Document:

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                           SECOND AMENDMENT TO LEASE
                           -------------------------

I.   PARTIES AND DATE.

     This Second Amendment to Lease (the "Amendment") dated July 6, 2000, is by
and between IRVINE TECHNOLOGY PARTNERS III, a California general partnership
("Landlord"), and LANTRONIX, a California corporation ("Tenant").

II.  RECITALS.

     On June 28, 1993, Landlord and Tenant entered into a lease for space in a
building located at 15353 and 15355 Barranca Parkway, Suite 102, Irvine,
California ("Premises"), which lease was amended by a First Amendment to Lease
dated August 10, 1995 (the "First Amendment"), wherein approximately 23,622
rentable square feet within the building was added to the Premises (as amended,
the "Lease").

     On March 18, 1996, Landlord, Tenant and Advanced Computing, Inc. ("Advanced
Computing") entered into a Consent to Subletting (the "Advanced Computing
Consent") permitting the sublease of a portion of the Premises, and on July 29,
1998 Landlord, Tenant and Inter-Tel Technologies, Inc. ("Inter-Tel") entered
into a Consent to Subletting (the "Inter-Tel Consent") permitting the sublease
of an additional portion of the Premises.

     Landlord and Tenant each desire to modify the Lease to extend the Lease
Term, adjust the Basic Rent, and make such other modifications as are set forth
in "III. MODIFICATIONS" next below.

III. MODIFICATIONS.

     A. Basic Lease Provisions.  The Basic Lease Provisions are hereby amended
        ----------------------
     as follows:

        1.  Item 5 is hereby deleted in its entirety and substituted therefor
        shall be the following:

            "5. Lease Term: The Term of this Lease shall expire at midnight on
            July 31, 2005"

        2.  Item 6 is hereby amended by adding the following:

            "Basic Rent: Commencing August 1, 2001, the Basic Rent shall be
            Fifty Six Thousand Eight Hundred Five Dollars ($56,805.00) per
            month, based on $1.11 per rentable square foot.

            Basic Rent is subject to adjustment as follows:

            Commencing August 1, 2001, the Basic Rent shall be Fifty Eight
            Thousand Three Hundred Forty-One Dollars ($58,341.00) per month,
            based on $1.14 per rentable square foot.

            Commencing August 1, 2002, the Basic Rent shall be Fifty Nine
            Thousand Eight Hundred Seventy-Six Dollars ($59,876.00) per month,
            based on $1.17 per rentable square foot.

            Commencing August 1, 2003, the Basic Rent shall be Sixty One
            Thousand Four Hundred Eleven Dollars ($61,411.00) per month, based
            on $1.20 per rentable square foot.

            Commencing August 1, 2004, the Basic Rent shall be Sixty Two
            Thousand Nine Hundred Forty-Six Dollars ($62,946.00) per month,
            based on $1.23 per rentable square foot.

        3.  Item 9 is hereby deleted in its entirety and substituted therefor
        shall be the following:

            "9. Security Deposit: $69,241.00"

<PAGE>

         4.   Item 12 is hereby deleted in its entirety and substituted therefor
         shall be the following:

              "12.  Address for Payments and Notices:

              LANDLORD

              IRVINE TECHNOLOGY PARTNERS III
              c/o Insignia/ESG of California, Inc.
              43 Discovery, Suite 120
              Irvine, CA 92618

              with a copy of notices to:
              IRVINE TECHNOLOGY PARTNERS III
              c/o The Irvine Company dba Irvine Industrial Company
              P.O. Box 6370
              Newport Beach, CA 92658-6370
              Attn: Vice President, Operations, Irvine Industrial Company

              TENANT

              LANTRONIX
              15353 Barranca Parkway, Suite 102
              Irvine, CA 92718
              Attn: Fred Thiel, President & CEO"
              with a copy of notices to: CFO

         5.   Item 14 is hereby deleted in its entirety and substituted therefor
         shall be the following:

              "14.  Vehicle Parking Spaces: Two Hundred Four (204) (of which,
              eight shall be marked "visitor" and eight (8) shall be marked
              "reserved")."

