<PAGE>



                              EMPLOYMENT AGREEMENT


                                  Exhibit 10.17



         THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of
October 10, 2002 (the "Effective Date") by and between The Med-Design
Corporation, a Delaware corporation, and its subsidiaries and affiliates (the
"Company"), with its principal office at 2810 Bunsen Avenue, Ventura, CA 93003,
and James M. Donegan ("Executive").

         WHEREAS, Executive desires to continue employment at the Company as the
Chief Executive Officer, and the Company desires to employ Executive upon the
terms and conditions hereinafter set forth.

         NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:

         1. Employment.

         1.1. Term. The Company hereby agrees to employ Executive, and Executive
hereby accepts such employment and agrees to perform Executive's duties and
responsibilities in accordance with the terms and conditions and provisions
hereinafter set forth. This Agreement shall be effective as of the Effective
Date set forth above, and shall continue until October 10, 2005, unless the
Agreement is terminated sooner in accordance with Section 3 below. The period
commencing on the effective date and ending on the date on which the Agreement
terminates under the preceding sentence is hereinafter referred to as the "Term
of the Agreement." Nothing in this Agreement shall be construed as giving
Executive any right to be retained in the employ of the Company, and Executive
specifically acknowledges that he shall be an employee-at will of the Company,
and thus subject to discharge at any time by the Company with or without Cause
and without compensation of any nature except as provided in Section 3 below.

         1.2. Representations. Executive hereby represents to the Company that
Executive is under no contractual obligation to refrain from working for a
competitor of any prior employer. Executive also hereby represents to the
Company that he knows of no circumstances that would adversely affect his
ability to function effectively in the functions essential to the position of
Chief Executive Officer as described in this Agreement.

         1.3. Duties and Responsibilities. During the Term of the Agreement,
Executive shall serve as the Chief Executive Officer of the Company. Executive
shall perform all duties and functions and accept all responsibilities incident
to his position as Chief Executive Officer and as may be reasonably assigned to
him by the Board of Directors of the Company (the "Board").

         1.4. Location of Employment. During the Term of the Agreement, the
services performed by Executive shall be rendered primarily at the Company's
facilities in Ventura, California; provided, however, that Executive
acknowledges that he may be required to perform services on temporary
assignments in other locations from time to time, he will be required to travel
on Company business, and, if Executive consents in advance, he may be reassigned
from time to time by the Company for extended periods to other locations.
<PAGE>

         1.5. Extent of Service. Executive agrees to use Executive's best
efforts to carry out Executive's duties and responsibilities under Section 1.3
hereof and, consistent with the other provisions of this Agreement, to devote
substantially all of Executive's business time, attention and energy thereto.
The foregoing shall not be construed as preventing Executive from making
investments in other businesses or enterprises, provided that Executive agrees
not to become engaged in any other business activity which, in the reasonable
judgment of the Board, is likely to interfere with Executive's ability to
discharge Executive's duties and responsibilities to the Company or violate
Executive's obligation to honor his non-competition obligation. Executive shall
annually provide the Compensation Committee a list of investments in any medical
device company. The Committee, in its sole discretion, will determine the
appropriateness of the investment.

         2. Compensation and Benefits.

         2.1. Base Salary. During the Term of the Agreement, for all the
services rendered by Executive hereunder, the Company shall pay Executive a
salary as set forth in Exhibit D Executive's base salary shall be reviewed
annually for appropriate increases by the Compensation Committee of the Board
(the "Committee") pursuant to the Committee's normal performance review policies
for senior level executives.

         2.2. Retirement and Welfare Plans. Executive shall be entitled to
participate in all employee retirement and welfare benefit plans and programs
made available to the Company's senior level executives as a group or to its
employees generally, as such retirement and welfare plans may be in effect from
time to time and subject to the eligibility requirements of the plans and
programs. Nothing in this Agreement shall prevent the Company from amending or
terminating any retirement, welfare or other employee benefit plans or programs
from time to time as the Company deems appropriate.

         2.3. Reimbursement of Expenses; Vacation and Other Benefits. Executive
shall be provided with reimbursement of reasonable expenses related to
Executive's employment by the Company on a basis no less favorable than that
which may be authorized from time to time for senior level executives as a
group. Executive shall be entitled to vacation and sick leave in accordance with
the Company's vacation and holiday policies and such other fringe benefits as
have been previously approved by the Compensation Committee.

         2.4. Incentive Compensation.

         (a) Initial Options. As of the Effective Date, the Company shall grant
to Executive stock options to purchase an aggregate of 100,000 shares of common
stock of the Company with an exercise price equal to the fair market value of
the Company's stock on the Effective Date. The option will be for a term of
seven (7) years and will vest immediately. To the maximum amount allowed by law,
these options will be in the form an Incentive Stock Option Grant and the
balance in Non-Qualified Options.

                                       2
<PAGE>

         (b) Incentive Plans. Executive shall be eligible to participate in any
short-term and long-term incentive programs established by the Company for its
senior level executives generally, on terms established by the Board from time
to time.

         (c) Performance Incentive Compensation. Executive is awarded at the
price of the Company's common stock of the Effective Date an option for 100,000
shares of common stock of the Company under terms and circumstances set forth in
Exhibit A. This additional incentive is given in lieu of cash or stock bonus for
the term of this contract. The Compensation Committee will review both the
Company's performance and Executive's performance as of the first anniversary of
this contract and will only authorize additional compensation in the event of
extraordinary efforts and success. To the maximum amount allowed by law, these
options will be in the form an Incentive Stock Option Grant and the balance in
Non-Qualified Options.

         3. Termination.

         (a) Cause. The Company may terminate Executive's employment at any time
for Cause (as defined below) upon written notice to Executive, in which event
all payments under this Agreement shall cease, except for Base Salary to the
extent already accrued. Executive shall be entitled to any benefits accrued or
earned before his termination in accordance with the terms of any applicable
benefit plans and programs of the Company.

         3.2. Termination Without Cause.

         (a) The Company may remove Executive at any time without Cause from the
position in which Executive is employed hereunder upon not less than 30 days'
prior written notice to Executive; provided, however, that, in the event that
such notice is given, Executive shall be under no obligation to render any
additional services to the Company and shall be allowed to seek other
employment.

         (b) Upon any termination described in Section 3.2(a) above, Executive
shall be entitled to receive only the amount due to Executive under the
Company's then current severance pay plan for employees, if any. No other
payments or benefits shall be due under this Agreement to Executive, but
Executive shall be entitled to any benefits accrued or earned in accordance with
the terms of any applicable benefit plans and programs of the Company.

         (c) Notwithstanding the provisions of Section 3.2(b), in the event that
Executive executes and does not revoke a written release substantially in the
form attached as Exhibit B, and, in fact, specifically reaffirms in writing said
release. Executive shall be entitled to receive, in lieu of the payment
described in Section 3.2(b), subject to Executive's covenant to not compete with
the activities of the Company directly or indirectly during the term of the
severance the following: The form of such covenant is agreed by the parties to
be set forth as in Exhibit E attached to this Agreement.

