Document:

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                                                                    Exhibit 10.4

                        AMENDMENT TO EMPLOYMENT AGREEMENT
                        ---------------------------------

         THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") is made this
12 day of April, 2002 by and between TELKONET COMMUNICATIONS, INC., a Utah
corporation (the "Company") and STEPHEN L. SADLE (the "Executive").

         WHEREAS, the Executive is employed as Executive Vice President and
Chief Operating Officer of the Company pursuant to a June 19, 2000 Employment
Agreement (the "Initial Agreement");

         WHEREAS, the Initial Agreement was amended by the parties on January
12, 2002 (the "Initial Amendment," together with the Initial Agreement, the
"Agreement"); and

         WHEREAS, the Executive and the Company desire to amend the Agreement as
set forth herein.

         NOW, THEREFORE, in consideration of the premises and the mutual
promises herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

         1. Unless otherwise defined herein, capitalized terms shall have the
same meaning as in the Agreement.

         2. Paragraph 3(b) of the Agreement is amended and restated in its
entirety as follows:

                    (b)       The Executive shall have the right to terminate
                              his employment with the Company but such
                              termination shall not be considered a voluntary
                              resignation or termination of such employment or
                              of this Employment Agreement by the Executive but
                              rather a discharge of the Executive by the Company
                              without "cause" (as defined in 6(A)(ii)). This
                              shall apply in the following conditions:

                              (i)       the Executive's place of employment or
                                        the principal executive offices of the
                                        Company are moved to a location more
                                        than fifty (50) miles from the
                                        geographical center of Severna Park,
                                        Maryland;

                              (ii)      there occurs a material breach by the
                                        Company of any of its obligations under
                                        this Employment Agreement (other than
                                        those specified in this Section 3(b))
                                        that has not been cured in all material
                                        respects within ten (10) days after the
                                        Executive gives notice thereof to the
                                        Company;

                              (iii)     there occurs a "change in control" (as
                                        hereinafter defined) of the Company; or

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                           (iv)     the Executive has not been paid for a
                                    cumulative sixty (60) day period without
                                    Executive's consent in excess of the period
                                    of non-payment for similar Executives.

                           then the Executive shall have the right to terminate
                           his employment with the Company, but such termination
                           shall not be considered a voluntary resignation or
                           termination of such employment or of this Employment
                           Agreement by the Executive but rather a discharge of
                           the Executive by the Company without "cause" (as
                           defined in Paragraph 5(a)(ii)).

         3. The Stock Lock-up Provision of the Initial Amendment is superceded
in its entirety by the Lock-up Agreement, attached hereto and made a part hereof
as SCHEDULE A.

         4. The Stock Surrender Provision of the Initial Amendment is amended
and restated in its entirety as follows:

                  The Executive agrees that, should he voluntarily terminate his
                  employment with Telkonet for any reason, other than the events
                  enumerated in paragraph 3(b) of the Employment Agreement or
                  death of the Executive, at any time between January 12, 2002
                  and January 12, 2005 (the "Stock Surrender Period"), the
                  Executive shall forfeit 40,000 shares of the Founders Stock
                  (as hereinafter defined) held by him for each month of the
                  Stock Surrender Period remaining following such termination.
                  For purposes of this paragraph, "Founders Stock" means
                  1,500,000 shares of the shares of common stock, par value
                  $0.001 per share, of Telkonet (the "Common Stock") owned by
                  the Executive on January 12, 2002. Notwithstanding the
                  foregoing, the number of shares of Founders Stock subject to
                  this Stock Surrender Provision shall be decreased upon each
                  exercise by the Executive of an option to purchase Common
                  Stock (each, an "Option") by a percentage calculated by
                  dividing the number of shares of Common Stock acquired upon
                  exercise of each Option by the total number of shares of
                  Common Stock subject to purchase pursuant to Options on such
                  date.

                  The Executive also agrees to the terms and conditions of the
                  Non-Competition and Confidentiality Agreement, which is
                  attached hereto and made a part hereof as ATTACHMENT A.

         5. In the event of any inconsistency or discrepancy between the
Agreement and this Amendment, the provisions of this Amendment shall govern and
control.

         6. This Amendment shall be governed by, and construed in accordance
with, the laws of the state of Maryland, without giving effect to applicable
conflict of laws principles.

