default Rate.  If a payment is more than 15 days late, the Borrower shall also pay to the Lender a late charge equal to 5% of the unpaid portion of the payment or $100, whichever is greater (the “Late Charge”).  Such 15 day period shall not be construed in any way to extend the due date of any such payment.  Upon maturity, whether by acceleration, demand or otherwise, and at the option of the Lender upon the occurrence of any Event of Default (as hereinafter defined) and during the continuance thereof, this Note shall bear interest at a rate per annum (calculated on the basis of the actual number of days that principal is outstanding over a year of 360 days) which shall be four percentage points (4%) in excess of the Fixed Rate in effect from time to time but not more than the maximum rate allowed by law (the “Default Rate”).  The Default Rate shall continue to apply whether or not judgment shall be entered on this Note.  Both the Late Charge and the Default Rate are imposed as liquidated damages for the purpose of defraying the Lender’s expenses incident to the handling of delinquent payments, but are in addition to, and not in lieu of, the Lender’s exercise of any rights and remedies hereunder, under the Loan Documents or under applicable law, and any fees and expenses of any agents or attorneys which the Lender may employ.  In addition, the Default Rate reflects the increased credit risk to the Lender of carrying a loan that is in default.  The Borrower agrees that the Late Charge and Default Rate are reasonable forecasts of just compensation for

  

  

  

anticipated and actual harm incurred by the Lender, and that the actual harm incurred by the Lender cannot be estimated with certainty and without difficulty.

4.           Prepayment.  The indebtedness evidenced by this Note may be prepaid in whole or in part at any time without penalty or premium.

5.           Events of Default.  The occurrence of any of the following events will be deemed to be an “Event of Default” under this Note:

(i)           Borrower fails to make any payment when due hereunder, or fails to otherwise comply with any term or provision of this Note, and such failure is not cured within any applicable cure period or fails to comply;

(ii)           The filing by or against Borrower of any proceeding in bankruptcy, receivership, insolvency, reorganization, liquidation, conservatorship or similar proceeding (and, in the case of any such proceeding instituted against any Obligor, such proceeding is not dismissed or stayed within 30 days of the commencement thereof);

(iii)           Any assignment by Borrower for the benefit of creditors, or any levy, garnishment, attachment or similar proceeding is instituted against any property of Borrower;

(iv)           A judgment or judgments are entered against Borrower, Borrower defaults in the payment of any other debts or there is a material adverse change in the financial condition of Borrower, or the Lender in good faith believes the prospects for repayment of this Note have been impaired; and

(v)           Any material statement made to the Lender about Borrower, or about Borrower’s financial condition, or about any collateral securing this Note is false or misleading.

Upon the occurrence of an Event of Default: (a) in an Event of Default specified in clauses (ii) or (iii) above shall occur, the outstanding principal balance and accrued interest hereunder together with any additional amounts payable hereunder shall be immediately due and payable without demand or notice of any kind; (b) if any other Event of Default shall occur, the outstanding principal balance and accrued interest hereunder together with any additional amounts payable hereunder, at the option of the Lender and without demand or notice of any kind may be accelerated and become immediately due and payable; (c) at the option of the Lender, this Note will bear interest at the Default Rate from the date of the occurrence of the Event of Default; and (d) the Lender may exercise from time to time any of the rights and remedies available to the Lender under applicable law.

6.           Indemnity.  The Borrower agrees to indemnify each of the Lender, each legal entity, if any, who controls, is controlled by or is under common control with the Lender, and each of their respective directors, officers and employees (the “Indemnified Parties”), and to hold each Indemnified Party harmless from and against any and all claims, damages, losses, liabilities and expenses (including all fees and charges of internal or external counsel with whom any Indemnified Party may consult and all expenses of litigation and preparation therefor) which any

  

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Indemnified Party may incur or which may be asserted against any Indemnified Party by any person, entity or governmental authority (including any person or entity claiming derivatively on behalf of the Borrower), in connection with or arising out of or relating to the matters referred to in this Note whether (a) arising from or incurred in connection with any breach of a representation, warranty or covenant by the Borrower, or (b) arising out of or resulting from any suit, action, claim, proceeding or governmental investigation, pending or threatened, whether based on statute, regulation or order, or tort, or contract or otherwise, before any court or governmental authority; provided, however, that the foregoing indemnity agreement shall not apply to any claims, damages, losses, liabilities and expenses solely attributable to an Indemnified Party’s gross negligence or willful misconduct. The indemnity agreement contained in this Section shall survive the termination of this Note, payment of any amounts hereunder and the assignment of any rights hereunder.  The Borrower may participate at its expense in the defense of any such auction or claim.