         (i) Executive shall receive a severance benefit equal to one year of
Executive's base salary as in effect on the termination date, which shall be
paid in substantially equal installments according to the Company's normal
payroll practices over a 12-month period. Payment shall begin after the
expiration of the revocation period for the Release. Executive will act as a
consultant to Company to assure a smooth transition. He will make himself
available for up to five hours a month. It is envisioned that said consultation
can for the most part be conducted telephonically. If travel is necessary,
Company will pay any expenses and conduct consultation at a time convenient to
Executive. Executive will agree to an additional ten hours per month at actual
compensation to be agreed upon by the parties.

                                       3
<PAGE>

         (ii) For a period of 12 months following the date of termination,
Executive shall continue to receive the medical coverage in effect at the date
of his termination (or generally comparable coverage) for himself and, where
applicable, his spouse and dependents, as the same may be changed from time to
time for employees generally, as if Executive had continued in employment during
such period; or, as an alternative, the Company may elect to pay Executive cash
in lieu of such coverage in an amount equal to Executive's after-tax cost of
continuing such coverage, where such coverage may not be continued (or where
such continuation would adversely affect the tax status of the plan pursuant to
which the coverage is provided). The COBRA health care continuation coverage
period under section 4980B of the Internal Revenue Code of 1986, as amended,
shall run concurrently with the foregoing 12-month benefit period.

         (iii) Executive shall receive any benefits accrued or earned in
accordance with the terms of any applicable benefit plans and programs of the
Company.

         3.3. Voluntary Termination for Good Reason After a Change of Control.

         (a) After a Change of Control (as defined below) of the Company,
Executive may voluntarily terminate his employment with the Company at any time
during the Term of the Agreement upon an occurrence that constitutes Good Reason
(as defined below); provided, however, that an occurrence shall not constitute
Good Reason if it is corrected by the Company within ten business days after the
Company's receipt of written notice from Executive.

         (b) If Executive voluntarily terminates employment for Good Reason
after a Change of Control, and provided that Executive executes and does not
revoke a written release in the form attached hereto as Exhibit B, Executive
shall be entitled to receive the following: The form of such covenant is agreed
by the parties to be set forth as in Exhibit E attached to this Agreement.

         (i) Executive shall receive a severance benefit equal to one year of
Executive's base salary as in effect on the termination date, which shall be
paid in substantially equal installments according to the Company's normal
payroll practices over a 12-month period. Payment shall begin after the
expiration of the revocation period for the Release.

         (ii) For a period of 12 months following the date of termination,
Executive shall continue to receive the medical coverage in effect at the date
of his termination (or generally comparable coverage) for himself and, where
applicable, his spouse and dependents, as the same may be changed from time to
time for employees generally, as if Executive had continued in employment during
such period; or, as an alternative, the Company may elect to pay Executive cash
in lieu of such coverage in an amount equal to Executive's after-tax cost of
continuing such coverage, where such coverage may not be continued (or where
such continuation would adversely affect the tax status of the plan pursuant to
which the coverage is provided). The COBRA health care continuation coverage
period under section 4980B of the Internal Revenue Code of 1986, as amended,
shall run concurrently with the foregoing 12-month benefit period.

         (iii) Executive shall receive any benefits accrued or earned in
accordance with the terms of any applicable benefit plans and programs of the
Company.

         3.4. Voluntary Termination. Executive may voluntarily terminate his
employment for any reason upon 30 days' prior written notice provided the
Executive is not otherwise in breach of this Agreement. In such event, after the
effective date of such termination, no further payments shall be due under this
Agreement, except as provided in Section 3.3 above. Executive shall be entitled
to any benefits due in accordance with the terms of any applicable benefit plans
and programs of the Company.

                                       4
<PAGE>

         3.5. Disability. The Company may terminate Executive's employment if
Executive has been unable to perform the material duties of his employment for a
period of six consecutive months in any 12-month period because of physical or
mental injury or illness ("Disability"); provided, however, that the Company
shall continue to pay Executive's Base Salary until the Company acts to
terminate Executive's employment. Executive agrees, in the event of a dispute
under this Section 3.5 relating to Executive's Disability, to submit to a
physical examination by a licensed physician jointly selected by the Board and
Executive. If the Company terminates Executive's employment for Disability,
Executive shall be entitled to receive any other benefits accrued or earned in
accordance with the terms of any applicable benefit plans and programs of the
Company.

         3.6. Death. If Executive dies while employed by the Company, the
Company shall pay to Executive's executor, legal representative, administrator
or designated beneficiary, as applicable, any benefits accrued or earned under
the Company's benefit plans and programs. Otherwise, the Company shall have no
further liability or obligation under this Agreement to Executive's executors,
legal representatives, administrators, heirs or assigns or any other person
claiming under or through Executive.

         3.7. Notice of Termination. Any termination of Executive's employment
shall be communicated by a written notice of termination to the other party
hereto given in accordance with Section 8. The notice of termination shall (i)
indicate the specific termination provision in this Agreement relied upon, (ii)
briefly summarize the facts and circumstances deemed to provide a basis for a
termination of employment and the applicable provision hereof, and (iii) specify
the termination date in accordance with the requirements of this Agreement.

         3.8. Definitions. For purposes of this Agreement, the following terms
shall have the meaning set forth below:

         (a) "Cause" shall mean any of the following grounds for termination of
Executive's employment:

         (i) Executive shall have been convicted of a felony,

         (ii) Executive fails substantially to perform his reasonably assigned
material duties to the Company (other than a failure resulting from Executive's
incapacity due to physical or mental illness), which failure has continued for a
period of at least 30 days after a written notice of demand for substantial
performance, signed by a duly authorized officer of the Company, has been
delivered to Executive specifying the manner in which Executive has failed
substantially to perform; provided, however, that the foregoing shall not apply
to a failure if the Board determines that the Executive used his best efforts to
perform his material duties to the Company, such determination will be in the
sole discretion of the Board of Directors,

         (iii) Executive engages in willful misconduct in the performance of his
duties, or

         (iv) Executive breaches any written non-competition, non-disclosure or
non-solicitation agreement in effect with the Company.

         (b) "Change of Control" shall be deemed to have occurred if:

                                       5
<PAGE>

         (i) Any "person" (as such term is used in sections 13(d) and 14(d) of
the Exchange Act) becomes a "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act ), directly or indirectly, of securities of the Company
representing more than 50% of the voting power of the then outstanding
securities of the Company; provided that a Change of Control shall not be deemed
to occur as a result of a transaction in which the Company becomes a subsidiary
of another corporation and in which the stockholders of the Company, immediately
prior to the transaction, will beneficially own, immediately after the
transaction, shares entitling such stockholders to more than 50% of all votes to
which all stockholders of the parent corporation would be entitled in the
election of directors (without consideration of the rights of any class of stock
to elect directors by a separate class vote);

         (ii) The consummation of (i) a merger or consolidation of the Company
with another corporation where the stockholders of the Company, immediately
prior to the merger or consolidation, will not beneficially own, immediately
after the merger or consolidation, shares entitling such stockholders to more
than 50% of all votes to which all stockholders of the surviving corporation
would be entitled in the election of directors (without consideration of the
rights of any class of stock to elect directors by a separate class vote), or
where the members of the Board, immediately prior to the merger or
consolidation, would not, immediately after the merger or consolidation,
constitute a majority of the board of directors of the surviving corporation,
(ii) a sale or other disposition of all or substantially all of the assets of
the Company, or (iii) a liquidation or dissolution of the Company.