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         IN WITNESS WHEREOF, the parties have duly executed this Amendment as of
the date first written above.

                                              TELKONET COMMUNICATIONS, INC.,
                                              a Maryland corporation

                                              By:_______________________________
                                              Name:_____________________________
                                              Title:____________________________

                                              __________________________________
                                              Stephen L. Sadle

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                                   SCHEDULE A
                                   ----------

                                LOCK-UP AGREEMENT
                                -----------------

                  THIS LOCK-UP AGREEMENT (this "Agreement") is made as of the
______ day of _______, 2002, by and between Stephen L. Sadle ("Stockholder") and
TELKONET, INC., a Utah corporation ("Telkonet").

                  WHEREAS, Stockholder is the owner of the shares of Telkonet
common stock, par value $0.001 ("Common Stock"), listed on EXHIBIT A, as may be
amended from time to time, attached hereto and made a part hereof (the "Telkonet
Stock");

                  WHEREAS, Stockholder has been granted options to purchase the
shares of Common Stock listed on EXHIBIT B, as may be amended from time to time,
attached hereto and made a part hereof (the "Telkonet Options");

                  WHEREAS, the parties have agreed that Stockholder shall not
make any Transfer (defined herein) of shares of Telkonet Stock, except in
accordance with this Agreement.

                  NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein contained, the parties hereto hereby agree as
follows:

                  1. RESTRICTIONS ON TRANSFER OF TELKONET STOCK. (a) Stockholder
hereby agrees that, without the consent of Telkonet, it will not, directly or
indirectly, sell, assign, transfer, pledge or otherwise dispose of (collectively
"Transfer") the Telkonet Stock prior to the end of the thirty-six (36) month
period following the date hereof, except in accordance with the release schedule
set forth in paragraph 1(b).

                  (b) The Telkonet Stock subject to restriction on Transfer (the
"Lock-up Restriction") hereunder shall be released from such Lock-up Restriction
in accordance with the following schedule:

                           (i) Upon execution of this Agreement, 139,280 shares
of the Telkonet Stock shall be released from the Lock-up Restriction;

                           (ii) On December 1, 2002, 50,000 shares of the
Telkonet Stock shall be released from the Lock-up Restriction;

                           (iii) On December 1, 2003, 50,000 shares of the
Telkonet Stock shall be released from the Lock-up Restriction;

                           (iv) On January 1, 2005, 50,000 shares of the
Telkonet Stock shall be released from the Lock-up Restriction;

                           (v) Upon execution of all or a portion of the
Telkonet Options, that number of shares of Telkonet Stock determined by
multiplying the Telkonet Stock subject to the Lock-up Restriction by a
percentage calculated by dividing the number of shares of Common Stock acquired
upon exercise of the Telkonet Options by the number of shares of Common Stock
subject to purchase pursuant to the Telkonet Options on such date, shall be
released from the Lock-up Restriction.

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                   (c) Notwithstanding the foregoing, Stockholder may Transfer
the Telkonet Stock to (i) the spouse or children of such Stockholder, whether
directly or in trust (including pursuant to the uniform gift to minors
provisions) for their sole benefit, provided that the transferee agrees in
writing to be bound by the terms of this Agreement, and provided further that
Stockholder may not disclaim beneficial ownership of such Telkonet Stock for
purposes of any filing pursuant to any securities law, or (ii) a trust in which
Stockholder owns all of the beneficial interest therein provided that the
transferee agrees in writing to be bound by the terms of this Agreement, and
provided further that Stockholder may not disclaim beneficial ownership of such
Telkonet Stock for purposes of any filing pursuant to any securities law, or
(iii) a third party making a cash tender or exchange offer in compliance with
Regulations 14D and 14E under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), following the filing with the SEC by Tekonet, in
compliance with the Exchange Act, a Recommendation Statement on Schedule 14D-9
pursuant to which Telkonet affirmatively recommends to the Telkonet stockholders
the acceptance of such cash tender or exchange offer.

                  2.       MISCELLANEOUS

                  (a) CHANGE OF CONTROL. In the event of a Change of Control (as
hereinafter defined) of Telkonet, all shares of Telkonet Stock still subject to
the Lock-up Restriction on the date of such Change of Control shall be
immediately released from the Lock-up Restriction.

