Document:

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                                                                   EXHIBIT 10.1

                               PERCEPTRONICS, INC.

                             1992 STOCK OPTION PLAN
                     (As amended through February 22, 1994)

1.   PURPOSE

     The purpose of the Perceptronics, Inc. 1992 Stock Option Plan (the
"Plan") is to further the interests of Perceptronics, Inc. (the "Company")
and its Subsidiaries by encouraging and enabling selected officers,
directors, employees, consultants and advisers, upon whose judgment,
initiative and effort the Company is largely dependent for the successful
conduct of its business, to acquire and retain a proprietary interest in the
Company by ownership of its stock through the exercise of stock options to be
granted hereunder. Options granted under the Plan are either options
intending to qualify as "incentive stock options" within the meaning of
Section 422 of the Code or non-qualified stock options.

2.   DEFINITIONS

     Whenever used herein the following terms shall have the following
meanings, respectively:

     (a)  "Board" shall mean the Board of Directors of the Company.

     (b)  "Code" shall mean the Internal Revenue Code of 1986, as amended.

     (c)  "Committee" shall mean the Stock Option or Compensation Committee
appointed by the Board of Directors of the Company, or if no committee has
been appointed reference to "Committee" shall be deemed to refer to the Board
of Directors of the Company.

     (d)  "Common Stock" shall mean the Company's Common Stock.

     (e)  "Company" shall mean Perceptronics, Inc., a Delaware corporation.

     (f)  "Disinterested Person" shall have the meaning set forth in Rule
16b-3(c)(2)(i) promulgated by the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934, as amended, or any successor rule.

     (g)  "Employee" shall mean, in connection with Incentive Options under
this Plan, only employees of the Company or any Subsidiary or Parent
Corporation of the Company.

     (h)  "Fair Market Value Per Share" of the Company's Common Stock shall
mean if the Company's Common Stock is publicly traded the mean between the
highest and lowest quoted selling prices of the Common Stock on the date of
the grant of the Option or, if not available, the mean between the bona fide
bid and asked prices of the Common Stock on the date of the grant of the
Option. In any situation not covered above or if there were no sales on the
date

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of the grant of an Option, the Fair Market Value Per Share shall be
determined by the Committee in accordance with Section 20.2031-2 of the
Federal Estate Tax Regulations.

     (i)  "Incentive Option" shall mean an Option granted under the Plan
which is designated as and qualified as an incentive stock option within the
meaning of Section 422 of the Code.

     (j)  "Non-Qualified Option" shall mean an Option granted under the Plan
which is designated as a non-qualified stock option.

     (k)  "Option" shall mean an Incentive Option, as defined in Section 2(i)
hereof, or a Non-Qualified Option, as defined in Section 2(j) hereof.

     (l)  "Optionee" shall mean any person who has been granted an Option to
purchase shares of Common Stock under the Plan.

     (m)  "Parent Corporation" shall have the meaning set forth in Section
424(e) of the Code.

     (n)  "Permanent Disability" shall mean termination of employment with
the Company or any Subsidiary or Parent Corporation of the Company with the
consent of the Company or such Subsidiary or Parent by reason of permanent
and total disability within the meaning of Section 22(e)(3) of the Code.

     (o)  "Plan" shall mean the Perceptronics, Inc. 1992 Stock Option Plan,
as amended from time to time.

     (p)  "Relationship" shall mean that the Optionee is or has agreed to
become an officer, director, employee or consultant of the Company or any
Subsidiary or Parent Corporation of the Company.

     (q)  "Subsidiary" shall have the meaning set forth in Section 424(f) of
the Code.

3.   ADMINISTRATION

     (a)  The Plan shall be administered either (i) by the Board, or (ii) in
the discretion of the Board, by a Committee of at least two directors
appointed by the Board; provided, however, that in the case of Options
granted to officers, directors or 10% stockholders of the Company who are
subject to the reporting requirements of Section 16(a) under the Securities
Exchange Act of 1934, as amended, the selection of the Optionee and all
decisions concerning the timing, pricing and amount of the grant and the
administration of the Option shall be made solely by a Committee consisting
of at least two directors, each member of which Committee is a Disinterested
Person. The Board may from time to time appoint members of the Committee in
substitution for or in addition to members previously appointed and may fill
vacancies.