     B.  Right to Extend this Lease. Provided that Tenant is not in default
         --------------------------
under any provision of this Lease beyond the expiration of any applicable cure
period, either at the time of exercise of the extension right granted herein or
at the time of the commencement of such extension, and provided further that
Tenant is occupying the entire Premises and has not assigned or sublet any of
its interest in this Lease, Tenant may extend the Term of this Lease for one (1)
period of sixty (60) months. Tenant shall exercise its right to extend the Term
by and only by delivering to Landlord, not less than nine (9) months or more
than twelve (12) months prior to the expiration date of the Term, Tenant's
irrevocable written notice of its commitment to extend (the "Commitment
Notice"). The Basic Rent payable under the Lease during any extension of the
Term shall be determined as provided in the following provisions.

         If Landlord and Tenant have not by then been able to agree upon the
Basic Rent for the extension of the Term, then within one hundred twenty (120)
and ninety (90) days prior to the expiration date of the Term, Landlord shall
notify Tenant in writing of the Basic Rent that would reflect the prevailing
market rental rate for a 60-month renewal of comparable space in the Project
(together with any increases thereof during the extension period) as of the
commencement of the extension period ("Landlord's Determination"). Should Tenant
disagree with the Landlord's Determination, then Tenant shall, not later than
twenty (20) days thereafter, notify Landlord in writing of Tenant's
determination of those rental terms ("Tenant's Determination"). Within ten (10)
days following delivery of the Tenant's Determination, the parties shall attempt
to agree on an appraiser to determine the fair market rental. If the parties are
unable to agree in that time, then each party shall designate an appraiser
within ten (10) days thereafter. Should either party fail to so designate an
appraiser within that time, then the appraiser designated by the other party
shall determine the fair market rental. Should each of the parties timely
designate an appraiser, then the two appraisers so designated shall appoint a
third appraiser who shall, acting alone, determine the fair market rental for
the Premises. Any appraiser designated hereunder shall have an MAI certification
with not less than five (5) years experience in the valuation of commercial
industrial buildings in the vicinity of the Project.

         Within thirty (30) days following the selection of the appraiser and
such appraiser's receipt of the Landlord's Determination and the Tenant's
Determination, the appraiser shall determine whether the rental rate determined
by Landlord of by Tenant more accurately reflects the fair market rental rate
for the 60-month renewal of the Lease for the Premises, as reasonably
extrapolated to the commencement of the extension period. Accordingly, either
the Landlord's Determination or the Tenant's

                                       2
<PAGE>

Determination shall be selected by the appraiser as the fair market rental rate
for the extension period. In making such determination, the appraiser shall
consider rental comparables for the Project (provided that if there are an
insufficient number of comparables within the Project, the appraiser shall
consider rental comparables for similarly improved space within the vicinity of
the Project with appropriate adjustment for location and quality of project),
but the appraiser shall not attribute any factor for market tenant improvement
allowances or brokerage commissions in making its determination of the fair
market rental rate. At any time before the decision of the appraiser is
rendered, either party may, by written notice to the other party, accept the
rental terms submitted by the other party, in which event such terms shall be
deemed adopted as the agreed fair market rental. The fees of the appraiser(s)
shall be borne entirely by the party whose determination of the fair market
rental rate was not accepted by the appraiser.

      Within twenty (20) days after the determination of the fair market
rental, Landlord shall prepare an appropriate amendment to this Lease for the
extension period, and Tenant shall execute and return same to Landlord within
twenty (20) days. Should the fair market rental not be established by the
commencement of the extension period, then Tenant shall continue paying rent at
the rate in effect during the last month of the initial Term, and a lump sum
adjustment shall be made promptly upon the determination of such new rental.

      If Tenant fails to timely comply with any of the provisions of this
paragraph, Tenant's right to extend the Term shall be extinguished and the Lease
shall automatically terminate as of the expiration date of the Term, without any
extension and without any liability to Landlord. Any attempt to assign or
transfer any right or interest created by this paragraph shall be void from its
inception. Tenant shall have no other right to extend the Term beyond the single
sixty (60) month extension period created by this paragraph. Unless agreed to in
a writing signed by Landlord and Tenant, any extension of the Term, whether
created by an amendment to this Lease or by a holdover of the Premises by
Tenant, or otherwise, shall be deemed a part of, and not in addition to, any
duly exercised extension period permitted by this paragraph.

