Document:

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                                                                   EXHIBIT 10.39

                                                               Execution Version

                              EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT is made as of March 21, 2000 (the "Effective
                                                                  ---------
Date") among Aurora Foods Inc., a Delaware corporation (the "Company") and
----                                                         -------
Christopher T. Sortwell (the "Executive").
                              ---------

     WHEREAS, the Executive is possessed of certain experience and expertise in
management; and

     WHEREAS, the Company wishes to employ the Executive as its Executive Vice
President and Chief Financial Officer and the Executive wishes to accept such
employment.

     NOW, THEREFORE, the parties agree as follows:

1.   EMPLOYMENT.

     1.1  Agreement.  The Company hereby agrees to employ the Executive, and the
          ---------
Executive hereby agrees to serve the Company, in each case subject to the terms
and conditions set forth herein.

     1.2  Term.  The employment of the Executive by the Company shall be for the
          ----
period commencing on the Effective Date and expiring on the date on which
termination of employment is effective pursuant to the provisions of Section 8
(the "Termination Date"). For all purposes of this Agreement, references to the
      ----------------
"term" of the Executive's employment hereunder shall mean the period commencing
on the Effective Date and ending on the Termination Date.

2.   POSITION AND DUTIES.  The Executive shall serve as Executive Vice President
and Chief Financial Officer ("EVP-CFO") of the Company, and shall be accountable
                              -------
to, and shall have such powers, duties and responsibilities consistent with and
customary to the position of Chief Financial Officer of a corporation the size
of the Company and as may from time to time be prescribed by the Board of
Directors of the Company (the "Board").  The Executive shall perform and
                               -----
discharge, faithfully, diligently, competently and in good faith such duties and
responsibilities.  In addition, during the term hereof, the Company shall cause
and maintain the election of the Executive as a member of the Board.   The
Executive (a) shall devote all of his business time and attention and his best
efforts and ability to the business and affairs of the Company and its
Subsidiaries and (b) shall not engage in other business activities whether or
not compensated during the term of this Agreement without prior written consent
of the Board; provided, however, the Executive may devote an amount of time to
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be mutually agreed between Executive and the Company winding up activities with
SBC Holdings as provided by
<PAGE>

the Consulting Agreement; provided, further, that after May 31, 2000,
                          --------  -------
Executive's obligations pursuant to the Consulting Agreement shall not interfere
with his obligations to the Company. The services of the Executive shall be
performed at the offices of the Company in the Metropolitan Area.

3.   COMPENSATION.  Subject to all of the terms and conditions hereof and to the
performance by the Executive of his duties and obligations to the Company:

     3.1  Salary.  As compensation for services performed from the Effective
          ------
Date through December 31, 2001, the Company shall pay the Executive a salary at
a rate of $400,000 per annum, and thereafter such other greater amount as may be
established by the Board annually (such annual rate of salary in effect from
time to time being referred to as the "Salary").  The Salary shall be payable in
                                       ------
accordance with the regular payroll practices of the Company. Except as
otherwise provided in this Agreement, the Salary shall be prorated for any
period less than a full year.

     3.2  Annual Bonus.  As additional compensation for services hereunder, the
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Executive shall receive an annual bonus in an amount based on Board-specified
performance targets set in accordance with an executive bonus plan to be adopted
by the Company (such annual bonus in effect from time to time being referred to
as the "Annual Bonus").  Such bonus plan shall provide for the Annual Bonus to
        ------------
be equal to 100% of Salary in the event the Company achieves 100% of the Board-
specified performance targets, and shall provide for the Annual Bonus to exceed
100% of Salary in the event the Company exceeds the Board-specified performance
targets.  For the Company's fiscal year ending December 31, 2000, the Annual
Bonus shall not be less than 100% of Salary paid in 2000 (the Salary for such
fiscal year shall be prorated since Executive shall have been employed by the
Company for less than a full year, but the Annual Bonus shall not be further
prorated by the following sentence), and for the Company's fiscal year ending
December 31, 2001, the Annual Bonus shall not be less than 75% of Salary paid in
2001.  Except as otherwise provided in this Agreement, the Annual Bonus shall be
prorated for any period less than a full year.

     3.3  Special Bonus.  On July 1, 2001, Executive will be eligible to receive
          -------------
a cash bonus of $150,000 (the "Special Bonus").  50% of the Special Bonus will
                               -------------
be payable based upon the Company's achievement of Board-specified performance
targets and 50% of the Special Bonus will be payable based upon Executive's
continued employment with the Company as of June 30, 2001.

     3.4  Stock Options.  As soon as practicable after the date of commencement
          -------------
of the Executive's employment hereunder, but in any event prior to May 1, 2000,
the Company shall grant to the Executive under the Company's 2000 Stock Option
Plan stock options (the "Stock Options") to purchase 450,000 shares of Common
                         -------------
Stock of the Company.  Such grant shall be subject to shareholder approval of
the Company's 2000 Stock Option Plan.  The Stock Options will have an exercise
price based on the trading price of Common Stock on the date of grant.

                                      -2-
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The Stock Options will vest as follows: 112,500 Stock Options vest on each of
December 31, 2000, 2001, 2002 and 2003, subject to the terms of a stock option
certificate.

     3.5  Business Expenses.  During the term of his employment hereunder, the
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Executive shall be entitled to receive prompt reimbursement by the Company for
all reasonable business expenses incurred by him on behalf of the Company or any
of its Subsidiaries or Affiliates (in accordance with the policies and
procedures established by the Board from time to time for the Company's
executive officers) in performing services hereunder; provided, however, that
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the Executive shall properly account therefor in accordance with requirements
for federal income tax deductibility and the Company's policies and procedures.

     3.6  Benefits.  From the period commencing on the Effective Date and
          --------
subject to any contribution generally required of executives of the Company,
Executive shall be entitled to participate in any and all employee benefit plans
from time to time in effect for senior executives of the Company generally,
except to the extent such plans are in a category of benefit otherwise provided
to Executive. Such participation shall be subject to (i) the terms of the
applicable plan documents, except that the Company will waive minimum service
requirements for participation, if possible (ii) generally applicable Company
policies and (iii) the discretion of the Board or any administrative or other
committee provided for in or contemplated by such plan, provided such discretion
must be exercised reasonably for the proper administration of the subject plan
and not for the purpose of denying benefits to the Executive. The Company may
alter, modify or terminate its employee benefit plans at anytime as it, in its
sole discretion, determines to be appropriate, provided such alterations and
modifications adverse to the Executive are applicable generally to other senior
executives of the Company.

     3.7  Vacations.  During the term of his employment hereunder, the Executive
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shall be entitled to 20 paid working days as vacation in each year and shall
also be entitled to all paid holidays given by the Company to its employees.
The paid vacation days shall be prorated for any period of service hereunder
less than a full year.  The Executive shall not be entitled to cash compensation
for any vacation time not taken during the term hereof and shall not be entitled
to accrue unused vacation.

     3.8  Life Insurance.  The Company shall maintain life insurance for the
          --------------
benefit of the Executive in an amount that is three times Executive's Salary.

     3.9  Transition Expenses.  Until the earlier of two years from the
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Effective Date and Executive moving his primary residence to the Metropolitan
Area, the Company shall reimburse Executive (a) for reasonable travel expenses,
including reasonable expenses for air and ground transportation and incidental
travel related expenses such as meals, parking, and long distance telephone
charges of Executive incurred in connection with travel between his primary
residence in Michigan and the Metropolitan Area and (b) the cost, up to an
amount to be mutually agreed between the Company and the Executive, of leasing a
furnished apartment in the Metropolitan Area.  Executive shall use his
reasonable efforts, taking into account the

                                      -3-
<PAGE>

status of the business, to relocate to the Metropolitan Area as soon as
reasonably possible after the Effective Date. For each applicable tax year, the
Company shall make a lump-sum cash "gross-up" payment to Executive with respect
to taxes paid by Executive in connection with reimbursement of transition costs
pursuant to this Section 3.9. The gross-up payment will be sufficient, after
giving effect to all federal, state and other taxes and charges (including
interest and penalties, if any, imposed as a result of any action or inaction by
the Company) with respect to the gross-up payment, to make Executive whole for
all taxes (including withholding taxes) and any associated interest and
penalties, imposed in connection with the reimbursement of transition costs.

     3.10  Relocation of Residence.  Up to two years after the Effective Date,
           -----------------------
the Company shall reimburse the Executive for the costs, up to an amount to be
mutually agreed between the Company and the Executive, associated with (i) the
closing of the purchase of a house or condominium in the Metropolitan Area
(including but not limited to, loan origination fees and brokers' fees); (ii)
the relocation of personal property (including art and other collectibles) to
such house or condominium; (iii) the sale of the Executive's existing home in
Michigan; and (iv) the reasonable cost of travel expenses, including expenses
for air and ground transportation and incidental travel-related expenses such as
meals, parking and long distance telephone charges incurred by the Executive's
spouse and immediate family in connection with travel to the Metropolitan Area
for the purpose of searching for housing in the Metropolitan Area; provided,
                                                                   --------
however, that the Executive shall properly account therefor in accordance with
-------
the requirements for federal income tax deductibility and the Company's policies
and procedures.  For each applicable tax year, the Company shall make a lump-sum
cash "gross-up" payment to Executive with respect to taxes paid by Executive in
connection with reimbursement of relocation costs pursuant to this Section 3.10.
The gross-up payment will be sufficient, after giving effect to all federal,
state and other taxes and charges (including interest and penalties, if any,
imposed as a result of any action or inaction by the Company) with respect to
the gross-up payment, to make Executive whole for all taxes (including
withholding taxes) and any associated interest and penalties, imposed in
connection with the reimbursement of relocation costs.

     3.11  Transportation Stipend.  During the term of his employment hereunder,
           ----------------------
the Executive shall be entitled to a stipend of $750, to be paid consistent with
Company practice for senior executives, each month to cover expenses associated
with transportation, including leasing or owning an automobile; provided,
                                                                --------
however, that the Executive shall properly account therefor in accordance with
-------
the requirements for federal income tax deductibility and the Company's policies
and procedures.

