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2. Compensation.     2.1 Salary. As compensation for the performance of the Executive’s serviceshereunder, during the Term, the Company shall pay to the Executive a salary at an annual rate ofone hundred ninety thousand dollars ($190,000) payable in accordance with the Company’s standardpayroll policies (the “Base Salary”). The Base Salary shall be reviewed annually and may beadjusted upward by the Board (or a committee thereof) at its discretion, based on competitive dataand the Executive’s performance. No increase in Base Salary shall limit or reduce any other rightor obligation to the Executive under this Agreement and the Base Salary shall not be reduced at anytime (including after any such increase).     2.2 Annual Bonus. Beginning with the fiscal year that commenced on October 1, 2008,for each completed fiscal year during the Term the Executive shall be eligible to receiveadditional cash incentive compensation pursuant to the annual bonus plan of the Company in effectat such time (the “Annual Bonus”). The target Annual Bonus shall be up to 10% of theExecutive’s Base Salary as in effect at the beginning of such fiscal year with the actual AnnualBonus to be based upon such individual and/or Company performance criteria established for eachsuch fiscal year by the Board in consultation with the Executive. In addition, the Executive shallbe eligible to participate in distributions from the quarterly Executive Bonus plan as configuredby the President and CFO.     2.3 Equity; Stock Purchase. The Executive shall be eligible to participate in anyCompany stock purchase plan and to be considered by the Board (or, if there is one, theCompensation Committee of the Board) for grants or awards of stock, stock options or warrants underany Company stock incentive or similar plan from time-to-time in effect.     2.4 Employee Benefits. During the Term, the Executive shall be eligible to participatein such health and other group insurance and other employee benefit plans and programs of theCompany and its affiliates as in effect from time to time on the same basis as other seniorexecutives of the Company.     2.5 Vacation. During the Term, the Executive shall be entitled to paid vacation inaccordance with the Company’s vacation policy as in effect from time to time, commencing with threeweeks per year, which may not be accumulated if not used.     2.6 Business Expenses. The Company shall pay or reimburse the Executive for allcommercially reasonable business out-of-pocket expenses that the Executive incurs during the Termin performing his duties under this Agreement upon presentation of documentation and in accordancewith the expense reimbursement policy of the Company as approved by the Board (or a committeethereof) and in effect from time to time.     2.7 [Intentionally left blank.]     2.8 Life Insurance. Life insurance on the life of Executive with anExecutive-directed beneficiary in the amount of Twenty-Five Thousand Dollars ($25,000)
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3. Termination of Employment.     3.1 Generally. The Company may terminate the Executive’s employment for any reasonduring the Term, and the Executive may voluntarily terminate his employment for any reason duringthe Term, in each case (other than a termination by the Company for Cause (as defined herein)) atany time upon not less than thirty (30) days’ notice to the other party. Upon the termination ofthe Executive’s employment with the Company for any reason, the Executive shall be entitled to anyBase Salary earned but unpaid through the date of termination, any earned but unpaid Annual Bonusfor completed fiscal years, any unreimbursed expenses in accordance with Section 2.6 hereof and, tothe extent not theretofore paid or provided, any other amounts or benefits required to be paid orprovided under any plan, program, policy or practice or other contract or agreement of the Companyand its affiliates through the date of termination of employment (collectively, the “AccruedAmounts”).     3.2 Certain Terminations.          a. Termination by the Company other than for Cause or Disability; Termination by theExecutive for Good Reason. If the Executive’s employment is terminated during the Term by theCompany other than for Cause or Disability, or by the Executive for Good Reason (as definedherein), the Executive shall be entitled to: (i) the Accrued Amounts, (ii) a pro-rata bonus for thefiscal year of termination, based on actual performance through the end of the applicable fiscalyear and the number of days that have elapsed in the fiscal year through the date of termination (a“Pro-Rata Bonus”), (iii) payment of an amount equal to the sum of 1/12 of Base Salary and1/12 of the target Annual Bonus each month for twelve (12) months following termination (the“Severance Payments”) and (iv) continuation of medical benefits on the same terms as activesenior executives for twelve (12) months following