         (c) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

         (d) "Good Reason" shall mean any of the following grounds for
Executive's voluntary termination of employment during the Term of the Agreement
after a Change of Control:

         (i) A change in Executive' position or responsibilities, which
represents a material adverse change from Executive's position or
responsibilities as in effect immediately before the change, or assignment to
Executive of any duties or responsibilities that are materially inconsistent
with Executive's position with the Company.

         (ii) A material reduction by the Company in Executive's annual base
salary as in effect immediately prior to the Change of Control date or as the
same may be increased from time to time thereafter.

         (iii) The failure of the Company to provide Executive with target
incentive compensation and benefits, in the aggregate, at least equal (in terms
of benefit levels and/or reward opportunities) to those provided to Executive
immediately before the Change of Control.

         (iv) Any material breach by the Company of any provision of this
Agreement not cured by the Company within 30 days of notice of same.

         (v) The failure of the Company to obtain an agreement from the
successors and assigns of the Company in the Change of Control to assume and
agree to perform this Agreement. This section will not apply in the event of a
merger wherein the acquiring company, as a matter of law, assumes all
liabilities of the Company.

                                       6
<PAGE>

         3.9. Nondisclosure, Nonsolicitation and Invention Assignment Agreement.
Executive hereby acknowledges that, during and solely as a result of his
employment by the Company, Executive will receive special training and education
with respect to the operation of the Company's business and other related
matters, and access to confidential information and business and professional
contacts. In consideration of Executive's employment and in consideration of the
special and unique opportunities afforded by the Company to Executive as a
result of Executive's employment, Executive hereby agrees to execute and abide
by the terms of the Nondisclosure, Nonsolicitation and Invention Assignment
Agreement attached as Exhibit C. Executive agrees and acknowledges that his
employment is full, adequate and sufficient consideration for the restrictions
and obligations set forth in the foregoing Agreement. Notwithstanding anything
in this Agreement to the contrary, the severance benefits and continued health
benefits described in Section 3.2 or 3.3 shall immediately cease if Executive
breaches the Nondisclosure, Nonsolicitation and Invention Assignment Agreement.

         4. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit Executive's continuing or future participation in or rights under any
benefit, bonus, incentive or other plan or program provided by the Company and
for which Executive may qualify; provided, however, that if Executive becomes
entitled to and receives the payments provided for in Section 3 of this
Agreement, Executive hereby waives Executive's right to receive payments under
any severance plan or similar program applicable to all employees of the
Company.

         5. Survivorship. The respective rights and obligations of the parties
under this Agreement shall survive any termination of Executive's employment to
the extent necessary to the intended preservation of such rights and
obligations.

         6. Mitigation. Executive shall not be required to mitigate the amount
of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise and there shall be no offset against amounts due
Executive under this Agreement on account of any remuneration attributable to
any subsequent employment that Executive may obtain.

         7. Arbitration; Expenses. In the event of any dispute under the
provisions of this Agreement, other than a dispute in which the primary relief
sought is an equitable remedy such as an injunction, the parties agree to submit
the dispute to mediation in accordance with the Employment Mediation Rules of
the American Arbitration Association. If the controversy cannot be resolved by
mediation, the parties shall be required to have the dispute, controversy or
claim settled by arbitration in Ventura, California in accordance with the
National Rules for the Resolution of Employment Disputes then in effect of the
American Arbitration Association, before an arbitrator who shall be selected by
the Company and Executive. If the Company and the Executive cannot agree to an
arbitrator within 30 days, the American Arbitration Association shall select
one. Any award entered by the arbitrator shall be final, binding and
non-appealable and judgment may be entered thereon by either party in accordance
with applicable law in any court of competent jurisdiction. This arbitration
provision shall be specifically enforceable. The arbitrator shall have no
authority to modify any provision of this Agreement or to award a remedy for a
dispute involving this Agreement other than a benefit specifically provided
under or by virtue of the Agreement. If Executive prevails on any material issue
that is the subject of such arbitration or lawsuit, the Company shall be
responsible for all of the fees of the arbitrator and any expenses relating to
the conduct of the arbitration (including the Company's and Executive's
reasonable attorneys' fees and expenses). Otherwise, each party shall be
responsible for its own expenses relating to the conduct of the arbitration
(including reasonable attorneys' fees and expenses) and shall share the fees of
the arbitrator.

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<PAGE>

         8. Incorporation of Prior Agreements. All terms of Executive's prior
Employment Agreements not inconsistent with this agreement are hereby ratified
and reaffirmed. Specifically all past equity awarded because of past under
compensation and Executive's entitlement to 50% of any executive compensation
paid in the event of merger or acquisition are hereby explicitly ratified and
reaffirmed.

         9. Notices. All notices and other communications required or permitted
under this Agreement or necessary or convenient in connection herewith shall be
in writing and shall be deemed to have been given when hand delivered or mailed
by registered or certified mail, as follows (provided that notice of change of
address shall be deemed given only when received):

         If to the Company, to:
                  The Med-Design Corporation
                  2810 Bunsen Avenue
                  Ventura, CA 93003

         With a required copy to:
                  Bongiovanni & Berger
                  121 S. Broad Street, Suite 1700
                  Philadelphia, PA  19107
                  Attention:  Joseph N. Bongiovanni, III, Esquire

         If to Executive, to:
                  James M. Donegan
                  840 King of Prussia Road
                  Radnor, PA  19087


or to such other names or addresses as the Company or Executive, as the case may
be, shall designate by notice to each other person entitled to receive notices
in the manner specified in this Section.

         10. Contents of Agreement; Amendment and Assignment.

         (a) This Agreement, along with the Nondisclosure, Nonsolicitation and
Invention Assignment Agreement sets forth the entire understanding between the
parties hereto with respect to the subject matter hereof and cannot be changed,
modified, extended or terminated except upon written amendment approved by the
Board and executed on its behalf by a duly authorized officer and by Executive.

         (b) All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
executors, administrators, legal representatives, successors and assigns of the
parties hereto, except that the duties and responsibilities of Executive under
this Agreement are of a personal nature and shall not be assignable or
delegatable in whole or in part by Executive. The Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business or
assets of the Company, within 60 days of such succession, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent as
the Company would be required to perform if no such succession had taken place.

         11. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provision or application of this Agreement which can be given
effect without the invalid or unenforceable provision or application and shall
not invalidate or render unenforceable such provision or application in any
other jurisdiction. If any provision is held void, invalid or unenforceable with
respect to particular circumstances, it shall nevertheless remain in full force
and effect in all other circumstances.

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<PAGE>

         12. Remedies Cumulative; No Waiver. No remedy conferred upon a party by
this Agreement is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to any other
remedy given under this Agreement or now or hereafter existing at law or in
equity. No delay or omission by a party in exercising any right, remedy or power
under this Agreement or existing at law or in equity shall be construed as a
waiver thereof, and any such right, remedy or power may be exercised by such
party from time to time and as often as may be deemed expedient or necessary by
such party in its sole discretion.