7.           Miscellaneous. All notices, demands, requests, consents, approvals and other communications required or permitted hereunder (“Notices”) must be in writing (except as may be agreed otherwise above with respect to borrowing requests) and will be effective upon receipt. Notices may be given in any manner to which the parties may separately agree, including electronic mail.  Without limiting the foregoing, first-class mail, facsimile transmission and commercial courier service are hereby agreed to as acceptable methods for giving Notices.  Regardless of the manner in which provided, Notices may be sent to a party’s address as set forth above or to such other address as any party may give to the other for such purpose in accordance with this section.  No delay or omission on the Lender’s part to exercise any right or power arising hereunder will impair any such right or power.  The Lender’s rights and remedies hereunder are cumulative and not exclusive of any other rights or remedies which the Lender may have under other agreements, at law or in equity.  No modification, amendment or waiver of, or consent to any departure by the Borrower from, any provision of this Note will be effective unless made in a writing signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.  The Borrower agrees to pay on demand, to the extent permitted by law, all costs and expenses incurred by the Lender in the enforcement of its rights in this Note and in any security therefor, including without limitation reasonable fees and expenses of the Lender’s counsel.  If any provision of this Note is found to be invalid, illegal or unenforceable in any respect by a court, all the other provisions of this Note will remain in full force and effect.  The Borrower and all other makers and indorsers of this Note hereby forever waive presentment, protest, notice of dishonor and notice of non-payment.  The Borrower also waives all defenses based on suretyship or impairment of collateral.  If this Notice is executed by more than one Borrower, the obligations of such persons or entities hereunder will be joint and several.  This Note shall bind the Borrower and its heirs, executors, administrators, successors and assigns, and the benefits hereof shall inure to the benefit of the Lender and its successors and assigns; provided, however, that the Borrower may not assign this Note in whole or in part without the Lender’s written consent and the Lender at any time may assign this Note in whole or in part.

This Note has been delivered to and accepted by the Lender and will be deemed to be made in the State where the Lender’s office indicated above is located.  This Note will be interpreted and the rights and liabilities of the Lender and the Borrower determined in

  

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accordance with the laws of the State where the Lender’s office indicated above is located, excluding its conflict of laws rules. The Borrower hereby irrevocably consents to the exclusive jurisdiction of any state or federal court in the county or judicial district where the Lender’s office indicated above is located; provided that nothing contained in this Note will prevent the Lender from bringing any action, enforcing any award or judgment or exercising any rights against the Borrower individually, against any security or against any property of the Borrower within any other county, state or other foreign or domestic jurisdiction.  The Borrower acknowledges and agrees that the venue provided above is the most convenient forum for both the Lender and the Borrower. The Borrower waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Note.

8.           Waiver of Jury Trial.  The Borrower irrevocably waives any and all right it may have to a trial by jury in any action, proceeding or claim of any nature relating to this Note, any documents executed in connection with this Notice or any transaction contemplated in any of such documents.  The Borrower acknowledges that the foregoing waiver is knowing and voluntary.

The Borrower acknowledges that it has read and understands all of the provisions of this Note, including the waiver of jury trial, and has been advised by counsel as necessary or appropriate.

WITNESS the due execution hereof by an authorized officer of Borrower, with the intent to be legally bound hereby.

 

	 	
NTS/VIRGINIA DEVELOPMENT COMPANY,

a Virginia corporation

 

 

By:          /s/ Gregory A. Wells         

Name:     Gregory A. Wells

Title:       Executive Vice President

 

 

4Exhibit10.1

EMPLOYMENT AGREEMENT

This Employment
Agreement (“Agreement”) is effective as of February 15th, 2012 (the “Effective Date”), by and among Electromed,
Inc., a Minnesota corporation (the “Corporation”), and James Cassidy (“Employee”).

RECITALS

		A.	Employee is currently employed by the Corporation in the capacity of Chief Operating Officer.

		B.	The Corporation wishes to provide incentives for the Employee to continue to remain with the Corporation.

		C.	The Corporation and Employee desire to enter into this Agreement, and it is the intention of the
Corporation and Employee that this Agreement entirely supersedes any prior agreements with respect hereto.