                  For purposes of this paragraph 2(a), "Change of Control" means
any consolidation, merger or share exchange, regardless of whether Telkonet is
the surviving company, in which any person or affiliated persons acquires in
excess of 20% of the combined voting power of the then outstanding securities of
Telkonet, inclusive of the voting power represented by any outstanding
securities of Telkonet, owned by such person or persons prior to the
consummation of such transaction, and regardless of whether such person or
persons are deemed to be affiliates or in control of Telkonet by virtue of their
ownership of outstanding securities of Telkonet, representation on Telkonet's
Board of Directors or otherwise prior to the consummation of such transaction.

                  (b) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.

                  (c) BINDING EFFECT AND ASSIGNMENT. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but except
as otherwise specifically provided, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by any of
the parties hereto without the prior written consent of the other.

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                  (d) AMENDMENTS AND MODIFICATION. This Agreement may not be
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.

                  (e) SPECIFIC PERFORMANCE. The parties hereto acknowledge that
Telkonet will be irreparably harmed and that there will be no adequate remedy at
law for a violation of any of the covenants or agreements of Stockholder set
forth herein. Therefore, it is agreed that, in addition to any other remedies
which may be available to Telkonet upon such violation, Telkonet shall have the
right to enforce such covenants and agreements by specific performance,
injunctive relief or by any other means available to Telkonet at law or in
equity.

                  (f) NOTICES. All notices and other communications hereunder
shall be in writing and shall be acceptable if (a) delivered personally or by
telecopy, or (b) if sent by registered or certified mail (return receipt
requested) and postage prepaid, or (c) if sent by reputable overnight courier,
so long as the parties to this Agreement receive such notices at the following
addresses or at such other address for a party as shall be specified by like
notice.

                  If to Stockholder:        Stephen L. Sadle
                                            ________________________

                                            ________________________

                  If to Telkonet:           Telkonet, Inc.
                                            902 A Commerce Road
                                            Annapolis, Maryland 21401

All such notices and communications shall be deemed to have been received on the
date of delivery if delivered personally or by telecopy, or on the date of
receipt, if mailed, or one day after mailing, if by overnight courier. Any party
giving notice under this Agreement to one party to this Agreement shall be
required to give such notice to all parties to this Agreement in order for such
notice to be effective.

                  (g) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, written and oral.

                  (h) APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, without giving
effect to applicable conflict of laws principles.

                  (i) SECTION HEADINGS. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.

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                  (j) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be a single agreement.

                  IN WITNESS WHEREOF, the undersigned have signed their names as
of the date first written above.

                                                 STOCKHOLDER:

                                                 _____________________________
                                                 Stephen L. Sadle

                                                 TELKONET, INC.

                                                 By:__________________________
                                                 Name:________________________
                                                 Title:_______________________

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                                    EXHIBIT A
                                    ---------

Telkonet Stock: 3,500,000 shares

                                       8
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                                    EXHIBIT B
                                    ---------

Telkonet Options: options to purchase 1,000,000 shares of Common Stock

                                       9<PAGE>

                                                                    Exhibit 10.5

                         EXECUTIVE EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the
18TH, DAY OF JANUARY, 2003, by and between TELKONET COMMUNICATIONS, INC., a
Delaware corporation (the "Company"), and STEPHEN L. SADLE (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 Chief
Operating Officer and the Executive 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 shall continue through January 17, 2006 (the
"Base Term") and shall automatically be extended for an additional one year
(each a "Renewal Year") at the end of the Base Term and each Renewal Term unless
on or before the sixtieth (60th) day prior to the end of the Base Term or an
Renewal Term, either party gives to the other party written notice of
termination of this Employment Agreement, in which case this Employment
Agreement shall terminate upon the completion of the then applicable employment
period.

         3. POSITION AND DUTIES.

                  (a) The Executive shall serve as Chief Operating Officer of
the Company. Without limiting the general scope of the Executive's position: (i)
the Executive shall not be required to report to any single individual other
than the President, CEO and the Board of Directors, (ii) no other individual
shall be elected or appointed as Chief Operating Officer of the Company, and
(iii) no individual or group of individuals (including a committee established
or other designee appointed by the Board) shall have any authority over or equal
to the authority of the Executive in his role as Chief Operating Officer or
could have the effect of, or appear to have the effect of, giving such authority
to any such individual or group. The Executive shall be entitled to the full
protection of applicable indemnification provisions of the certificate of
incorporation and bylaws of the Company, as the same may be amended from time to
time, for his service as a director, officer and employee of the Company.