  C.  Security Deposit. Concurrently with Tenant's delivery of this Amendment,
      ----------------
Tenant shall deliver the sum of Forty One Thousand Sixteen Dollars ($41,016.00)
to Landlord, which sum shall be added to the Security Deposit presently being
held by Landlord in accordance with Section 4.3 of the Lease.

  D.  Project Costs. The definition of "Building Costs" in Section 4.2 (e) of
      -------------
the Lease is hereby amended to include the establishment of reasonable reserves
for the replacement and/or repair of the Building as well as for Common Area
improvements.

  E.  Operating Expense Caps.  The provisions of Article III(F) of the First
      ----------------------
Amendment (which insert a revised Section 4.2(g) of the Lease), are hereby
deleted in their entirety and shall have no further force or effect.

  F.  Parking. The requirement in the second line of Section 6.4 Parking of the
      -------
Lease for five (5) reserved parking spaces is hereby deleted in its entirety
in favor of the revised provisions of Item 14 of the Basic Lease Provisions set
forth in this Amendment. The cost of marking the "visitor" and "reserved" spaces
shall be part of the Landlord's Contributions as defined in the Work Letter
attached to this Amendment.

  G.  Restoration. The reference in the eighth (8th) line of Section 11.1(a) of
      -----------
the Lease to "one hundred eighty (180) days", is hereby revised to "two hundred
seventy (270) days".

  H.  Holding Over.  Subsection (a) and (b) of Section 15.1 Holding Over of the
      ------------                                          ------------
Lease are hereby deleted in their entirety, and substituted therefor shall be
the following:"...(a) one hundred seventy-five percent (175%) of the Basic Rent
for the month immediately preceding the date of termination for the initial two
(2) months of holdover, and two hundred percent (200%) of the Basic Rent for the
month immediately preceding the date of termination for each month of holdover
thereafter, or (b) the then currently scheduled Basic Rent for comparable space
in the Project."

  I.  Tenant Improvements.  Landlord hereby agrees to complete the Tenant
      -------------------
Improvements for the Premises in accordance with the provisions of Exhibit X-1,
                                                                   -----------
Work Letter, attached hereto. It is understood that the Tenant Improvements
shall be done during Tenant's occupancy of the Premises. In this regard, Tenant
agrees to assume any risk of injury, loss or damage which may result, unless
caused by the gross negligence or willful misconduct of Landlord, its
contractors or employees. Tenant further agrees that no rental abatement shall
result while the Tenant Improvements are completed in the Premises.
<PAGE>

     J.   Consents to Subletting.  Tenant agrees that the subtenancies of
          ----------------------
Advanced Computing and of Inter-Tel of the Premises have terminated or will
terminate not later than July 31, 2000, and that the Advanced Computing Consent
and the Inter-Tel Consent shall not be effective or binding on Landlord beyond
July 31, 2000.

IV.  GENERAL

     A.   Effect of Amendments.  The Lease shall remain in full force and effect
          --------------------
except to the extent that it is modified by this Amendment.

     B.   Entire Agreement.  This Amendment embodies the entire understanding
          ----------------
between Landlord and Tenant with respect to the modifications set forth in "III.
MODIFICATIONS" above and can be changed only by a writing signed by Landlord and
Tenant.

     C.   Counterparts.  If this Amendment is executed in counterparts, each is
          ------------
hereby declared to be an original; all, however, shall constitute but one and
the same amendment.  In any action or proceeding, any photographic, photostatic,
or other copy of this Amendment may be introduced into evidence without
foundation.

     D.   Defined Terms.  All words commencing with initial capital letters in
          -------------
this Amendment and defined in the Lease shall have the same meaning in this
Amendment as in the Lease, unless they are otherwise defined in this Amendment.

     E.   Corporate and Partnership Authority.  If Tenant is a corporation or
          -----------------------------------
partnership, or is comprised of either or both of them, each individual
executing this Amendment for the corporation or partnership represents that he
or she is duly authorized to execute and deliver this Amendment on behalf of the
corporation or partnership and that this Amendment is binding upon the
corporation or partnership in accordance with its terms.

