<PAGE>

                                                                EXHIBIT 10.2

                   FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
                        FOR GERSHON WELTMAN, Ph.D.


    This Amendment to Employment Agreement is made and entered into on
October 22, 1991, by and between Perceptronics, Inc., a Delaware Corporation
(hereinafter referred to as "Employer"), and GERSHON WELTMAN, Ph.D.
(hereinafter referred to as "Employee"), with reference to the following:

    WHEREAS, Employer and Employee entered into an Employment Agreement
effective on August 1, 1989 (the "Agreement"), which Agreement provides for a
five-year term; and

    WHEREAS, in order to insure the continued loyalty and service of Employee,
Employer and Employee desire to amend the Agreement to provide for automatic
renewal of the term thereof;

    NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein and in the Agreement, the parties hereby amend the Agreement
in the following respects:

    1.   Paragraph 3 of the Agreement is hereby amended to read in full as
         follows:

              "3.       TERM OF AGREEMENT

              The term of this Agreement shall be for a period of five (5)
              years beginning August 1, 1991, subject, however, to prior
              termination as provided herein. Subject to such termination
              provisions, the term of this Agreement shall be automatically
              extended for successive one-year periods beginning on August 1,
              1992, and each August 1 thereafter, unless either party shall
              give the other party written notice of its election not to
              extend the term of this Agreement at least 30 days prior to
              August 1 of any year. Upon the giving of such notice of
              election not to extend, this Agreement shall remain in effect
              for the remaining balance of the term hereof."

<PAGE>

    2.   There is hereby added to the Agreement a new paragraph 22 which
         shall read as follows:

              "22.      NOTICES

              Each party shall give the other party 30 days prior written
              notice of its intention to terminate this Agreement pursuant to
              Paragraph 7.1 or 7.2(a) hereof.

              Any notice or demand required or permitted to be given under
              this Agreement shall be deemed to have been duly given if in
              writing and if personally delivered or sent by registered or
              certified mail, return receipt requested, with postage prepaid:

                                       if to Employer:

                                            Perceptronics, Inc.
                                            21135 Erwin Street
                                            Woodland Hills, CA 91367

                                            Attn:  Corporate Secretary

                                       if to Employee:

                                            Gershon Weltman

                                            -------------------------------

                                            -------------------------------

              Either party may change the address to which notices are to be
              sent to it or him by giving ten days' written notice of such
              change of address to the other party in the manner above
              provided for giving notice. Notices will be considered
              delivered on the date of personal delivery or on the date of
              deposit in the United States mail in the manner above provided
              for giving notice by mail."

<PAGE>

    Except as specifically set forth in this Amendment, the Agreement shall
remain in full force and effect without alteration or modification.

    IN WITNESS WHEREOF, the parties have executed this Amendment on the day
and year first above written.

                                       PERCEPTRONICS, INC.


                                       By:   /s/ Amos Freedy
                                            -------------------------------
                                            AMOS FREEDY
                                            Chief Operating Officer


                                       By:   /s/ Sarah A.S. Goldberg
                                            -------------------------------
                                            SARAH A.S. GOLDBERG
                                            Corporate Secretary


                                       /s/ Gershon Weltman
                                       -------------------------------------
                                       GERSHON WELTMAN, Ph.D.
<PAGE>

                                                                    EXHIBIT 10.2

                            EMPLOYMENT AGREEMENT
                                    FOR
                           GERSHON WELTMAN, Ph.D.