         13. Beneficiaries/References. Executive shall be entitled, to the
extent permitted under any applicable law, to select and change a beneficiary or
beneficiaries to receive any compensation or benefit payable under this
Agreement following Executive's death by giving the Company written notice
thereof. In the event of Executive's death or a judicial determination of
Executive's incompetence, reference in this Agreement to Executive shall be
deemed, where appropriate, to refer to Executive's beneficiary, estate or other
legal representative.

         14. Miscellaneous. All section headings used in this Agreement are for
convenience only. This Agreement may be executed in counterparts, each of which
is an original. It shall not be necessary in making proof of this Agreement or
any counterpart hereof to produce or account for any of the other counterparts.

         15. Withholding. All payments under this Agreement shall be made
subject to applicable tax withholding, and the Company shall withhold from any
payments under this Agreement all federal, state and local taxes as the Company
is required to withhold pursuant to any law or governmental rule or regulation.
Except as specifically provided otherwise in this Agreement, Executive shall
bear all expense of, and be solely responsible for, all federal, state and local
taxes due with respect to any payment received under this Agreement.

         16. Governing Law. This Agreement shall be governed by and interpreted
under the laws of California without giving effect to any conflict of laws
provisions.

         17. Indemnity. The Company agrees to indemnify Executive in connection
with the performance of services under this Agreement to the fullest extent
allowed by law of the state of the Corporation, that is Delaware.

         IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.

                                          THE MED-DESIGN CORPORATION
                                          By:
                                          Name:
                                          Title:




                                          James M. Donegan





                                       9
<PAGE>

                                    Exhibit A
                    (James M. Donegan Compensation Agreement)

         Executive is awarded a performance option for 100,000 shares of the
Company's common stock. This option is priced as of the Effective Date. This
option is for ten (10) years, will absolutely vest in five (5) years and will
vest earlier upon the following circumstances:

         1/3 will vest if the Company's common stock has a closing price of
$8.00 a share for thirty (30) consecutive trading days; an additional 1/3 will
vest if the Company's common stock has a closing trading price of $10.00 for any
thirty (30) day period; the remaining 1/3 will vest if for any thirty (30) day
period the Company's common stock has a closing trading price of $12.00. By way
of example, the Company's closing price for thirty (30) consecutive days exceeds
$12.00 the entire grant vests.

         In the event that Executive dies while in the employ of the Company
this option will vest and inures to the benefit of his estate.

         If the Executive voluntarily leaves the employ of the Company prior to
expiration of this contract or is discharged for cause, any unexercised options
are cancelled.

         If the Executive voluntarily leaves the employ of the Company prior to
expiration of this contract or is discharged for cause, any shares from vested
options that the Executive exercised and retained at the time of his separation
or the proceeds from same if Executive had sold same shall be owed to the
Company. The Executive will be given credit for the exercise price in computing
his debt to the Company except if the Executive leaves the Company after
completing one year of service, he shall be entitled to keep 1/3 of all vested
option shares and an additional 1/3 if he leaves the employ after the completion
of two years.



                                      A-1
<PAGE>


                                    Exhibit B

                       SEPARATION OF EMPLOYMENT AGREEMENT
                               AND GENERAL RELEASE

         WHEREAS James M. Donegan ("Executive") has been employed by The
Med-Design Corporation (the "Company"), and because Executive's employment with
the Company will terminate effective, _____________, not for cause, Executive
and the Company agree as follows:

         1. In consideration of the promises of the Company set forth in
paragraph 4 below, Executive, and his or her heirs, executors and
administrators, intending to be legally bound, hereby permanently and
irrevocably agree to the termination of Executive's employment with the Company
effective on _____________ (or such earlier date as may be communicated in
writing by ___________) (the "Termination Date") and hereby REMISE, RELEASE and
FOREVER DISCHARGE the Company and any individual or organization related to the
Company and against whom or which Executive could assert a claim, including any
and all subsidiaries and affiliates, and their officers, directors,
shareholders, partners, employees and agents, and their respective successors
and assigns, heirs, executors and administrators (hereinafter referred to
collectively as "Releasees"), of and from any and all causes of action, suits,
debts, claims and demands whatsoever, which he had, has, or may have against
Releasees up until the date of his execution of this Agreement and General
Release, other than the Release Exclusions (as defined below). Particularly, but
without limitation, Executive so releases all claims relating in any way to his
employment or the termination of his employment relationship with the Company,
including without limitation claims under the Pennsylvania Human Relations Act,
43 P.S. ss. 951 et seq., California Fair Employment and Housing Act, the
California Labor Code, Title VII of the Civil Rights Act of 1964, as amended,
ss. 42 U.S.C. 2000e et seq., the Americans with Disabilities Act, 42 U.S.C. ss.
12101 et seq., the Employee Retirement Income Security Act 29 U.S.C. ss. 1001 et
seq., the Age Discrimination in Employment Act, as amended 29 U.S.C. ss. 621 et
seq. (the "ADEA"), any common law claims and all claims for counsel fees and
costs. Executive specifically waives all rights and benefits pursuant to ss.1542
of the California Civil Code. Executive agrees and covenants that should any
other person, organization, or other entity file, charge, claim, sue, or cause
or permit to be filed any civil action, suit or legal proceeding involving any
matter occurring at any time in the past, up to and including the date of this
release, Executive will not seek or accept any personal relief in such civil
action, suit or legal proceeding. This release does not give up Executive's
rights, if any, to the following claims that Executive has or may have (the
"Release Exclusions"): (i) to seek indemnification pursuant to applicable state
law and the Company's By-Laws, (ii) to seek coverage under directors' and
officers' liability insurance policies maintained or required to be maintained
by the Company and (iii) the payments and benefits Executive is entitled to
receive under paragraph 4 below.

         2. Executive shall promptly take all steps necessary to dismiss with
prejudice any and all pending complaints, charges and grievances against the
Company or Releasees, regardless of whether they are or have been filed
internally or externally. Executive also agrees that the payment in Paragraph 3
is in full satisfaction of any liability or obligation to Executive under the
Employment Agreement, dated as of October 10, 2002, between the Company and
Executive.


                                      B-1
<PAGE>

         3. For the purposes of implementing a full and complete release and
discharge of claims, Executive expressly acknowledges that this Agreement is
intended to include in its effect, without limitation, all the claims described
in the preceding paragraphs, whether known or unknown, suspected or unsuspected,
and that this Agreement contemplates the extinction of all such claims,
including claims for attorney's fees. Executive expressly waives any right to
assert after the execution of this Agreement that any such claim, demand,
obligation, or cause of action has, through ignorance or oversight, been omitted
from the scope of the Agreement. Executive expressly waives any and all rights
and benefits conferred upon Executive by the provisions of Section 1542 of the
Civil Code of California which provides as follows:

         A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.

         4. In full consideration of Executive's execution of this Separation of
Employment Agreement and General Release, and his or her agreement to be legally
bound by its terms, the Company will provide Executive with the following
consideration, to which Executive acknowledges he or she would not otherwise be
entitled:

         (a) Executive shall receive a severance benefit equal to one year of
Executive's base salary as in effect on the termination date, which shall be
paid in substantially equal installments according to the Company's normal
payroll practices over a 12-month period. Payment shall begin after the
expiration of the revocation period for the Release.

