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                              EMPLOYMENT AGREEMENT

      AGREEMENT made as of December 31, 2003 between Home Director, Inc,
(Company), a Delaware corporation, with an office at 2525 Collier Canyon Road,
Livermore, CA 94550 and Michael Liddle (Employee), with an office at 20 North
Santa Cruz Ave., Suite C-1, Los Gatos, CA 95030.

                                    RECITALS

      Company wishes to employ Employee as Chief Executive Officer (CEO); and

      Employee is willing to accept that employment upon the terms and
conditions described herein.

      NOW, THEREFORE in consideration of the Recital and the terms and
conditions described herein, the parties agree as follows:

      1. Employee's Duties, Obligations and Authority.

            1.1 General. Company hereby employs Employee as its CEO and Employee
hereby accepts that employment upon the terms and conditions described herein.

            1.2 Company's Board of Directors. Company shall nominate Employee to
its Board of Directors (the Board) and, if elected or appointed to the Board,
Employee shall serve as a member.

            1.3 Employee's Responsibilities

                  a) Employee's responsibilities, duties and authority shall be
consistent with his position as CEO and he shall have such additional
responsibilities, duties and authority as may, from time to time, be assigned to
him by the Board.

                  b) Employee shall serve Company faithfully to the best of his
abilities, and devote such business time and effort to Company's and any
subsidiaries' and affiliates' business and affairs and the promotion of their
interests and such other activities as the Board may designate from time to
time. The foregoing provisions shall not be construed as preventing Employee
from (i) investing his assets in such form or manner that will not require any
services on his part; or (ii) performing a reasonable amount of charitable
services.

                  c) Company hereby understands and acknowledges that during the
Term, Employee will also be permitted to engage in other activities provided
that such activities individually or in the aggregate do not materially
interfere with the proper performance of Employee's duties and responsibilities
hereunder and, in the good faith

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judgment of the Board, does not conflict with Employee's fiduciary duties to
Company or create any appearance thereof.

                  d) Company shall furnish Employee with reasonable office
facilities and secretarial services commensurate with his position hereunder
that are adequate to allow him to perform the service required of him hereunder.

      2. The Term. The term (Term) of this Agreement shall commence on the date
and year first set forth above and continue through December 31, 2006.
Thereafter, unless this Agreement is terminated in accordance with Section 3
below, the Term shall be automatically extended for successive and additional
one-year periods.

      3. Termination of Employment. The Board may terminate Employee's
employment with the Company at any time, with or without Cause (as defined
below). If Company terminates Employee's employment with Company for Cause,
Employee shall not be entitled to any Severance (as defined below). If
Employee's employment is terminated by Company without Cause, Employee will be
paid severance (Severance) of an amount equal to his Base (as defined below)
that has been paid to him over the 12-month period preceding such termination,
or such lesser period, if his employment is terminated before the end of the
initial 12 months of the Term (the applicable period is referred to herein as
the Severance Period). In addition, as part of his Severance, Employee shall be
entitled to any unpaid Bonus earned with respect to a calendar year prior to the
calendar year during which his employment is terminated without Cause. If during
the calendar year of any such termination, Employee was actively employed with
Company for at least six months and the targets for the Objective Portion of the
Bonus (as defined below) for such calendar year are met, he shall be entitled to
pro rata share of the Objective Portion of the Bonus for such year determined by
multiplying the amount of the Objective Portion of the Bonus by a fraction, the
numerator of which is the number of months (including a partial months of at
least 10 working days) during such year prior to the termination of employment
and the denominator of which is 12.

      The portion of Employee's Severance based on his Base shall be paid to
Employee at the same intervals that his regular Base is paid, reduced by such
amounts that Employee has earned (whether paid or deferred and whether in cash
or in other property) from third parties over the Severance Period. Any Bonus
due to Employee under this Section 3 shall be paid to him at the time such Bonus
would otherwise be due to Employee pursuant to Section 4.3 hereof.