     THIS AGREEMENT is made and entered into to be effective on August 1,
1989, by and between PERCEPTRONICS, a California corporation (hereinafter
referred to as "Employer") and GERSHON WELTMAN, Ph.D. (hereinafter referred
to as "Employee"), with reference to the following:

     WHEREAS, Employee is currently employed as the Chief Executive Officer
of Employer and is rendering valuable service to Employer in that capacity
pursuant to a five (5) year employment agreement effective as of August 1,
1984; and

     WHEREAS, the above referenced employment agreement between Employer and
Employee expires on July 31, 1989, and

     WHEREAS, it is the desire of Employer and Employee to ensure that
Employer will continue to receive the benefit of Employee's loyalty and
service; and

     WHEREAS, in order to help ensure that Employer will continue to receive
the benefit of Employee's loyalty and service, the parties desire to enter
into this formal employment agreement (hereinafter referred to as the
"Employment Agreement" or simply the "Agreement") to provide Employee with
appropriate compensation and retirement arrangements, and to assure Employee
of employment stability by preparing for the contingencies of change in
management and control of Employer which might otherwise adversely impact on
Employee's performance and ability to contribute to Employer's continued
growth;

    NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, and for other valuable consideration,

                                      -1-

<PAGE>

the receipt of which is hereby acknowledged, the parties agree as follows:

     1.   EXPIRATION OF EXISTING EMPLOYMENT AGREEMENT

          The parties hereby acknowledge that the existing employment
agreement dated to be effective on August 1, 1984 shall expire on July 31,
1989. Effective August 1, 1989, the parties intend that this Employment
Agreement shall be the sole arrangement defining the rights and obligations
of the parties with respect to the matters discussed herein.

     2.   SCOPE OF EMPLOYMENT

     2.1  EMPLOYMENT

          Employer hereby employs Employee and Employee hereby accepts
employment on the terms and conditions described herein.

     2.2  DESCRIPTION OF SERVICES

          Employee agrees to devote his full working time and attention to
working as the Chairman of the Board of Directors and Chief Executive Officer
for Employer. Subject to such supervisory powers as may be given by the Board
of Directors to the Chairman of the Board, as the Chief Executive Officer,
Employee shall have general supervision, direction and control of the
business and the officers of Employer. He shall have the general powers and
duties of management usually vested in the office of Chief Executive Officer
of a corporation, and shall have such other powers and duties as may be
prescribed by the Board of Directors, specifically including, but not by way
of limitation, the powers and duties required to manage commercial product
development and marketing for Employer, manage S.E.C. compliance of Employer,
manage personnel for Employer, manage special projects for Employer, and head
up the product subsidiary operations of Employer. Expenditure of reasonable
amounts of time for personal or outside business, and charitable and
professional activities shall not be deemed a breach of this Agreement,
provided that those activities do not materially interfere with the services
required to be rendered to Employer under this Agreement.

                                      -2-

<PAGE>

     2.3  EMPLOYER'S AUTHORITY

          Employee agrees to observe and comply with Employer's rules and
regulations as adopted by Employer's Board of Directors regarding performance
of his duties, and to carry out and perform those orders, directions and
policies periodically established and set forth by Employer with respect to
his employment.

     2.4  NONCOMPETITION BY EMPLOYEE

          During the period of Employee's active employment under this
Agreement, Employee shall not, directly or indirectly, either as an employee,
employer, consultant, agent, principal, partner, stockholder, corporate
officer, director, or in any other individual or representative capacity,
engage or participate in any business that is in competition with the
business of Employer. This restrictive covenant shall not apply following
termination of Employee's employment with Employer, notwithstanding the fact
that Employee may be entitled to receive severance benefits as provided
herein.

     3.   TERM OF AGREEMENT

          The term of this Agreement shall be for a period of five (5) years
beginning on the effective date set forth above, subject, however, to prior
termination as provided for herein.

     4.   COMPENSATION PAYABLE TO EMPLOYEE

     4.1  GENERAL POLICY REGARDING ESTABLISHMENT OF BASE SALARY

          Employer agrees to pay Employee a base salary during the term of
this Agreement in an amount to be established annually by Employer's Board of
Directors with reference to negotiations with Employee (hereinafter referred
to as the "Base Salary"); provided, however, that Employee's annual Base
Salary shall never be set at an amount which is less than the minimum annual
Base Salary amount computed pursuant to the terms of Paragraph 4.2 below.

