THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the
Delaware corporation (the "Company"), and RONALD W. PICKETT (the "Executive").
                              W I T N E S S E T H:
         WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, on the terms and subject to the
conditions set forth herein;
         NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereby agree as follows:
         1. EMPLOYMENT. The Company hereby employs the Executive as its
President and hereby accepts such employment, on the terms and subject to the
conditions hereinafter set forth.
         2. TERM. Subject to the provisions for the termination of this
Agreement as provided for herein, the term of this Employment Agreement shall
commence on the date hereof and the Executive shall serve at the pleasure of the
board of Directors
                  (a) The Executive shall serve as President of the Company.
Without limiting the general scope of the Executive's position: (i) the
Executive shall be permitted to work from his home office located in Wilmington,
North Carolina and he shall not be required to report to any single individual
other than the Chairman of the Board of Directors,
         4. COMPENSATION.
During the term of this Employment Agreement the Company shall pay or provide,
as the case may be, to the Executive the compensation and other benefits and
rights set forth in this Paragraph 4.
(a) The Company shall pay to the Executive a base salary payable in accordance
with the Company's usual pay practices (and in any event no less frequently than
monthly) at the rate of One Hundred Thousand Dollars ($100,000) per annum, which
may be increased (but not decreased) from time to time (based upon the
performance of the Company and the Executive). Currently this amount is payable
(b) The Executive shall receive 3,000 shares of common stock per month, for
every month that the Executive serves as President, from the Employee Stock
Incentive Plan.
(c) The Company may pay to the Executive bonus compensation for each calendar or
fiscal year of the Company, not later than sixty (90) days following the end of
each year or the termination of his employment, as the case may be, prorated on
a per diem basis for partial calendar of fiscal years. It is acknowledged that
these bonuses may be based in part on the Executive's performance and in part on
the Company's performance.
(d) During the Base Term of this Agreement and any Renewal Term, the Company
shall maintain in full force and effect, and the Executive shall be entitled to
participate in, all of the Company's employee benefit plan and arrangements in
effect on the date hereof in at least the same manner and capacity as the
officers and key management employees of the Company. The Company shall not make
any changes in such plans and arrangements which would adversely affect the
Executive's rights or benefits thereunder, unless such change occurs pursuant to
a program applicable to all officers and key management employees of the Company
and does not result in a proportionately greater reduction in the rights of or
benefits to the Executive as compared with any other officers of the Company.
The Executive shall be entitled to participate in or receive benefits under any
employee benefit plan or arrangement made available by the Company in the future
to its officers and key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements. Nothing paid to the Executive under any plan or arrangement
presently in effect or made available to the Executive in the future shall be
deemed to be in lieu of any amounts payable to the Executive pursuant to this
Section 4.
(e) The Company shall reimburse the Executive or provide him with an expense
allowance during the term of this Employment Agreement for travel, entertainment
and other expenses reasonably and necessarily incurred by the Executive in
connection with the Company's business. The Executive shall furnish such
documentation with respect to reimbursements to be made hereunder as the Company
shall reasonably request. The Company will reimburse the Executive for the
monthly cost of his cellular and home office phone service.
(f) Upon dissolution or liquidation of the Company, or upon a merger or
consolidation in which the Company is not the surviving corporation, all Options
awarded to the Executive under the ESOP and not previously exercised and vested
shall become fully exercisable and vested no later than the date of such
dissolution, merger or consolidation, and the Executive shall have the right to
exercise such Executive's Options in whole or in part at any time within the
next four (4) years.
(g) The Company shall pay the full cost of providing health and group life
insurance for the Executive, his spouse and eligible dependent children and any
other such benefits as the Company may choose to offer the employees of the
         5. TERMINATION.
                The employment of the Executive under this Employment Agreement,
and the terms hereof, may be terminated by the Company at any time upon sixty
(60) days notice and the Executive may resign at any time by giving the Company
sixty (60) days notice.
acknowledges the Company's reliance and expectation of the Executive's continued
commitment to performance of his duties and responsibilities during the term of
this Employment Agreement. In light of such reliance and expectation on the part
of the Company, the Executive hereby agrees to be bound by the terms of the
Noncompetition and Confidentiality Agreement, and is acknowledged by the
Executive's signature on this Employment Agreement.