     3.12  Country Club Allowance.  Executive shall be entitled to reimbursement
           ----------------------
of up to (a) $60,000 to cover initiation fees and (b) $6,500 to cover annual
dues at any country club in the Metropolitan Area.; provided, however, that the
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Executive shall properly account therefor in accordance with the requirements
for federal income tax deductibility and the Company's policies and procedures.

                                      -4-
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     3.13  Legal Fees.  The Company shall pay directly to Butzel Long, or such
           ----------
other legal counsel as the Executive shall direct, up to $10,000 of legal fees
and related expenses incurred in connection with the negotiation of this
agreement.

4.   OFFICES; SUBSIDIARIES AND AFFILIATES.

     4.1  Generally.  In addition to being EVP-CFO of the Company, the Executive
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agrees to serve during the term of his employment hereunder, if elected or
appointed thereto, in one or more positions as an officer or director of the
Company or any of its Subsidiaries, or as an officer, trustee, director or other
fiduciary of any pension or other employee benefit plan of the Company or any of
its Subsidiaries.  Service in such additional positions will be without
additional compensation except for reimbursement of reasonably related business
expenses on the same terms as provided elsewhere in this Agreement.

     4.2  Indemnification.  The Company agrees that in connection with the
          ---------------
Executive's service in additional positions as provided under Section 4.1, the
Executive shall be entitled to the benefit of any indemnification provisions in
the charter and by-laws of the Company and any of its Subsidiaries for which the
Executive serves in such an additional position and any director and officer
liability insurance coverage carried by the Company and any of its Subsidiaries
for which the Executive serves as an officer or director; provided, however,
                                                          --------  -------
that this Section 4.2 shall not impose on the Company or any of its Subsidiaries
any obligation to include any such indemnification provisions in its charter or
by-laws or to maintain any such insurance coverage.

5.   UNAUTHORIZED DISCLOSURE; INVENTIONS.

     5.1  Confidential Information.  The Executive acknowledges that the Company
          ------------------------
and its Subsidiaries and Affiliates continually develop Confidential
Information, that the Executive may develop Confidential Information for the
Company or its Subsidiaries or Affiliates and that the Executive may learn of
Confidential Information during the course of employment.  The Executive will
comply with the policies and procedures of the Company and its Subsidiaries and
Affiliates for protecting Confidential Information and agrees not to disclose to
any Person (except as required by applicable law or for the proper performance
of his duties and responsibilities to the Company and its Subsidiaries and
Affiliates), or use for his own benefit or gain, any Confidential Information
obtained by the Executive incident to his employment or other association with
the Company or any of its Subsidiaries or Affiliates.  The Executive understands
that this restriction shall continue to apply after his employment terminates,
regardless of the reason for such termination.

                                      -5-
<PAGE>

     5.2  Protection of Documents.  All documents, records, tapes and other
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media of every kind and description relating to the business, present or
otherwise, of the Company or its Subsidiaries or Affiliates and any copies, in
whole or in part, thereof (the "Documents"), whether or not prepared by the
                                ---------
Executive, shall be the sole and exclusive property of the Company or its
Subsidiaries or Affiliates.  The Executive shall safeguard all Documents and
shall surrender to the Company at the time his employment terminates, or at such
earlier time or times as the Board or its designee may specify, all Documents
then in the Executive's possession or control.

     5.3  Proprietary Rights.  Any and all inventions, discoveries,
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developments, methods, processes, compositions, works, supplier and customer
lists (including information relating to the generation and updating thereof),
concepts and ideas (whether or not patentable or copyrightable) (collectively,
"Inventions") conceived, made, developed, created or reduced to practice
 ----------
(collectively, "Conceived") by the Executive (whether at the request or
                ---------
suggestion of the Company or otherwise, whether alone or in conjunction with
others, and whether during regular hours of work or otherwise) during the term
of his employment by the Company, which may be directly or indirectly useful in,
or related to, the business, ventures or other activities of or products
manufactured or sold by the Company or any of its Subsidiaries or Affiliates or
any business or products contemplated by the Company or any of its Subsidiaries
or Affiliates while the Executive was or is an employee, officer or director of
the Company (collectively, "Proprietary Rights"), together with Inventions so
                            ------------------
Conceived by the Executive within the six-month period following the Termination
Date and which directly relate to Company work initiated, conducted, observed,
or contemplated prior to the Termination Date, shall be promptly and fully
disclosed by the Executive to the Board and shall be the exclusive property of
the Company as against the Executive and his successors, heirs, devisees,
legatees and assigns, and the Executive hereby assigns to the Company his entire
right, title and interest therein and shall promptly deliver to the Company all
papers, drawings, models, data and other material relating to any of the
foregoing Proprietary Rights conceived, made, developed, created or reduced to
practice by him as aforesaid.  All copyrightable Proprietary Rights shall be
considered "works made for hire."  The Executive shall, upon the Company's
request and without any payment therefor or expense with respect thereto,
execute any documents necessary or advisable in the reasonable opinion of the
Company's counsel to assign, and confirm the Company's title in, his entire
right, title and interest in the foregoing Proprietary Rights and to direct
issuance of patents or copyrights to the Company with respect to such
Proprietary Rights as are the Company's exclusive property as against the
Executive and his successors, heirs, devisees, legatees and assigns under this
Section 5.3 or to vest in the Company title to such Proprietary Rights as
against the Executive and his successors, heirs, devisees, legatees and assigns,
the expense of securing any such patent or copyright, however, to be borne by
the Company.

6.   RESTRICTED ACTIVITIES.  The Executive agrees that some restrictions on his
activities during and after his employment are necessary to protect the
goodwill, Confidential Information and other legitimate interests of the Company
and its Subsidiaries and Affiliates:

                                      -6-
<PAGE>

     6.1  Non-Competition.  While the Executive is employed by the Company and
          ---------------
for a period of two years immediately following termination of his employment
(the "Non-Competition Period"), the Executive shall not, directly or indirectly,
      ----------------------
whether as owner, partner, investor, consultant, agent, employee, co-venturer or
otherwise, compete with the Company or any of its Subsidiaries or Affiliates
within the United States in any Competitive Business or undertake any planning
for any Competitive Business.  Without limiting the generality of the foregoing,
during the Non-Competition Period, the Executive will not solicit or encourage
any Person who is or was a customer of the Company or any of its Subsidiaries or
Affiliates to terminate its relationship with any of them, or to conduct with
any other Person any business or activity which such customer conducted with the
Company or any of its Subsidiaries or Affiliates, and which is or would be
detrimental to the Company.

     6.2  Outside Activities.  The Executive agrees that except as provided by
          ------------------
the proviso to Section 2, during his employment with the Company, he will not
undertake any outside activity, whether or not competitive with the business of
the Company or any of its Subsidiaries or Affiliates, that could reasonably give
rise to a conflict of interest or otherwise interfere with the performance of
his duties and obligations to the Company or any of its Subsidiaries or
Affiliates.

     6.3  Non-Solicitation of Employees.  Acknowledging the strong interest of
          -----------------------------
the Company in an undisrupted workplace, the Executive further agrees that while
he is employed by the Company and for a period of two years immediately
following termination of his employment, the Executive will not (a) directly, or
indirectly through agents or other representatives, seek to persuade, solicit or
encourage any employee of the Company or any of its Subsidiaries or Affiliates
to discontinue employment with the Company or any of its Subsidiaries or
Affiliates or (b) solicit or encourage any independent contractor providing
services to the Company or any of its Subsidiaries or Affiliates to terminate or
diminish its relationship with the Company or any of its Subsidiaries or
Affiliates.

     6.4  Ownership of Securities.  Notwithstanding the provisions of this
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Sections 6, the Executive shall have the right to acquire as a passive investor
(with no involvement in the operations or management of the business) up to 1%
of any class of securities which is (a) issued by any Person engaged in a
Competitive Business and (b) publicly traded on a national securities exchange
or over-the-counter market.

7.   ENFORCEMENT OF COVENANTS.  The Executive acknowledges that he has carefully
read and considered all the terms and conditions of this Agreement, including
the restraints imposed upon him pursuant to Sections 5 and 6.  The Executive
agrees that such restraints are necessary for the reasonable and proper
protection of the Company and its Subsidiaries and Affiliates and that each and
every one of the restraints is reasonable in respect to subject matter, length
of time and geographic area.  The Executive further acknowledges that, were he
to breach any of the covenants contained in Section 5 or 6, the damage to the
Company would be irreparable.  The Executive therefore agrees that the Company,
in addition to any other remedies available to it, shall be entitled to
preliminary and permanent injunctive (or other

                                      -7-
<PAGE>

equitable) relief against any breach or threatened breach by the Executive of
any of such covenants, without having to post bond. The Company will be entitled
to recover from the Executive any attorneys fees and costs it incurs in
connection with the successful enforcement of its rights under Section 5 and 6,
and the Executive will be entitled to recover from the Company reasonable
attorneys fees and costs he incurs in connection with the successful defense of
any such enforcement action brought by the Company. The parties further agree
that, in the event that any provision of Section 5 or 6 shall be determined by
any court of competent jurisdiction to be unenforceable by reason of its being
extended over too great a time, too large a geographic area or too great a range
of activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law.

8.   TERMINATION.

     8.1  Death.  The Executive's employment hereunder shall terminate upon his
          -----
death.

     8.2  Incapacity.  If the Executive shall have been unable to perform his
          ----------
duties hereunder by reason of any physical or mental illness, injury or other
incapacity (collectively "Incapacity") (a) for any period of 90 consecutive days
                          ----------
or (b) for a total of 150 days in any period of 12 consecutive calendar months,
in the reasonable judgment of the Board, after consultation with such experts,
if any, as the Board may deem necessary or advisable, the Company may terminate
the Executive's employment hereunder by written notice to the Executive.  During
any period of Incapacity prior to termination of the Executive's employment
under this Section 8.2, the Company shall continue to pay and provide to the
Executive, as the case may be, all amounts and benefits due the Executive under
Section 3.