     4.2  MINIMUM BASE SALARY DURING INITIAL TERM; COST OF LIVING ADJUSTMENTS

          During the first year of the term of this Agreement, Employee's
minimum annual Base Salary shall be One Hundred Sixty-

                                      -3-

<PAGE>

Eight Thousand Dollars ($168,000.00). Each year during the balance of the
term of this Agreement, Employee's minimum annual Base Salary shall be
increased by an amount which is equal to the amount of Employee's annual Base
Salary for the fiscal year 1988-1989, as increased (but never decreased) with
reference to changes in the Consumer Price Index for "All Items"--Los
Angeles/Anaheim/Riverside, published by the U.S. Department of Labor Business
Labor Statistics.

     4.3  PAYMENT OF BASE SALARY

          Subject to the terms of Paragraph 5.1 herein below, which
paragraph describes a deferred compensation arrangement adopted by Employer,
Employee's Base Salary shall be paid at intervals convenient to Employer
pursuant to the payroll schedule established by Employer's Board of Directors
for all employees of Employer. All compensation payable as Base Salary to
Employee shall be subject to the customary withholding tax and other
employment taxes required with respect to compensation paid by Employer to its
Employees.

     4.4  ANNUAL BONUSES

          In addition to the Base Salary set forth hereinabove, sixty (60)
days following the end of each fiscal year, and subject only to Employee's
election to defer receipt of a portion of said amount (provided Employer was
profitable during said prior fiscal year), Employer may pay an annual bonus
to Employee (hereinafter referred to as the "Annual Bonus") in an amount, if
any, to be determined in the discretion of the Board of Directors.

     4.5  REIMBURSEMENT FOR BUSINESS EXPENSES

          During the period of his employment with Employer, Employee will be
reimbursed for reasonable business expenses in accordance with the general
policy of Employer as adopted by Employer's Board of Directors from time to
time (hereinafter referred to as the "Expense Reimbursements").

     4.6  DEFINITION: TOTAL COMPENSATION

          For purposes of this Agreement, the term "Total Compensation" shall
mean the annual Base Salary (as defined at Paragraph 4.1) and Annual Bonus
(as defined at Paragraph 4.4).

                                      -4-

<PAGE>

     5.   FORMAL FRINGE BENEFITS ARRANGEMENTS

     5.1  DEFERRED COMPENSATION ARRANGEMENT

          During the term of this Agreement, Employer shall maintain the
Employee Benefit Plan adopted in April, 198  (commonly referred to as the
"401(k) Plan") and shall take all steps reasonably required in order to
maintain the qualification of such plan under Section 401(k) of the Internal
Revenue Code. Anything to the contrary notwithstanding, Employer's obligation
to maintain said plan shall not impose any obligation on Employer to make any
contributions to such plan.

     5.2  INCENTIVE STOCK OPTION ARRANGEMENT

          Employee shall be entitled to receive options to purchase Common
Stock of Employer under Employer's 1982 Incentive Stock Option Plan and 1984
Non-Qualified Stock Option Plan, or such other stock option plans as may be
adopted by Employer, at such times, in such amounts and on such terms as shall
be recommended by Employer's Compensation Committee and approved by
Employer's Board of Directors.

     5.3  COMPANY AUTOMOBILE

          Whenever during the term of this Agreement the Board of Directors
approves car allowances for corporate officers of Employer, Employer shall
provide Employee with the use of a luxury class automobile with optional
equipment of Employee's election. Said automobile shall at no time be older
than three (3) years. Employer shall pay all operating expenses of any nature
whatsoever with regard to such automobile and shall procure and maintain in
force an automobile liability insurance policy on such automobile, with
coverage in the minimum amounts of One Million Dollars ($1,000,000.00) for
bodily injury or death to one (1) person in one (1) accident, and Two Hundred
Fifty Thousand Dollars ($250,000.00) for property damage in one (1) accident.