      After the termination of his employment without Cause, Employee shall have
a duty to seek other employment and shall inform the Company regarding his
success in obtaining such employment and the terms of such employment when
obtained. Company shall have the right to review Employee's tax returns and the
supporting documentation for the periods that include the Severance Period.
Company's obligation to provide Severance to Employee (and the continuation of
Benefits, as well as, the acceleration of the vesting of options and the
continued exercisability of options pursuant to Section 4.6 hereof) shall be
subject to Employee's execution of a general


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release acceptable to Company which releases it and certain other parties from
any claims Employee may then have against Company and such other parties. During
the Severance Period, Employee shall continue to be entitled to the Benefits he
received immediately prior to the termination of his employment; provided,
however, any health insurance he is entitled to shall terminate upon his
achieving eligibility to health insurance coverage from another employer or
under his spouse's coverage.

      4. Compensation and Benefits.

            4.1 Salary. Employee shall receive a base salary (Base) from Company
at an annual rate of $216,000, or such increased rate as the Board, in its sole
discretion, may hereafter from time to time determine, payable in accordance
with Company's regular payroll practices, subject to all applicable federal and
state deductions and withholdings.

            4.2 Increase in the Base. The Base shall be increased to $300,000
after the conclusion of Company's second consecutive profitable quarter (the
Standard). As used herein, the Standard shall mean a minimum net income of at
least 5% of Company's net revenues in the first of two consecutive profitable
quarters and a minimum net income of at least 10% of Company's net revenues in
the second of the said two consecutive profitable quarters. For purposes of this
Section 4, net income and net revenues shall mean such amounts as reflected on
Company's financials include in its periodic reports filed with the U. S.
Securities and Exchange Commission.

            4.3 Incentive Compensation. Employee shall be eligible to receive
annual incentive compensation (Bonus) from Company for each calendar year
(starting in 2004) up to 50% of Base, contingent upon the achievement of certain
Company targets and his performance during the year. Seventy-five percent (75%)
of the Bonus (the Objective Portion of the Bonus) shall be subject to Company's
net revenues and net income for such year being at least 75% of the net revenues
and net income set forth in a Board approved annual plan (the Plan) for that
year. The balance of the said Bonus, or 25%, shall be based on Company's
Compensation Committee's subjective analysis of Employee's performance for that
year. The Bonus with respect to a calendar year shall be paid within 30 days
after the Board receives and approves Company's audited financial report for
such calendar year. Except as otherwise provided herein, Employee shall not be
entitled to a Bonus with respect to a calendar year unless he is a Company
employee on the date the Bonus is paid or to be paid.

            4.4 Expenses. Company shall pay or reimburse Employee for his
reasonable and necessary Company business expenses, including, but not limited
to, travel, lodging and all other reasonable out-of-pocket expenses incurred by
him in performing his services hereunder. Company shall also pay Employee an
automobile allowance of $750 per month. All such payments or reimbursements
shall be made under Company's current expense account and reimbursement
policies, provided that Employee submits the required documentation of such
expenses to Company's CFO.


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            4.5 Other Benefits. Company shall pay Employee all health and
welfare benefits (Benefits) that it currently provides to its senior management
team, subject to the terms of its applicable plans and other arrangements.

            4.6 Options.

                  a) Company shall grant Employee a ten year option (Initial
Option) to acquire that number of shares of Company stock (Company Stock) equal
to 3% of the sum of the outstanding Company Stock and Company Stock subject to
in-the-money warrants as of the later of (i) December 31, 2003 or (ii) the
consummation of the current Spencer Trask private offering (the Offering). The
Initial Option shall vest and become exercisable to the extent of 1/36th of the
shares subject to such option on the last day of the month in which the Initial
Option is granted and to the extent of an additional 1/36th of the shares
subject to such option on the last day of each subsequent month until the option
is 100% vested and exercisable.

                  b) If Company meets Plan for the first calendar year of the
Term, Company shall grant Employee an additional ten year option (Second Year
Option) to acquire that number of shares of Company Stock equal to1% of
Company's outstanding Common Stock as of December 31, 2004. The Second Year
Option shall vest and become exercisable to the extent of 1/36th of the shares
subject to such option on the last day of the month in which the Second Year
Option is granted and to the extent of an additional 1/36th of the shares
subject to such option on the last day of each subsequent month until the option
is 100% vested and exercisable.