     F.   Attorneys' Fees.  The provisions of the Lease respecting payment of
          ---------------
attorneys' fees shall also apply to this Amendment.

V.   EXECUTION.

     Landlord and Tenant executed this Amendment on the date as set forth in "I.
PARTIES AND DATE." above.

LANDLORD:                                   TENANT:

IRVINE TECHNOLOGY PARTNERS III,             LANTRONIX,
a California general partnership            a California corporation

By:  THE IRVINE COMPANY         [SEAL]
     Its General Partner
                                            By:  /s/ Steven V. Cotton
                                               ---------------------------------
                                                 Name:  STEVEN V. COTTON
                                                      --------------------------
                                                 Title:  CFO
                                                       -------------------------
By   /s/ Robert E. Williams, Jr.
  -------------------------------------
  Robert E. Williams, Jr., President
  Irvine Industrial Company, a division     By:  /s/ Frederick G. Thiel
  of The Irvine Company                        ---------------------------------
                                                 Name:  Frederick G. Thiel
                                                      --------------------------
                                                 Title:    CEO
                                                       -------------------------

By   /s/ Nancy E. Trujillo
  -------------------------------------
  Nancy e. Trujillo
  Assistant Secretary

                                       4
<PAGE>

                                   EXHIBIT X

                                  WORK LETTER

                               DOLLAR ALLOWANCE
                           [SECOND GENERATION SPACE]

The Tenant Improvement work (herein "Tenant Improvements") shall consist of any
work required to complete the Premises pursuant to approved plans and
specifications. All of the Tenant Improvement work shall be performed by the "TI
Contractor" selected by Landlord, all in accordance with the procedures and
requirements set forth below.

1.     ARCHITECTURAL AND CONSRUCTION PROCEDURES
       ----------------------------------------

       A.  Tenant and Landlord have approved, or shall approve within the time
period set forth below, both (i) a detailed space plan for the Premises,
prepared by Landlord's architect, which includes interior partitions, ceilings,
interior finishes, interior office doors, suite entrance, floor coverings,
window coverings, lighting, electrical and telephone outlets, plumbing
connections, heavy floor loads and other special requirements ("Preliminary
Plan"), and (ii) an estimate, prepared by Landlord's contractor, of the cost for
which Landlord will complete or cause to be completed the Tenant Improvements
("Preliminary Cost Estimate"). Tenant shall approve or disapprove each of the
Preliminary Plan and the Preliminary Cost Estimate by signing copies of the
appropriate instrument and delivering same to Landlord within five (5) working
days of its receipt by Tenant. If Tenant disapproves any matter, Tenant shall
specify in detail the reasons for disapproval and Landlord shall attempt to
modify the Preliminary Plan and the Preliminary Cost Estimate to incorporate
Tenant's suggested revisions in a mutually satisfactory manner. Subject to the
express provisions of Article II.A below regarding the application of up to One
Dollar ($1.00) per rentable square foot of the Landlord's Contribution towards
the cost of "Non-Standard Improvements" (as hereinafter defined), it is
understood and agreed that the Preliminary Plan submitted by Landlord's
architect is intended to include all improvements desired by Tenant using
Landlord's "Standards" (as hereinafter defined), whether or not the full amount
of Landlord's Contribution would be required to complete construction of the
improvements as shown in the Preliminary Plan. In all events, however, Tenant
shall approve in all respects a Preliminary Plan and Preliminary Cost Estimate
not later than July 6, 2000 ("Plan Approval Date").

       B. On or before the Plan Approval Date, Tenant shall provide in writing
to Landlord or Landlord's architect all specifications and information requested
by Landlord for the preparation of final construction documents and costing,
including without limitation Tenant's final selection of wall and floor
finishes, complete specifications and locations (including load and HVAC
requirements) of Tenant's equipment, and details of all "Non-Standard
Improvements" (as defined below) to be installed in the Premises (collectively,
"Programming Information"). Tenant understands that final construction documents
for the Tenant Improvements shall be predicated on the Programming Information,
and accordingly that such information must be accurate and complete.