                                      -5-

<PAGE>

     6.   DISABILITY AND DEATH BENEFITS

     6.1  DISABILITY BENEFIT

          (a)  If Employee becomes permanently disabled at any time during
the term of this Agreement, resulting from bodily injury or disease which
prevents Employee from engaging in further employment with Employer,
Employee's obligation to render service hereunder shall terminate and
Employer will become obligated to pay Employee as follows:

               (i)  during the thirty-six (36) month period following the
date the Employee becomes disabled, an amount equal to the greater of Ten
Thousand Dollars ($10,000.00) per month or Employee's monthly benefit
pursuant to the monthly disability insurance policy referred to in Paragraph
10.1 hereinbelow; and

               (ii) following said thirty-six (36) month period, the
disability benefit pursuant to said disability insurance policy.

          (b)  Payments shall commence on the first day of the first month
after termination of employment by reason of said disability and shall
continue throughout the term of Employee's disability.

     6.2  PRE-RETIREMENT DEATH BENEFIT

          If Employee dies during the term of this Agreement while employed
on a full-time basis by Employer, Employer shall be obligated to pay
Employee's designated beneficiary a lump sum payment in an amount not less
than Five Hundred Thousand Dollars ($500,000.00). The parties acknowledge
that Employer intends to fund its obligation under this Paragraph 6.2 by its
payment of the insurance premiums on the life insurance policies referred to
in Paragraph 10.2 hereinbelow.

     7.   SEVERANCE BENEFITS PAYABLE ON EMPLOYEE'S VOLUNTARY OR INVOLUNTARY
          TERMINATION OF EMPLOYMENT

     7.1  GENERAL POLICY REGARDING EMPLOYER'S RIGHT TO TERMINATE EMPLOYER'S
          EMPLOYMENT

          Subject to all of the executory terms and provisions of this
Agreement (specifically those providing for severance benefits payable to
Employee upon early termination of employment with

                                      -6-

<PAGE>

Employer), Employer's Board of Directors reserves the right to terminate
Employee's employment with Employer, in its sole discretion, prior to
expiration of the term of this Agreement, provided that any such termination
shall trigger Employee's rights to the severance benefit described in
Paragraph 7.3(a) below.

     7.2  GENERAL POLICY REGARDING EMPLOYEE'S RIGHT TO RESIGN

          (a)  Upon any "change in control" (as defined in subparagraph
7.2(b) below) of Employer, if Employee, in Employee's sole discretion,
determines that due to said change in control, Employee would be impaired in
any way in effectively discharging his duties hereunder, or if any reason of
said change in control, Employee determines in his sole discretion that his
responsibilities or position with Employer have been downgraded, Employee
shall have the right to resign and terminate his employment prior to the
expiration of the term of this agreement, and upon said resignation or early
termination of employment, Employee shall be entitled to receive payment of
the severance benefit described in Paragraph 7.3(b) below.

          (b)  For purposes of this Agreement, a "change in control" shall be
deemed to have occurred if:

               (i)  The shareholders of Employer shall approve (1) any
consolidation or merger of Employee or any subsidiary where the shareholders
of Employer, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, beneficially own, directly or
indirectly, shares representing in the aggregate more than fifty percent
(50%) of all votes to which all shareholders of the corporation issuing cash
or securities in the consolidation or merger (or of its ultimate parent
corporation, if any) would be entitled under ordinary circumstances in the
election of directors or where the members of the Board of Directors of
Employer, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, constitute a majority of the
Board of Directors of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if any), (2)
any sale, lease, exchange or other transfer (in one

                                      -7-

<PAGE>

transaction or a series of transactions contemplated or arranged by any
party as a single plan) of all or substantially all of the assets of
Employer, or (3) any plan or proposal for the liquidation or dissolution of
Employer;

               (ii) Individuals who, as of the date hereof, constitute the
entire Board of Directors of Employer (as of the date hereof the "Incumbent
Directors") cease for any reason to constitute at least a majority of the
Board of Directors, provided that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
Employer's shareholders, was approved by a vote of at least a majority of the
then Incumbent Directors (other than an election or nomination of an
individual whose assumption of office is the result of an actual or
threatened election contest relating to the election of directors of Employer,
as such terms are used in Rule 14a-11 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), shall be, for purposes of this
Agreement, considered as though such individual were an Incumbent Director;
or