AGREEMENT

In consideration
of the above recitals and the mutual promises set forth in this Agreement, the parties agree as follows:

1.                  
Nature and Capacity of Employment. The Corporation hereby agrees to employ the Employee
as its Chief Operating Officer, subject to the direction of the Board of Directors of the Corporation and pursuant to the terms
and conditions set forth in this Agreement. The Employee hereby accepts employment under the terms and conditions set forth in
this Agreement. The Employee agrees to perform or be available to perform the functions of this position, pursuant to the terms
of this Agreement.

2.                  
Term of Employment. The term of the Employee’s employment hereunder shall commence
on the Effective Date of this Agreement and shall continue thereafter through the last day of calendar year 2013 (“Initial
Term”), unless terminated earlier in accordance with Paragraph 4 of this Agreement. The term of this Agreement and the
Employee’s employment hereunder shall automatically renew for successive one calendar year periods beyond expiration of the
Initial Term, unless at least sixty (60) days prior to expiration of the Initial Term or any Renewal Term either party hereto gives
written notice to the other party that it does not intend to renew this Agreement for the coming calendar year. During the Initial
Term or any Renewal Term, this Agreement may be terminated pursuant to the terms of Paragraph 4 of this Agreement.

3.                  
Compensation and Benefits.

3.1.             
Base Salary. As of the Effective Date, the Corporation agrees to pay the Employee an
annualized Base Salary of $172,000.00, which amount shall be earned by the Employee on a pro rata basis as the Employee performs
services and which shall be paid according to the Corporation’s normal payroll practices. For the Calendar Year ending in
December 31, 2013 and thereafter during the term of this Agreement or any Renewal Term, the Board of Directors acting reasonably
shall determine the amount of Base Salary payable pursuant to this Paragraph 3.1.

    	 

    	 

    
 

3.2.             
Employee Benefits. During the Employee’s employment with the Corporation, the
Employee shall be entitled to participate in the retirement plans, health plans, and all other employee benefits made available
by the Corporation, and as they may be changed from time to time. The Employee acknowledges and agrees that he will be subject
to all eligibility requirements and all other provisions of these benefits plans, and that the Corporation is under no obligation
to the Employee to establish and maintain any employee benefit plan in which the Employee may participate. The terms and provisions
of any employee benefit plan of the Corporation are matters within the exclusive province of the Corporation’s Board of Directors,
subject to applicable law.

3.3.             
Paid Time Off. The Corporation agrees that the Employee shall be entitled to Paid Time
Off (“PTO”) of up to fifteen (15) days per calendar year, prorated for any partial calendar year of employment, without
reduction of the minimum annual base salary payable to the Employee pursuant to Paragraph 3.1 of this Agreement. PTO which is unused
at the end of any calendar year will carry over to the next calendar year, subject to the Corporation’s limitations on carry-over
and accrual maximums. At end of Employee’s employment for any reason, the Corporation will pay Employee for his ending balance
of unused PTO.

3.4.             
Stock Option. The Company has adopted the Electromed, Inc. 2011 Stock Incentive Plan
(the “Plan”). Pursuant to the terms of the Plan, Employee will be granted a five year option to acquire 20,000 shares
of the Company’s common stock (the “Option”). The Option shall vest as follows: 10,000 shares on December 31,
2012; 10,000 shares on December 31, 2013, provided on each date Employee is still employed by the Company and Employee has continued
to provide exemplary service to the Company as reasonably determined by the Company’s Chairman and CEO. The exercise price
of the Option shall be at least 100% of the Fair Market Value of the Company’s common stock on the date of grant, as defined
in the Plan. The Option shall be subject to the Plan and the specific terms of a signed Grant Letter, which are hereby made a part
of this Agreement.

3.5.             
Other Benefits. During the Term or Renewal Term, the Corporation shall directly pay
the cost of a cell phone or wireless handheld device for the Employee’s use. Additionally, during the Term or any Renewal
Term, the Corporation shall promptly reimburse the Employee, upon receipt of appropriate documentation, for any reasonable automobile
lease payments up to an amount of $400 per month. The Corporation shall also provide a corporate credit card for approved business
expenses and shall otherwise reimburse the Employee for, or pay directly, all reasonable business expenses incurred by the Employee
in the performance of his duties under this Agreement, provided that the Employee incurs and accounts for such expenses in accordance
with all Corporation policies and directives in effect from time to time.