     8.3  Cause.  The Company may terminate the Executive's employment hereunder
          -----
for Cause at any time upon written notice to the Executive.  For the purposes of
this Agreement, the Company shall have "Cause" to terminate the Executive's
                                        -----
employment hereunder upon: (a) the Executive's breach of any of his obligations
set forth in this Agreement, which breach is not cured within 15 days after
receipt by the Executive from the Board of written notice of such breach; (b)
the Executive's breach of his fiduciary duties as an officer or director of the
Company or any of its Subsidiaries or Affiliates, or as an officer, trustee,
director or other fiduciary of any pension or employee benefit plan of the
Company or any of its Subsidiaries or Affiliates; (c) the Executive's commission
of a felony involving fraud, personal dishonesty or moral turpitude (whether or
not in connection with his employment); or (d) the Executive's failure to follow
the reasonable instructions of the Board, which failure does not cease within 15
days after receipt by the Executive from the Board of written notice of such
failure.

     8.4  Other than for Cause.  The Company may terminate the Executive's
          --------------------
employment hereunder other than for Cause at any time upon written notice to the
Executive.

     8.5  Good Reason.  The Executive may terminate the Executive's employment
          -----------
hereunder for Good Reason at any time upon 60 days' prior written notice to the
Company.  In the event of termination of the Executive pursuant to this Section
8.5, the Board may elect to

                                      -8-
<PAGE>

waive the period of notice or any portion thereof. For the purposes of this
Agreement, the Executive shall have "Good Reason" to terminate the Executive's
                                     -----------
employment hereunder upon: (a) material diminution in the nature or scope of
Executive's responsibilities, duties or powers, in each case except in the event
of termination of the Executive's employment pursuant to Section 8.1, 8.2, 8.3
or 8.6, (b) a reduction in the amount of Executive's Salary, (c) the failure by
the Company to pay the Executive his Salary, Special Bonus or Annual Bonus as
provided in Sections 3.1 through 3.3, respectively (provided, that in the case
                                                    --------
of the Annual Bonus or the Special Bonus, the Company is not required to pay any
part of such bonus that is conditioned upon certain events, including, without
limitation, the achievement of Board-specified performance targets, unless such
events have occurred), (d) the failure by the Company to grant the Executive the
Stock Options, (e) the material failure, individually or in the aggregate, by
the Company to provide the Executive with the benefits provided for in Sections
3.5 through 3.13, (f) a Change of Control in which the successor company, if
any, to the Company fails to assume this Agreement in its entirety or (g)
subsequent to a Change of Control, the Executive is not the most senior finance
officer of the Company or the successor company, as the case may be.

     8.6  Other than for Good Reason.  The Executive may terminate his
          --------------------------
employment hereunder at any time upon 60 days' prior written notice to the
Company. In the event of termination of the Executive pursuant to this Section
8.6, the Board may elect to waive the period of notice, or any portion thereof.

9.   COMPENSATION UPON TERMINATION.

     9.1  Death.  In the event of the Executive's death during the term hereof,
          -----
the Company shall pay or transfer, as the case may be, to the Executive's
designated beneficiary or, if no beneficiary has been designated by the
Executive, to his estate, (a) his Salary that is earned and unpaid at the date
of death, (b) all amounts due the Executive as of the date of Executive's death
pursuant to Sections 3.3 and 3.5 through 3.13, and (c) to the extent not already
granted, the grant of Stock Options contemplated by Section 3.4; provided, that
Executive's rights in the event of death with respect to the Stock Options shall
be governed by a stock option certificate, and (d) at the end of such fiscal
year, an amount equal to the product of (A) the Annual Bonus that the Executive
would otherwise have earned for such fiscal year if death had not occurred
multiplied by (B) a fraction, the numerator of which is the number of days from
---------- --
the beginning of such fiscal year until the date of death and the denominator of
which is 365.

     9.2  Incapacity.  If the Executive's employment shall be terminated by
          ----------
reason of his incapacity pursuant to Section 8.2, the Company shall (a) continue
through the Termination Date to pay or provide to Executive, as the case may be,
all amounts and benefits due to the Executive through the Termination Date under
Section 3 and (b) pay the Executive at the end of the fiscal year in which the
Termination Date occurred, an amount equal to the product of (A) the Annual
Bonus that the Executive would otherwise have earned for such fiscal year if
termination pursuant to Section 8.2 had not occurred multiplied by (B) a
                                                     ---------- --
fraction, the

                                      -9-
<PAGE>

numerator of which is the number of days from the beginning of such fiscal year
until the date of termination pursuant to Section 8.2 and the denominator of
which is 365. In addition, the Executive shall receive disability insurance
payments to the extent the Executive is eligible under the Company's disability
insurance policy and applicable law.

     9.3  Cause.  If the Company shall terminate the Executive's employment for
          -----
Cause, the Company shall have no further obligations to the Executive under this
Agreement other than the payment or provision to the Executive, as the case may
be, of all amounts and benefits due the Executive through the Termination Date
under Section 3.

     9.4  Other than for Cause; Good Reason.  If the Company shall terminate the
          ---------------------------------
Executive's employment pursuant to Section 8.4 or the Executive shall terminate
the Executive's employment pursuant to Section 8.5, and, if no benefits are
payable to the Executive under a separate severance agreement or an executive
severance plan (acknowledged in writing by the Executive to supersede the
provisions of this Section 9.4) as a result of such termination, then the
Company shall pay or provide to the Executive:

          (a)  as soon as reasonably practicable after the Termination Date, all
     amounts and benefits provided for in Section 3 and due to the Executive
     through the Termination Date; and

          (b)  Executive's Salary in effect at the time notice of termination is
     given until the second anniversary of the Termination Date, payable on a
     monthly basis or such other time increment as the Executive and the Company
     mutually agree, and

          (c)  to the extent not previously paid, an Annual Bonus for the
     fiscal year ending December 31, 2000 (such Annual Bonus to be prorated for
     the period that Executive is employed by the Company in 2000) in an amount
     equal to 100% of Salary in effect at the time notice of termination is
     given, and an Annual Bonus for the fiscal year ending December 31, 2001 in
     an amount equal to 75% of Salary in effect at the time notice of
     termination is given.

With respect to any termination of employment to which this Section 9.4 applies,
until the earlier to occur of (1) the second anniversary of the Termination Date
or (2) the date on which the Executive receives from another employer (including
self-employment or engaging in an enterprise as a sole proprietor or partner)
medical and dental benefits substantially comparable to those made available by
the Company to the Executive as of the time notice of termination is given (and
without regard to any diminution of such medical and dental benefits made by the
Company in anticipation of such notice of termination) (the "Benefits
                                                             --------
Termination Date"), the Company shall, if the Executive was participating in any
----------------
Company medical and dental insurance plans pursuant to Section 3.6 immediately
prior to the effectiveness of his termination of employment and subject to any
employee contribution applicable to the Executive immediately prior to such
effectiveness, continue to provide and contribute to the cost of the Executive's
participation in such medical and dental insurance plans so long as the

                                      -10-
<PAGE>

Executive is entitled to continue such participation under applicable law and
plan terms.  The obligations of the Company to the Executive under this Section
9.4 (other than clause (a) of the first sentence of this Section 9.4) are
conditioned upon the Executive's signing a release of claims in the form of
Exhibit A (the "Release") within 28 days of the date on which notice of
                -------
termination is given and upon such Release remaining in full force and effect
thereafter.  Except as otherwise provided, all severance payments under this
Section 9.4 will be in the form of salary continuation, payable in accordance
with the normal payroll practices of the Company and will begin at the Company's
next regular payroll period following the effective date of the Release, but
shall be retroactive to the Termination Date; provided, that payments to the
                                              --------
Executive under this Section 9.4 shall not be reduced by reason of any
compensation payments Executive receives from employment subsequent to the
Termination Date.

     9.5  Other than for Good Reason.  If the Executive shall terminate his
          --------------------------
employment pursuant to Section 8.6, the Company shall have no further
obligations to the Executive under this Agreement other than payment or
provision of all amounts and benefits provided for in Section 3 and due to the
Executive through the Termination Date (provided, that, if, in accordance with
Section 8.6, the Board elects to waive the period of notice, or any portion
thereof, the payment of Salary under this Section 9.5 shall continue through the
notice period or any portion thereof so waived).

     9.6  Post-Termination Obligations Generally.  Except as expressly set forth
          --------------------------------------
in this Section 9, the Stock Option Certificate and as provided by law, the
Company shall have no further obligations to the Executive following expiration
of the term of the Executive's employment hereunder, and performance by the
Company of any obligation specifically provided in this Section 9 shall
constitute full settlement of any claim that the Executive may have on account
of such termination against the Company and its Subsidiaries and Affiliates and
all of their respective past and present officers, directors, stockholders,
controlling Persons, employees, agents, representatives, successors and assigns
and all other others connected with any of them, both individually and in their
official capacities.

     9.7  Change of Control.  If within two years of a Change of Control, the
          -----------------
Executive terminates his employment for Good Reason or the Company terminates
Executive's employment other than for Cause, the Company shall have no further
obligations to the Executive under this Agreement other than (i) a lump sum
payment equal to two times the sum of the Salary and the Annual Bonus paid to
Executive during the preceding twelve months; provided, that if Executive
                                              --------
terminates his employment pursuant to this Section 9.7 during any period prior
to March 21, 2001, the Annual Bonus portion of the calculation shall be fixed at
$400,000 and (ii) continued contributions (if the Executive was participating in
any Company medical and dental insurance plans pursuant to Section 3.6
immediately prior to the effectiveness of his termination of employment and
subject to any employee contribution applicable to the Executive immediately
prior to such effectiveness), until the Benefits Termination Date, to the cost
of Executive's participation in such medical and dental insurance plans so long
as the Executive is entitled to continue such participation under applicable law
and plan terms.

                                      -11-
<PAGE>

10.  CONFLICTING AGREEMENTS.  Executive hereby represents and warrants that the
execution of this Agreement and the performance of Executive's obligations
hereunder will not breach or be in conflict with any other agreement to which
Executive is a party or is bound and that Executive is not now subject to any
covenants against competition, nonsolicitation or similar covenants that would
affect the performance of Executive's obligations hereunder or would restrict
the Company in its operations, including hiring any additional executives.
Executive has provided the Company with a true and correct copy of all
agreements having executory obligations on the part of the Executive or the
Company between Executive and Executive's former employer or employers and any
similar agreements governing Executive's rights and obligations relating to any
former employer. Executive will not disclose to or use on behalf of the Company
any confidential or proprietary information of a third party without such
party's consent.