               (iii) Any "person," as such term is used in Sections 13(d)
and 14(d) of the Exchange Act (other than Employer, any of its subsidiaries,
any employee benefit plan of Employer or any of its subsidiaries or any
entity organized, appointed or established by Employer for or pursuant to the
terms of such plan), together with all "affiliates" and "associates" (as such
terms are defined in Rule 12b-2 under the Exchange Act) of such person, shall
become the "beneficial owner" or "beneficial owners" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of
securities of Employer representing in the aggregate fifteen percent (15%) or
more of either (1) the then outstanding shares of common stock of Employer
("Common Shares"), or (2) the combined voting power of all then outstanding
securities of Employer having the right under ordinary circumstances to vote
in an election of the Board of Directors of Employer ("Voting Securities")
(in either such case, other than as a result of acquisitions of such
securities directly from Employer).


                                      -8-

<PAGE>

Notwithstanding the foregoing, a "change in control" shall not be deemed to
have occurred for purposes of the foregoing clause 7.2(b)(iii) solely as the
result of an acquisition of securities by Employer which, by reducing the
number of Common Shares or other Voting Securities outstanding, increases (1)
the proportionate number of Common Shares beneficially owned by any person to
fifteen percent (15%) or more of the Common Shares then outstanding, or (2)
the proportionate voting power represented by the Voting Securities
beneficially owned by any peron to fifteen percent (15%) or more of the
combined voting power of all then outstanding Voting Securities; PROVIDED,
HOWEVER, that if any person referred to in clause (1) or (2) of this sentence
shall thereafter become the beneficial owner of any additional Common Shares
or other Voting Securities (other than pursuant to a stock split, stock
dividend or similar transaction), then a "change in control" shall be deemed
to have occurred for purposes of the foregoing clauses 7.2(b)(iii).

          (c)  The definition of change in control expressly excludes any
change in control resulting from the exercise of the Convertible Debentures of
Employer outstanding as of the effective date this Agreement or any issuance
of securities or other transaction which is approved by the Incumbent
Directors and arises out of the engagement by Employer of Bear Stearns, Inc.

     7.3  SEVERANCE BENEFITS

          If Employee's employment with Employer is terminated involuntarily
by Employer for any reason other than criminal misconduct or gross neglect of
duties, or on Employee's resignation or other voluntary withdrawal from
employment with Employer in the event of a "change in control" of Employer
(as that term is defined hereinabove), then Employer shall be obligated to
pay Employee a severance benefit in an amount described in this paragraph as
follows:

          (a)  SEVERANCE BENEFIT PAYABLE FROM EMPLOYEE'S INVOLUNTARY
               TERMINATION OF EMPLOYMENT

               If Employer's Board of Directors terminates Employee's
employment for any reason (other than Employee's


                                      -9-



<PAGE>


criminal misconduct or gross neglect of duties). Employee shall be entitled
to receive a severance pay benefit equal to three (3) times Employee's Total
Compensation earned by Employee during Employer's fiscal year immediately
preceding said termination. This benefit shall be payable in thirty-six (36)
equal monthly installments, without interest, with the first such installment
due and payable thirty (30) days following the date of said termination. The
severance payments payable to Employee pursuant to this subparagraph 7.3(a)
shall be in lieu of any obligation of Employer under Paragraph 4.

