CONFIDENTIAL SEPARATION AGREEMENT

                          AND GENERAL RELEASE OF CLAIMS



         THIS CONFIDENTIAL SEPARATION AGREEMENT AND GENERAL RELEASE OF CLAIMS

(the "Agreement") dated May 31, 2002 is between Charles H. Lloyd ("Employee")

and SpaceDev, Inc. (the "Company"), a Colorado corporation and Integrated Space

Systems, Inc., a California corporation ("ISS")(for purposes of this Agreement,

references to the Company include ISS). As used in this Agreement, the Company

refers to SpaceDev, Inc. and all parents, subsidiaries, divisions, predecessors,

and successors of SpaceDev, Inc.



                                    RECITALS



         WHEREAS, Employee wishes to resign his positions as Chief Financial

Officer and Chief Operating Officer of the Company and as Chief Executive

Officer and Chief Financial Officer of ISS on the terms and conditions set forth

herein; and



         WHEREAS, Company and ISS has each accepted Employee's resignation from

each of these positions on the terms and conditions set forth herein;



         NOW, THEREFORE, the parties agree as follows:



                                    AGREEMENT



         1. RESIGNATION AS AN OFFICER AND BOARD MEMBER OF THE COMPANY.

Employee's employment as Chief Financial Officer and Chief Operating Officer of

the Company, and Chief Executive Officer and Chief Financial Officer of ISS,

will terminate effective as of June 14, 2002 (the "Separation Date") and

Employee will resign from such position on the Separation Date. On the

Separation Date, Employee will also resign from the Company's Board of Directors

and the Board of Directors of ISS, effective as of the Separation Date.



         2. OBLIGATIONS OF THE COMPANY.



                  a. In exchange for the release of claims and other promises

         set forth in this Agreement and the attached Addendum A, the Company

         agrees to provide Employee with the following benefits:



                                    (1) Employee will receive an aggregate

                  payment of Thirty-Six Thousand Dollars ($36,000) payable in

                  four installments of Nine Thousand Dollars ($9,000) each on

                  the Separation Date, the thirty-day anniversary of the

                  Separation Date, the sixty-day anniversary of the Separation

                  Date, and the ninety-day anniversary of the Separation Date.

                  An Event of Default in payment of any of the amounts due

                  hereunder will result in a late payment penalty equal to five

                  percent (5%) of the value of the payment. All payments made

                  under this Section 1(a)(1) shall have no withholding and

                  reported at the end of the year on a Form 1099.. For the

                  purposes of this Agreement, an "Event of Default" shall mean

                  the failure to make any payment required hereunder no later

                  than fifteen (15) days of the due date.

{PAGE}



                           (2) Employee shall receive payment of salary for

                  services rendered through the Separation Date at his current

                  base salary (less applicable withholdings) payable

                  semi-monthly pursuant to the payroll procedures regularly

                  established. Employee shall receive all accrued but unpaid

                  salary as of the Separation Date on the Separation Date.



                           (3) Employee shall receive reimbursement for accrued

                  but unpaid expenses reasonably incurred by him in carrying out

                  his duties as Chief Financial Officer and Chief Operating

                  Officer of the Company, and Chief Executive Officer and Chief

                  Financial Officer of ISS, in an amount of $_______.



                           (4) Employee will be compensated for all accrued and

                  unused vacation at the Separation Date, less applicable

                  withholding taxes, payable on the Separation Date.



                           (5) The Company agrees to maintain Employee's current

                  email account, telephone number and voice mail with the

                  Company and to provide Employee access thereto until 12:00

                  p.m. on the Separation Date.



                           (6) Employee shall be allowed to remove all personal

                  belongings from the Company's facilities up until 12:00 p.m.

                  on the Separation Date.



                           (7) The Company shall, at the Company's expense,

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