11.  WITHHOLDING.  All payments made by the Company under this Agreement shall
be reduced by any tax or other amounts required to be withheld by the Company
under applicable law.

12.  NOTICES. All notices, requests and demands to or upon the parties hereto to
be effective shall be in writing, by facsimile, by overnight courier or by
registered or certified mail, postage prepaid and return receipt requested, and
shall be deemed to have been duly given or made upon:  (a) delivery by hand, (b)
one business day after being sent by nationally recognized overnight courier; or
(c) in the case of transmission by facsimile, when confirmation of receipt is
obtained.  Such communications shall be addressed and directed to the parties as
follows (or to such other address as either party shall designate by giving like
notice of such change to the other party):

          If to the Executive:

               Christopher T. Sortwell
               950 E. Glengarry Circle
               Bloomfield Hills, MI 48301

          with a copy to:

               Butzel Long
               150 West Jefferson Street, Suite 900
               Detroit, MI 48226
               Attention: George Kuehn
               Facsimile: (313) 225-7080

                                      -12-
<PAGE>

          If to the Company:

               Aurora Foods Inc.
               1000 St. Louis Union Station, Suite 200
               St. Louis, MO 63103
               Attention: Chief Executive Officer
               Facsimile: (314) 632-5633

          with a copy to:

               Fenway Partners, Inc.
               152 West 57th Street, 59th Floor
               New York, NY 10019
               Attention: Richard C. Dresdale
               Facsimile: (212) 757-0609

          and

               Ropes & Gray
               One International Place
               Boston, MA 02110
               Attention: Lauren I. Norton, Esq.
               Facsimile: (617) 951-7050

13.  DEFINITIONS; CERTAIN RULES OF CONSTRUCTION.  Certain capitalized terms are
used in this Agreement with the specific meanings defined below in this Section
13.  Except as otherwise explicitly specified to the contrary or unless the
context clearly requires otherwise, (a) the capitalized term "Section" refers to
sections of this Agreement, (b) the capitalized term "Exhibit" refers to
exhibits to this Agreement, (c) references to a particular Section include all
subsections thereof, (d) the word "including" shall be construed as "including
without limitation" and (e) references to "$" mean United States dollars.

     13.  "AAA" is defined in Section 19.
           ---

     13.2 "Affiliate" shall mean (a) any Person directly or indirectly
           ---------
controlling, controlled by or under direct or indirect common control with the
Company (or other specified Person),  (b) any other Person which, together with
its Affiliates (as defined in clause (a) above), shall, directly or indirectly,
own beneficially or control the voting of at least 10% of the ownership interest
in the Company (or other specified Person) and (c) any other Person of which the
Company (or other specified Person) and its Affiliates (as defined in clauses
(a) and (b) above) shall, directly or indirectly, own beneficially or control
the voting of at least 10% of any class of outstanding capital stock or other
evidence of beneficial interest or of any interest as a general partner or joint
venturer.

                                      -13-
<PAGE>

     13.3  "Annual Bonus" is defined in Section 3.2.
            ------------

     13.4  "Beneficial Owner" shall have the meaning in Rules 13d-3 and 13d-5
            ----------------
under the Exchange Act, except that a Person shall be deemed to have a
"beneficial ownership" of all shares that any such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time.

     13.5  "Benefits Termination Date" is defined in Section 9.4.
            -------------------------

     13.6  "Board" is defined in Section 2.
            -----

     13.7  "Cause" is defined in Section 8.3.
            -----

     13.8  "Change of Control" means:
            -----------------

               a.   any person (used as such term is defined in Sections 13(d)
          and 14(d) of the Exchange Act), other than one or more Permitted
          Holders, is or becomes the Beneficial Owner, directly or indirectly,
          of more than 35% of the total voting power of the Voting Stock of the
          Company; provided that the Permitted Holders are Beneficial Owners of,
          directly or indirectly, in the aggregate, a lesser percentage of the
          total voting power of the Voting Stock of the Company than such other
          person (used as such term is defined in Sections 13(d) and 14(d) of
          the Exchange Act) and do not have the right or ability by voting
          power, contract or otherwise to elect or designate for election a
          majority of the Board; provided, further, that a person (used as such
          term is defined in Sections 13(d) and 14(d) of the Exchange Act) shall
          be deemed to be the Beneficial Owner of any Voting Stock of a Person
          held by any other Person (the "Parent Corporation") if such other
          person (used as such term is defined in Sections 13(d) and 14(d) of
          the Exchange Act) is the Beneficial Owner of, directly or indirectly,
          more than 35% of the voting power of the Voting Stock of the Parent
          Corporation and the Permitted Holders are Beneficial Owners of,
          directly or indirectly, in the aggregate, a lesser percentage of the
          voting power of the Voting Stock of the Parent Corporation and do not
          have the right or ability by voting power, contract or otherwise to
          elect or designate for election a majority of the board of directors
          of the Parent Corporation; or

               b.   the consummation, through one transaction or a series of
          related transactions, of a reorganization, merger or consolidation, in
          each case, unless, following such reorganization, merger or
          consolidation the shareholders of the Company immediately prior to
          such reorganization, merger or consolidation are the Beneficial
          Owners, directly or indirectly, of more than 50% of, respectively, the
          then outstanding shares of Common Stock resulting from such
          reorganization, merger or consolidation and the combined voting power
          of the Voting Stock of the Company; or

                                      -14-
<PAGE>

               c.   the consummation, through one transaction or a series of
           related transactions, of (i) a complete liquidation or dissolution of
           the Company or (ii) the sale, disposition or other transfer or
           removal of assets of the Company to which 40% of the Company's
           annualized revenues as of December 31, 1999 are directly
           attributable; provided, that a Change of Control shall not be deemed
                         --------
           to have occurred if the entity or entities acquiring control in such
           sale or disposition are the Permitted Holders or their Affiliates.

     13.9  "Common Stock" means the common stock, $.01 par value, of the
            ------------
           Company.

     13.10 "Company" is defined in the preamble to this Agreement.
            -------

     13.11 "Competitive Business" means any existing business conducted by the
            --------------------
Company or any of its Subsidiaries during the term of the Executive's employment
with the Company; provided that the phrase "existing business" shall for
purposes of this Section 13.11 be deemed to include any business actively
proposed to be conducted by the Company and for which the Company has developed
a formal business or marketing plan.

     13.12 "Confidential Information" means any and all information regarding
            ------------------------
the Company and its Subsidiaries and Affiliates that is not generally known by
others with whom they compete or do business, or with whom they actively plan to
compete or do business, including such information relating to (a) the
development, research, testing, manufacturing, marketing and financial
activities of the Company and its Subsidiaries, (b) the Products, (c) the costs,
sources of supply, financial performance and strategic plans of the Company and
its Subsidiaries and Affiliates, (d) the identity and special needs of the
customers of the Company and its Subsidiaries and Affiliates and (e) the people
and organizations with whom the Company and its Subsidiaries and Affiliates have
business relationships and those relationships, but excluding information which
(i) is generally available to and known by the public or (ii) is or becomes
known on a non-confidential basis from a source other than the Executive.

     13.13 "Consulting Agreement" means the Consulting Agreement dated as of May
            --------------------
10, 1999, among the Executive, SBC Holdings and The Stroh Companies, Inc.

     13.14 "Documents" is defined in Section 5.2.
            ---------

     13.15 "Effective Date" is defined in the preamble.
            --------------

     13.16 "Executive" is defined in the preamble.
            ---------

     13.17 "Exchange Act" means the Securities and Exchange Act of 1934, as
            ------------
amended.

     13.18 "Fenway" means Fenway Capital Partners Fund, L.P., a Delaware limited
            ------
partnership, and Fenway Capital Partners Fund II, L.P., a Delaware limited
partnership.

     13.19 "Good Reason" is defined in Section 8.5.
            -----------

                                      -15-
<PAGE>

     13.29 "McCown" means McCown De Leeuw & Co. III, L.P., McCown De Leeuw & Co.
            ------
III (Europe), L.P., McCown De Leeuw & Co. III (Asia), L.P., Gamma Fund LLC,
McCown De Leeuw & Co. IV, L.P., McCown De Leeuw & Co. IV Associates, L.P.

     13.21 "Metropolitan Area" means the St. Louis, Missouri metropolitan area.
            -----------------

     13.22 "Non-Competition Period" is defined in Section 6.1.
            ----------------------

     13.23 "Permitted Holders" means Fenway, McCown, Delta Fund LLC, California
            -----------------
Public Employees Retirement System, Dartford Partnership L.L.C., Tiger Oats
Limited and UBS Capital LLC.

     13.24 "Person" means any individual, partnership, corporation, association,
            ------
trust, joint venture, limited liability company, unincorporated organization or
entity, and any government, governmental department or agency or political
subdivision thereof.

     13.25 "Products" means all products planned, researched, developed, tested,
            --------
manufactured, sold, licensed, leased or otherwise distributed or put into use by
the Company or any of its Subsidiaries or Affiliates, together with all services
provided or planned by the Company or any of its Subsidiaries or Affiliates,
during the Executive's employment; provided that Products shall not include
products not in distribution and for which there is not active planning,
research, development or testing or for which there is not a current formal
business or marketing plan.

     13.26 "Proprietary Rights" is defined in Section 5.3.
            ------------------

     13.27 "Release" is defined in Section 9.4.
            -------

     13.28 "Salary" is defined in Section 3.1.
            ------

     13.29 "SBC Holdings" means SBC Holdings, Inc. (f/k/a The Stroh Brewery
            ------------
Company), and, for purposes of Section 2, includes its parent, subsidiaries and
affiliates.