        (b) SEVERANCE BENEFITS PAYABLE UPON EMPLOYEE'S VOLUNTARY
            TERMINATION OR RESIGNATION

            If Employee elects to resign and terminates employment early
pursuant to the terms of this Agreement set forth above at Paragraph 7.2,
Employee shall be entitled to receive the following severance pay benefits:

            (i) During the first year following termination of employment,
Employee shall be entitled to receive a severance pay benefit, payable in
equal monthly installments, with the total amount of such installments during
said year equal to sixty percent (60%) of Employee's Total Compensation
earned by Employee during Employer's fiscal year immediately preceding said
termination;

            (ii) During the second year following termination of
employment, Employee shall be entitled to receive a severance pay benefit,
payable in equal monthly installments, with the total amount of such
installments during said year equal to fifty percent (50%) of Employee's
Total Compensation earned by Employee during Employer's fiscal year
immediately preceding said termination; and

            (iii) During the third year following termination of employment,
Employee shall be entitled to receive a severance pay benefit, payable in
equal monthly installments, with the total amount of such installments during
said year equal to forty percent (40%) of Employee's Total Compensation
earned by Employee during Employer's fiscal year immediately preceding said
termination.


                                       -10-
<PAGE>


     7.4  LIMITATION ON SEVERANCE BENEFIT PAYMENTS TO EMPLOYEE

          Notwithstanding anything herein to the contrary, the present value
of the severance benefits payable to Employee pursuant to Paragraph 7.3(a) or
(b) above shall not exceed two hundred ninety-nine percent (299%) of
Employee's "Base Amount" as that term in defined in Internal Revenue Code
Section 280G and the regulations thereunder. The present value of said
severance benefits shall be determined using the discount rate required under
Internal Revenue Code Section 280G.

     7.5  SEVERANCE BENEFIT EXCLUSION

          The severance benefits described in Paragraph 7.3 above shall not
be payable upon termination of employment by reason of a disability or death,
pursuant to which Employer becomes obligated to pay the disability or death
benefits provided for in Paragraph 6 above.

     8.   VACATION AND SICK LEAVE; LEAVE OF ABSENCE

     8.1  VACATION AND SICK LEAVE

          Employee shall be entitled, without loss of compensation, to an
annual vacation and to annual sick leave pursuant to the policies established
from time to time by Employer's Board of Directors. Vacation time shall be
deemed to be earned by Employee ratably during each employment year, and upon
termination of this Agreement for any reason, the salary applicable to any
excess vacation time which has been utilized by Employee shall be considered
as an indebtedness of Employee to Employer which is due and payable upon the
date of termination.

     8.2  LEAVES OF ABSENCE

          Employee shall be entitled to such additional time without loss of
compensation for attendance at meetings, conventions and post-graduate
courses as the Board of Directors of Employer shall, from time to time,
determine. The Board of Directors of Employer may, in its sole discretion,
permit Employee to take an additional leave of absence from employment, in
which event Employee's salary may be reduced by agreement of the parties;
provided, however, during such leave of absence, all other terms of this
Agreement will continue in full force and effect.

                                       -11-

<PAGE>

     9.   RIGHTS IN AND TO INVENTIONS AND PATENTS

     9.1  DESCRIPTION OF PARTIES' RIGHTS

          Employee agrees that as to any inventions made by him during the
term of his employment, solely or jointly with others, which are made with
Employer's equipment, supplies, facilities, trade secrets or time, or which
relate to the business of Employer or Employer's actual or demonstrably
anticipated research or development, or which result from any work performed
by Employee for Employer, such inventions shall belong to Employer. Employee
also agrees that Employer shall have the right to keep such inventions as
trade secrets, if Employer chooses.

     9.2  EXCLUSIONS

          This Agreement does not apply to any inventions which are the
subject of Section 2870 of the California Labor Code.

     9.3  DISCLOSURE REQUIREMENTS

          For the purposes of this Agreement, an invention is deemed to have
been made during the period of Employee's employment if, during such period,
the invention was conceived or first actually reduced to practice, and
Employee agrees that any patent application filed within a year after
termination of his employment shall be presumed to relate to an invention
made during the term of Employee's employment unless he can provide evidence
to the contrary. In order to permit Employer to claim rights to which he may
be entitled, Employee agrees to disclose to Employer in confidence all
inventions which Employee makes during the course of his employment and all
patent applications filed by Employee within a year after termination of his
employment.

