<PAGE>   1
                                                                    EXHIBIT 10.1


                              EMPLOYMENT AGREEMENT


     THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated March 4, 1998, is made
by and between LIDAK Pharmaceuticals, a California corporation having its
principal offices at 11077 North Torrey Pines Road, La Jolla, California, 92037,
(the "Company") and Gerald J. Yakatan ("Employee").


                                    AGREEMENT

     1. Effective Date.

     Employee's employment will commence effective March 4, 1998 ("Commencement
Date").

     2. At-will Employment.

     Employee's employment relationship with the Company ("Employment") is
at-will, terminable at any time and for any reason by either the Company or
Employee. While certain paragraphs of this Agreement describe events which could
occur at a particular time in the future, nothing in this Agreement may be
construed as a guarantee of employment of any length.

     3. Employment Duties.

          a.   Title/Responsibilities. Employee shall hold the title of Chief
Executive Officer and President of the Company. Employee also shall perform all
duties which from time to time are assigned to him by the Board of Directors
("Board").

          b.   Full Time Attention. Employee shall devote all of his business
time and attention, energy and skills to the Company during the time he is
employed under this Agreement, except as set forth in Schedule A.

          c.   Policy Compliance. Employee is required to comply with the
Company policy, practice and procedure in effect during his Employment. Employee
must agree to the terms and conditions of the Company's Employee Confidentiality
and Inventions Agreement ("Confidentiality Agreement") which is attached to this
Agreement as Exhibit 1 and is incorporated by reference.

     4. Compensation.

          a.   Base Salary. The Company shall pay Employee an annual Base Salary
of Three Hundred Thousand Dollars ($300,000.00), less applicable state and
federal taxes, to be paid bi-weekly during the year ("Base Salary"). Any
increase to the monthly Base Salary is within the sole discretion of the Board.



<PAGE>   2

          b.   Bonus Compensation. In addition to the compensation provided
above, Employee may, at the sole discretion of the Board, be eligible for an
incentive bonus. Employee must be employed when bonuses are distributed in order
to be eligible for any portion of the bonus.

          c.   Stock Options.

               i.   Grant of Options. On the Commencement Date, Employee will
receive a grant of 300,000 stock options ("Options") pursuant to the Company's
1994 Stock Option Plan ("the Plan"), consisting of 196,611 incentive stock
options and 103,389 non-qualified options, at an exercise price of $1.8125
equaling the fair market value of the Company's Class A Common Stock on March
13, 1998, the date of the grant of the options, and subject to the terms and
conditions of the Stock Option Agreements, attached hereto as Exhibits 2 and 3,
reflecting that grant (the "Option Agreements"). Each option shall entitle
Employee to purchase one share of the Company's Class A Common Stock. Subject to
paragraphs 12(b) and 13(c), the Options shall vest as follows: 100,000 non
qualified options to vest on March 13, 1998, the remainder to vest in four equal
annual increments of 50,000 per year on the anniversary date of Employee's
employment, commencing on the first anniversary date of Employee's Employment as
follows. The first years' annual increment shall consist of 46,611 incentive
stock options and 3,389 non qualified options. The remaining years' increments
shall consist solely of incentive stock options. Subject to paragraphs 12(b) and
13(c), the Options are subject to the terms and provisions set forth in the
Option Agreements and the Plan as well as applicable state and federal laws
including, but not limited to, tax and securities laws.

               ii.  Tax Implications. The Company does not make any warranty or
representation with respect to (1) the tax status of the stock options granted
as incentive stock options, despite the description of the options as such or
(2) tax consequence of any of the above grant of options or tax consequences of
any exercise of the options or consequent sale of the shares purchased. Employee
is advised to consult with his own tax advisor with respect to the tax treatment
of all aspects of the option grant contained in the Agreement or the Option
Agreements.

          d.   Fringe Benefits. Employee will be eligible for Fringe Benefits
including Vacation and Health Benefits in an amount equal to that provided to
other Company Senior Executives.

          e.   Reimbursement of Expenses. During his Employment, with approval
by the Chief Financial Officer, Employee shall be entitled to reimbursement of
reasonable and actual expenses, incurred on behalf of the Company, including but
not limited to travel and entertainment expenses, supplies and cellular phone
expenses.