termination (“Medical Continuation”). Inaddition, all of the Options granted pursuant to Section 2.3 that are unvested at the time of suchtermination will become fully vested at termination in accordance with this Section 3.2.a (“OptionVesting”). Receipt of the Severance Payments, Medical Continuation and Option Vesting shall beconditioned on the Executive’s continued compliance with his obligations under Section 4 of thisAgreement. In the event that the Executive breaches any of the material covenants set forth inSection 4 of this Agreement, the Executive shall immediately return to the Company any portion ofthe Severance Payments that have been paid to the Executive pursuant to this Section 3.2(a) and anyshares or other amounts received in respect of the Options that became vested pursuant to thisSection 3.2(a), and the Medical Continuation shall immediately terminate. Subject to Section3.2(c), the Company will commence payment of the Severance Payments as soon as practicablefollowing the effectiveness of the Release. The Pro-Rata Bonus will be paid at the time the Companyordinarily pays incentive bonuses to its executives with respect to the fiscal year in which thetermination occurs.          b. Termination upon Death or Disability. If the Executive’s employment is terminateddue to the Executive’s death or Disability, the Executive (or the Executive’s estate, ifapplicable) will receive (i) the Accrued Amounts, (ii) a Pro-Rata Bonus and (iii) Option Vesting.
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          c. Section 409A Specified Employee. Notwithstanding anything to the contrary containedherein, if the Executive is a “specified employee” for purposes of Section 409A of the InternalRevenue Code (the “Code”) and regulations and other interpretive guidance issued thereunder(“Section 409A”), the Company shall not commence payment of the Severance Payments to theExecutive until one (1) day after the day which is six (6) months after the Executive’s terminationdate (the “Delay Period”), with the first (1st) payment equaling the total of all paymentthat would have been paid during the Delay Period but for the application of Section 409A to suchpayments. For purposes of this Agreement, the Executive’s employment with the Company shall beconsidered to have terminated when the Executive incurs a “separation from service” with theCompany within the meaning of Section 409A(a)(2)(A)(i) of the Code, and applicable administrativeguidance issued thereunder.          d. Exclusive Remedy. The foregoing payments upon termination of the Executive’semployment shall constitute the exclusive severance payments due the Executive upon a terminationof his employment under this Agreement. The Executive acknowledges that the Medical Continuation isin full satisfaction of the Company’s obligation under COBRA.     3.3 Resignation from All Positions. Upon the termination of the Executive’s employmentwith the Company for any reason, the Executive shall be deemed to have resigned, as of the date ofsuch termination, from all positions he then holds as an officer, director, employee and member ofthe Board (and any committee thereof) and the board of directors (and any committee thereof) of anyof the Company’s affiliates.     3.4 Cooperation. Following the termination of the Executive’s employment with theCompany for any reason, the Executive agrees to reasonably cooperate with the Company uponreasonable request of the Board and to be reasonably available to the Company with respect tomatters arising out of the Executive’s services to the Company and its subsidiaries and affiliates.The Company shall pay the Executive a reasonable fee for any such services and promptly reimbursethe Executive for expenses reasonably incurred in connection with such matters.4. Unauthorized Disclosure; Non-Competition; Non-Solicitation; Interference with Business Relationships; Proprietary Rights.     4.1 Unauthorized Disclosure. The Executive agrees and understands that in theExecutive’s position with the Company, the Executive will be exposed to and will receiveinformation relating to the confidential affairs of the Company and its affiliates, including,without limitation, technical information, intellectual property, business and marketing plans,strategies, customer information, software, other information concerning the products, promotions,development, financing, expansion plans, business policies and practices of the Company and itsaffiliates and other forms of information considered by the Company and its affiliates to beconfidential or in the nature of trade secrets (including, without limitation, ideas, research anddevelopment, know-how, formulas, technical data, designs, drawings, specifications, customer andsupplier lists, pricing and cost information and business and marketing plans and proposals)(collectively, the “Confidential Information”). The Executive agrees that at all timesduring the Executive’s employment with the Company and thereafter, the Executive shall not disclosesuch Confidential Information, either directly or indirectly, to any