To induce Telkonet Communications, Inc., a Delaware corporation ("Telkonet") to
employ the Employee pursuant to this Employment Agreement, the Employee agrees
that for the term of the Employment Agreement and a period of One (1) year
following termination of the Employment Agreement (the "Noncompetition Period"),
he will not (a) Participate In (as hereinafter defined) any other business or
organization which at any time during the Noncompetition Period is engaged in
the same business as or in competition with Telkonet within the geographic
confines of the markets where Telkonet's products are sold or targeted; (b)
directly or indirectly solicit for business any person or enterprise that at any
time during the two (2) year period preceding the date of termination of the
Employment Agreement was a customer of Telkonet; or (c) directly or indirectly
employ any person other than Robert P. Crabb who, at any time during the two (2)
year period preceding the date of termination of the Employment Agreement was,
or during the Noncompetition Period is, an employee of Telkonet. As used in this
Agreement, "Participate In" shall mean "directly or indirectly, for his own
benefit or for, with, or through any other person or entity, own, manage,
operate, control, loan money to, or participate in the ownership, management,
operation, or control of, or be connected as a director, officer, employee,
partner, consultant, agent, independent contractor, or otherwise with, or
acquiesce in the use of his name in;" provided, nothing contained herein shall
prohibit the Employee from owning, directly or indirectly up to 5.0% of the
outstanding voting securities of any company, the securities of which are traded
on a national securities exchange or listed for quotation on an automated system
of quotation.
In consideration of the execution, delivery and performance of this
Noncompetition Agreement by the Employee, Telkonet has executed the Employment
Agreement, which confers a substantial economic benefit upon the Employee.
Notwithstanding anything in this Noncompetition Agreement to the contrary, if at
any time the Employment Agreement is terminated by either Telkonet or the
Employee for any reason (whether or not constituting cause) or for no reason,
the provisions of this Noncompetition Agreement shall remain binding upon the
Employee. Nothing in this Noncompetition Agreement shall be deemed to entitle or
confer upon the Employee the right to be employed by Telkonet for a term or
otherwise alter the employment status of the Employee with Telkonet.
A material breach of this Noncompetition Agreement by the Employee could not
adequately be compensated by money damages and will constitute irreparable harm
and injury to Telkonet. In the event of any such material breach or threatened
or anticipated breach, Telkonet shall be entitled, in addition to any other
right and remedy available, to an injunction restraining such breach or a
threatened breach, and no bond or other security shall be required in connection
therewith provided Telkonet satisfies the applicable burden of proof with
respect to all legal requirements applicable to the issuance of an injunction
other than with respect to the inadequacy of money damages and /or irreparable
harm or injury.
The Employee agrees that the provisions of this Noncompetition Agreement are
necessary and reasonable to protect Telkonet in the conduct of its business. If
any restriction contained in this Noncompetition Agreement shall be deemed to be
invalid, illegal, or unenforceable by reason of the extent, duration, or
geographical scope thereof, or otherwise, then the court making such
determination shall have the right to reduce such extent, duration, geographical
scope, or other provisions hereof, to the minimal extent necessary to comply
with applicable law or equitable considerations, and in its reduced form such
restriction shall then be enforceable in the manner contemplated hereby.
This Noncompetition Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to conflict of
laws principles.
         7. MISCELLANEOUS.
                  (a) The Executive represents and warrants that he is not a
party to any agreement, contract or understanding, whether employment or
otherwise, which would restrict or prohibit him from undertaking or performing
employment in accordance with the terms and conditions of this Employment
                  (b) The provisions of this Employment Agreement are severable
and if any one or more provisions may be determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions and any partially
unenforceable provision, to the extent enforceable in any jurisdiction,
nevertheless shall be binding and enforceable.
                  (c) The rights and obligations of the Company under this
Employment Agreement shall inure to the benefit of, and shall be binding on, the
Company and its successors and assigns, and the rights and obligations (other
than obligations to perform services) of the Executive under this Employment
Agreement shall inure to the benefit of, and shall be binding upon, the
Executive and his heirs, personal representatives and assigns.
                  (d) Any notice to be given under this Employment Agreement
shall be personally delivered in writing or shall have been deemed duly given
when received after it is posted in the United States mail, postage prepaid,
registered or certified, return receipt requested, and if mailed to the Company,
shall be addressed to its principal place of business and if mailed to the
Executive, shall be addressed to him at his home address last known on the
records of the Company, or at such other address or addresses as either the
Company or the Executive may hereafter designate in writing to the other.
                  (e) The failure of either party to enforce any provision or
provisions of this Employment Agreement shall not in any way be construed as a
waiver of any such provision or provisions as to any future violations thereof,
or prevent that party thereafter from enforcing each and every other provision
of this Employment Agreement. The rights granted the parties herein are
cumulative and the waiver of any single remedy shall not constitute a waiver of
such party's right to assert all other legal remedies available to it under the
                  (f) This Employment Agreement supersedes all prior agreements
and understandings between the parties and may not be modified or terminated
orally. No modification, termination or attempted waiver shall be valid unless
in writing and signed by the party against whom the same is sought to be
                  (g) This Employment Agreement shall be governed by and
construed according to the laws of the State of Maryland without giving effect
to applicable conflicts of law provisions.
         IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
                                                  TELKONET COMMUNICATIONS, INC.
                                                  Name: Warren V. Musser
                                                  Title: Chairman of the Board
                                                  Ronald W. Pickett, President