     5. Funding of IriSys Development Efforts. The Board agrees to consider, in
good faith but in its sole discretion, a proposal from IriSys Research and
Development, LLC ("IriSys") for the Company to fund certain development efforts
of IriSys in exchange for rights to market the products developed by IriSys. The
Board will provide Employee 



                                       2
<PAGE>   3

with a decision on the proposal within sixty (60) days of the submission of any
such proposal.

     6. Non-disclosure Covenant.

          a.   Employee acknowledges that during his Employment and as a part of
that Employment, Employee will be afforded access to trade secrets concerning
the Company's business, including but not limited to (1) product specifications,
processes, inventions and ideas, past, current and planned research and
development, customer lists and information, current and anticipated customer
requirements, price lists and vendor information, market studies, business
plans, computer software and programs (including object code and source code),
database technologies, and any other information, however documented, of the
Company that is a trade secret within the meaning of the Uniform Trade Secrets
Act (California Civil Code Sections 3426 through 3426.11); and (2) information
concerning the business and affairs of the Company (which includes historical
financial statements, financial projections and budgets, historical and
projected sales, capital spending budgets and plans, the names and backgrounds
of key personnel, personnel training and techniques and materials), however
documented. The foregoing is referred to as "Confidential Information".

          b.   Employee acknowledges that public disclosure of Confidential
Information could have an adverse effect on the Company and its business;

          c.   In consideration of the compensation and benefits to be paid or
provided to Employee by the Company under this Agreement, Employee covenants as
follows:

               i.   During and following his Employment, Employee will hold in
confidence the Confidential Information and will not disclose it to any person
or entity except with the specific prior written consent of the Company or
except as otherwise expressly permitted by the terms of this Agreement.

               ii.  Any trade secrets of the Company will be entitled to all of
the protections and benefits under the Uniform Trade Secrets Act (California
Civil Code Sections 3426 through 3426.11) and any other applicable law.
Information that the Company deems to be a trade secret but is found by an
arbitrator not to be a trade secret for purposes of this Agreement may still
constitute Confidential Information for purposes of this Agreement if the facts
and circumstances justify. Employee hereby waives any requirement that the
Company submit proof of the economic value of any trade secret or post a bond or
other security.

               iii. None of the foregoing obligations and restrictions applies
to any part of the Confidential Information that Employee demonstrates was or
became generally available to the public other than as a result of a disclosure
by Employee.



                                       3
<PAGE>   4

               iv.  Employee will not remove from the Company's premises (except
to the extent such removal is for purposes of the performance of Employee's
duties at home or while traveling, or except as otherwise specifically
authorized by the Company) any document, record, notebook, plan, model,
component, device or computer software or code, whether embodied in a disk or in
any other form (collectively, the "Proprietary Items"). Employee recognizes
that, as between the Company and Employee, all of the Proprietary Items, whether
or not developed by Employee, are the exclusive property of the Company. Upon
termination of Employee's Employment by either party, or upon the request of the
Company during Employment, Employee will return to the Company all of the
Proprietary Items in Employee's possession or subject to Employee's control, and
Employee will not retain any copies, abstracts, sketches or other physical
embodiment of any of the Proprietary Items.

     7. Employee Inventions

          a.   Because Employee possesses substantial technical expertise and
skill with respect to the Company's business, the Company desires to obtain
exclusive ownership of each "Employee Invention", and the Company will be at a
substantial competitive disadvantage if it fails to acquire exclusive ownership
of each Employee Invention. "Employee Invention" means idea, invention,
technique, process or improvement (whether patentable or not), created,
conceived, or developed by Employee, either solely or in conjunction with
others, during Employment or a period that includes a portion of the Employment
period, that (1) relates in any way to, or is useful in any manner in, the
business then being conducted or then proposed to be conducted by the Company;
or (2) is based upon or uses Confidential Information. The provisions of this
Paragraph are reasonable and necessary to prevent the improper use or disclosure
of Confidential Information and to provide the Company with exclusive ownership
of all Employee Inventions.