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individual, corporation, partnership, limited liability company, association, trust or other entityor organization, including a government or political subdivision or an agency or instrumentalitythereof (each a “Person”) other than in connection with the Executive’s employment with theCompany without the prior written consent of the Company and shall not use or attempt to use anysuch information in any manner other than in connection with his employment with the Company,unless required by law to disclose such information, in which case the Executive shall provide theCompany with written notice of such requirement as far in advance of such anticipated disclosure aspossible. This confidentiality covenant has no temporal, geographical or territorial restriction.Upon termination of the Executive’s employment with the Company, the Executive shall promptlysupply to the Company all property, keys, notes, memoranda, writings, lists, files, reports,customer lists, correspondence, tapes, disks, cards, surveys, maps, logs, machines, technical dataand any other tangible product or document which has been produced by, received by or otherwisesubmitted to the Executive during the Executive’s employment with the Company, and any copiesthereof in his (or capable of being reduced to his) possession; provided, however, that theExecutive may retain his full rolodex or similar address and telephone directories.     4.2 Non-Competition. By and in consideration of the Company entering into thisAgreement and the payments made and the benefits provided hereunder, and in further considerationof the Executive’s exposure to the Confidential Information of the Company and its affiliates, theExecutive agrees that the Executive shall not, during the Executive’s employment with the Companyand for eighteen (18) months thereafter (the “Restriction Period”), directly or indirectly,own, manage, operate, join, control, be employed by, or participate in the ownership, management,operation or control of, or be connected in any manner with, including, without limitation, holdingany position as a stockholder, director, officer, consultant, independent contractor, employee,partner, or investor in, any Restricted Enterprise (as defined below); provided, that in no eventshall ownership of one percent (1%) or less of the outstanding securities of any class of anyissuer whose securities are registered under the Securities Exchange Act of 1934, as amended,standing alone, be prohibited by this Section 4.2, so long as the Executive does not have, orexercise, any rights to manage or operate the business of such issuer other than rights as astockholder thereof. For purposes of this paragraph, “Restricted Enterprise” shall mean anyPerson that is actively engaged in any geographic area in any business which is either (i) incompetition with the business of the Company or any of its subsidiaries or affiliates or (ii)proposed to be conducted by the Company or any of its subsidiaries or affiliates in theirrespective business plans as in effect at that time. During the Restriction Period, upon request ofthe Company, the Executive shall notify the Company of the Executive’s then-current employmentstatus.     4.3 Non-Solicitation of Employees. During the Restriction Period, the Executive shallnot directly or indirectly contact, induce or solicit (or assist any Person to contact, induce orsolicit) for employment any person who is, or within twelve (12) months prior to the date of suchsolicitation was, an employee of the Company or any of its subsidiaries or affiliates.     4.4 Interference with Business Relationships. During the Restriction Period (otherthan in connection with carrying out his responsibilities for the Company and its affiliates), theExecutive shall not directly or indirectly contact, induce or solicit (or assist any Person to
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contact, induce or solicit) any customer or client of the Company or its subsidiaries or affiliatesto terminate its relationship or otherwise cease doing business in whole or in part with theCompany or its subsidiaries or affiliates, or directly or indirectly interfere with (or assist anyPerson to interfere with) any material relationship between the Company or its subsidiaries oraffiliates and any of its or their customers or clients so as to cause harm to the Company or itsaffiliates.     4.5 Extension of Restriction Period. The Restriction Period shall be tolled for anyperiod during which the Executive is in breach of any of Sections 4.2, 4.3 or 4.4 hereof.     