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     (b) Any action of the Committee with respect to the administration of
the Plan shall be taken by majority vote or by written consent of a majority
of its members.

     (c) Subject to the provisions of the Plan, the Committee shall have the
authority to construe and interpret the Plan, to define the terms used
therein, to determine the time or times an Option may be exercised and the
number of shares which may be exercised at any one time, to amend the terms
of outstanding options, including the exercisability thereof, to prescribe,
amend and rescind rules and regulations relating to the Plan, to approve and
determine the duration of leaves of absence which may be granted to
participants without constituting a termination of their employment for
purposes of the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. All determinations and
interpretations made by the Committee shall be conclusive and binding on all
Employees and on their guardians, legal representatives and beneficiaries.

     (d) The Company will indemnify and hold harmless the members of the
Board and the Committee from and against any and all liabilities, costs and
expenses incurred by such persons as a result of any act, or omission to act,
in connection with the performance of such persons' duties, responsibilities,
and obligations under the Plan, other than such liabilities, costs and
expenses as may result from the negligence, gross negligence, bad faith,
willful misconduct and/pr criminal acts of such persons.

4.   NUMBER OF SHARES SUBJECT TO PLAN

     The stock to be offered under the Plan shall consist of up to 300,000
shares of the Company's Common Stock. If any Option granted hereunder shall
expire or terminate for any reason without having been exercised in full, the
unpurchased shares subject thereto shall again be available for purposes of
this Plan.

5.   ELIGIBILITY AND PARTICIPATION

     (a) Non-Qualified Options may be granted to any person who has a
Relationship with the Company, any of its Subsidiaries, or its Parent
Corporation. Incentive Options may be granted only to Employees. The
Committee shall determine the persons to whom Options shall be granted, the
time or times at which such Options shall be granted, the number of shares to
be subject to each Option and other terms of the Options. An Optionee who has
been granted an Option may, if he is otherwise eligible, be granted an
additional Option or Options if the Committee shall so determine. An Employee
may be granted Incentive Options or Non-Qualified Options or both under the
Plan; provided, however, that the grant of Incentive Options and
Non-Qualified Options to an Employee shall be the grant of separate Options
and each Incentive Option and each Non-Qualified Option shall be specifically
designated as such.

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     (b) In no event shall the aggregate fair market value (determined as of
the time the Option is granted) of the shares with respect to which Incentive
Options (granted under the Plan or any other plans of the Company and any
Subsidiary of Parent Corporation of the Company) are exercisable for the
first time by an Optionee in any calendar year exceed $100,000.

6.   PURCHASE PRICE

     The purchase price of each share covered by each Incentive Option shall
not be less than 100% of the Fair Market Value Per Share of the Common Stock
of the Company on the date the Incentive Option is granted; provided,
however, that if at the time an Incentive Option is granted the Optionee owns
or would be considered to own by reason of Section 424(d) of the Code more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary of Parent Corporation of the Company, the purchase
price of the shares covered by such Incentive Option shall not be less than
110% of the Fair Market Value Per Share of the Common Stock on the date the
Incentive Option is granted. The purchase price of each share covered by
each Non-Qualified Option shall not be less than 85% of the Fair Market Value
Per Share of the Common Stock on the date the Option is granted,

7.   DURATION OF OPTIONS

     The expiration date of the Option (which may not exceed ten years from
the date of grant) and all other rights thereunder shall be determined by the
Committee. In the event the Committee does not specify the expiration date of
the Option, the expiration date shall be 10 years from the date on which the
option was granted, and shall be subject to earlier termination as provided
herein; provided, however, that if at the time an Incentive Option is granted
the Optionee owns or would be considered to own by reason of Section 424(d)
of the Code more than 10% of the total combined voting power of all classes
of stock of the Company, or any Subsidiary or Parent Corporation of the
Company, such Incentive Option shall expire not more than 5 years from the
date the Incentive Option is granted unless the Committee selects an earlier
date.