                  c) If Company meets Plan for the second calendar year of the
Term, Company shall grant Employee an additional ten year option (Third Year
Option) to acquire that number of shares of Company Stock equal to1% of
Company's outstanding Common Stock as of December 31, 2005. The Third Year
Option shall vest and become exercisable to the extent of 1/36th of the shares
subject to such option on the last day of the month in which the Third Year
Option is granted and to the extent of an additional 1/36th of the shares
subject to such option on the last day of each subsequent month until the option
is 100% vested and exercisable.

                  d) If Company exceeds Plan by at least 25% for the first
calendar year of the Term, the number of shares subject to the Second Year
Option shall increase from 1% to 1.75% of the outstanding Company Stock on
December 31, 2004.

                  e) If Company exceeds Plan by at least 25% for the second
calendar year of the Term, the number of shares subject to the Third Year Option
shall increase from 1% to 1.75% of the outstanding Company Stock on December 31,
2005.

                  f) All options granted pursuant to this Section 4.6 shall be
subject to the terms and provisions of the Company stock option plan (Stock
Option Plan) and the stock option agreements reflecting the terms of such
grants. The parties


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hereto acknowledge that the Stock Option Plan does not currently have sufficient
shares of Company Stock available for grant of the options contemplated in this
Section 4.6 and any grant of such options in excess of shares available shall be
subject to shareholder approval of an amendment to the Stock Option Plan
increasing the number of shares available under the plan.

                  g) Each option granted pursuant to this Section 4.6 shall have
an option exercise price equal to the fair market value of a share of Company
Stock on the date of its grant.

                  h) If Employee's employment is terminated by Company without
Cause, all outstanding options granted to Employee pursuant to this Section 4.6
shall immediately vest and become exercisable and such options shall remain
exercisable for their remaining original term.

            4.7 Vacation. Employee shall be entitled to four (4) weeks of
vacation during each calendar year of the Term and his Base shall be paid for
holidays given by Company to its employees generally. Any unused vacation days
for any calendar year of the Term may be used by him in a subsequent calendar
year of the Term. Upon termination of Employee's employment, Employee shall be
paid an amount equivalent to all accrued and unused vacation as of his
termination date.

            4.8 Key-man Life Insurance. Employee understands and acknowledges
that Company may wish to purchase key-man life insurance on him. In that event,
Employee shall take all action requested of him, including submitting to a
physical examination, to facilitate the Company obtaining such policy.

      5. Termination of Employment.

            5.1 Events of Termination. Employee's employment hereunder shall
terminate prior to the expiration of the Term, upon the occurrence of any one or
more of the following events:

                  a) Death. In the event of his death, Employee's employment
hereunder shall terminate on the date of death. If Employee's employment
hereunder is terminated as a result of his death, Company shall pay his estate
Base through the date of death, any unpaid Bonus earned with respect to a
calendar year prior to the year of his death and reimbursement for any expenses
incurred by him to the date of death.

                  b) Disability. In the event of his disability, Employee's
employment hereunder shall terminate on the date of such disability. Disability
shall mean Employee's inability, due to physical or mental incapacity, to
substantially perform his duties and responsibilities under this Agreement for a
period of 90 consecutive days or for 90 days in a 356-day period. If Employee's
employment hereunder is terminated as a result of his disability, Company shall
pay him Base through the date of the termination of his employment, any unpaid
Bonus earned with respect to a calendar


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year prior to the year of such termination and reimbursement for any expenses
incurred by him to the date of termination.

                  c) Termination by the Company for Cause. Company may terminate
Employee's employment for Cause upon written notice to Employee and such
employment shall terminate on the date on which such notice is given. As used
herein, Cause shall include Employee's (i) conviction of, or guilty plea or a
plea of nolo contrendere to, a felony; (ii) commission of fraudulent, illegal or
dishonest acts, as determined by the Board; (iii) willful misconduct or gross
negligence which reasonably could be expected to be materially injurious to the
business or operations of the Company (monetarily or otherwise); or (iv)
material failure to perform his duties hereunder, or any other material breach
hereof, as reasonably determined by the Board if Employee fails to cure any such
failure or other material breach within thirty (30) days following receipt of
written notice thereof. If Employee's employment is terminated for Cause,
Employee shall be entitled to only the Base earned by him up to and including
the effective date of such termination plus any of his expenses that have not
been reimbursed.

                  d) Termination by Employee. Employee may terminate his
employment hereunder for any reason whatsoever by giving the Board at least
thirty (30) days prior written notice. If Employee's employment is terminated by
the Employee under this provision, Employee shall be entitled to only the Base
earned by him up to and including the effective date of such termination plus
any of his expenses that have not been reimbursed.