4.6 Proprietary Rights. The Executive shall disclose promptly to the Company any andall inventions, discoveries, and improvements (whether or not patentable or registrable undercopyright or similar statutes), and all patentable or copyrightable works, initiated, conceived,discovered, reduced to practice, or made by him, either alone or in conjunction with others, duringthe Executive’s employment with the Company and related to the business or activities of theCompany and its affiliates (the “Developments”). Except to the extent any rights in anyDevelopments constitute a work made for hire under the U.S. Copyright Act, 17 U.S.C. § 101 et seq.that are owned ab initio by the Company and/or its applicable affiliate, the Executive assigns allof his right, title and interest in all Developments (including all intellectual property rightstherein) to the Company or its nominee without further compensation, including all rights orbenefits therefor, including without limitation the right to sue and recover for past and futureinfringement. The Executive acknowledges that any rights in any Developments constituting a workmade for hire under the U.S. Copyright Act, 17 U.S.C § 101 et seq. are owned upon creation by theCompany and/or its applicable affiliate as the Executive’s employer. Whenever requested to do so bythe Company, the Executive shall execute any and all applications, assignments or other instrumentswhich the Company shall deem necessary to apply for and obtain trademarks, patents or copyrights ofthe United States or any foreign country or otherwise protect the interests of the Company and itsaffiliates therein. These obligations shall continue beyond the end of the Executive’s employmentwith the Company with respect to inventions, discoveries, improvements or copyrightable worksinitiated, conceived or made by the Executive while employed by the Company, and shall be bindingupon the Executive’s employers, assigns, executors, administrators and other legal representatives.In connection with his execution of this Agreement, the Executive has informed the Company inwriting of any interest in any inventions or intellectual property rights that he holds as of thedate hereof as set forth on Exhibit B hereto (the “Existing Inventions”). Notwithstandinganything to the contrary herein, the Developments shall not include any Existing Inventions. If theCompany is unable for any reason, after reasonable effort, to obtain the Executive’s signature onany document needed in connection with the actions described in this Section 4.6, the Executivehereby irrevocably designates and appoints the Company and its duly authorized officers and agentsas the Executive’s agent and attorney in fact to act for and on the Executive’s behalf to execute,verify and file any such documents and to do all other lawfully permitted acts to further thepurposes of this Section 4.6 with the same legal force and effect as if executed by the Executive.     4.7 Confidentiality of Agreement. Other than with respect to information required tobe disclosed by applicable law, the parties hereto agree not to disclose the terms of thisAgreement to any Person; provided the Executive may disclose this Agreement and/or any of itsterms to the Executive’s immediate family, financial advisors and attorneys, so long as theExecutive instructs every such Person to whom the Executive makes such disclosure not to disclosethe terms of this Agreement further.
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     4.8 Remedies. The Executive agrees that any breach of the terms of this Section 4would result in irreparable injury and damage to the Company for which the Company would have noadequate remedy at law; the Executive therefore also agrees that in the event of said breach or anythreat of breach, the Company shall be entitled to an immediate injunction and restraining order toprevent such breach and/or threatened breach and/or continued breach by the Executive and/or anyand all Persons acting for and/or with the Executive, without having to prove damages, in additionto any other remedies to which the Company may be entitled at law or in equity, including, withoutlimitation, the obligation of the Executive to return any Severance Payments made by the Company tothe Company. The terms of this Section 4.8 shall not prevent the Company from pursuing any otheravailable remedies for any breach or threatened breach hereof, including, without limitation, therecovery of damages from the Executive. The Executive and the Company further agree that theprovisions of the covenants contained in this Section 4 are reasonable and necessary to protect thebusinesses of the Company and its affiliates because of the Executive’s access to ConfidentialInformation and his material participation in the operation of such businesses.5. Representation. The Executive and the Company each represents and warrants that (i) heor it is not subject to any contract, arrangement, policy or understanding, or to any statute,governmental rule or regulation, that in any way limits his or its ability to enter into and fullyperform his or its obligations under this Agreement and (ii) he or it is not otherwise unable toenter into and fully perform his or its obligations under