8.   EXERCISE OF OPTIONS

     An Option shall be exercisable in installments or otherwise upon such
terms as the Committee shall in its discretion determine at the time the
Option is granted or upon subsequent amendment of the Option; provided,
however, that each Option shall be exercisable in installments of at least 20%
per year beginning one year after the date the Option is granted. An Optionee
may purchase less than the total number of shares for which the Option is
exercisable, provided that a partial exercise of an Option may not be for
less than 50 shares, unless the exercise is during the the final year of the
Option, and shall not include any fractional shares. As a condition to the
exercise, in whole or in part, of any Option, the Committee may in its sole
discretion require the

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Optionee to pay, in addition to the purchase price of the shares covered by
the Option, an amount equal to any federal, state and local taxes that the
Committee has determined are required to be paid in connection with the
exercise of such Option in order to enable the Company to claim a deduction
or otherwise. Furthermore, if any Optionee disposes of any shares of stock
acquired by exercise of an Incentive Option prior to the expiration of either
of the holding periods specified in Section 422(a)(1) of the Code, the
Optionee shall pay to the Company, or the Company shall have to right to
withhold from any payments to be made to the Optionee, an amount equal to any
Federal, state and local taxes that the Committee has determined are required
to be paid in connection with the exercise of such Option in order to enable
the Company to claim a deduction or otherwise.

9.  METHOD OF EXERCISE

     (a)  To the extent that the right to purchase shares has accrued,
Options may be exercised from time to time by giving written notice to the
Company stating the number of shares with respect to which the option is
being exercised. Payment of the purchase price for the number of shares being
purchased shall be made to the Company in such manner permitted by law as
determined by the Committee, which may include cash, check or delivery of
shares of Common Stock, or a combination thereof and, if applicable, any
federal, state or local taxes required to be paid in accordance with the
provisions of Section 8 hereof. The Company shall issue a separate
certificate or certificates with respect to each option exercised by an
Optionee.

     (b)  If payment is made with shares of Common Stock, the Optionee, or
other person entitled to exercise the Option shall deliver to the Company
certificates representing the number of shares of Common Stock in payment for
the shares being purchased, duly endorsed for transfer to the Company. If
requested by the Committee, prior to the acceptance of such certificates in
payment for such shares, the Optionee, or any other person entitled to
exercise the Option, shall supply the Committee with a representation and
warranty in writing that he has good and marketable title to the shares
represented by the certificate(s), free and clear of all liens and
encumbrances. The value of the shares of Common Stock tendered in payment for
the shares being purchased shall be their Fair Market Value Per Share on the
date of the Optionee's exercise.

     (c)  Notwithstanding the foregoing, the Company shall have the right to
postpone the time of delivery of the shares for such period as may be
required for it to comply, with reasonable diligence, with any applicable
listing requirements of any national securities exchange or any federal,
state or local law. If an Optionee, or other person entitled to exercise an
Option, fails to accept delivery of or fails to pay for all or any portion
of the shares requested in the notice of exercise, upon tender of delivery
thereof, the Committee shall have the right to terminate his Option with
respect to the shares not accepted or paid for.

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10.  NON-TRANSFERABILITY OF OPTIONS

     No Option granted under the Plan shall be assignable or transferable by
the Optionee, either voluntarily or by operation of law, otherwise than by
will or the laws of descent and distribution, and shall be exercisable during
his lifetime only by the Optionee.

11.  CONTINUANCE OF RELATIONSHIP

     Nothing contained in the Plan or in any Option granted under the Plan
shall confer upon any Optionee any rights with respect to the continuation of
his Relationship with the Company or any Subsidiary or Parent Corporation of
the Company or interfere in any way with the right of the Company or any
Subsidiary or Parent Corporation of the Company at any time to terminate such
Relationship or to increase or decrease the compensation of the Optionee from
the rate in existence at the time of the grant of an Option.