     13.30 "Special Bonus" is defined in Section 3.3.
            -------------

     13.31 "Stock Options" is defined in Section 3.4.
            -------------

     13.32 "Subsidiary" means any Person of which the Company (or other
            ----------
specified Person) shall, directly or indirectly, own beneficially or control the
voting of at least a majority of the outstanding capital stock (or other shares
of beneficial interest) entitled to vote generally or at least a majority of the
partnership, joint venture or similar interests, or in which the Company (or
other specified Person) or a Subsidiary thereof shall be a general partner or
joint venturer without limited liability.

     13.33 "Termination Date" is defined in Section 1.2.
            ----------------

                                      -16-
<PAGE>

     13.34 "Voting Stock" of a Person means all classes of capital stock of such
            ------------
Person then outstanding and normally entitled to vote in the election of
directors or managers.

14.  MISCELLANEOUS.  No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is approved by the
Board and agreed to in writing by the Executive and such officer as may be
specifically authorized by the Board in connection with such approval.  No
waiver by either party hereto at any time of compliance with or of any breach by
the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.  No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement.  The validity, interpretation,
construction and performance of this Agreement and the legal relations created
thereby shall be governed by the domestic substantive laws of the State of
Missouri without giving effect to any choice or conflict of laws provision or
rule that would cause the application of the domestic substantive laws of any
other jurisdiction.

15.  SEVERABILITY.  If any portion or provision of this Agreement shall to any
extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.

16.  COUNTERPARTS.  This Agreement may be executed in any one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.

17.  ENTIRE AGREEMENT.  This Agreement (together with the Stock Option
Certificate) constitutes the entire agreement between the parties hereto, and
supersedes any and all prior communications, agreements and understandings,
written or oral, with respect to the terms and conditions of the Executive's
employment with the Company.

18.  ASSIGNMENT.  This Agreement shall inure to the benefit of and be binding
upon (a) the Executive, his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees and (b)
the Company and its successors (including by means of reorganization, merger,
consolidation or liquidation) and permitted assigns.  The Company may assign
this Agreement to any of its Subsidiaries or to any successor of the Company by
reorganization, merger, consolidation or liquidation and any transferee of all
or substantially all of the business or assets of the Company or of any division
or line of business of the Company with which the Executive is at any time
associated; provided that, except to the extent it occurs upon a Change of
Control, no such assignment shall operate to release the Company from its
payment and benefit obligations hereunder.  The Company requires the personal
services of the Executive hereunder and the Executive may not assign this
Agreement.

                                      -17-
<PAGE>

19.  ARBITRATION.  With the exception of claims arising under or connected to
Sections 5 and 6, any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted by a single arbitrator in St. Louis, Missouri in accordance with the
National Rules for the Resolution of Employment Disputes of the American
Arbitration Association ("AAA") then in effect; provided, however, that the
                          ---                   --------  -------
parties may agree to use an arbitrator other than those provided by the AAA.
The arbitrator shall not have the authority to add to, detract from, or modify,
any provision hereof nor to award punitive damages to any injured party.  The
arbitrator shall have the authority to order back-pay and severance
compensation, and, to the extent deemed reasonable and appropriate by such
arbitrator given the issues involved and the outcome of the arbitration, shall
award to the prevailing party reimbursement of out of pocket costs and expenses
(including legal fees) incurred by such party in connection with such dispute or
controversy, together with interest thereon.  A decision by a the arbitrator
shall be final and binding.  Judgment may be entered on the arbitrator's award
in any court having competent jurisdiction.  Responsibility for bearing the cost
of the arbitration shall be determined by the arbitrator and shall be
proportional to the arbitrator's decision on the merits.

     IN WITNESS WHEREOF, the parties hereto have hereunto set their hands under
seal, as of the date first above written.

                              THE COMPANY:

                              AURORA FOODS, INC.

                              By_________________________________
                                Name:
                                Title:

                              THE EXECUTIVE:

                              ___________________________________
                              Christopher T. Sortwell

                                      -18-
<PAGE>

                                                                       Exhibit A
                                                                       ---------

                               RELEASE OF CLAIMS

     FOR AND IN CONSIDERATION OF the special payments and benefits to be
provided in connection with the termination of my employment in accordance with
the terms of the Employment Agreement dated as of March 21, 2000 (as amended and
in effect from time to time, the "Employment Agreement") between Aurora Foods
                                  --------------------
Inc., a Delaware corporation (the "Company"), and me, I, on my own behalf and on
                                   -------
behalf of my personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees and all others connected
with me, hereby release and forever discharge Fenway (as defined in the
Employment Agreement), the Company and their respective Affiliates (as defined
in the Employment Agreement) and all of their respective past and present
officers, directors, stockholders, controlling persons, employees, agents,
representatives, successors and assigns and all others connected with any of
them (all collectively, the "Released"), both individually and in their official
                             --------
capacities, from any and all rights, liabilities, claims, demands and causes of
action of any type (collectively, "Claims") which I have had in the past, now
                                   ------
have, or might now have, through the date of my signing of this Release of
Claims, in any way resulting from, arising out of or connected with my
employment or its termination or pursuant to any federal, state, foreign or
local employment law, regulation or other requirement (including, without
limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, and the fair employment
practices laws of the state or states in which I have been employed by the
Company, each as amended from time to time); provided, however, that the
                                             --------  -------
foregoing release shall not apply to any future claim to enforce the terms of my
Employment Agreement with the Company or any future claim arising from my status
as a vested beneficiary of an employee benefit or pension benefit plan.

     In signing this Release of Claims, I acknowledge that I have had at least
21 days from the date of notice of termination of my employment to consider the
terms of this Release of Claims and that such time has been sufficient; that I
am encouraged by the Company to seek the advice of an attorney prior to signing
this Release of Claims; and that I am signing this Release of Claims voluntarily
and with a full understanding of its terms.

     I understand that I may revoke this Release of Claims at any time within
seven days of the date of my signing by written notice to the Company and that
this Release of Claims will take effect only upon the expiration of such seven-
day revocation period and only if I have not timely revoked it.

     Intending to be legally bound, I have signed this Release of Claims under
seal as of the date first written above.

Signature: ___________________________________
               Christopher T. Sortwell

Date Signed: _________________________________<PAGE>

                                                                   Exhibit 10.40

                              EMPLOYMENT AGREEMENT
                              --------------------

                                (James W. Liken)

          THIS AGREEMENT, made as of October 1, 1999 ("Effective Date"), by and
between RESPIRONICS, INC., a Delaware corporation (the "Company"), and JAMES W.
LIKEN, of Pittsburgh, Pennsylvania ("Executive").

                              W I T N E S S E T H:
                              - - - - - - - - - -

          WHEREAS, the Company is engaged in the business of the design,
development, manufacture, marketing and sale principally of respiratory and
other medical equipment;

          WHEREAS, Executive is a Director of the Company and possesses valuable
knowledge and skills that have contributed and will contribute to the successful
operation of the Company's business;

          WHEREAS, the Company and Executive have agreed to execute and deliver
this Agreement in consideration, among other things, of (i) the access Executive
has had and will continue to have to confidential or proprietary information of
the Company, (ii) the access Executive will have to confidential or proprietary
information to be acquired hereafter by the Company, (iii) the willingness of
the Company to make valuable benefits available hereafter to Executive and (iv)
Executive's receipt of compensation from time to time by the Company; and

          WHEREAS, the Company desires to retain the services of Executive, and
Executive is willing to accept employment with the Company, upon the terms and
subject to the conditions hereinafter set forth.

          NOW, THEREFORE, intending to be legally bound, the Company agrees to
employ Executive, and Executive hereby agrees to be employed by the Company,
upon the following terms and conditions:

                                   ARTICLE I
                                   EMPLOYMENT
                                   ----------

          1.01.  Office.  Executive is hereby employed as President and Chief
                 ------
Executive Officer of the Company and in such other executive and managerial
capacities as the Board of Directors of the Company may from time to time
determine, and in such capacity or capacities shall use his best energies or
<PAGE>

abilities in the performance of his duties hereunder and as prescribed in the
By-Laws of the Company.

          1.02.  Term.
                 ----

          (a)  Subject to the terms and provisions of Article II hereof,
Executive shall be employed by the Company for a period of three (3) years (the
"Initial Term"), commencing on the Effective Date of this Employment Agreement
and ending on September 30, 2002.

          (b)  Subject to the terms and provisions of Article II hereof, the
Initial Term shall automatically be extended for a period of three (3) years
(the "Extended Term") unless (i) not less than thirty (30) days prior to the
expiration of the Initial Term, the Company shall advise Executive that the
Extended Term will not apply or (ii) not less than ninety (90) days prior to the
expiration of the Initial Term, Executive shall advise the Company that the
Extended Term shall not apply.

          (c)  Subject to the terms and provisions of Article II hereof, the
Extended Term (if applicable) shall automatically be extended for successive one
(1) year periods (such that the Extended Term will annually be extended to a
three (3) year period) unless, not less than ninety (90) days prior to the
expiration of the then current first year of the Extended Term, either Executive
or the Company shall advise the other that the Extended Term will not be further
extended.

          (e)  The Initial Term and the Extended Term (if applicable) are herein
referred to as the "Term."

          1.03.  Compensation.
                 ------------

          (a)  Base Salary.  During the Term, compensation shall be paid to
               -----------
Executive by the Company at the rate of $100,000 per annum (the "Base Salary"),
payable in equal installments every other week.  The Base Salary to be paid to
Executive shall not be adjusted during the Initial Term.  During the Extended
Term (if applicable), the Base Salary to be paid to Executive may be adjusted
upward or downward (but not below $100,000) by the Board of Directors of the
Company at any time (but not less frequently than annually) based upon
Executive's contribution to the success of the Company and on such other factors
as the Board of Directors of the Company shall deem appropriate.

          (b)  Stock Options.  As of the Effective Date of this Agreement,
               -------------
Executive shall be granted options to acquire 263,700 shares of the Company's
common stock (the "Stock Options") under

                                      -2-
<PAGE>

the Company's 1992 Stock Incentive Plan (the "1992 Plan") at an exercise price
equal to $8 3/8 per share. Subject to the terms hereof and the terms of the
Stock Option Agreement to be entered into in accordance with the terms of the
1992 Plan (the "Option Agreement"), the Stock Options shall vest and shall
become exercisable as follows: one-twelfth of the Stock Options shall vest and
become exercisable on the first day of each calendar quarter commencing January
1, 2000 if this Agreement has not been terminated by the Company or Executive
effective on or before the last day of the immediately preceding calendar
quarter.