      6. Non-Interference; Noncompetition. During the Term and for two years
thereafter, Employee shall not:

                  a) interfere with any of Company's relationships with, or
endeavor to employ or entice away any person who at any time is or shall be a
Company employee of or interfere with or seek to alter Company's relationship
with any supplier, licensee or distributor; or

                  b) directly or indirectly, engage in or facilitate or support
others to engage in the production, sale or distribution of any products or
services competitive to Company's products or business, or directly or
indirectly, solicit or attempt to solicit for business any suppliers, clients or
customers with whom it shall have done business in a manner that reasonably be
expected to result in a detriment to Company; or

                  c) seek or obtain employment with or provide services to any
Company customer or client which employment or services could reasonably be
expected to result in a detriment to Company.

      7. Property Rights. With respect to information, inventions and
discoveries developed, made or conceived of by Employee, either alone or with
others, at any time during his employment by Company and whether or not within
working hours, arising


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out of such employment or pertinent to any field of business or research in
which, during such employment, Company is engaged or (if such is known to or
ascertainable by Employee) is considering engaging, Employee understands and
acknowledges that:

                  a) all such information, inventions and discoveries, whether
or not patented or patentable, shall be and remain the exclusive property of
Company;

                  b) he shall promptly disclose to an authorized Company
representative all such information, inventions and discoveries and all
information in his possession as to possible applications and uses thereof;

                  c) he will not file any patent application relating to any
such invention or discovery, except with the prior written consent of an
authorized Company officer;

                  d) he hereby waives and releases any and all rights he may
have in and to such information, inventions and discoveries, and hereby assigns
to Company and/or its nominees all of his rights, titles and interests in them,
and all of his rights, titles and interests in any patent, patent application,
copyright or other property right based thereon. He hereby irrevocably
designates and appoints Company and each of its duly authorized officers and
agents as agent and attorney-in-fact to act for him and in his behalf and stead
to execute and file any document and to do all other lawfully permitted acts to
further the prosecution, issuance and enforcement of any such patent, patent
application, copyright or other property right with the same force and effect as
if executed and delivered by him; and

                  e) at the request of Company, and without expense to him, to
execute such documents and perform such other acts as Company deems necessary or
appropriate, to obtain patents on such inventions in a jurisdiction or
jurisdictions designated by Company, and to assign to it or its designee such
inventions and any and all patent applications and patents relating thereto.

      8. Confidentiality. With respect to the information, inventions and
discoveries referred to in Section 7 above, and also with respect to all other
information, whatever its nature and form and whether obtained orally, by
observation, from graphic materials or otherwise (except such as is generally
available through publication), obtained by Employee during or as a result of
his employment hereunder relating to any invention, improvement, enhancement,
product, know-how, formula, software, process, apparatus, design, concept or
other creation, or to any use of any of them, or to materials, tolerances,
specifications, costs (including, without limitation, manufacturing costs),
prices, suppliers, finances or to any plans or strategies of Company, or to any
other trade secret or proprietary information of Company Employee understands
and acknowledges that:

            a) he will hold all such information, inventions and discoveries
which have not otherwise become public knowledge in strict confidence and not
publish


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or otherwise disclose any of them to any person or entity, other than Company,
except with the prior written consent of an authorized officer of Company or as
may be required by law;

                  b) he will take all reasonable precautions to assure that all
such information, inventions and discoveries are properly protected from access
by unauthorized persons;

                  c) he will not make use of or exploit in any way any such
information, invention or discovery except as required in the performance of his
employment duties for Company;

                  d) upon termination of his employment by Company, or at any
time upon its request he will deliver it all graphic materials and all
substances, models, software, prototypes and the like containing or relating to
any such information, invention or discovery, all of which graphic materials and
other things shall be and remain the exclusive property of Company; and

                  e) for purposes hereof, Graphic Materials includes, without
limitation, letters, memoranda, reports, notes, notebooks, books of account,
drawings, prints, specifications, formulae, software, data print-outs,
microfilms, magnetic tapes and disks and other documents and recordings,
together with all copies, excerpts and summaries thereof.