          b.   Each Employee Invention will belong exclusively to the Company.
Employee acknowledges that all of Employee's writing, works of authorship,
specially commissioned works and other Employee Inventions are works made for
hire and are the property of the Company, including any copyrights, patents or
other intellectual property rights pertaining thereto. If it is determined that
any such works are not works made for hire, Employee hereby assigns to the
Company all of Employee's right, title, and interest, including all rights of
copyright, patent and other intellectual property rights, to or in such Employee
Inventions. Employee covenants that he will promptly:

               i.   disclose to the Company in writing any Employee Invention;

               ii.  assign to the Company or to a party designated by the
Company at the Company's request and without additional compensation, all of
Employee's right to the Employee Invention for the United States and all foreign
jurisdictions;

               iii. execute and deliver to the Company such applications,
assignments, and other documents as the Company may request in order to apply
for 




                                       4
<PAGE>   5

and obtain patents or other registrations with respect to any Employee
Invention in the United States and any foreign jurisdictions;

               iv.  sign all other papers necessary to carry out the above
obligations;

               v.   give testimony and render any other assistance in support of
the Company's rights to any Employee Invention.

          c.   Without limiting the foregoing, any invention by IriSys that is
made without access to or benefit of Company Confidential Information shall not
be deemed to be an "Employee's Invention."

     8.   Non Competition. During his Employment, Employee shall not, directly
or indirectly, either as an employee, employer, consultant, corporate officer,
director, or in any other individual or representative capacity, engage or
participate in any business that is in competition in with the business of the
Company in any location, unless such participation or interest is fully
disclosed to the Company and approved by the Board.

     9.   Non-Solicitation/Non-Interference. During his Employment and for a
period of two years thereafter, whether for Employee's own account or the
account of any other person, Employee will not solicit, employ, or otherwise
engage as an employee, independent contractor, or otherwise, any person who is
or was an employee of the Company at any time during his Employment or in any
manner induce or attempt to induce any employee of the Company to terminate his
employment with the Company; or at any time during or after his Employment,
interfere with the Company's relationship with any person or entity, including
any person or entity who at any time during Employee's Employment was an
employee, contractor, supplier, or customer of the Company.

     10.  Agreement with Previous Employers. Employee agrees that he does not
have any agreement with any previous employer which will prevent him from
performing under this Agreement or which will limit his performance.

     11.  Voluntary Resignation or Termination for "Cause".

          a.   Payment upon Voluntary Resignation or Termination for Cause. If
Employee voluntarily resigns his Employment at his own initiative or if Employee
is terminated for Cause, the Company will pay Employee accrued and unpaid Base
Salary through the date of termination and any vacation which is accrued but
unused as of the date of termination. Employee is ineligible for Severance
Payments or any continuation of benefits (other than provided for under the
federal Consolidated Omnibus Budget Reconciliation Act ("COBRA")), or any other
such compensation pursuant to this Agreement or otherwise.

          b.   "Cause" Defined. As set forth above, the Employment relationship
between the parties is at-will, terminable at any time by either party for any
reason or 



                                       5
<PAGE>   6

no reason. The termination may, nonetheless, be for "Cause". "Cause" is defined
as (i) Employee's material breach of this Agreement or the Confidentiality
Agreement; (ii) Employee's failure or refusal to substantially and materially
perform according to or to comply with the reasonable policies and directions
established by the Company; (iii) the appropriation (or attempted appropriation)
of a material business opportunity of Employer, including attempting to secure
or securing any personal profit in connection with any transaction entered into
on behalf of Employer; (iv) the misappropriation (or attempted misappropriation)
of any of Employer's funds or property; (v) the conviction of, or the entering
of a guilty plea or plea of no contest with respect to a felony, the equivalent
thereof, or any other crime with respect to which imprisonment is a possible
punishment; (vi) willful misconduct or incompetence; (vii) physical or mental
disability or other inability to perform the essential functions of his
position, with or without reasonable accommodation; or (viii) death.