                  (b) If:

                           (i) the Company materially changes the Executive's
duties and responsibilities as set forth in Paragraph 3(a) without his consent
(including, without limitation, violation of any of the provisions of clause
(i), (ii) or (iii) of Paragraph 3 (a));

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                           (ii) the Executive's place of employment is moved to
a location more than fifty (50) miles from the geographical center of Severna
Park, Maryland;

                           (iii) there occurs a material breach by the Company
of any of its obligations under this Employment Agreement (other than those
specified in this Section 3(b)) that has not been cured in all material respects
within ten (10) days after the Executive gives notice thereof to the Company;

                           (iv) there occurs a "change in control" (as
hereinafter defined) of the Company or;

                           (v) the Board or any nominating committee thereof or
committee performing a Board nomination function fails to nominate the Executive
for election to the Board in connection with any shareholders' meeting to be
held or action to be taken for the election of directors;

                           (vi) the Executive has not been paid for a cumulative
sixty (60) day period without Executive's consent in excess of the period of
non-payment for similar Executives.

Then the Executive shall have the right to terminate his employment with the
Company, but such termination shall not be considered a voluntary resignation or
termination of such employment or of this Employment Agreement by the Executive
but rather a discharge of the Executive by the Company without "cause" (as
defined in Paragraph 6(a)(ii)).

(c) The term "change in control" means the first to occur of the following
events:

                           (i) any person or group of commonly controlled
persons acquires, directly or indirectly, thirty percent (30%) or more of the
voting control or value of the equity interests in the Company; or

                           (ii) the shareholders of the Company approve an
agreement to merge or consolidate with another corporation or other entity
resulting (whether separately or in connection with a series of transactions) in
a change in ownership of twenty percent (20%) or more of the voting control or
value of the equity interests in the Company, or an agreement to sell or
otherwise dispose of all or substantially all of the Company's assets
(including, without limitation, a plan of liquidation or dissolution), or
otherwise approve of a fundamental alteration in the nature of the Company's
business.

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 Thirty Thousand Dollars ($130,000) 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 bi-weekly.

(b) The Executive shall receive options to purchase 900,000 shares of common
stock from the Employee Stock Incentive Plan at the exercise price of $1.00 per
share.

(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.

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(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. Depending on the individuals exact duties, a Company
owned vehicle may be provided.

(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
Company.

(h) The Company will reimburse the Executive for the monthly cost of his
cellular phone service.

         5. PAYMENT IN THE EVENT OF DISABILITY.

                  (a) In the event of the Executive's "permanent disability" (as
hereinafter defined) during the term of this Employment Agreement, for a period
of 6 months after determination of a permanent disability the Company shall pay
to the Executive an annual amount equal to the Executive's then effective per
annum rate of salary, as determined under Paragraph 4(a). The Company to the
extent prudent, shall insure against disability through an insurance company.
Such coverage shall contain a benefit for total, as well as partial and residual
disabilities, and shall be in addition to the payment obligation contained in
this Paragraph (5a). If such insurance is obtained, the premiums shall be added
to the employees W-2 as other compensation. The Company shall review and revise
the amount of coverage not less than annually in accordance with the prior
year's total cash compensation as soon as the amount of cash compensation,
including all cash bonuses, can be calculated.

                   (b) For purposes of this Employment Agreement, the
Executive's "permanent disability" shall be deemed to have occurred after one
hundred twenty (120) days in the aggregate during any consecutive twelve (12)
month period, or after ninety (90) consecutive days, during which one hundred
twenty (120) or ninety (90) days, as the case may be, the Executive, by reason
of his physical or mental disability or illness, shall have been unable to

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discharge his duties under this Employment Agreement. The date of permanent
disability shall be such one hundred twentieth (120th) or ninetieth (90th) day,
as the case may be. In the event either the Company or the Executive, after
receipt of notice of the Executive's permanent disability from the other,
dispute that the Executive's permanent disability shall have occurred, the
Executive shall promptly submit to a physical examination by the chief of
medicine of any major accredited hospital in the State of Maryland, and, unless
such physician shall issue his written statement to the effect that in his
opinion, based on his diagnosis, the Executive is capable of resuming his
employment and devoting his full time and energy to discharging his duties
within thirty (30) days after the date of such statement, such permanent
disability shall be deemed to have occurred. In lieu of any such examination, a
determination by the disability carrier for the Company shall suffice.