          1.04.  Executive Benefits.  At all times during the Term, Executive
                 ------------------
shall have the right to participate in and receive benefits under and in
accordance with the then-current provisions of all incentive, profit sharing,
retirement, stock option or purchase plans, life, health and accident insurance,
hospitalization and other incentive and benefit plans or programs (except for
any such plan in which Executive may not participate pursuant to the terms of
such plan or Executive's geographic location) which the Company may at any time
or from time to time have in effect for executive employees of the Company or
its subsidiaries, Executive's participation to be on a basis commensurate with
other executive employees considering their respective responsibilities and
compensation.  Executive shall also be entitled to be reimbursed for all
reasonable expenses incurred by him in the performance of his duties hereunder.
In addition, the Company shall reimburse Executive for his membership dues at
the Duquesne Club in Pittsburgh, Pennsylvania.

          1.05.  Principal Place of Business.  The headquarters and principal
                 ---------------------------
place of business of the Company is located in Pittsburgh (Forest Hills),
Pennsylvania.  Executive's principal place of business will be at that site and
he will reside within a reasonable distance thereof.

                                   ARTICLE II
                                  TERMINATION
                                  -----------

          2.01.  Illness, Incapacity.  If, during the Term of Executive's
                 -------------------
employment hereunder, the Board of Directors of the Company shall determine that
Executive shall be prevented from effectively performing all his duties
hereunder by reason of illness or disability and such failure so to perform
shall have continued for a period of not less than three (3) months, then the
Company may, by written notice to Executive, terminate Executive's employment
hereunder effective at any time after such three (3) month period.  Upon
delivery to Executive of such notice, together with payment of any salary
accrued and unpaid

                                      -3-
<PAGE>

under Section 1.03 hereof, Executive's employment and all obligations of the
Company under Article I hereof shall forthwith terminate. The obligations of
Executive under Article IV hereof shall continue notwithstanding termination of
Executive's employment pursuant to this Section 2.01.

          2.02.  Death.  If Executive dies during the Term of his employment
                 -----
hereunder, Executive's employment hereunder shall terminate and all obligations
of the Company hereunder, other than any obligations with respect to the payment
of accrued and unpaid salary, shall terminate.

          2.03.  Company Termination.  (a)  For Cause.  In the event that, in
                 -------------------        ---------
the reasonable judgment of the Board of Directors of the Company, Executive
shall have (a) been guilty of any act of dishonesty material with respect to the
Company, or (b) been convicted of a crime involving moral turpitude, or (c)
intentionally disregarded the provisions of this Agreement or (d) intentionally
disregarded the express instructions of the Board of Directors of the Company
with respect to matters of policy continuing (in the case of clause (d)) for a
period of not less than thirty (30) days after notice of such disregard, the
Company may terminate this Agreement effective at such date as it shall specify
in a written notice to Executive.  Any such termination by the Company shall be
deemed to be termination "for cause".  Upon delivery to Executive of such notice
of termination, together with payment of any salary accrued and unpaid under
Section 1.03 hereof, Executive's employment and all obligations of the Company
under Article I hereof shall forthwith terminate.  The obligations of Executive
under Article IV hereof shall continue notwithstanding termination of
Executive's employment pursuant to this Section 2.03(a).

          (b)  Without Cause.  Executive's employment hereunder may be
               -------------
terminated at any time by the Company without cause if the Board of Directors of
the Company, by resolution duly adopted by the Board, so determines.  Except as
set forth in Section 2.05, all obligations of the Company under Articles I and
II cease upon termination.  The obligations of Executive under Article IV hereof
shall continue notwithstanding termination of Executive's employment pursuant to
this Section 2.03(b).

          2.04.  Executive Termination.  Executive agrees to give the Company
                 ---------------------
ninety (90) days prior written notice of the termination of his employment with
the Company. Simultaneously with such notice, Executive shall inform the Company
in writing as to his employment/consulting plans following the termination of
his employment with the Company.  In the event Executive has terminated his
employment with the Company because, in his

                                      -4-
<PAGE>

reasonable judgment, there has been: (a) a material downgrading in Executive's
duties, titles or responsibilities, (b) a change in the Executive's principal
place of business to a location not within 30 miles of its present location, (c)
any significant and prolonged increase in the traveling requirements applicable
to the discharge of Executive's responsibilities or (d) any other significant
material adverse change in working conditions, responsibilities or prestige
(including a notice under Section 1.02(c) hereof that the Extended Term (if
applicable) will not be further extended), Executive shall be entitled to the
compensation provided for in Section 2.05(b) upon such termination; provided
                                                                    --------
that Executive must provide notice of a termination within ninety (90) days of
the occurrence of a change Executive believes to be covered by clause (a), (b)
or (c) herein in order to claim that the termination is because of such change.
Otherwise, all obligations of the Company under Article I cease upon
termination, except for the payment of any salary accrued and unpaid under
Section 1.03. The obligations of Executive under Article IV hereof shall
continue notwithstanding termination of Executive's employment pursuant to this
Section 2.04.

          2.05.  Termination Payments - Discharge Without Cause.
                 ----------------------------------------------

          (a) If the Company terminates Executive's employment without cause
pursuant to Section 2.03(b) effective at any time on or before September 30,
2000, Executive shall not be entitled to any termination payments or other
benefits hereunder.

          (b) If the Company terminates Executive's employment without cause
pursuant to Section 2.03(b) effective at any time after September 30, 2000,
Executive shall be paid for the balance of the Term the Base Salary then in
effect; provided that if Executive's notice of termination occurs within ninety
        --------
(90) days of a reduction in Executive's Base Salary, the Base Salary prior to
the reduction shall be used for purposes of this Section 2.05(b) (it being
agreed that if such termination occurs before October 1, 2002, then for purposes
of this Section 2.05(b) the Base Salary used to determine the amount to which
Executive is entitled for the remainder of the Term shall be deemed to be
$400,000).  Additionally, for the balance of the Term, the Company will provide
Executive with health and dental insurance coverage as though Executive remained
an employee.  Executive will be required to pay the same portion of the premium
for such insurance coverage as if Executive remained an employee.  Executive
agrees to inform the Company of his employment/consulting jobs during the period
of time which Executive is receiving money under this Section.

                                      -5-
<PAGE>

          2.06.  Termination Payments - After Change of Control.
                 ----------------------------------------------

          (a) Change of Control shall mean the occurrence of any of the
following events:

               (i)   Individuals who on December 1, 1999 constitute the Board of
          Directors ("Board") of the Company (the "Incumbent Directors") cease
          for any reason to constitute at least a majority of the Board,
          provided that any person becoming a director subsequent to December 1,
          1999, whose election or nomination for election was approved by a vote
          of at least two-thirds of the Incumbent Directors then on the Board
          (either by a specific vote or by approval of the proxy statement of
          the Company in which such person is named as a nominee for director,
          without written objection by such Incumbent Directors to such
          nomination) shall be deemed to be an Incumbent Director.

               (ii)  Any "person" (as such term is defined in Section 3(a)(9) of
          the Securities Exchange Act of 1934, as amended (the "Exchange Act")
          and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is
          or becomes a "beneficial owner" (as defined in Rule 13d-3 under the
          Exchange Act), directly or indirectly, of securities of the Company
          representing a majority of the combined voting power of the Company's
          then outstanding securities eligible to vote for the election of the
          Board ("Company Voting Securities"); provided, however, that the event
                                               --------  -------
          described in this paragraph (ii) shall not be deemed to be a Change of
          Control by virtue of any of the following acquisitions: (A) by the
          Company or any subsidiary, (B) by any employee benefit plan sponsored
          or maintained by the Company or any subsidiary, or by any employee
          stock benefit trust created by the Company or any subsidiary or (C) by
          any underwriter temporarily holding securities pursuant to an offering
          of such securities.

               (iii) Consummation of any merger, consolidation, stock-for-stock
          exchange or similar transaction (collectively, "Business Combination")
          involving the Company or any of its subsidiaries that requires the
          approval of the Company's shareholders (whether for such transaction
          or the issuance of securities in the transaction), in which the
          holders of Company Voting Securities immediately prior to consummation
          of the Business Combination own, as a group, immediately after
          consummation of the Business Combination, voting

                                      -6-
<PAGE>

          securities of the Company (or, if the Company does not survive the
          Business Combination, voting securities of the corporation surviving
          the Business Combination) having less than 50% of the total voting
          power in an election of directors of the Company (or such other
          surviving corporation), excluding securities received by any holders
          of Company Voting Securities in the Business Combination which
          represent disproportionate percentage increases in their shareholdings
          in comparison to other holders of Company Voting Securities.

               (iv) Consummation of any sale, lease, exchange or other transfer
          (in one transaction or a series of related transactions, excluding any
          Business Combination) of all or substantially all of the assets of the
          Company to a person or entity which is not controlled by or under
          common control with the Company.

          (b) If Executive is terminated without cause upon or within eighteen
(18) months after a Change of Control, or if Executive provides notice (as
provided for in Section 2.04) to the Company upon or within eighteen (18) months
after the occurrence of a Change of Control that he is terminating employment
with the Company because, in his reasonable judgment, there has been: (i) a
material downgrading in Executive's duties, titles or responsibilities, (ii) a
change in Executive's principal place of business to a location not within
thirty (30) miles of its present location, (iii) any significant and prolonged
increase in the traveling requirements applicable to the discharge of
Executive's responsibilities or (iv) any other significant material adverse
change in working conditions, responsibilities or prestige, Executive shall be
entitled to the payments and other benefits provided for in Section 2.05(b) upon
such termination; provided that in this Change of Control circumstance,
notwithstanding Section 2.05(b), the termination payments shall be in an amount
equal to three (3) full years of Executive's Base Salary (regardless of the
remaining Term), and such payment shall be made to Executive in a lump sum to be
paid to Executive within five (5) business days after the termination of
employment (it being agreed that notwithstanding the parenthetical at the end of
the first sentence of Section 2.05(b), if such termination occurs before October
1, 2002, the Base Salary used to determine the amounts to which Executive is
entitled pursuant to this Section 2.06(b) shall be $100,000 and not $400,000).
Otherwise, all obligations of the Company under Article I cease upon
termination, except for the payment of any salary accrued and unpaid under
Section 1.03 hereof.  The obligations of Executive under Article IV hereof shall
continue

                                      -7-
<PAGE>

notwithstanding termination of Executive's employment pursuant to this Section
2.06.