     12.  Termination Without "Cause".

          a.   Payment upon Termination Without Cause. In the event the
Employment relationship is terminated without "Cause" within the first three (3)
years of Employment, as Cause is defined in Paragraph 11(b) above, Employee is
eligible for payment of Base Salary and accrued but unused vacation through the
date of termination. In addition, Employee is eligible for Severance Payments
under this Agreement in an amount equal to twelve (12) months of Base Salary
("Severance Payments") paid on the same dates as Employee would have received
salary payments had Employee continued to be employed by the Company, over a
twelve (12) month period ("Severance Period"), in exchange for his execution of
a release of all claims effective as of the termination date, in substantially
the form attached to this Agreement as Exhibit 4. The Severance Payments will be
decreased to the extent that Employee is paid or accrues the right to be paid
compensation during the Severance Period in connection with new employment or by
virtue of consultancy to any company other than IriSys.

          b.   Stock Option Vesting. In the event of a Termination Without
Cause, vesting of the options described in Paragraph 4(c) will be accelerated to
include options that otherwise would have vested had Employee remained an
employee of the Company for an additional twelve (12) months from the date of
termination.

          c.   Exercise of Vested Options after Termination Without Cause. In
the event of a Termination without Cause, Employee's vested options will be
exercisable in all respects in accordance with the terms of Section 6 of the
Plan.

     13.  Change of Control Termination.





                                       6
<PAGE>   7

          a.   Payment upon Change of Control Termination. In the event of a
"Change of Control Termination" during the first three years of Employment,
Employee is eligible for payment of Base Salary and accrued but unused vacation
through the date of termination. In addition, Employee is eligible for severance
under this Agreement in an amount equal to twelve (12) months of Base Salary
("Severance Payments") paid on the same dates as Employee would have received
salary payments had Employee continued to be employed by the Company, over a
twelve (12) month period ("Severance Period"), in exchange for his execution of
a release of all claims effective as of the termination date, in substantially
the form attached to this Agreement as Exhibit 4. The Severance Payments will be
decreased to the extent that Employee is paid or accrues the right to be paid
compensation during the Severance Period in connection with new employment or by
virtue of consultancy to any company other than IriSys.

          b.   Defined. A "Change of Control Termination" of the employment
relationship occurs where Employee is (i) terminated without "Cause" or (ii)
"Resigns for Good Reason", within twelve (12) months following a "Change of
Control".

               i.   "Cause" is defined in Paragraph 11(b) above.

               ii.  "Resignation for Good Reason" is defined as resignation
based on

               (1)  a meaningful and detrimental alteration in Employee's
                    position or the nature or status of Employee's
                    responsibilities and reporting relationship from those in
                    effect upon execution of this Agreement;

               (2)  the assignment to Employee of any duties inconsistent with
                    his status as an executive officer of Company;

               (3)  a reduction by the Company in Employee's Base Salary by
                    greater than Five Percent (5%), except to the extent the
                    base salaries of other executive officers of the Company are
                    accordingly reduced;

               (4)  a relocation of Employee's or the Company's principal
                    executive offices to a location outside San Diego County, if
                    Employee's principal office is at such offices, without
                    reimbursement of relocation costs.

               (5)  any other conduct which satisfies the requirements for
                    "constructive termination" as that term is defined under
                    California law.

     An event described in 13(b)(ii)(1) -- (5) will not constitute Good Reason
unless it is communicated by Employee to the Company in writing and unless it is
not 




                                       7
<PAGE>   8

corrected by the Company in a manner which is reasonably satisfactory to
Employee within ten (10) days of the Company's receipt of such written notice.

               iii. "Change of Control" is defined to have occurred if, and only
if,

               (1)  any individual, partnership, firm, corporation, association,
                    trust, unincorporated organization or other entity or
                    person, or any syndicate or group deemed to be a person
                    under Section 14(d)(2) of the Exchange Act is or becomes the
                    "Beneficial Owner" (as defined in Rule 13d-3 of the General
                    Rules and Regulations under the Exchange Act), directly or
                    indirectly, of securities of the Company representing 50% or
                    more of the combined voting power of the Company's then
                    outstanding securities entitled to vote in the election of
                    directors of the Company;