         (b) For a period of 12 months following the date of termination,
Executive shall continue to receive the medical coverage in effect at the date
of his termination (or generally comparable coverage) for himself and, where
applicable, his spouse and dependents, as the same may be changed from time to
time for employees generally, as if Executive had continued in employment during
such period; or, as an alternative, the Company may elect to pay Executive cash
in lieu of such coverage in an amount equal to Executive's after-tax cost of
continuing such coverage, where such coverage may not be continued (or where
such continuation would adversely affect the tax status of the plan pursuant to
which the coverage is provided). The COBRA health care continuation coverage
period under section 4980B of the Internal Revenue Code of 1986, as amended,
shall run concurrently with the foregoing 12-month benefit period.

         (c) Executive shall receive any benefits accrued or earned in
accordance with the terms of any applicable benefit plans and programs of the
Company.

         Executive understands and expressly agrees that each benefit
enhancement and payment under paragraphs (a) and (b) above is expressly
contingent on Executive's continued employment through _________________, or
such earlier date as may be communicated in writing by the Company.

         Except as set forth in this Agreement, it is expressly agreed and
understood that Releasees do not have, and will not have, any obligation to
provide Executive at any time in the future with any payments, benefits or
considerations other than those recited in this paragraph, or those required by
law, other than under the terms of any benefit plans which provide benefits or
payments to former employees according to their terms and other than the Release
Exclusions.



                                       B-2
<PAGE>

         5. The parties acknowledge that the performance of the promises of each
are expressly contingent upon the fulfillment and satisfaction of the
obligations of the other party as set forth in this Agreement and General
Release.

         6. Executive hereby agrees and recognizes that, as of his or her
Termination Date, Executive's employment relationship with the Company or
Releasees will be permanently and irrevocably severed and that Executive will
not apply for a position with the Company or its affiliates and Executive waives
his or her right to be hired or rehired in the future by the Company and any of
its affiliates. It is further agreed and understood that Executive will continue
to be available and cooperate in a reasonable manner in providing assistance to
the Company in concluding any matters which are reasonably related to the duties
and responsibilities which Executive had while employed by the Company, provided
that such cooperation and assistance does not create a burden with respect to
any subsequent employment obtained by Executive.

         7. Executive agrees and acknowledges that this Agreement is not and
shall not be construed to be an admission of any violation of any federal, state
or local statute or regulation, or of any duty owed by Releasees.

         8. Executive agrees, covenants and promises that Executive will not
communicate or disclose the terms of this Agreement and General Release to any
persons with the exception of members of Executive's immediate family and
Executive's attorney and financial advisor, except as required by law. Executive
further agrees to refrain from using or disclosing for the benefit of any
person, business or entity other than the Company, any confidential information
relating to the Company's business, which includes but is not limited to
information relating to the Company's employees, processors, suppliers,
customers, services, plans, marketing studies or analyses, and financial or
business affairs. Executive represents that any and all documents containing
such confidential information will be returned to the Company upon termination
of employment.

         9. This Agreement and General Release, and the provisions of the
Employment Agreement that survive Executive's termination of employment,
constitute the complete and entire understanding between the parties, and
supersede any and all prior agreements and understandings between the parties to
the extent they are inconsistent with this Agreement.

         10. Executive hereby certifies that Executive has read the terms of
this Agreement and General Release, that Executive has been advised by the
Company to consult with an attorney of his or her own choice prior to executing
this Agreement, that Executive has had an opportunity to do so, and that
Executive understands this Agreement's terms and effects. Executive further
certifies that neither Releasees nor any representative of Releasees has made
any representations to Executive concerning this Agreement and General Release
other than those contained herein.



                                       B-3
<PAGE>

         11. Executive acknowledges that Executive has been informed that this
Agreement and General Release includes a waiver of claims under the ADEA, and
that Executive has the right to consider this Agreement and General Release for
a period of 21 days. Executive also understands that he or she has the right to
revoke this Agreement and General Release for a period of seven days following
his execution of this Agreement and General Release by giving written notice to
the Company in care of ___________________.

         12. If any provision of this Agreement and General Release is deemed
invalid, the remaining provisions shall not be affected.

         13. The provisions of this Agreement and General Release shall be
governed by the laws of California, without regard to any choice of law
provisions.

         IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties have executed the foregoing Agreement and General Release on the dates
indicated below.


WITNESS:
-------------------------------        -------------------------------
                                       JAMES M. DONEGAN
                                       DATE:
                                             -------------------------------

                                       THE MED DESIGN CORPORATION



WITNESS:                               BY:
                                             -------------------------------
                                       TITLE:
                                             -------------------------------
                                       DATE:
                                             -------------------------------


                                       B-4
<PAGE>



                                    Exhibit C

                       NONDISCLOSURE, NONSOLICITATION AND
                         INVENTION ASSIGNMENT AGREEMENT

This Nondisclosure, Nonsolicitation and Invention Assignment Agreement (this
"Agreement") is made by and between The Med-Design Corporation (hereinafter
"Employer"), and James M. Donegan ("Employee"), to be effective as of October
10, 2002:

         1. Confidential Information and Company Property.

         1.1. Employee acknowledges that Employer and its parents, subsidiaries,
divisions and affiliates, as well as majority-owned companies of such parents,
subsidiaries, divisions and affiliates, and their respective successors
(hereinafter collectively, the "Company") possess certain Confidential
Information that has been and may be revealed to or learned by Employee during
his/her employment with the Company. Employee acknowledges that the term
"Confidential Information" includes all information that has or could have
commercial value or other utility in the Company's Business, or the unauthorized
disclosure of which could be detrimental to the Company's interests, whether or
not such information is specifically identified as Confidential Information by
the Company.

         1.2. Employee acknowledges that the Company's Business includes all
businesses in which the Company is planning or preparing to engage and all
businesses in which the Company is currently engaged, as well as such other
businesses as the Company may enter, plan to enter, or prepare to enter
subsequent to the date that this Agreement is executed.

         1.3. By way of example and not limitation, Confidential Information
includes any and all information, whether or not meeting the legal definition of
a trade secret, concerning the Company's actual, planned or contemplated (i)
marketing plans, business plans, strategies, forecasts, budgets, projections and
costs; (ii) personnel information; (iii) customer, vendor and supplier lists;
(iv) customer, vendor and supplier needs, transaction histories, contacts,
volumes, characteristics, agreements and prices; (v) promotions, operations,
sales, marketing, and research and development; (vi) business operations,
internal structures and financial affairs; (vii) software and operating systems
and procedures; (viii) pricing structure of the Company's services and products;
(ix) proposed services and products; (x) contracts with other parties; (xi)
performance characteristics of the Company's products; and (xii) Inventions and
Works as defined in Section 4. Confidential Information does not include
information that has become widely known to the public other than through the
improper disclosure of Employee. Notwithstanding anything to the contrary in
this Agreement, however, Confidential Information includes any and all
information that the Company is obligated to maintain as confidential.