          (c) After a Change of Control, Executive has the option to terminate
his employment with the Company for any reason by providing notice (as provided
for in Section 2.04) of termination to the Company, such notice to be provided
to the Company at any time within six (6) months after the Change of Control.
Within five (5) business days after a termination of employment governed by this
provision, Executive shall receive from the Company a lump sum payment equal to
one (1) year of Executive's Base Salary.  Additionally, for one (1) year after
the termination, the Company will provide Executive with health and dental
insurance coverage as though Executive remained an employee.  Executive will be
required to pay the same portion of the premium for such insurance coverage as
if Executive remained an employee.  Otherwise, all obligations of the Company
under Article I cease upon termination, except for the payment of any salary
accrued and unpaid under Section 1.03 hereof.  The obligations of Executive
under Article IV hereof shall continue notwithstanding termination of
Executive's employment pursuant to this Section 2.06.

          2.07.  Treatment of Stock Options Upon Termination and Change of
                 ---------------------------------------------------------
Control.  The Option Agreement to be entered into in connection with the Stock
-------
Options shall provide as follows in connection with the treatment of the Stock
Options in the event of termination of this Agreement and a Change of Control:

          (a) Termination by the Company Pursuant to Section 2.01.  Termination
              ---------------------------------------------------
of Executive's employment by the Company pursuant to Section 2.01 shall be
governed by the terms of the 1992 Plan applicable to termination of a "Disabled
Grantee" (as defined in the 1992 Plan), such that all Stock Options shall
immediately vest and become exercisable and remain exercisable for a period of
one (1) year after termination (but in no event after the expiration date for
the Stock Options).

          (b) Termination Pursuant to Section 2.02.  Termination of Executive's
              ------------------------------------
employment pursuant to Section 2.02 shall be governed by the terms of the 1992
Plan applicable in the case of death of an optionee during employment, such that
all Stock Options shall immediately vest and become exercisable and shall remain
exercisable by executive's estate or legal representative for a period of one
(1) year after the date of death (but in no event after the expiration date for
the Stock Options).

          (c) Termination by the Company Pursuant to Section 2.03(a).
              ------------------------------------------------------
Termination of Executive's employment by the Company

                                      -8-
<PAGE>

pursuant to Section 2.03(a) shall be governed by the terms of the 1992 Plan
applicable to termination of employment other than for reason of voluntary
termination with consent of the Company, retirement or death, such that all
unexercised Stock Options (whether vested or unvested) shall automatically and
immediately terminate.

          (d) Termination by the Company Pursuant to Section 2.03(b).
              ------------------------------------------------------
Termination of Executive's employment by the Company pursuant to Section 2.03(b)
shall be deemed to be a "voluntary termination with consent" for purposes of the
1992 Plan, such that all Stock Options which have vested and become exercisable
prior to the date of termination shall be exercisable for the periods set forth
in the 1992 Plan (generally, three months from termination in the case of Stock
Options which are incentive stock options and one year in the case of Stock
Options which are non-statutory stock options, but in no event after the
expiration date for the Stock Options).  In accordance with the 1992 Plan, all
unvested Stock Options shall terminate immediately upon termination of
Executive's employment by the Company pursuant to Section 2.03(b).

          (e) Termination by Executive Pursuant to Section 2.04.  Termination of
              -------------------------------------------------
Executive's employment by Executive pursuant to Section 2.04 shall be governed
by the terms of the 1992 Plan applicable to termination of employment other than
for reason of voluntary termination with consent of the Company, retirement or
death, such that all unexercised Stock Options (whether vested or unvested)
shall automatically and immediately terminate.

          (f) Effect of Change of Control and Termination After Change of
              -----------------------------------------------------------
Control.  Notwithstanding Section 8 of the 1992 Plan or any other provision
-------
thereof, in the event of a Change of Control all Stock Options shall immediately
vest and become exercisable and shall remain exercisable for the period during
which Executive remains employed by the Company and for a period of one (1) year
after termination in accordance with Sections 2.06(b) or (c) hereof (but in no
event after the expiration date for the Stock Options).

                                  ARTICLE III
                          EXECUTIVE'S ACKNOWLEDGMENTS
                          ---------------------------

          Executive recognizes and acknowledges that:  (a) in the course of
Executive's employment by the Company it will be necessary for Executive to
acquire information including, without limitation, information concerning the
Company's sales, sales volume, sales methods, sales proposals, customers and
prospective customers, identity of customers and prospective customers,

                                      -9-
<PAGE>

identity of key purchasing personnel in the employ of customers and prospective
customers, amount or kind of customer's purchases from the Company, the
Company's sources of supply, the Company's computer programs, system
documentation, special hardware, product hardware, related software development,
the Company's manuals, formulae, processes, methods, machines, compositions,
ideas, improvements, inventions or other confidential or proprietary information
belonging to the Company or relating to the Company's affairs (collectively
referred to herein as the "Confidential Information"); (b) for purposes of this
Agreement, confidential information of an affiliate of the Company or a person
or entity with which the Company explores or conducts business is considered to
be Confidential Information; (c) the Confidential Information is the property of
the Company; (d) the use, misappropriation or disclosure of the Confidential
Information would constitute a breach of trust and could cause irreparable
injury to the Company; and (e) it is essential to the protection of the
Company's good will and to the maintenance of the Company's competitive position
that the Confidential Information be kept secret and that Executive not disclose
the Confidential Information to others or use the Confidential Information to
Executive's own advantage or the advantage of others.  For purposes of this
Agreement, "Confidential Information" shall not include any information that is
in the public domain, so long as such information is not in the public domain as
a result of any action or inaction by Executive which would constitute a
violation of this Agreement or the Company's policies with respect to such
information.

          Executive further recognizes and acknowledges that it is essential for
the proper protection of the business of the Company that Executive be
restrained, but only to the extent hereinafter provided (a) from soliciting or
inducing any employee of the Company to leave the employ of the Company, (b)
from hiring or attempting to hire any employee of the Company, (c) from
soliciting the trade of or trading with the customers and suppliers of the
Company, and (d) from competing against the Company for a reasonable period
following the termination of Executive's employment with the Company.

          Executive further recognizes and understands that his duties at the
Company may include the preparation of materials, including written or graphic
materials, and that any such materials conceived or written by him shall be done
as "work made for hire" as defined and used in the Copyright Act of 1976, 17 USC
(S) 1 et seq.  In the event of publication of such materials, Executive
      -- ---
understands that the Company will solely retain and own all rights in said
materials, including right of copyright, and that the Company may, at its
discretion, on a case-by-case basis,

                                      -10-
<PAGE>

grant Executive by-line credit on such materials as the Company may deem
appropriate.

          For purposes of interpreting Article III and Article IV hereof, the
acknowledgements, covenants and obligations of Executive with respect to the
Company shall apply equally with respect to its affiliates.

                                   ARTICLE IV
                      EXECUTIVE'S COVENANTS AND AGREEMENTS
                      ------------------------------------

          4.01.  Non-Disclosure of Confidential Information.  Executive agrees
                 ------------------------------------------
to hold and safeguard the Confidential Information in trust for the Company, its
successors and assigns and agrees that he shall not, without the prior written
consent of the Company, misappropriate or disclose or make available to anyone
for use outside the Company's organization at any time, either during his
employment with the Company or subsequent to the termination of his employment
with the Company for any reason, including without limitation termination by the
Company for cause or without cause, any of the Confidential Information, whether
or not developed by Executive, except as required in the performance of
Executive's duties to the Company.

          4.02.  Disclosure of Works and Inventions/Assignment of Patents and
                 ------------------------------------------------------------
Other Rights.  (a) Executive shall disclose promptly to the Company or its
------------
nominee any and all works, inventions, discoveries and improvements authored,
conceived or made by  Executive during the period of employment and related to
the business, prospective business or activities of the Company, and hereby
assigns and agrees to assign all his interest therein to the Company or its
nominee.  Whenever requested to do so by the Company, Executive shall execute
any and all applications, assignments or other instruments, and otherwise
cooperate with the Company at no expense to Executive, to assist the Company in
applying for and obtaining Letters Patent or Copyrights of the United States or
any foreign country or to otherwise protect the Company's interest therein.
Such obligations shall continue beyond the termination of employment with
respect to works, inventions, discoveries and improvements authored, conceived
or made by Executive during the period of employment, and shall be binding upon
Executive's assigns, executors, administrators and other legal representatives.

          (b) Executive agrees that in the event of publication by Executive of
written or graphic materials the Company will retain and own all rights in said
materials, including right of copyright.

                                      -11-
<PAGE>

          4.03.  Duties.  Executive agrees to be a loyal employee of the
                 ------
Company.  Executive agrees to devote his best efforts full time to the
performance of his duties for the Company, to give proper time and attention to
furthering the Company's business, and to comply with all rules, regulations and
instruments established or issued by the Company.  Executive further agrees that
during the term of this Agreement, Executive shall not, directly or indirectly,
engage in any business which would detract from Executive's ability to apply his
best efforts to the performance of his duties hereunder.  Executive also agrees
that he shall not usurp any corporate opportunities of the Company.

          4.04.  Return of Materials.  Upon the termination of Executive's
                 -------------------
employment with the Company for any reason, including without limitation
termination by the Company for cause or without cause, Executive shall promptly
deliver to the Company all correspondence, drawings, blueprints, manuals,
letters, notes, notebooks, reports, flow-charts, programs, proposals and any
documents concerning the Company's customers or concerning products or processes
used by the Company and, without limiting the foregoing, will promptly deliver
to the Company any and all other documents or materials containing or
constituting Confidential Information.

