EMPLOYMENT AGREEMENT



This Employment Agreement ("Agreement") is entered into this 28th  day of July

2000, by and between William A. Knaus, M.D. (the "Executive") and APACHE

MEDICAL SYSTEMS, INC. (the "Company").



WHEREAS, Executive currently is employed by the University of Virginia; and



WHEREAS, Executive wishes to take a leave of absence from such employment and

be employed during such leave of absence by the Company; and



WHEREAS, the Company wishes to retain the services of the Executive during such

period;



NOW, THEREFORE, in consideration of the promises and mutual agreements made

herein, and intending to be legally bound hereby, the Company and Executive

(collectively, the "Parties") agree as follows:



    1.   Employment Term. Subject to Section 5, the term of this Agreement

shall be from July 1, 2000, through December 31, 2000 (the "Term"). Should the

Parties wish to extend this Agreement beyond December 31, 2000, the Parties

shall enter into a renewal agreement delineating the terms and conditions of

Executive's employment no later than November 30, 2000.



    2.   Employment Duties. Executive will serve as President and Chief

Executive Officer of the Company subject to the direction and control of the

Board of Directors. Executive shall be fully responsible for all facets of the

Company's operations, with all of the Company's employees reporting to

Executive, either directly or indirectly. Executive agrees to perform and

discharge the duties assigned to him to the Board's reasonable satisfaction. In

performing such duties, Executive agrees to comply fully with all of the

Company's policies and standards and to follow



<PAGE>   2



the lawful instructions and directives of the Board of Directors. Executive

agrees to devote his full professional time, skills and best efforts to the

business of the Company and will not, during the term of this Agreement, engage

(whether or not during normal business hours) in any other business or

professional activity, whether or not such activity is pursued for gain, profit

or other pecuniary advantage, without the prior written authorization of the

Board of Directors, or its designee.



    3.   Compensation. For all services rendered by Executive under this

Agreement, the Company will pay Executive a base salary of $12,825 per month,

in equal bi-weekly installments. The Company shall withhold federal and state

income and employment taxes from the salary amounts it disburses to Executive

under this Section.



    4.   Benefits.



         (a)  Executive shall continue to participate in the University of

Virginia's health insurance, retirement and life insurance plans, and will not

participate in any of the like benefit plans of the Company, and the Company

shall pay to Executive $3,388.55 per month (the "Benefit Continuation

Payment"), which he shall be solely responsible for paying as full

reimbursement to the University of Virginia in order to maintain his health,

retirement and life insurance benefits at their current level.



         (b)  The Company shall reimburse Executive for all reasonable expenses

incurred in connection with the performance of his duties under this Agreement

pursuant to the Company's standard business expense reimbursement policies.

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