this Agreement.6. Non-Disparagement. From and after the Effective Date and following termination of theExecutive’s employment with the Company, the Executive agrees not to make any statement (other thanstatements made in connection with carrying out his responsibilities for the Company and itssubsidiaries and affiliates) that is intended to become public, or that should reasonably beexpected to become public, and that criticizes, ridicules, disparages or is otherwise derogatory ofthe Company or any of its subsidiaries, affiliates, employees, officers, directors or stockholders.The Company and its affiliates shall cause their officers and directors not to make any suchstatement regarding the Executive.7. Withholding. The Company may withhold from any amounts payable under this Agreement suchFederal, state local or foreign taxes as shall be required to be withheld pursuant to anyapplicable law or regulation. The Executive shall be solely responsible for the payment of alltaxes relating to the payment or provision of any amounts or benefits hereunder.8. Definitions. For purposes of this Agreement, the following terms shall have thefollowing meanings:     8.1 “Cause” means termination upon (i) the willful and continued failure by Executiveto substantially perform his duties with the Company or the oral or written instructions of theCompany’s President, CEO, and/or the Board of Directors (other than any such failure
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resulting from Executive’s incapacity due to physical or mental illness) after an oral or writtendemand for substantial performance is delivered to Executive by the President, CEO or Board ofDirectors, which demands specifically identifies the manner in which the President, CEO or theBoard believes that Executive has not substantially performed his duties or complied with aninstruction from the President, the CEO or the Board; (ii) the willful engaging by Executive in conduct that isdemonstrably and materially injurious to the Company; (iii)failure to observe material policiesgenerally applicable to officers or employees of the Company; (iv) failure to cooperate with anyinternal investigation of the Company or any of its affiliates; (v) commission of any act of fraud,theft or financial dishonesty with respect to the Company or any of its affiliates or indictment orconviction of any felony; or (vi) material violation of the provisions of this Agreement.     8.2 “Disability” shall mean the Executive is entitled to receive long-term disabilitybenefits under the long-term disability plan of the Company or its affiliates in which Executiveparticipates, or, if there is no such plan, the Executive’s inability, due to physical or mentalill health, to perform the essential functions of the Executive’s job, with or without a reasonableaccommodation, for 180 days during any 365 day period irrespective of whether such days areconsecutive.     8.3 “Good Reason” shall mean (i) a material and adverse change in the Executive’sduties or responsibilities; (ii) a reduction in the Executive’s Base Salary or target Annual Bonus;(iii) a relocation of the Executive’s principal place of employment by more than fifty (50) miles;or (iv) breach by the Company of any material provision of this Agreement; provided, that theExecutive must give notice of termination for Good Reason within sixty (60) days of the occurrenceof the first event giving rise to Good Reason.9. Miscellaneous.     9.1 Indemnification. The Company shall indemnify the Executive to the fullest extentprovided under the Company’s By-Laws. The Company shall also maintain director and officerliability insurance in such amounts and subject to such limitations as the Board shall, in goodfaith, deem appropriate for coverage of directors and officers of the Company.     9.2 Amendments and Waivers. This Agreement and any of the provisions hereof may beamended, waived (either generally or in a particular instance and either retroactively orprospectively), modified or supplemented, in whole or in part, only by written agreement signed bythe parties hereto; provided, that, the observance of any provision of this Agreement may be waivedin writing by the party that will lose the benefit of such provision as a result of such waiver.The waiver by any party hereto of a breach of any provision of this Agreement shall not operate orbe construed as a further or continuing waiver of such breach or as a waiver of any other orsubsequent breach, except as otherwise explicitly provided for in such waiver. Except as otherwiseexpressly provided herein, no failure on the part of any party to exercise, and no delay inexercising, any right, power or remedy hereunder, or otherwise available in respect hereof at lawor in equity, shall operate as a waiver thereof, nor shall any single or partial exercise of suchright, power or remedy by such party preclude any other or further exercise thereof or the exerciseof any other right, power or remedy.