12.  TERMINATION OF EMPLOYMENT OTHER THAN BY DEATH OR PERMANENT DISABILITY

     Except as the Committee may determine otherwise with respect to any
particular Non-Qualified Option granted hereunder:

     (a)  If an Optionee ceases to have a Relationship for any reason other
than his death or Permanent Disability, any Options granted to him under the
Plan shall terminate three months from the date on which such Optionee
terminates his Relationship unless such Optionee has resumed or initiated a
Relationship and has a Relationship on such date. During such three-month
period, the Optionee may exercise any Option granted to him but only to the
extent such Option was exercisable on the date of termination of his
Relationship and provided that such Option has not expired or otherwise
terminated as provided herein. A leave of absence approved in writing by the
Committee shall not be deemed a termination of Relationship for purposes of
this Section, but no Option may be exercised during such leave of absence,
except during the first three months thereof.

     (b)  For purposes hereof, termination of an Optionee's Relationship
other than by death or Permanent Disability shall be deemed to take place
upon the earliest to occur of the following: (i) the date of the Optionee's
retirement under the normal retirement policies of the Company, and
Subsidiary of the Company or Parent Corporation of the Company; (ii) the date
of the Optionee's retirement with the approval of the Committee because of
disability other than Permanent Disability; (iii) the date an Optionee
receives notice or advice that his employment or other Relationship is
terminated; or (iv) in the case of an Optionee who is an employee, the date
the Optionee terminates his employment with the Company or any Subsidiary or
Parent Corporation of the Company; (v) in the case of an Optionee who is a
non-employee director, the date he ceases to be a director; or (vi) in the
case

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of an Optionee who is a consultant, the date the Optionee ceases to render
the services for which he was engaged or retained (in the case of clauses
(iv), (v) and (vi) hereof, absences for temporary illness, emergencies and
vacation or leave of absence approved in writing by the Committee excepted).

13. DEATH OR PERMANENT DISABILITY OF OPTIONEE

     Except as the Committee may determine otherwise with respect to any
Non-Qualified Options granted hereunder, if an Optionee shall die at a time
when he is in a Relationship or if the Optionee shall cease to have a
Relationship by reason of Permanent Disability, any Options granted to him
under this Plan shall terminate one year after the date of his death or
termination of Relationship due to Permanent Disability unless by its terms
it shall expire before such date or otherwise terminate as provided herein,
and shall only be exercisable to the extent that it would have been
exercisable on the date of his death or his termination due to Permanent
Disability. In the case of death, the Option may be exercised by the person
or persons to whom the Optionee's rights under the Option shall pass by will
or by the laws of descent and distribution.

14. STOCK PURCHASE NOT FOR DISTRIBUTION

     Each Optionee shall, by accepting the grant of an Option under the Plan,
represent and agree, for himself and his transferees by will or the laws of
descent and distribution, that all shares of stock purchased upon exercise of
the Option will be received and held without a view to distribution except as
may be permitted by the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder. After each notice of exercise of any
portion of an Option, if requested by the Committee, the person entitled to
exercise the Option must agree in writing that the shares of stock are being
acquired in good faith without a view to distribution.

15. PRIVILEGES OF STOCK OWNERSHIP

     The Company shall deliver to each Optionee annual financial statements,
quarterly reports containing financial information and other documents
delivered to shareholders generally. No person entitled to exercise any
Option granted under the Plan, however, shall have any of the rights or
privileges of a stockholder of the Company with respect to any shares of
Common Stock issuable upon exercise of such Option until such person has
become the holder of record of such shares. No adjustment shall be made for
dividends or distributions of rights in respect of such shares if the record
date is prior to the date on which such person becomes the holder of record,
except as provided in Section 16 hereof.