         1.4. During the term of Employee's employment with the Company and
thereafter, Employee will not, directly or indirectly, use or disclose to
anyone, or authorize disclosure or use by anyone of, any of the Confidential
Information revealed to, learned by or created by Employee during the course of
his/her employment with the Company, unless such use or disclosure is both
consistent with the Company's obligations and is for the sole purpose of
carrying out Employee's duties to the Company. Employee further agrees that
he/she will take all reasonable efforts to protect the confidentiality of
Confidential Information.



                                       C-1
<PAGE>

         1.5. Employee acknowledges that Confidential Information is essential
to the Company's Business. Employee will not remove from the Company's place of
business any document or other medium containing Confidential Information, or
other Company property, without the permission of the Company, which permission
the Company may in its absolute discretion withhold. Employee agrees that he/she
will not make any copies of Confidential Information or other Company property
except as authorized by the Company. Employee agrees that at the cessation of
his/her employment he/she will return to the Company immediately any and all
Company property and documents and other media containing Confidential
Information (and all copies thereof) in Employee's possession, custody or
control. The Company's property includes, but is not limited to, all financial
books, records, instruments and documents; customer lists; data; reports;
programs; software; hardware; tapes; rolodexes; telephone and address books;
card decks; listings; programming; customer files and records; and any and all
other instruments, records and documents recorded or stored on any medium
whatsoever relating or pertaining, directly or indirectly, to corporations,
governmental entities and other persons and entities with whom the Company has
or has had contractual relations, the services or products provided by the
Company, or the Company's Business or business affairs.

         1.6. If Employee is requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or other process) to disclose Confidential Information,
Employee will immediately notify the Company of such request or requirement so
that the Company may take any action deemed by the Company to be necessary or
advisable to protect the confidentiality of the Confidential Information. Unless
the Company waives the protections of this Agreement in writing, Employee agrees
to take all lawful steps to protect the confidentiality of the Confidential
Information and to cooperate fully with the Company's efforts to protect the
confidentiality of the Confidential Information, including, but not limited to,
seeking a protective order and refusing to produce such Confidential Information
unless compelled to do so by a final order that has been upheld by the highest
appellate court having jurisdiction over the matter. If Employee is ultimately
compelled to disclose Confidential Information, Employee agrees to take all
lawful efforts to limit the dissemination of, and maintain the confidentiality
of, the Confidential Information. Employer agrees to reimburse Employee for all
reasonable expenses incurred by Employee in complying with this Section 1.6,
including, but not limited to reasonable attorneys fees.

         2. Employee Responsibilities and Restrictive Covenants.

         2.1. Employee agrees to devote Employee's best efforts and entire work
time and attention to the Company's Business during the term of Employee's
employment with the Company. While the Company does not seek to interfere with
the off-duty and personal conduct of its employees, certain conduct may
interfere with the Company's legitimate business interests. Employee agrees
that, during the term of Employee's employment, except as otherwise approved in
writing by the Company, which approval the Company may in its absolute
discretion withhold, Employee will not, engage in any outside business activity
that conflicts with, or adversely affects, his job performance. Employee must
disclose to his immediate supervisor, the Board of Directors of the Company
involvement in any outside business activity that may conflict with or be
adverse to the interests of the Company. Employee further agrees that, during
the term of Employee's employment, except as otherwise approved in writing by
the Company, which approval the Company may in its absolute discretion withhold:


                                       C-2
<PAGE>

         (a) Employment that conflicts with Employee's work schedule, duties, or
responsibilities;

         (b) Employment that is incompatible with Employee's employment with the
Company;

         (c) Employment that impairs or has a detrimental effect on Employee's
work or performance with the Company;

         (d) Employment that requires Employee to conduct work or related
activities on the Company's property during Employee's working hours or to use
the Company's facilities and/or equipment.

         2.2. Employee further agrees that he will not take any action
inconsistent with the fiduciary relationship of an employee to his corporate
employer. This shall not prohibit Employee from owning stock or other securities
of a competitor of the Company or any subsidiary or affiliate of such competitor
so long as Employee's ownership does not interfere with Employee's job
performance. Executive shall annually provide the Compensation Committee a list
of investments in any medical device company. The Committee, in its sole
discretion, will determine the appropriateness of the investment.

         2.3. Employee agrees that, during the term of Employee's employment
with the Company, and for a period of twelve (12) months thereafter, Employee
will not, either directly or indirectly, or for himself/herself or through, on
behalf of or in conjunction with any person, persons or legal entity, persuade,
induce or attempt to persuade or induce any employee or person who has provided
services to the Company as an employee or independent contractor or employee of
an independent contractor to leave his/her employment with the Company or to
refrain from providing services to the Company.

         2.4. Employee agrees that, for a period of twelve (12) months after the
cessation of Employee's employment, Employee will promptly inform Employer in
writing of any employment or other business affiliations that Employee has with
any business or business entity offering or planning to offer a service or
product in competition with the Company. Such information will include, but not
be limited to (i) the name and address of the business or business entity with
which Employee has such a relationship; and (ii) the general nature of
Employee's business-related activities; and (iii) agrees to abide by the terms
of the non-competition agreement which preclude Executive from owning stock in
or working for a competitor of the Company. Executive agrees that the Board of
Directors, in its sole discretion, can make the determination whether the
employment or investment is a direct competitor of the Company.

         2.5. Employer and Employee agree that Sections 2.1 and 2.2 hereof are
not intended to, and do not, prevent ownership of up to 5% or $100,000,
whichever is less, of any class of equity or debt securities that are traded on
a national securities exchange.



                                       C-3
<PAGE>

         3. Company Access.

         3.1. Employee agrees and consents that, during the term of Employee's
employment with the Company and thereafter, the Company may review, audit,
intercept, access and disclose all messages created, stored, received or sent
over the electronic mail and Internet access systems provided by the Company,
with or without notice to Employee, and that such review, audit, interception,
access or disclosure may occur during or after working hours. Employee further
consents and agrees that the Company may, at any time, access, review and
disclose the contents of all computers, computer disks and other data-storage
equipment and devices, files, desks, drawers, closets, cabinets and work
stations that are either on the Company's premises or owned or provided by the
Company.

         4. Intellectual Property.

         4.1. Employee agrees to disclose fully, promptly and in writing to
Employer any and all Inventions and Works, separately defined below, that are
conceived, made, reduced to practice, developed, authored, created, drawn or
written at any time while Employee is employed by the Company and for a period
of six (6) months thereafter. Employee will generate and provide to the Company
adequate and current written records of all Inventions and Works in the form of
notes, sketches, drawings, reports, notebooks or other documents relating
thereto or in such other form as will be requested by the Company, which records
and any copies thereof will be and will remain the exclusive property of
Employer and will be available to the Company at all times.