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4.                  
Termination of Employment Prior to the End of the Term or Renewal Term. The Employee’s
employment may be terminated prior to the expiration of the Term or a Renewal Term as follows:

4.1.             
For Cause Termination, Without Severance. Notwithstanding anything contained herein
to the contrary, the Corporation may discharge the Employee for Cause and terminate this Agreement immediately upon written notice
to the Employee. For the purposes of this Agreement, “Cause” shall mean the occurrence of any of the following:

	(i)	Employee’s material failure to perform his job duties competently as reasonably determined
by the Corporation’s Board of Directors;
	 	 
	(ii)                	gross misconduct by the Employee which the Corporation’s Board of Directors determines is
(or will be if continued) demonstrably and materially damaging to the Corporation; or
	 	 
	(iii)               	fraud, misappropriation, or embezzlement by the Employee; or
	 	 
	(iv)              	conviction of a felony crime or a crime of moral turpitude; or
	 	 
	(v)                	conduct in the course of employment that the Corporation’s Board of Directors determines is
unethical; or
	 	 
	(vi)              	the material breach of this Agreement by the Employee.

 

If the Corporation
terminates the Employee’s employment for Cause pursuant to this Paragraph 4.1, the Employee shall not be entitled to any
stock options pursuant to Paragraph 3.4 or to severance pay under Paragraph 4.2 or to any incentive compensation of any kind.

4.2.             
Without Cause, With Severance. The Corporation may terminate the Employee’s employment
immediately at any time and for any reason without Cause upon providing notice to the Employee. However, in such event, provided
that the Employee meets all of the conditions set forth in this paragraph for receiving severance pay, the Corporation shall pay
the Employee severance pay in a lump sum in an amount equal to his ending base salary from the date of termination through the
expiration of the then current Term (“Severance Amount”), payable within sixty (60) days after termination. The Employee
shall only be entitled to receive the severance pay described herein if the Employee (a) complies with his separate Non-Competition,
Non-Solicitation, and Confidentiality Agreement and (b) signs, does not rescind, and complies with a Confidential Separation Agreement
at the time of termination in a form prepared by the Corporation that includes in part: (i) agreement to a general release of any
and all legal claims; (ii) return of all of the Corporation’s property in the Employee’s possession; and (iii) agreement
not to disparage the Corporation and its representatives.

4.3.             
Resignation by the Employee Due to Change of Control, With Severance. For purposes
of this Agreement, “Change of Control” means:

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(i)                  
A “change in ownership,” as described in Section 1.409A-3(i)(5)(v) of the Treasury
Regulations.

(ii)                
A “change in effective control,” as described in Section 1.409A-3(i)(5)(vi) of
the Treasury Regulations.

(iii)               
A “change in ownership of a substantial portion of the assets,” as described in
Section 1.409A-3(i)(5)(vii) of the Treasury Regulations.

Employee shall
have the right to terminate the Employee’s employment for any reason within six (6) months following a Change of Control
in the Corporation upon providing thirty (30) days advance written notice to the Corporation. The Corporation may then elect either
(a) to have the Employee continue performing work for the Corporation throughout the 30 day notice period; or (b) to accept the
Employee’s resignation effective immediately.

In the event
of the Employee’s termination of employment with the Corporation following a Change of Control under this Paragraph 4.3,
the Corporation shall pay the Employee any earned and unpaid bonus or incentive compensation, if any, on a pro rata basis for the
period through the Employee’s termination date. The amount of such bonus, if any, shall be calculated based on the Corporation’s
annualized gross sales revenue as of the last day of Employee’s employment and shall be paid in a lump sum approximately
sixty (60) days after termination. In addition, provided that the Employee meets all of the conditions set forth in this paragraph
for receiving severance pay, the Corporation shall pay the Employee severance pay in a lump sum equal to two years’ base
salary within sixty (60) days after termination. The Employee shall only be entitled to receive the severance pay described herein
if the Employee signs and does not rescind a Confidential Separation Agreement at the time of termination in a form prepared by
the Corporation that includes: (i) agreement to a general release of any and all legal claims; (ii) return of all of the Corporation’s
property in the Employee’s possession; and (iii) agreement not to disparage the Corporation and its representatives.