     9.4  COOPERATION OF PARTIES

          Employee shall assist Employer in obtaining patents on all
inventions, designs, improvements, and discoveries deemed patentable by
Employer in the United States and in all foreign countries, and shall execute
all documents and do all things necessary to obtain letters patent, to vest
full and extensive title thereto, and to protect the same against
infringement by others.

                                       -12-
<PAGE>

    10.   INSURANCE POLICIES

    10.1  DISABILITY INSURANCE POLICIES

          (c)  Employer, in order to help fund its obligations under
Paragraph 6.1 of this Agreement, has acquired a disability income insurance
policy on Employee from PAUL REVERE, policy number 01022184630, attached
hereto as Exhibit "A." Any subsequent policy acquired by Employer shall
provide for benefit payment periods and monthly benefit amounts not less than
those periods and amounts in the existing policy described at Exhibit "A"
attached hereto.

          (d)  Employee shall be the sole owner and beneficiary of the
disability policies acquired, but Employer shall pay all premiums for said
policies. Proceeds payable upon disability of Employee shall reduce and be
deemed to satisfy Employer's obligation to make disability payments hereunder
on a dollar for dollar basis.

     10.2  LIFE INSURANCE POLICIES

          Employer, in order to help fund its obligations under Paragraph 6.2
hereof, will maintain and pay all premiums on a life insurance policy on
Employee's life from EXECUTIVE LIFE, policy number C 115540591L, attached
hereto as Exhibit "B." Notwithstanding Employer's obligation to make premium
payments on the insurance policy, such policy shall be owned outright and
held by Employee, and Employer shall not have any right to borrow against or
otherwise encumber the policy.

     10.3  LIABILITY OF THE INSURANCE EMPLOYER

          An insurance company insuring Employee pursuant to this Agreement;

          (a)  Shall not be deemed to be a party to this Agreement for any
purpose and shall not in any way be responsible for its validity;

          (b)  Shall not be obligated to inquire as to the distribution of
any monies payable or paid by it under any policy issued pursuant to this
Agreement;

                                      -13-

<PAGE>

          (c)  Shall be fully discharged from any and all liability under the
terms of any policy issued by it which is subject to the terms of this
Agreement, upon payment or other performance of its obligations in accordance
with the terms of such policy.

     10.4  DISPOSITION OF INSURANCE POLICIES UPON TERMINATION OF AGREEMENT

          Employee shall have the option to purchase from Employer any and
all insurance policies on his life maintained by Employer within sixty (60)
days after termination of this Agreement. The purchase price shall be the
fair market (cash surrender) value of said policies.

     11.  TERMINATION OF AGREEMENT

          Employee's employment with Employer shall be terminated and, except
for the executory provisions hereof pertaining to deferred compensation and
severance benefits, this Agreement shall be terminated upon any of the
following events:

          (e)  Mutual agreement of Employee and Employer;

          (f)  Death of Employee;

          (g)  Either party's failure to rectify a material breach of any of
the terms, covenants and conditions contained herein within thirty (30) days
after receiving written demand from the other party to cure such default;

          (h)  Total disability of Employee which continues for three (3)
consecutive months. For purposes of this paragraph, Employee shall be
considered to be totally disabled if Employee is determined to be unable
because of any physical or mental disability requiring the treatment of a
physician, to engage in his regular occupation;

          (i)  Employee's criminal misconduct or gross neglect of his duties
which adversely impact Employer.

     12.  ASSIGNABILITY OF BENEFITS

          Except to the extent that this provision may be contrary to law, no
assignment, pledge, collateralization or attachment of any of the benefits
under this Agreement shall be valid or recognized by Employer. Payment
provided for by this Agreement

                                     -14-

<PAGE>

shall not be subject to seizure for payment of any debts or judgments
against Employee or any beneficiary named herein, nor shall Employee or any
beneficiary have any right to transfer, modify, anticipate or encumber any
rights or benefits hereunder.