         4.2. Employer and Employee agree that the term "Inventions" is defined
in this Agreement to include any and all new or useful ideas, developments,
discoveries, improvements, designs, formulas, modifications, trademarks, service
marks, trade secrets, and other intellectual property, whether patentable or not
(including without limitation any technology, computer programs, software, test,
concept, idea, apparatus, device, mechanism, equipment, machinery, process,
method, composition of matter, formula or technique), and all know-how related
thereto, that Employee conceives, makes, reduces to practice, or develops,
solely or jointly with others, that (i) relate to the actual or contemplated
business, work or activities of the Company, (ii) result from or are suggested
by any work that Employee has done or may do on behalf of the Company, or by any
information that Employee may receive while employed by the Company, or (iii)
are developed, tested, improved or investigated either in part or entirely on
time for which Employee was paid by the Company, or with the use of premises,
equipment or property provided, owned, leased or contracted for by or on behalf
of the Company. Notwithstanding anything herein to the contrary, this Agreement
does not apply to any Invention that qualifies fully under the provisions of
section 2870 of the California Labor Code, which provides:


                  Employment Agreements; Assignment of Rights


                  (i) provision in an employment agreement which provides that
         an employee shall assign, or offer to assign, any of his/her rights in
         an invention to his/her employer shall not apply to an invention that
         the employee developed entirely on his/her own time without using the
         employer's equipment, supplies, facilities, or trade secret information
         except for those inventions that either:


                                      C-4
<PAGE>

                           (1) Rate at the time of conception or reduction to
                  practice of the invention to the employer's business, or
                  actual or demonstrably anticipated research or development of
                  the employer; or

                           (2) Result from any work performed by the employee
                  for the employer.


                  (ii) To the extent a provision in an employment agreement
         purports to require an employee to assign an invention otherwise
         excluded from being required to be assigned under subdivision (a), the
         provision is against the public policy of this state and is
         unenforceable.

         4.3. Employer and Employee agree that the term "Works" is defined in
this Agreement to include any and all materials for which copyright protection
may be obtained, including without limitation literary works (including books,
pamphlets, articles and other writings), mask works, artistic works (including
designs, graphs, drawings, blueprints and other graphic works), computer
programs, compilations, recordings, photographs, motion pictures and other
audio-visual works that Employee authors, conceives, creates, draws, makes or
writes, solely or jointly with others, that (i) relate to the actual or
contemplated business, work or activities of the Company, (ii) result from or
are suggested by any work that Employee has done or may do on behalf of the
Company, or by any information that Employee may receive while employed by the
Company, or (iii) are developed, tested, improved or investigated either in part
or entirely on time for which Employee was paid by the Company, or with the use
of premises, equipment or property provided, owned, leased or contracted for by
or on behalf of the Company.

         4.4. Employee agrees to assign, transfer and convey, and hereby
assigns, transfers and conveys, to Employer all of the right, title and interest
in and to any and all such Inventions and Works that Employee has or may acquire
in such Inventions or Works that are conceived, made, reduced to practice,
developed, authored, created, drawn or written at any time while Employee is
employed by the Company. Employee further agrees that for a period of six (6)
months after the end of the employment relationship, Employee shall notify and
inform Employer of any and all Inventions and Works Employee conceives, makes,
or reduces to practice, develops, authors, or creates, and agrees to assign,
transfer and convey, and hereby assigns, transfers and conveys, to the Company
all of the right, title and interest in and to any and all such Inventions and
Works that Employee conceives, makes, reduces to practice, develops, authors, or
creates, drawn or written, arising from, based upon, relating to, utilizing, or
employing Company's proprietary, confidential, or trade secret information or
the use of the Company's facilities. Employee agrees that Employer will be the
sole owner of all patents, copyrights, trademarks and other intellectual
property rights in connection therewith, and agrees to take all such actions as
may be requested by the Company during Employee's employment with the Company
and at any time thereafter, with respect to any such Inventions or Works to
confirm or evidence such assignment, transfer, conveyance or ownership, and to
assist in the Company's maintenance, enforcement, licensing, assignment,
transfer, or conveyance of rights in respect of the Inventions or Works.


                                      C-5
<PAGE>

         4.5. By way of example and not limitation, at any time and from time to
time, upon the request of the Company, Employee agrees to execute, acknowledge,
swear to, seal and deliver to the Company any and all lawful instruments,
documents and papers, give evidence and do any and all other lawful acts that,
in the opinion of the Company, are or may be necessary or desirable to document
such assignment, transfer and conveyance or to enable the Company to file and
prosecute applications for, and to acquire, maintain and enforce any and all
patents, trademarks, copyrights and other property rights under United States,
local, state or foreign law with respect to, any such Inventions or Works, or to
obtain any extension, validation, reissue, continuance or renewal of any such
patent, trademark, copyright or other intellectual property right. By way of
further example and not limitation, Employee agrees to meet with Company
representatives or attorneys for the purpose of initiating, maintaining or
defending litigation, administrative or other proceedings, and to participate
fully in litigation, administrative or other proceedings as requested by the
Company. In the event that the Company may be unable, for any reason whatsoever,
after reasonable effort, to secure Employee's signature on any patent,
copyright, trademark or other intellectual property application or other papers,
Employee hereby irrevocably designates and appoints the Company and its duly
authorized officers and agents as Employee's agent and attorney-in-fact to act
for and on behalf of Employee to execute, acknowledge, swear to, seal and
deliver to the Company and file any such application or applications or other
papers, and to do all other lawfully permitted acts to further the provisions of
this Section 4.

         4.6. Employer agrees to reimburse Employee for reasonable expenses
incurred by Employee in complying with the provisions of Sections 4.4 and 4.5 of
this Agreement. Employer and Employee agree that Employee is not entitled to
additional compensation beyond that paid to Employee for the period of time that
he/she is employed by the Company, which compensation, along with Employer's
understandings set forth in this Agreement, is expressly acknowledged to be
adequate consideration for all of Employee's promises and obligations set forth
in this Agreement.

         4.7. Employee expressly acknowledges and states that all Works that are
made by Employee (solely or jointly with others) are being created at the
instance of Employer and are "works made for hire," as that term is defined in
the Copyright Act of 1976, 17 U.S.C. ss. 101. In the event that such laws are
inapplicable or in the event that any such Works, or any part thereof, are
determined by a court of competent jurisdiction not to be a work made for hire,
this Agreement will operate as an irrevocable and unconditional assignment by
Employee to Employer of all Employee's right, title and interest (including,
without limitation, all rights in and to the copyrights throughout the world,
including the right to prepare derivative works and the rights to all renewals
and extensions) in the Works in perpetuity.

         4.8. Employee represents that Schedule A to this Agreement describes
all Inventions and Works, whether patentable or not, that have been conceived,
made, reduced to practice, developed, authored, created, drawn or written prior
to Employee's employment by the Company; provided, however, that Employee has
not disclosed in Exhibit A information that is a trade secret belonging to
another, or that is the subject of a contract preventing Employee's disclosure
of such information to the Company.



                                       B-6
<PAGE>

         5. Employee Representations.

         5.1. Employee represents and warrants that this Agreement and his/her
employment by the Company do not conflict with and will not be constrained by
any prior business relationship or contract, that Employee does not possess
trade secrets or other proprietary information arising out of any prior business
relationship or contract that, in Employee's best judgment, would be utilized in
connection with Employee's employment with the Company. Employee further agrees
that he/she will not disclose any such trade secrets or other proprietary
information to the Company or others.