         6. TERMINATION.

                  (a) The employment of the Executive under this Employment
Agreement, and the terms hereof, may be terminated by the Company:

                           (i) on the death or permanent disability of the
Executive (as defined in Paragraph 5(b), or

                           (ii) for cause at any time by action of the Board.
For purposes hereof, the term "cause" shall mean:

(A) The Executive's fraud, commission of a felony or of an act or series of acts
which result in material injury to the business reputation of the Company,
commission of an act or series of repeated acts of dishonesty which are
materially inimical to the best interests of the Company, or the Executive's
willful and repeated failure to perform his lawful duties under this Employment
Agreement, which failure has not been cured within fifteen (15) days after the
Company gives notice thereof to the Executive, provided, however, that shall not
be entitled to any more than two notice cure opportunities during each fiscal
year of the Company; or

(B) The Executive's material breach of any material provision of this Employment
Agreement not involving performance of his duties, which breach has not been
cured in all substantial respects within ten (10) days after the Company gives
notice thereof to the Executive. Provided, however that Executive shall not be
entitled to any more than 2 week notice cure opportunities during each fiscal
year of the Company.

The exercise by the Company of its rights of termination under this Paragraph 6
shall be the Company's sole remedy in the event of the occurrence of an event as
a result of which such right to terminate arises. Upon any termination of this
Employment Agreement, the Executive shall be deemed to have resigned from all
offices held by the Executive in the Company.

In the event of a termination claimed by the Company to be for "cause" pursuant
to Paragraph 6(a)(ii), the Executive shall have the right to have the
justification for said termination determined by arbitration. In order to
exercise such right, the Executive shall serve on the Company within thirty (30)
days after termination a written request for arbitration. The Company
immediately shall request the appointment of an arbitrator by the American
Arbitration Association and thereafter the question of "cause" shall be
determined under the rules of the American Arbitration Association, and the
decision of the arbitrator shall be final and binding on both parties. The
parties shall use all reasonable efforts to facilitate and expedite the
arbitration and shall act to cause the arbitration to be completed as promptly
as possible. Expenses of the arbitration shall be borne equally by the parties,
unless apportioned otherwise by the arbitrators.

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(C)In the event of termination for any of the reasons set forth in subparagraph
(a)(i) or (a)(ii) of this Paragraph 6, or if the Executive terminates his
employment, unless as under subparagraph 3b, the Executive shall be entitled to
no further compensation or other benefits under this Employment Agreement,
except as to that portion of any unpaid salary and other benefits accrued and
earned by him hereunder up to and including the effective date of such
termination. If the Company terminates the Executive's employment other than
pursuant to subparagraph 6(a)(i) or 6(a)(ii) or if the Executive terminates his
employment pursuant to subparagraph 3(b), all of the compensation and benefits
payable to the Executive pursuant to this Employment Agreement shall be paid to
the Executive for a period of eighteen (18) months following the date of such
termination (the "Severance Period"). For purposes of this Paragraph 6(c), with
respect to any benefits payable to the Executive following termination, the
Company may elect to (i) pay to the Executive in cash an amount equivalent to
the value of the benefits to be paid for the duration of the Severance Period;
or (ii) continue to provide benefits to the Executive for the duration of the
Severance Period. If there occurs a change of control, or take over, of the
Company and the acquiring or controlling entity terminates the Executive, then
the Executive shall be paid for a period of Thirty Six (36) months following the
date of such termination (the "Severance Period"), including all of the
compensation and other benefits payable to the Executive pursuant to this
Employment Agreement

(D)NON-COMPETITION AND CONFIDENTIALITY AGREEMENT The Executive 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 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.

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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
Agreement.

                  (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.

                                       6
<PAGE>

                  (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
circumstances.

                  (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
enforced.

                  (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.

                                                 By:_____________________
                                                 Name: Ronald W. Pickett
                                                 Title: President & Chairman

                                                 ________________________
                                                 Stephen L. Sadle

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