     13.  BENEFICIARY DESIGNATION

          In the event of Employee's death, any remaining installments
provided for in the deferred compensation arrangement set forth in Paragraph
5 hereof, or any other payments then owing to Employee hereunder, shall be
paid one-half to Employee's spouse, if any, and one-half to Employee's then
living issue by right of representation. The beneficiary named herein may be
changed at any time and from time to time at the sole discretion of Employee
upon written instruction to Employer.

     14.  HEADINGS AND TITLES

          The article, section and paragraph headings and titles of this
Agreement are for convenience and ease of reference only, and do not define,
limit, augment or describe the scope, content or intent of this Agreement or
any part or parts of this Agreement.

     15.  GOVERNING LAW

          This Agreement is drawn to be effective in the State of California
and shall be construed in accordance with California law.

     16.  ATTORNEYS' FEES

          If any legal action or arbitration or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions
of this Agreement, the successful prevailing party or parties shall be
entitled to recover reasonable attorneys' fees and all other costs incurred
in connection with pursuing such action or proceeding in addition to any
other relief to which such parties may be entitled.

                                      -15-




<PAGE>

     17.  ARBITRATION

          Any dispute between the parties hereto arising out of or relating
to this Agreement, the terms of conditions hereof, the breach hereof, any of
the accountings or evaluations to be made pursuant hereto, or any other
rights of the parties with respect hereto, shall be arbitrated in Los
Angeles, California, before and pursuant to the then applicable rules and
regulations of the American Arbitration Association, or any successor
organization thereto. In any such proceeding, the arbitration panel shall
determine who is the prevailing party and shall award to such party its
reasonable attorneys', accountants' and other professional fees, and other
costs incurred in connection with such proceeding. The award of the
arbitration panel shall be final and binding upon the parties, and
non-appealable, and may be entered into and enforced by any court of
competent jurisdiction. Such court may add to the award of the arbitration
panel additional reasonable attorneys' fees and costs incurred by the
prevailing party in attempting to enforce such award. The parties hereto
expressly incorporate herein by this reference the provisions of California
Code of Civil Procedure, Section 1283.05.

     18.  AMENDMENT

          This Agreement may be amended, supplemented or varied at any time
and in any and all respects only by an instrument in writing executed by each
of the parties who are then subject hereto. Without limiting the generality
of the foregoing, the parties may, in writing, extend the time for
performance of any of the obligations contained herein, waive any
inaccuracies in representations by the other contained herein or in any
document delivered pursuant hereto, waive compliance by the other with any of
the covenants contained in this Agreement, or the performance of any of the
obligations by the other party.

     19.  WAIVER

          Unless mutually agreed to by the parties in writing, the failure of
any party at any time to require performance by the


                                     -16-

<PAGE>

other of any provision hereunder shall not affect its right thereafter to
enforce the same, nor shall a waiver by any party of any breach of any
provision hereof, whether or not agreed to in writing, be taken or held to be
a waiver of any other term or provision of this Agreement. No extension of
the time for performance of any obligation or act shall be deemed to be an
extension of time for the performance of any other obligation or act
hereunder.

     20.  SEVERABILITY

          Wherever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited or invalid
under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such
provision, or the remaining provisions of this Agreement, each of which shall
continue to be valid and binding upon the parties.

     21.  ENTIRE AGREEMENT

          This Agreement contains all of the terms and conditions of
employment agreed upon by the parties. No other understanding, oral or
otherwise, regarding the subject matter of this Agreement shall be deemed to
exist or to bind either of the parties hereto.

     IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective on the day and year first above written.


"Employer"                                  PERCEPTRONICS,
                                            a California corporation


                                            By: /s/ AMOS FREEDY
                                               -------------------------------
                                                Amos Freedy, Ph.D.
                                                Chief Operating Officer



                                            By: /s/ SARAH A.S. GOLDBERG
                                               -------------------------------
                                                Sarah A.S. Goldberg
                                                Secretary


                                     -17-

<PAGE>



"Employee"                                     /s/ GERSHON WELTMAN
                                               -------------------------------
                                               Gershon Weltman, Ph.D.


                                     -18-