               (2)  during the period of March 4, 1998 through March 3, 1999,
                    the following persons cease to constitute a majority of the
                    Board: (a) individuals who constituted the Board as of the
                    Commencement Date (the "Incumbent Directors"); (b)
                    individuals (the "New Directors") who were elected by, or
                    whose nomination for election by the Company's shareholders
                    was approved by a majority of the Incumbent Directors; and
                    (c) individuals who were elected by, or whose nomination for
                    election by the Company's shareholders was approved by, a
                    majority of the Incumbent Directors and the New Directors
                    still serving as Board Members at the time of such election.
                    It is expressly acknowledged that all directors who are not
                    Incumbent Directors and who are nominated for election
                    pursuant to the terms of the Agreement of Compromise and
                    Settlement, dated March 24, 1998, will constitute "New
                    Directors" for purposes of this provision.

               (3)  there occurs a reorganization, merger, consolidation or
                    other corporate transaction involving the Company
                    ("Transaction"), in each case, with respect to which the
                    stockholders of the Company immediately prior to such
                    Transaction do not, immediately after the Transaction, own
                    more than fifty (50) percent of the combined voting power of
                    the Company or other corporation resulting from such
                    Transaction; or

               (4)  all or substantially all of the assets of the Company are
                    sold, liquidated or distributed.





                                       8
<PAGE>   9

          c.   Stock Option Vesting upon Change of Control Termination. In the
event of a Change of Control Termination of the employment relationship, as
defined above, within the first year of Employee's Employment, vesting of the
options described in Paragraph 4(c) will be accelerated to include options that
otherwise would have vested had Employee remained an employee of the Company for
an additional twenty four (24) months from the date of termination. In the event
of a Change of Control Termination of the employment relationship after the
first year of Employee's Employment, vesting of the options described in
Paragraph 4(c) will be accelerated to include options that otherwise would have
vested had Employee remained an employee of the Company for an additional twelve
(12) months from the date of termination.

          d.   Exercise of Vested Options after Change of Control Termination.
In the event of a Change of Control Termination within Employee's first year of
Employment, Employee's vested options will be exercisable in all respects in
accordance with the terms of Section 6 of the Plan, unless Employee requests,
within ninety (90) days following the termination, an extension of his time to
exercise. In the event of such a request, Employee has up to twelve (12) months
following the date of termination to exercise any vested options and Employee's
vested options will immediately convert to non-qualified options. In the event
of a Change of Control Termination after Employee's first year of Employment,
Employee's vested options will be exercisable in all respects in accordance with
the terms of Section 6 of the Plan.

     14.  Dispute Resolution Procedures. Any dispute or claim arising out of
this agreement shall be subject to final and binding arbitration. The
arbitration will be conducted by one arbitrator who is a member of the American
Arbitration Association (AAA) or of the Judicial Arbitration and Mediation
Services (JAMS). The arbitration shall be held in San Diego, California. The
arbitrator shall have all authority to determine the arbitrability of any claim
and enter a final and binding judgment at the conclusion of any proceedings in
respect of the arbitration. Any final judgment only may be appealed on the
grounds of improper bias or improper conduct of the arbitrator. The parties will
be entitled to conduct discovery (i.e. investigation of facts through
depositions and other means) which shall be governed by the Code of Civil
Procedure section 1283.05. The arbitrator shall have all power and authority to
enter orders relating to such discovery as are allowed under the Code. The
arbitrator will apply California substantive law in all respects. The party
prevailing in the resolution of any such claim will be entitled, in addition to
such other relief as may be granted, to an award of all actual attorneys fees
and costs incurred in pursuit of the claim, without regard to any statute,
schedule, or rule of court purported to restrict such award.

     15.  General Provisions.

          a.   Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of California.

          b.   Assignment. Employee may not assign, pledge or encumber his
interest in this Agreement or any part thereof.