       C. The Tenant Improvements shall incorporate Landlord's building
standard materials and specifications ("Standards"). No deviations from the
Standards may be required by Tenant with respect to doors and frames, finish
hardware, entry graphics, the ceiling system, light fixtures and switches,
mechanical systems, life and safety systems, and/or window coverings; provided
that Landlord may, in its sole discretion, authorize in writing one or more of
such deviations. In the event that Landlord shall so authorize any such
deviations from the Standards, Landlord shall advise Tenant at the time such
deviations(s) are authorized whether: (i) such deviation(s) shall remain in the
Premises at the expiration or earlier termination of this Lease, or (ii) such
deviation(s) shall be replaced with the applicable standard item(s) (in which
event Tenant shall pay to Landlord, prior to the commencement of construction
and in addition to sums otherwise due hereunder from Tenant, an amount equal to
the cost, as reasonably estimated by Landlord, of replacing the deviating
item(s) with the applicable Standard item(s) upon the expiration or termination
of this Lease). All other non-standard items ("Non-Standard Improvements") shall
be subject to the reasonable prior approval of Landlord. Landlord shall in no
event be required to approve any Non-Standard Improvement if Landlord determines
that such improvement (i) is of a lesser quality than the corresponding
Standard, (ii) fails to conform to applicable governmental requirements, (iii)
requires building services beyond the level normally provided to other tenants,
or (iv) would have an adverse aesthetic impact from the exterior of the
Premises.

<PAGE>

     D.   Upon Tenant's approval of the Preliminary Plan and Preliminary Cost
          Estimate and delivery of the complete Programming Information,
          Landlord's architect and engineers shall prepare and deliver to Tenant
          working drawings and specifications ("Working Drawings and
          Specifications"). Upon completion of the competitive bid process
          described below, the "Bid Amount" (as defined below) together with
          Landlord's final cost estimate of the Completion Cost of the Tenant
          Improvements work (the "Final Cost Estimate") shall be delivered to
          Tenant. Tenant shall have five (5) working days from the receipt
          thereof to approve or disapprove the Working Drawings and
          Specifications and the Final Cost Estimate. Tenant shall not
          unreasonably withhold or delay its approval, and any disapproval or
          requested modification shall be limited to items not contained in the
          approved Preliminary Plan or Preliminary Cost Estimate. Should Tenant
          disapprove the Working Drawings and Specifications and the Final Cost
          Estimate, such disapproval shall be accompanied be a detailed list of
          revisions. Any revision requested by Tenant and accepted by Landlord
          shall be incorporated into a revised set of Working Drawings and
          Specifications and Final Cost Estimate, and Tenant shall approve same
          in writing within five (5) business days of receipt without further
          revision.

     E.   In the event that Tenant requests in writing a revision in the
          approved Working Drawings and Specifications ("Change"), Landlord
          shall advise Tenant by written change order as soon as is practical of
          any increase in the Completion Cost such Change would cause. Tenant
          shall approve or disapprove such change order in writing within two
          (2) working days following its receipt from Landlord. Tenant's
          approval of a Change shall be accompanied by Tenant's payment of any
          resulting increase in the Completion Cost. Landlord shall have the
          right to decline Tenant's request for a Change for any of the reasons
          set forth in Article I.C. above for Landlord's disapproval of a Non-
          Standard Improvement. It is understood that Landlord shall have no
          obligation to interrupt or modify the Tenant Improvement work pending
          Tenant's approval of a change order.

     F.   Landlord shall submit the Working Drawings and Specifications to a
          competitive bidding process involving at least three (3) licensed and
          reputable general contractors. If requested by Tenant, Landlord shall
          provide copies of the bid responses to Tenant. After adjustments for
          any inconsistent assumptions to reflect an "apples to apples"
          comparison, Landlord shall select the lowest qualified bidder and that
          bid so selected shall be referred to as the "Bid Amount". In the event
          Landlord selects other than the lowest bidder, it shall do so based on
          commercially reasonable factors which it shall demonstrate to Tenant.
          Upon selection of the bidder, Landlord shall enter into a "lump sum"
          or "fixed price" construction contract with the chosen contractor (the
          "TI Contractor") for construction of the Tenant Improvements in
          accordance with the approved and final Working Drawings and
          Specifications for the Bid Amount (the "TI Contract").