      9. No Conflicts. Employee covenants that his entering into this Agreement
and the performance of his obligations hereunder will not breach any other
agreement to which he is a party. Employee understands and acknowledges that his
employment hereunder does not and will not breach any agreement made by him to
keep in confidence information acquired by him prior to or outside of his
employment with Company. Employee shall comply with any and all valid
obligations which he may now have to prior employers or to others relating to
confidential information, inventions or discoveries which are the property of
those prior employers or others. Employee has supplied or shall promptly supply
to Company, upon request, a copy of each written agreement setting forth any
such obligation. Employee understands and acknowledges that he has not brought
and will not bring with him for use in the performance of his duties hereunder
any materials, documents or information of a former employer or any third party
that are not generally available to the public, unless he has express written
authorization from the owner thereof for possession and use or he has otherwise
undisputed proprietary rights to such material, documents or information.

      10. Specific Performance. Without intending to limit the remedies
available to Company hereunder, Employee understands and acknowledges that
damages at law would be an inadequate remedy to Company if he breaches or
attempts to breach this Agreement and, in that event, Company may apply for and,
without the posting of any bond or other security, obtain injunctive relief in
any court of competent jurisdiction to


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restrain Employee's breach or threatened breach hereof, or otherwise to enforce
specifically, any of the covenants contained herein.

      11. Survival. The provisions of Sections 3, 4.6(h), 5, 6, 7, 8, 9, 10, 11,
12.1, 12.4, 12.5 and 12.7 shall, subject to any express provisions of such
Sections, survive any termination of this Agreement. Employee's obligations
under Sections 5, 6, and 7 hereof shall remain in effect throughout Employee's
employment by the Company and, subject to the express provisions of such
Sections, thereafter, unaffected by any transfer to a subsidiary or affiliate of
the Company, and without regard to the reason for termination of Employee's
employment.

      12. Miscellaneous.

            12.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
agreements made and entered into and performed in that state, without regard to
principles of conflict of laws.

            12.2 Entire Agreement; Amendment. This Agreement contains the
complete understanding and agreement between the parties with respect to the
subject matter hereof, and supersedes all prior understandings and agreements,
written or oral, between the parties.

            12.3 Assignment. This Agreement and the rights and obligations
hereunder may not be assignable or delegable by any party without the prior
written consent of the other party, except with respect to an assignment by
Company to any affiliate or pursuant to a merger or consolidation involving
Company or pursuant to the sale of all or substantially all of its assets.

            12.4 Severability. In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for any
reason, in whole or in part, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law and any such invalidity or unenforceability shall be
deemed replaced by a term or provision determined by the parties as coming
closest to expressing the intention of the invalid or unenforceable term or
provision.

            12.5 Notice. Any notice to be given hereunder shall be in writing
and either delivered in person, by facsimile, by nationally recognized overnight
courier, or by registered or certified first class mail, postage prepaid,
addressed the parties at the addresses first set forth above. Notices delivered
personally shall be deemed given as of actual receipt; notices sent via
facsimile transmission shall be deemed given as of one business day following
sender's receipt from sender's facsimile machine of written confirmation of
transmission thereof; notices sent by overnight courier shall be deemed


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given as of one business day following sending; and notices mailed shall be
deemed given as of five business days after proper mailing. Any party may change
its address in a notice given to the other party in accordance with this
Section.

            12.6 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective heirs, legal
representatives, successors (including, without limitation, any successor by
merger or sale of all or substantially all assets) and permitted assigns.

            12.7 Further Assurances. Employee shall execute and deliver all
instruments and other documents which are mutually and reasonably agreed to by
Employee and Company to be necessary or appropriate to carry out the terms
hereof.

            12.8 Headings. The Section headings in this Agreement are for
convenience of reference only and shall not affect its interpretation.

            12.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which when
together shall constitute one and the same agreement.

      IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto as of the date first above written.

                                          EMPLOYER:

                                          HOME DIRECTOR, INC.

                                          By:_________________________________

                                          Print Name__________________________

                                          Print Title ________________________

                                          EMPLOYEE:

                                          ____________________________________
                                          Michael Liddle


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