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16. ADJUSTMENTS

     (a) If the number of outstanding shares of Common Stock of the Company
are increased or decreased, or if such shares are exchanged for a different
number or kind of shares or securities of the Company through reorganization,
merger, recapitalization, reclassification, stock dividend, stock split,
combination of shares, or other similar transaction, the aggregate number of
shares of Common Stock subject to the Plan as provided in Section 4 hereof
and the shares of Common Stock subject to issued and outstanding Options
under the Plan shall be appropriately and proportionately adjusted by the
Committee. Any such adjustment in the outstanding Options shall be made
without change in the aggregate purchase price applicable to the unexercised
portion of the Option but with an appropriate adjustment in the price for
each share or other unit of any security covered by the Option.

     (b) Notwithstanding the provisions of subsection (a) of this Section,
upon the dissolution or liquidation of the Company or upon any
reorganization, merger or consolidation with one or more corporations as a
result of which the Company is not the surviving corporation, or upon a sale
of substantially all the assets of the Company or of more than 80% of the
then outstanding stock of the Company to another corporation or entity, the
Plan and each outstanding Option shall terminate; provided, however, that:
(i) each Option for which no option has been tendered by the surviving
corporation in accordance with all of the terms of provision (ii) immediately
below shall become fully exercisable subject to the provisions of Section 12
hereof, thirty days before the effective date of such dissolution,
liquidation, merger, consolidation or sale of stock or assets in which the
Company is not the surviving corporation; or (ii) in its sole and absolute
discretion, the surviving corporation may, but shall not be obligated to,
tender to any Optionee holding an Option, an option or options to purchase
shares of the surviving corporation or acquiring corporation, and such new
option or options shall contain such terms and provisions as shall be
required substantially to preserve the rights and benefits of any Option then
outstanding under this Plan.

     (c) Adjustments under this Section shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. No fractional shares of stock shall
be issued under the Plan or in connection with any such adjustment.

17. AMENDMENT AND TERMINATION OF PLAN

     (a) The Board of Directors of the Company may from time to time, with
respect to any shares at the time not subject to Options, suspend or
terminate, the Plan or amend or revise the terms of the Plan; provided that
any amendment to the Plan shall be approved by the shareholders of the
Company if the amendment would increase the number of shares of Common Stock
which may be issued under the Plan, except as permitted under the provisions
of Section 16 hereof, or change the description of persons eligible to receive

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Incentive Options under the Plan.

     (b) No amendment, suspension or termination of the Plan shall, without
the consent of the Optionee, alter or impair any rights or obligations under
any Option theretofore granted to such Optionee under the Plan.

     (c) The terms and conditions of any Option granted to an Optionee under
the Plan may be modified or amended only by a written agreement executed by
the Optionee and the Company; provided, however, that if any amendment or
modification of an Incentive Option would constitute a "modification,
extension or renewal" within the meaning of Section 425(h) of the Code, such
amendment shall be null and void unless the amendment contains an
acknowledgment by the parties substantially in the following form: "The
parties hereto recognize and agree that this amendment constitutes a
modification, renewal or extension within the meaning of Section 425(h) of
the Code, of the option granted on _______________________."

18. EFFECTIVE DATE OF PLAN

     This Plan shall become effective upon adoption by the Board of Directors
of the Company and approval by the Company's shareholders; provided,
however, that prior to approval of the Plan by the Company's shareholders,
but after adoption by the Board of Directors, Options may be granted under
the Plan subject to obtaining the shareholders' approval of the adoption of
the Plan. Notwithstanding the foregoing, shareholders' approval must occur no
later than 12 months after the date of adoption of the Plan by the Board of
Directors.

19. TERM OF PLAN

     No Option shall be granted pursuant to the Plan after 10 years from the
earlier of the date of adoption of the Plan by the Board of Directors of the
Company or the date of approval of the Plan by the Company's shareholders.

     The date of the initial adoption of the Plan by the Board was July 8,
1992. The date of the approval of the Plan by the Shareholders was September
23, 1992.

                                       9<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."

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    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-

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