                                       9
<PAGE>   10

          c.   No Waiver Of Breach. The failure to enforce any provision of this
Agreement will not be construed as a waiver of any such provision, nor prevent a
party thereafter from enforcing the provision or any other provision of this
Agreement. The rights granted the parties are cumulative, and the election of
one will not constitute a waiver of such party's right to assert all other legal
and equitable remedies available under the circumstances.

          d.   Severability. The provisions of this Agreement are severable, and
if any provision will be held to be invalid or otherwise unenforceable, in whole
or in part, the remainder of the provisions, or enforceable parts of this
Agreement, will not be affected.

          e.   Entire Agreement. This Agreement constitutes the entire agreement
of the parties with respect to the subject matter of this Agreement, and
supersedes all prior and contemporaneous negotiations, agreements and
understandings between the parties, oral or written. f. Modification; Waivers.
No modification, termination or attempted waiver of this Agreement will be valid
unless in writing, signed by the party against whom such modification,
termination or waiver is sought to be enforced.

          g.   Fees and Expenses. If any proceeding is brought for the
enforcement or interpretation of this Agreement, or because of any alleged
dispute, breach, default or misrepresentation in connection with any provisions
of this Agreement, the successful or prevailing party will be entitled to
recover from the other party reasonable attorneys' fees and other costs incurred
in that proceeding (including, in the case of an arbitration, arbitration fees
and expenses), in addition to any other relief to which such party may be
entitled.

          h.   Amendment. This Agreement may be amended or supplemented only by
a writing signed by both of the parties hereto.

          i.   Duplicate Counterparts. This Agreement may be executed in
duplicate counterparts, each of which shall be deemed an original; provided,
however, such counterparts shall together constitute only one instrument.

          j.   Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.



                                       10
<PAGE>   11

          k.   Drafting Ambiguities. Each party to this Agreement and its
counsel have reviewed and revised this Agreement. The rule of construction that
any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any of the amendments to
this Agreement.

Dated: March 30, 1998                 LIDAK Pharmaceuticals


                                      By: /s/ William N. Jenkins
                                          ------------------------------------
                                          William Jenkins, Chairman of the Board


Dated:  March 30, 1998                    /s/ Gerald J. Yakatan
                                          --------------------------------------
                                          Gerald J. Yakatan



                                       11
<PAGE>   12

SCHEDULE A

Mr. Yakatan is permitted to engage in outside consulting activities on behalf of
IriSys Research and Development, LLC ("IriSys") up to four (4) days a month. Mr.
Yakatan otherwise will work full time for LIDAK and, notwithstanding his outside
consulting activities referenced above, devote on average at least forty (40)
hours per week to his duties at LIDAK.




                                       12
<PAGE>   13

EXHIBIT 4

GENERAL RELEASE


     This GENERAL RELEASE ("Release") is entered into effective as of
______________ __, ____, (the "Effective Date") by and between The Company, a
California corporation, having its principal offices at 11077 North Torrey Pines
Road, La Jolla, California, 92037 ("Company") and Employee, an individual
residing at ________________ ("Employee") with reference to the following facts:

RECITALS

     A. On March __, 1998, the parties hereto entered into an Employment
Agreement ("Agreement") by which the parties agreed that upon (i) termination
without "Cause" or (ii) termination resulting from "Change in Control", Employee
would become eligible for severance payments for a period of twelve (12) months
(the "Severance Period") from the date of termination of his Employment
("Termination Date") in exchange for Employee's release of the Company from all
claims which Employee may have against the Company as of the Termination Date.

     B.   The parties desire to dispose of, fully and completely, all claims
which Employee may have against the Company in the manner set forth in this
Release.

AGREEMENT

     1.   Release. Employee, for himself and his heirs, successors and assigns,
each fully releases, and discharges Company, its officers, directors, employees,
shareholders, attorneys, accountants, other professionals, insurers and agents
of the other (collectively "Agents"), and all entities related to each party,
including, but not limited to, heirs, executors, administrators, personal
representatives, assigns, parent, subsidiary and sister corporations,
affiliates, partners and co-venturers (collectively "Related Entities"), from
all rights, claims, demands, actions, causes of action, liabilities and
obligations of every kind, nature and description whatsoever, Employee now has,
owns or holds or has at anytime had, owned or held or may have against the
Company, Agents or Related Entities from any source whatsoever, whether or not
arising from or related to the facts recited in this Release. Employee
specifically releases and waives any and all claims arising under any express or
implied contract, rule, regulation or ordinance, including, without limitation,
Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the
Americans with Disabilities Act, the California Fair Employment and Housing Act,
and the Age Discrimination in Employment Act, as amended ("ADEA").