     G.   Tenant hereby designates Terry Kirschner, Telephone No. (949) 453-
          7153, as its representative, agent and attorney-in-fact for the
          purpose of receiving notices, approving submittals and issuing
          requests for Changes, and Landlord shall be entitled to rely upon
          authorizations and directives of such person(s) as if given directly
          by Tenant. Tenant may amend the designation of its construction
          representative(s) at any time upon delivery of written notice to
          Landlord.

II.  COST OF TENANT IMPROVEMENTS

     A.   Landlord shall complete, or cause to be completed, the Tenant
          Improvements, at the construction cost shown in the approved Final
          Cost Estimate (subject to the provisions of this Work Letter), in
          accordance with final Working Drawings and Specifications approved
          by both Landlord and Tenant. Landlord shall pay towards the final
          construction costs ("Completion Cost") as incurred a maximum of Four
          Hundred Thirty Four Thousand Nine Hundred Ninety-Six Dollars
          ($434,996.00)) ("Landlord's Contribution"), based on $8.50 per square
          foot of the Premises, and Tenant shall be fully responsible for the
          remainder ("Tenant's Contribution"). Up to, but not exceeding, One
          Dollar ($1.00) per rentable square foot of the Landlord's Contribution
          may be applied towards the cost of "Non-Standard Improvements"
          approved by Landlord pursuant to Article I.C above and incorporated
          into the approved Working Drawings and Specifications. If the actual
          cost of completion of the Tenant Improvements is less than the
          maximum amount provided for the Landlord's Contribution, such savings
          shall inure to the benefit of Landlord and Tenant shall not be
          entitled to any credit or payment.

     B.   The Completion Cost shall include all direct costs of Landlord in
          completing the Tenant Improvements, including but not limited to the
          following: (i) the Bid Amount, (ii) payments made to architects,
          engineers, contractors, subcontractors and other third party
          consultants in the performance of the work, (iii) permit fees and
          other sums paid to

<PAGE>

          governmental agencies, (iv) costs of all materials incorporated into
          the work or used in connection with the work, and (v) keying and
          signage costs. The Completion Cost shall also include an
          administrative/ supervision fee to be paid to Landlord in the amount
          of five percent (5%) of all such direct costs.

     C.   Prior to start of construction of the Tenant Improvements, Tenant
          shall pay to Landlord in full the amount of the Tenant's Contribution
          set forth in the Final Cost Estimate. If the actual Completion Cost of
          the Tenant Improvements is less than the Final Cost Estimate, any
          portion of the Tenant's Contribution paid by Tenant but not expended
          towards the Completion Cost shall be credited to rent next due under
          this Lease. If the actual Completion Cost is greater than the Final
          Cost Estimate because of modifications or extras not reflected on the
          approved working drawings, then Tenant shall pay to Landlord, within
          ten (10) days following submission of an invoice therefore, all such
          additional costs, including any additional architectural fee. If
          Tenant defaults in the payment of any sums due under this Work Letter,
          Landlord shall (in addition to all other remedies) have the same
          rights as in the case of Tenant's failure to pay rent under the Lease.

     D.   Landlord's obligation to fund the Landlord's Contribution shall only
          apply to such Tenant Improvement work for which contracts are let not
          later than January 15, 2001. Any portion of the Landlord's
          Contribution not utilized by such date shall be considered forfeited
          by Tenant.<PAGE>

                       NEUROBIOLOGICAL TECHNOLOGIES, INC.

                              EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
March 15, 2001 by and between NEUROBIOLOGICAL TECHNOLOGIES, INC., a Delaware
corporation ("NTI") and Paul E. Freiman ("Freiman").

                                   BACKGROUND

     A. NTI desires to continue to retain the services of Freiman as President
and Chief Executive Officer of NTI, commencing March 15, 2001 (the "Effective
Date").

     B. Freiman is willing to be employed by NTI on the terms and subject to the
conditions set forth in this Agreement.

     C. Freiman is currently employed as President and Chief Executive Officer.
It is the intent of the parties to induce Freiman's commitment to the Term
specified in this Agreement in exchange for NTI's payment of the Retention
Bonus, and that the terms of this Agreement control Freiman's continued
employment.