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     9.3 Assignment; No Third-Party Beneficiaries. This Agreement, and the Executive’srights and obligations hereunder, may not be assigned by the Executive, and any purportedassignment by the Executive in violation hereof shall be null and void. Nothing in this Agreementshall confer upon any Person not a party to this Agreement, or the legal representatives of suchPerson, any rights or remedies of any nature or kind whatsoever under or by reason of thisAgreement.     9.4 Notices. Unless otherwise provided herein, all notices, requests, demands, claimsand other communications provided for under the terms of this Agreement shall be in writing. Anynotice, request, demand, claim or other communication hereunder shall be sent by (i) personaldelivery (including receipted courier service) or overnight delivery service, (ii) facsimile duringnormal business hours, with confirmation of receipt, to the number indicated, (iii) reputablecommercial overnight delivery service courier or (iv) registered or certified mail, return receiptrequested, postage prepaid and addressed to the intended recipient as set forth below:   If to the Company: Liberator Medical Holdings, Inc.  2979 SE Gran Park Way  Stuart, FL 34997  Facsimile: (772) 781-3867   With a copy to: Jonathan L. Shepard  Siegel, Lipman, Dunay, Shepard & Miskel, LLP  5355 Town Center Road, Suite 801  Boca Raton, FL 33486  Facsimile: (561) 368-9274   If to the Executive: Robert Davis, at his principal office at the  Company (during the Term), and at all times to  his principal residence as reflected in the records  of the Company.All such notices, requests, consents and other communications shall be deemed to have been givenwhen received. Either party may change its facsimile number or its address to which notices,requests, demands, claims and other communications hereunder are to be delivered by giving theother parties hereto notice in the manner then set forth.     9.5 Governing Law. This Agreement shall be construed and enforced in accordance with,and the rights and obligations of the parties hereto shall be governed by, the laws of the State ofFlorida, without giving effect to the conflicts of law principles thereof.     9.6 Severability. Whenever possible, each provision or portion of any provision ofthis Agreement, including those contained in Section 4 hereof, will be interpreted in such manneras to be effective and valid under applicable law but the invalidity or unenforceability of anyprovision or portion of any provision of this Agreement in any jurisdiction shall not affect thevalidity or enforceability of the remainder of this Agreement in that jurisdiction or the validityor
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enforceability of this Agreement, including that provision or portion of any provision, in anyother jurisdiction. In addition, should a court or arbitrator determine that any provision orportion of any provision of this Agreement, including those contained in Section 4 hereof, is notreasonable or valid, either in period of time, geographical area, or otherwise, the parties heretoagree that such provision should be interpreted and enforced to the maximum extent which such courtor arbitrator deems reasonable or valid.     9.7 Entire Agreement. From and after the Effective Date this Agreement shallconstitute the entire agreement between the parties hereto, and supersede all priorrepresentations, agreements and understandings (including any prior course of dealings), bothwritten and oral, between the parties hereto with respect to the subject matter hereof.     9.8 Counterparts. This Agreement may be executed in any number of counterparts, eachof which shall be deemed an original, but all such counterparts shall together constitute one andthe same instrument.     9.9 Binding Effect. This Agreement shall inure to the benefit of, and be binding on,the successors of each of the parties, including, without limitation, the Executive’s heirs and thepersonal representatives of the Executive’s estate and any successor to all or substantially all ofthe business and/or assets of the Company.     9.10 General Interpretive Principles. The name assigned this Agreement and headings ofthe sections, paragraphs, subparagraphs, clauses and subclauses of this Agreement are forconvenience of reference only and shall not in any way affect the meaning or interpretation of anyof the provisions hereof. Words of inclusion shall not be construed as terms of limitation herein,so that references to “include,” “includes” and “including” shall not be limiting and shall beregarded as references to non-exclusive and non-characterizing illustrations.     9.11 Mitigation. Notwithstanding any other provision of this Agreement, (i) theExecutive will have no obligation to mitigate damages for any breach or termination of thisAgreement by the Company, whether by seeking employment or otherwise and (ii) the amount of anypayment or benefit due the Executive after the date of such breach or termination will not bereduced or offset by any payment or benefit that the Executive may receive from any other source.     9.12 Section 409A Compliance. This Agreement is intended to comply with Section 409A(to the extent applicable) and, to the extent it would not adversely impact the Company, theCompany agrees to interpret, apply and administer this Agreement in the least restrictive mannernecessary to comply with such requirements and without resulting in any diminution in the value ofpayments or benefits to the Executive.
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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first writtenabove.      LIBERATOR MEDICAL HOLDINGS, INC.