     2.   Section 1542 Waiver. This Release is intended as a full and complete
release and discharge of any and all claims that Employee may have against the
Company, Agents or Related Entities. In making this release, Employee intends to





                                       13
<PAGE>   14

release the Company, Agents and Related Entities from liability of any nature
whatsoever for any claim of damages or injury or for equitable or declaratory
relief of any kind, whether the claim, or any facts on which such claim might be
based, is known or unknown to him. Employee expressly waives all rights under
?1542 of the Civil Code of the State of California, which Employee understands
provides as follows:

          A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
          [EMPLOYEE] DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR
          AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY
          HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
          [EMPLOYER].

     Employee acknowledges that he may discover facts different from or in
addition to those which he now believes to be true with respect to this Release.
Employee agrees that this Release shall remain effective notwithstanding the
discovery of any different or additional facts.

     3.   Waiver of Certain Claims. Employee acknowledges that he has been
advised in writing of his right to consult with an attorney prior to executing
the waivers set out in this Release, and that he has been given a 21-day period
in which to consider entering into the release of ADEA claims, if any. In
addition, Employee acknowledges that he has been informed that he may revoke a
signed waiver of the ADEA claims for up to seven (7) days after executing this
Release.

     4.   No Undue Influence. This Release is executed voluntarily and without
any duress or undue influence. Employee acknowledges he has read this Release
and executed it with his full and free consent. No provision of this Release
shall be construed against any party by virtue of the fact that such party or
its counsel drafted such provision or the entirety of this Release.

     5.   Governing Law. This Release is made and entered into in the State of
California and accordingly the rights and obligations of the parties hereunder
shall in all respects be construed, interpreted, enforced and governed in
accordance with the laws of the State of California as applied to contracts
entered into by and between residents of California to be wholly performed
within California.

     6.   Severability. If any provision of this Release is held to be invalid,
void or unenforceable, the balance of the provisions of this Release shall,
nevertheless, remain in full force and effect and shall in no way be affected,
impaired or invalidated.

     7.   Counterparts. This Release may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Release may be
executed by facsimile, with originals to follow by overnight courier.



                                       14
<PAGE>   15

     8.   Dispute Resolution Procedures. Any dispute or claim arising out of
this Release shall be subject to final and binding arbitration. The arbitration
will be conducted by one arbitrator who is a member of the American Arbitration
Association (AAA) or of the Judicial Arbitration and Mediation Services (JAMS)
and will be governed by the Model Employment Arbitration rules of AAA. The
arbitration shall be held in San Diego, California. The arbitrator shall have
all authority to determine the arbitrability of any claim and enter a final and
binding judgment at the conclusion of any proceedings in respect of the
arbitration. Any final judgment only may be appealed on the grounds of improper
bias or improper conduct of the arbitrator. Notwithstanding any rule of AAA to
the contrary, the parties will be entitled to conduct discovery (i.e.
investigation of facts through depositions and other means) which shall be
governed by the Code of Civil Procedure Section 1283.05. The arbitrator shall
have all power and authority to enter orders relating to such discovery as are
allowed under the Code. The arbitrator will apply California substantive law in
all respects. The party prevailing in the resolution of any such claim will be
entitled, in addition to such other relief as may be granted, to an award of all
actual attorneys fees and costs incurred in pursuit of the claim, without regard
to any statute, schedule, or rule of court purported to restrict such award.

     9.   Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter of this Agreement, and supersedes
all prior and contemporaneous negotiations, agreements and understandings
between the parties, oral or written.

     10.  Modification; Waivers. No modification, termination or attempted
waiver of this Agreement will be valid unless in writing, signed by the party
against whom such modification, termination or waiver is sought to be enforced.

     11.  Amendment. This Agreement may be amended or supplemented only by a
writing signed by Employee and the Company.


Dated:
       ------------------------         ----------------------------------------
                                        Employee