NEW EMPLOYMENT AGREEMENT

A.

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

B.

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

C.

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

          3.1.     Base Salary. As of the Effective Date, the Corporation agrees to pay the Employee an annualized base salary of $146,000.00, which amount shall be earned by the Employee on a pro rata basis as the Employee performs services and which shall be paid according to the Corporation’s normal payroll practices. For the Calendar Year ending in December 31, 2011 and thereafter during the term of this Agreement or any Renewal Term, the

Board of Directors acting reasonably shall determine the amount of Base Salary payable pursuant to this Paragraph 3.1.

          3.2.     Annual Bonus. For the Calendar Year ending December 31, 2010, provided that the gross sales revenue of the Corporation reaches at least $10,000,000, the Employee shall receive an Annual Bonus as follows: For every $250,000 above $10,000,000 of gross sales revenue reached by the Corporation for the Calendar Year ending December 31, 2010, the Employee shall receive an additional $1,875. Notwithstanding anything to the contrary set forth herein, the Employee shall not be entitled to any Annual Bonus if the gross sales revenue for the Calendar Year ending December 31, 2010, is less than $10,000,000. Unless an exception is approved by the Board of Directors, the Employee’s Annual Bonus, if any, will be paid to the Employee in equal bi-monthly installments throughout the first ten months of the subsequent Calendar Year according to the Corporation’s normal payroll practices. For the Calendar Year ending December 31, 2011 and thereafter during the term of this Agreement or any Renewal Term, the Board of Directors acting reasonably shall determine the amount of, and related gross sales revenue levels for, the Annual Bonus payable pursuant to this Paragraph 3.2.

          3.3.     Deferred Compensation. The Employee shall not be entitled to deferred compensation and by signing this Agreement, Employee knowingly waives and forfeits any existing rights to deferred compensation under the Corporation’s Deferred Compensation Plan effective January 1, 2010.

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

          3.5.     Paid Time Off. The Corporation agrees that the Employee shall be entitled to Paid Time Off (“PTO”) of up to three (3) weeks per year without reduction of the minimum annual base salary payable to the Employee pursuant to Paragraph 3.1 of this Agreement. PTO which is unused at the end of any Calendar year will carry over to the next Calendar year.

          3.6.     Other Benefits: During the Term or Renewal Term, the Corporation shall directly pay the cost of a cell phone or wireless handheld device for the Employee’s use. Additionally, during the Term or any Renewal Term, the Corporation shall promptly reimburse the Employee, upon receipt of appropriate documentation, for any reasonable automobile lease payments up to an amount of $375 per month. The Corporation shall also provide a corporate credit card for approved business expenses and shall otherwise reimburse the Employee for, or pay directly, all reasonable business expenses incurred by the Employee in the performance of his duties under this Agreement, provided that the Employee incurs and accounts for such expenses in accordance with all Corporation policies and directives in effect from time to time.

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

          (i)     gross misconduct by the Employee which the Corporation’s Board of Directors determines is (or will be if continued) demonstrably and materially damaging to the Corporation; or

          (ii)     fraud, misappropriation, or embezzlement by the Employee; or

          (iii)    conviction of a felony crime or a crime of moral turpitude; or

          (iv)    conduct in the course of employment that the Corporation’s Board of Directors determines is unethical; or

          (v)     the material breach of this Agreement by the Employee.

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

          4.2.     Without Cause, With Severance. The Corporation may terminate the Employee’s employment immediately at any time and for any reason without Cause upon providing notice to the Employee. However, in such event the Corporation shall pay the Employee any earned and unpaid bonus, if any, on a pro rata basis for the period through the Employee’s termination date. The amount of such bonus, if any, shall be calculated based on the Corporation’s annualized gross sales revenue as of the last day of Employee’s employment and shall be paid in a lump sum approximately sixty (60) days after termination. In addition, provided that the Employee meets all of the conditions set forth in this paragraph for receiving severance pay, the Corporation shall pay the Employee severance pay in a lump sum equal to one year’s base salary within sixty (60) days after termination. The Employee shall only be entitled to receive the severance pay described herein if the Employee signs and does not rescind a Confidential Separation Agreement at the time of termination in a form prepared by the Corporation that includes: (i) agreement to a general release of any and all legal claims; (ii) return of all of the Corporation’s property in the Employee’s possession; and (iii) agreement not to disparage the Corporation and its representatives.

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

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

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

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

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

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

          4.4.     Other Resignation by the Employee, Without Severance. The Employee may resign the Employee’s position upon providing ninety (90) days advance, written notice to the Corporation. The Corporation may then elect either (a) to have the Employee continue performing work for the Corporation throughout the 90 day notice period; or (b) to accept the Employee’s resignation effective immediately. In the event of the Employee’s termination of employment with the Corporation under this Paragraph 4.4, the Employee shall not be paid any severance pay as provided in Paragraph 4.2, but shall be paid any earned and unpaid bonus, if any, on a pro rata basis for the period through the Employee’s termination date. The amount of such bonus, if any, shall be calculated based on the Corporation’s annualized gross sales revenue as of the last day of Employee’s employment and shall be paid in a lump sum approximately sixty (60) days after termination.

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

pursuant to this Paragraph, the Employee shall not be entitled to severance pay under Paragraph 4.2, but shall be paid any earned and unpaid bonus, if any, on a pro rata basis for the period through the Employee’s termination date. The amount of such bonus, if any, shall be calculated based on the Corporation’s annualized gross sales revenue as of the last day of Employee’s employment and shall be paid in a lump sum approximately sixty (60) days after termination.

5.          Miscellaneous.

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

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

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

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

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

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

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

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

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

Section 409A, as it may be amended from time to time, and the regulations, notices and other guidance of general applicability issued thereunder.

ELECTROMED, INC.

EMPLOYEE:

By:

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