4.4.             
Other Resignation by the Employee, Without Severance. The Employee may resign the Employee’s
position upon providing sixty (60) days advance, written notice to the Corporation. The Corporation may then elect either (a) to
have the Employee continue performing work for the Corporation throughout the 60 day notice period; or (b) to accept the Employee’s
resignation effective immediately. In the event of the Employee’s termination of employment with the Corporation under this
Paragraph 4.4, the Employee shall not be paid any severance pay.

4.5.             
Because of Death, Disability or Incapacity of the Employee, Without Severance. In the
event of the Employee’s death, this Agreement shall terminate immediately. If the Employee is unable to perform the Employee’s
duties and responsibilities for more than ninety (90) days in any consecutive twelve (12) month period by reason of physical or
mental disability or incapacity, the Corporation may terminate the Employee’s employment upon thirty (30) days advance written
notice to the Employee. This Paragraph does not relieve the Corporation of any duty to reasonably accommodate a qualifying disability
under the Americans with Disabilities Act, any legal duty under the Family Medical Leave Act, or any of its other duties pursuant
to applicable law. If the Employee’s employment is terminated pursuant to this Paragraph, the Employee shall not be entitled
to severance pay.

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4.6.             
Non-Renewal By Either Party Upon Expiration of the Initial or Renewal Term. For the
avoidance of doubt, the parties agree that either party may elect, with or without cause, not to renew this Agreement at the end
of the then current Term and that Employee shall not be entitled to severance pay in the event of non-renewal by either party.

5.                  
Miscellaneous.

5.1.             
Integration. This Agreement embodies the entire agreement and understanding among the
parties relative to subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter,
including but not limited to any earlier employment agreements of the Employee.

5.2.             
Applicable Law. This Agreement and the rights of the parties shall be governed by and
construed and enforced in accordance with the laws of the state of Minnesota.

5.3.             
Payments. All amounts paid under this Agreement shall be subject to normal withholdings
or such other treatment as required by law.

5.4.             
Counterparts. This Agreement may be executed in several counterparts and as so executed
shall constitute one agreement binding on the parties hereto.

5.5.             
Binding Effect. Except as herein or otherwise provided to the contrary, this Agreement
shall be binding upon and inure to the benefit of the Corporation and its successors, assigns and personal representatives without
any requirement of the consent of the Employee for assignment of its rights or obligations hereunder.

5.6.             
Modification. This Agreement shall not be modified or amended except by a written instrument
signed by the parties.

5.7.             
Severability. The invalidity or partial invalidity of any portion of this Agreement
shall not invalidate the remainder thereof, and said remainder shall remain in fully force and effect.

5.8.             
Opportunity to Obtain Advice of Counsel. The Employee acknowledges that the Employee
has been advised by the Corporation to obtain legal advice prior to executing this Agreement, and that the Employee had sufficient
opportunity to do so prior to signing this Agreement.

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5.9.             
Savings Clause for 409A. Notwithstanding anything in this Agreement to the contrary,
if any of the payments described in this Agreement are subject to the requirements of Code Section 409A and the Corporation determines
that Employee is a “specified employee” as defined in Code Section 409A as of the date of Employee’s termination
of employment, such payments shall not be paid or commence earlier than the first day of the seventh month following the date of
Employee’s termination of employment. In addition, notwithstanding anything in this Agreement to the contrary, the Corporation
expressly reserves the right to amend this Agreement to the extent necessary to comply with Code Section 409A, as it may be amended
from time to time, and the regulations, notices and other guidance of general applicability issued thereunder.

5.10.          
Employee’s Representations. The Employee represents that he is not subject to
any agreement or obligation that would prevent or limit him from entering into this Agreement or that would be breached upon performance
of his duties under this Agreement, including but not limited to any duties owed to any former employers not to compete. If the
Employee possesses any information that he knows or should know is considered by any third party, such as a former employer of
the Employee’s, to be confidential, trade secret, or otherwise proprietary, the Employee shall not disclose such information
to the Corporation or use such information to benefit the Corporation in any way.

 

 

 

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THIS AGREEMENT was voluntarily
and knowingly executed by the parties as of date and year first set forth above.

 

	ELECTROMED, INC.	 	EMPLOYEE:	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	By:	/s/ Robert D. Hansen	 	/s/ James Cassidy	 
	Its: 	Chairman/CEO	 	James Cassidy  2/17/2012	 

 

 

 

 

 

 

 

 

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