Chief Financial Officer Employment Agreement

Exhibit 10.3

EMPLOYMENT AGREEMENT

This Employment Agreement ("Agreement") dated October 8, 2004 between BioElectronics Corporation, a Maryland Corporation (the "Company") located at 3612 Sprigg Street South, Frederick, Maryland 21704 and Thomas O92Connor (the "Executive"), residing at 1130 E. Missouri Avenue, Suite 700, Phoenix, Arizona 85014.

WITNESSETH:

WHEREAS. The Board of Directors (the "Board") of the Company wishes to employ the Executive as Vice President Operations and Chief Financial Officer of the Company on the terms and subject to the conditions set forth herein; and

WHEREAS, the Executive wishes to accept employment with the Company in the position of Vice President Operations and Chief Financial Officer on the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and obligations hereinafter set forth, the parties agree as follows:

1) EMPLOYMENT

The Executive92s employment under the terms of this Agreement shall commence on October 1, 2004 (the "Effective Date"), and shall continue until December 31, 2007 unless terminated earlier pursuant to Section 5. (Such period of employment under this Agreement is hereinafter referred to as the "Employment Term."). The Executive shall provide services to the Company hereunder as Vice President Operations and Chief Financial Officer of the Company. The Executive will relocate, reside, and work at the Company92s planned offices in the Frederick, Maryland area. The Executive will serve the Company subject to the general supervision, advice and direction of the President upon the terms and conditions set forth in this Agreement.

2) DUTIES

PERFORMANCE OF DUTIES. During the period of the Executive92s employment with the Company, the Executive shall:

a) Manage the Company92s manufacturing, warehousing and distribution, order fulfillment, customer service, information systems and accounting. Executive shall also perform such further duties as are incidental or implied from its obligation to provide overall operational management and leadership to the Company;

b) In all respects use his best efforts to further, enhance, and develop the Company92s business, affairs, interests and welfare; and




c) Not become directly or indirectly associated with or engaged in any business which competes with the Company or accept any employment or other engagement whatsoever from any other person, firm, corporation, or entity or do anything inconsistent with its duties to the Company.

3) COMPENSATION AND BENEFITS

a) BASE COMPENSATION . The Company shall pay the Executive a base salary (the "Base Salary"), as compensation for his employment under this Agreement, in the amount of $150,000 a year thereafter within the Employment Term, the Base Salary shall be as determined by the President and the Board of Directors but shall not be less than $150,000. During the Employment Term such Base Salary shall be paid in equal installments on at least a monthly basis, or on such other basis as is applicable to Executives of the Company.

b) ANNUAL BONUS . For each calendar year ending during the Employment Term, the Executive92s bonus compensation ("Annual Bonus") shall be up to 50% of base compensation for the year. The 2005 calendar year bonus will be predicated and calculated on annual sales as follows:

(i) Sales under $1.5 million 0.0%

(ii) Sales over $1.5 million 1.0% of total sales.

(iii) Sales over $2.0 million 1.5% of total sales.

(iv) Sales over $3.0 million 2.5% of total sales.

The annual bonus formula after the first year will be established by the Compensation Committee of the Board of Directors. The Executive92s Annual Bonus earned with respect to each year shall be paid on or before March 31 st of the succeeding year.

c) STOCK OPTIONS . On the Effective Date of this Agreement, (the "Grant Date"), the Company shall in consideration of the Covenants in paragraph 5 grant to the Executive a Grant of $500,000 thousand shares of restricted common stock of the Company and an option (the "Option") to purchase 2.1 million shares of common stock of the Company, $.01 par value per share (the "Stock"). The Option shall be granted subject to the following terms: (i) the exercise price with respect to the initial 700,000 shares under the Option shall be $.30 per share (ii) an additional 700,000 shares at a grant price of $.40 per share; (iii) an additional 700,000 shares at a grant price of $.50 per share; (iv) the Option and Grant shall fully vest over a three-year period the Options are exercisable as follows: 33.3% shall be exercisable on each of the first, second and third anniversaries of the Grant Date; and (iv) the Option shall be exercisable by Executive or his estate for a period of five years. The Executive shall immediately become 100% vested in, and eligible to exercise, the Option, and others

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that may be granted to him in the future, in the event of (a) his termination without Cause (as defined in Section 4, (b) a dissolution or liquidation of the Company, (c) a sale of all or substantially all of the Company92s assets, (d) a merger or consolidation involving the Company in which the Company is not the surviving corporation, (e) a merger or consolidation involving the Company in which the Company is the surviving ...