         5.2. Employee represents and warrants that if his/her employment with
the Company were to terminate, he/she could earn a living while fully complying
with all of the terms of this Agreement and that the restrictions contained in
this Agreement are reasonable and necessary to protect the Company's legitimate
interests in its Confidential Information and customer relationships.

         6. Interpretation.

         6.1. Wherever this Agreement contemplates that Employee will have an
obligation or restriction at or after the term of Employee's employment with the
Company, Employee agrees that that obligation or restriction will exist without
regard to which party to the Agreement terminates the employment relationship,
and without regard to the reason (or lack thereof) for the termination of the
employment relationship.

         6.2. Employer and Employee agree that this Agreement constitutes the
entire understanding and agreement of Employee and the Company with respect to
the
subject matter of this Agreement, and supersedes all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the Company and Employee, with the exception of the
Employment Agreement between Employer and Employee dated as of October 10, 2002
(the "Employment Agreement").

         6.3. Employer and Employee agree that if any provision of this
Agreement, or the application thereof, will for any reason and to any extent be
invalid or unenforceable, such provision will be deemed severable and the
remainder of this Agreement will remain valid and fully enforceable.

         6.4. Employer and Employee agree that if all or any portion of a
covenant is held unreasonable or unenforceable by a court or agency having valid
jurisdiction in a final decision, Employee will be bound by any lesser covenant
subsumed within the terms of such covenant, which lesser covenant imposes the
maximum duty permitted by law, as if the resulting covenant were separately
stated in and made a part of this Agreement.

         6.5. Employer and Employee agree that the headings in this Agreement
are included solely for convenience and will be given no effect in the
construction of this Agreement.

         6.6. Employer and Employee agree that, although this Agreement was
drafted by Employer, it accurately reflects both parties' intent and
understanding and should not be presumptively construed against the Company in
the event that there is any dispute over the meaning or intent of any provision.


                                      C-7
<PAGE>

         7. Enforcement.

         7.1. If reasonably requested by Employer, Employee agrees, at any time
during the term of Employee's employment and thereafter, to reaffirm in writing
the obligations imposed by, and Employee's past compliance with, any or all of
the provisions of this Agreement.

         7.2. Employee agrees that if he/she engages in any activities
prohibited by this Agreement or fails to take actions required by this
Agreement, irreparable harm to the Company will likely result, for which a
remedy in the form of damages may not be adequate or otherwise ascertainable.
Consequently, Employer will be entitled to temporary, preliminary and permanent
injunctive relief against Employee. This section will not limit any other legal
or equitable remedies that Employer may have against Employee for violations of
these restrictions.

         7.3. Employer and Employee agree that this Agreement will be governed
by the laws of California, without giving effect to the conflict of laws
provisions thereof. All suits, proceedings and other actions relating to,
arising out of or in connection with this Agreement will be submitted solely to
the in personam jurisdiction of the United States District Court for the Central
District of California ("Federal Court") or to the Superior Court of Ventura
County, if the Federal Court lacks jurisdiction to hear the matter. Venue for
all such suits, proceedings and other actions will be in Ventura County,
California. Employee hereby waives any claims against or objections to such in
personam jurisdiction and venue.

         7.4. Employer and Employee agree that, in any lawsuit for breach of
this Agreement, the prevailing party will be entitled to recover its or his/her
reasonable attorneys' fees and costs, including expert witness fees, unless
there is an express determination by the court that the nonprevailing party's
position was substantially justified.

         8. General.

         8.1. Employer and Employee agree that this Agreement will be binding
upon and inure to the benefit of the Company and its successors and assigns.
This Agreement may be assigned in whole or in part by Employer to a successor to
all or substantially all of the business or assets of Employer or the subportion
of the business or assets of Employer that relate to Employee's duties; or to
any division or part of Employer; or to any subsidiary, affiliate or division;
or to any entity that is majority-owned by Employer or its subsidiaries,
divisions or affiliates.

         8.2. Employer and Employee agree that any term or provision of this
Agreement may be amended or waived only by a writing signed by Employee and an
officer of Employer. The failure of either party to enforce any of the
provisions in this Agreement will not be construed to be a waiver of the right
of that party to enforce such provision thereafter.

         8.3. Employee agrees that this Agreement is not confidential, and that
the Company may, during the term of Employee's employment with the Company and
thereafter, provide copies of this Agreement to others, including persons or
entities that may employ, do business with or consider employing or doing
business with Employee in the future.



                                       C-8
<PAGE>

         8.4. Employee and Employer agree that this Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
shall become effective upon the execution of a counterpart hereof by each of the
parties hereto.

         8.5. By his/her signature below, Employee acknowledges that he/she (i)
has had sufficient opportunity to read each provision of this Agreement and
understands each provision, (ii) has had an opportunity to review the Agreement
with legal counsel of Employee's choice, (iii) is not under duress and (iv) is
not relying on any representations or promises that are not set forth in the
Agreement or the Employment Agreement.

EMPLOYEE:                                 EMPLOYER:

Signature:                                Signature:
          -----------------------                    ---------------------------
Name (Print):                             Name (Print):
          -----------------------                    ---------------------------
Title:                                    Title:
          -----------------------                    ---------------------------
Social Security No.:
          -----------------------
Date:                                         Date:
          -----------------------                    ---------------------------
Exhibit A attached:      Yes            No
                               -------       -------



                                       C-9
<PAGE>


                                   Schedule A

The following is a complete list of all Inventions and Works that have been
conceived, made, reduced to practice, developed, authored, created, drawn or
written by me alone or jointly with others prior to my engagement by the
Company.

         __________________________________________
         __________________________________________
         __________________________________________
         __________________________________________
         __________________________________________
         __________________________________________
         __________________________________________

Due to a preexisting contract with another party, I cannot disclose certain
Inventions or Works that would otherwise be included on the above list.
         ________ additional sheets are attached.

         (number)


EMPLOYEE:

     Signature:
                     -------------------------------
     Name (Print):
                     -------------------------------
     Title:
                     -------------------------------
     Social Security No.:
                     -------------------------------
     Date:
                     -------------------------------



                                      C-10




<PAGE>


                                    Exhibit D


         Executive will receive a signing bonus within ninety (90) days of the
Effective Date of Ninety Two Thousand ($92,000) Dollars. His base salary for the
first year will be Three Hundred Forty Six Thousand Two Hundred ($346,200.00)
Dollars; for the second year Three Hundred Thirty Nine Thousand ($339,000.00)
Dollars and for the third year Three Hundred Sixteen Thousand Eight Hundred
($316,800.00) Dollars.







                                      C-11



<PAGE>


                                    Exhibit E

                        FORM OF NON-COMPETITION AGREEMENT

         For a period of one year or for whatever time period during which
employee is receiving severance payment, whichever is longer from the date of
termination of this Agreement within the geographical confines of the United
States of America and Canada, Employee will not directly or indirectly own,
manage, operate, join, control or be employed in any manner with any business of
the type and character of Employer's business at the time of Employee's
termination.
         Employer's Board of Directors in its sole discretion can determine
whether the subsequent employment of Employee during this time period is of any
nature and character that comes within this provision.







                                      C-12