          4.05.  Restrictions on Competition.  Executive covenants and agrees
                 ---------------------------
that during the period of Executive's employment hereunder plus a period of two
(2) years (or such longer period, not in excess of three (3) years, in respect
of which base salary is paid to Executive pursuant to (S) 2.04 or 2.05)
following the termination of Executive's employment, including without
limitation termination by the Company for cause or without cause, Executive
shall not, in the United States of America or in any other country of the world
in which the Company has done business at any time during the last three years
prior to termination of Executive's employment with the Company, engage,
directly or indirectly, whether as principal or as agent, officer, director,
employee, consultant, shareholder, or otherwise, alone or in association with
any other person, corporation or other entity, in any Competing Business.  For
purposes of this Agreement, the term "Competing Business" shall mean and include
any person, corporation or other entity which develops, manufactures, sells or
markets or attempts to develop, manufacture, sell or market any product or
services which are the same as, similar to or compete with the products and
services (i) sold by the Company at any time and from time to time during the
last three years prior to the termination of Executive's employment hereunder or
(ii) which are active research and development projects of the Company of which
Executive is aware at the time of termination; provided, however, that for
                                               --------  -------
purposes

                                      -12-
<PAGE>

of determining what constitutes a Competing Business there shall not be included
(x) any product or service of any entity which product or service Executive
determines is not material to the business or prospects of the Company and which
product or service the Company's Board, having been requested to do so by
Executive, also so determines; or (y) any product or service of any entity so
long as the Executive and such entity can demonstrate to the reasonable
satisfaction of the Company that Executive is and will continue to be
effectively isolated from and not participate in the development, manufacture,
sale or marketing of such product or service, but only so long as Executive is
effectively so isolated and does not so participate. In the event the employment
of Executive terminates at the conclusion of the Term before Executive obtains
the age of 65 and because the Company has elected not to further extend the Term
pursuant to (S) 1.02, then the provisions of this (S) 4.05 and (S)'s 4.06 and
4.07 shall not be applicable after the conclusion of the Term unless the Company
advises Executive at least six months prior to conclusion of the Term that it
will continue to pay the Base Salary in effect at conclusion of the Term for
such two-year period or such shorter portion thereof as the Company may specify
(which specification shall foreshorten such two-year period accordingly) and the
Company pays such amounts during such two-year or shorter period.

          4.06.  Non-Solicitation of Customers and Suppliers. Executive agrees
                 -------------------------------------------
that during his employment with the Company he shall not, directly or
indirectly, solicit the trade of, or trade with, any customer, prospective
customer, supplier, or prospective supplier of the Company for any business
purpose other than for the benefit of the Company, with respect to any products
competitive with those of the Company.  Executive further agrees that for two
(2) years following termination of his employment with the Company, including
without limitation termination by the Company for cause or without cause,
Executive shall not, directly or indirectly, solicit the trade of, or trade
with, any customers or suppliers, or prospective customers or suppliers, of the
Company with respect to any products competitive with those of the Company.

          4.07.  Non-Solicitation of Employees.  Executive agrees that, during
                 -----------------------------
his employment with the Company and for two (2) years following termination of
Executive's employment with the Company, including without limitation
termination by the Company for cause or without cause, Executive shall not,
directly or indirectly, solicit or induce, or attempt to solicit or induce, any
employee of the Company to leave the Company for any reason whatsoever, or hire
any employee of the Company.

                                      -13-
<PAGE>

                                   ARTICLE V
                   EXECUTIVE'S REPRESENTATIONS AND WARRANTIES
                   ------------------------------------------

          5.01.  No Prior Agreements.  Executive represents and warrants that he
                 -------------------
is not a party to or otherwise subject to or bound by the terms of any contract,
agreement or understanding which in any manner would limit or otherwise affect
his ability to perform his obligations hereunder, including without limitation
any contract, agreement or understanding containing terms and provisions similar
in any manner to those contained in Article IV hereof.  Executive further
represents and warrants that his employment with the Company will not require
him to disclose or use any confidential information belonging to prior employers
or other persons or entities.

          5.02.  Executive's Abilities.  Executive represents that his
                 ---------------------
experience and capabilities are such that the provisions of Article IV will not
prevent him from earning his livelihood, and acknowledges that it would cause
the Company serious and irreparable injury and cost if Executive were to use his
ability and knowledge in competition with the Company or to otherwise breach the
obligations contained in Article IV.

          5.03.  Remedies.  In the event of a breach by Executive of the terms
                 --------
of this Agreement, the Company shall be entitled, if it shall so elect, to
institute legal proceedings to obtain damages for any such breach, or to enforce
the specific performance of this Agreement by Executive and to enjoin Executive
from any further violation of this Agreement and to exercise such remedies
cumulatively or in conjunction with all other rights and remedies provided by
law.  Executive acknowledges, however, that the remedies at law for any breach
by him of the provisions of this Agreement may be inadequate and that the
Company shall be entitled to injunctive relief against him in the event of any
breach.

                                   ARTICLE VI
                                 MISCELLANEOUS
                                 -------------

          6.01.  Authorization to Modify Restrictions.  It is the intention of
                 ------------------------------------
the parties that the provisions of Article IV hereof shall be enforceable to the
fullest extent permissible under  applicable law, but that the unenforceability
(or modification to conform to such law) of any provision or provisions hereof
shall not render unenforceable, or impair, the remainder thereof.  If any
provision or provisions hereof shall be deemed invalid or unenforceable, either
in whole or in part, this Agreement shall

                                      -14-
<PAGE>

be deemed amended to modify, as necessary, the offending provision or provisions
and to alter the bounds thereof in order to render it valid and enforceable or,
if necessary, to delete the offending provision.

          6.02.  Tolling Period.  The non-competition, non-disclosure and non-
                 --------------
solicitation obligations contained in Article IV hereof shall be extended by the
length of time during which Executive shall have been in breach of any of the
provisions of such Article IV.

          6.03.  Entire Agreement.  This Agreement represents the entire
                 ----------------
agreement of the parties with respect to the employment of Executive by the
Company and may be amended only by a writing signed by each of them.

          6.04.  Governing Law.  This Agreement shall be governed by and
                 -------------
construed in accordance with the laws of the Commonwealth of Pennsylvania.

          6.05.  Consent to Jurisdiction; Venue.  Executive hereby irrevocably
                 ------------------------------
submits to the personal jurisdiction of the United States District Court for the
Western District of Pennsylvania or the Court of Common Pleas of Allegheny
County, Pennsylvania in any action or proceeding arising out of or relating to
this Agreement, and Executive hereby irrevocably agrees that all claims in
respect of any such action or proceeding may be heard and determined in either
such court.  Executive hereby irrevocably waives any objection which he now or
hereafter may have to the laying of venue of any action or proceeding arising
out of or relating to this Agreement brought in the United States District Court
for the Western District of Pennsylvania or the Court of Common Pleas of
Allegheny County, Pennsylvania and any objection on the ground that any such
action or proceeding in either of such Courts has been brought in an
inconvenient forum.  Nothing in this Section 6.05 shall affect the right of the
Company to bring any action or proceeding against Executive or his property in
the courts of other jurisdictions where the Executive resides or has his
principal place of business or where such property is located.

          6.06.  Service of Process.  Executive hereby irrevocably consents to
                 ------------------
the service of any summons and complaint and any other process which may be
served in any action or proceeding arising out of or related to this Agreement
brought in the United States District Court for the Western District of
Pennsylvania or the Court of Common Pleas of Allegheny County by the mailing by
certified or registered mail of copies of such

                                      -15-
<PAGE>

process to Executive at his address as set forth on the signature page hereof.

          6.07.  Agreement Binding.  The obligations of Executive under this
                 -----------------
Agreement shall continue after the termination of his employment with the
Company for any reason, with or without cause, and shall be binding on, and
inure to the benefit of, his heirs, executors, legal representatives if the
Executive should die while any amounts are still payable to him or her
hereunder, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's devisee, legatee,
or designee or, if there be no such designee, to the Executive's estate.  This
Agreement also shall be binding upon, and inure to the benefit of, any
successors and assigns of the Company.

          6.08.  Successor to the Company.  The Company will require any
                 ------------------------
successor or assign (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, to expressly, absolutely and unconditionally to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or assignment had
taken place.  Any failure of the Company to obtain such agreement prior to the
effectiveness of any such succession or assignment shall be a material breach of
this Agreement and shall entitle the Executive to terminate the Executive's
employment and to receive the payments and other benefits set forth in Section
2.06(b) as if Executive had been terminated without cause upon a Change of
Control.  As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor or assign to its business and/or assets
as aforesaid.

          6.09.  Counterparts, Section Headings.  This Agreement may be executed
                 ------------------------------
in any number of counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same instrument.  The
section headings of this Agreement are for convenience of reference only and
shall not affect the construction or interpretation of any of the provisions
hereof.

          6.10.  Notices.  All notices, requests, demands and other
                 -------
communications hereunder shall be in writing and shall be deemed to have been
duly given if (a) hand delivered or (b) mailed, registered mail, first class
postage paid, return receipt requested, or (c) sent via overnight delivery
service or

                                      -16-
<PAGE>

courier, delivery acknowledgment requested, or (d) via any other delivery
service with proof of delivery:

          if to the Company:

          Respironics, Inc.
          1501 Ardmore Blvd.
          Pittsburgh, PA  15221-4401
          Attention:  General Counsel

          if to Executive, at the address set forth on the signature page hereof

or to such other address or to such other person as either party hereto shall
have last designated by notice to the other party.

          Executive acknowledges that he has read and understands the foregoing
provisions and that such provisions are reasonable and enforceable.

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed the day and year first above written.

Witness:

       /s/ Daniel J. Bevevino               /s/ James W. Liken
--------------------------------     ---------------------------------
                                               James W. Liken

                                     Address:  5 Deer Spring Lane
                                               -----------------------
                                               Pittsburgh, PA 15238
                                               -----------------------

Attest

                                     RESPIRONICS, INC.

    /s/ Dorita A. Pishko             By:  /s/ G. E. McGinnis
---------------------------------       ------------------------------
        Secretary

                                     Title: Board Chairman
                                           ---------------------------

[Corporate Seal]
                                      -17-

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