         THE PARTIES AGREE AS FOLLOWS:

     1.   Positions and Duties.

          1.1 President and Chief Executive Officer. Freiman shall be employed
by NTI as its President and Chief Executive Officer, and NTI agrees to employ
and retain Freiman in such capacity.

          1.2 Duties. Freiman shall devote all of his business time, energy, and
skill to the affairs of NTI; provided, however, that reasonable time for
personal business, charitable or professional activities shall be permitted, so
long as such activities do not materially interfere with Freiman's performance
of services under this Agreement.

     2.   Terms of Employment.

          2.1 Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:

          (a) "Accrued Compensation" shall mean any accrued Total Cash
Compensation, any benefits under any plan of NTI in which Freiman is a
participant to the full extent of Freiman's rights under such plans, any accrued
vacation pay, and any appropriate business expenses incurred by Freiman in
connection with the performance of Freiman's duties hereunder, all to the extent
unpaid on the date of termination.

          (b) "Base Salary" shall have the meaning set forth in Section 3.1
hereof.

<PAGE>

              (c) "Termination For Cause" means termination by NTI of Freiman's
employment by reason of Freiman's dishonesty or fraud, gross negligence in the
performance of his duties hereunder, material breach of this Agreement,
intentional engagement in acts seriously detrimental to NTI's operations, or
conviction of a felony involving moral turpitude.

              (d) "Termination Other Than For Cause" means termination by NTI of
Freiman's employment for any reason other than as specified in Sections 2.1, (d)
or (f) hereof.

              (e) "Total Cash Compensation" shall mean Freiman's Base Salary (as
defined in Section 3.1) plus any cash bonuses, commissions or similar payment
accrued during any single calendar year.

              (f) "Voluntary Termination" means termination of Freiman's
employment by the voluntary action of Freiman.

          2.2 Employee at Will. Freiman is an "at will" employee of NTI, and
Freiman's employment may be terminated at any time upon a Termination For Cause
or a Termination Other Than For Cause by the giving of written notice thereof to
Freiman, subject to the terms and conditions of this Agreement.

          2.3 Termination For Cause. Upon Termination For Cause, NTI shall pay
Freiman Accrued Compensation, if any, and Freiman shall refund the Retention
Bonus within 30 days of such termination.

          2.4 Termination Other Than For Cause. Upon Termination Other Than For
Cause, NTI shall pay Freiman all Accrued Compensation.

          2.5 Voluntary Termination. Freiman shall have the right to effect a
Voluntary Termination by giving at least 30 days advance written notice to NTI.
During such period, Freiman shall continue to receive regularly scheduled Base
Salary payments and benefits. Following the effective date of a Voluntary
Termination, NTI shall pay Freiman Accrued Compensation, if any, and Freiman
shall refund the Retention Bonus within 30 days of such termination.

          2.6 Timing of Termination Payments. Unless expressly provided
otherwise, the foregoing termination payments shall be made at the usual and
agreed times provided for in Section 3.1 of this Agreement.

     3. Compensation and Benefits.

          3.1 Base Salary. As payment for the services to be rendered by Freiman
as provided in Section 1 and subject to the provisions of Section 2 of this
Agreement, NTI shall pay Freiman a Base Salary ("Base Salary") at the rate of
$200,000 per year, payable on NTI's normal payroll schedule.

                                       2

<PAGE>
          3.2 Additional Benefits.

              (a) Benefit Plans. Freiman shall be eligible to participate in
NTI's benefit plans as are now generally available or later made generally
available to senior officers of NTI, including, without limitation, medical,
dental, life, and disability insurance plans.

              (b) Expense Reimbursement. NTI agrees to reimburse Freiman for all
reasonable, ordinary and necessary travel and entertainment expenses incurred by
Freiman conjunction with his services to NTI consistent with NTI's standard
reimbursement policies. NTI shall pay travel costs incurred by Freiman in
conjunction with his services to NTI consistent with NTI's standard travel
policy.

              (c) Vacation. Freiman shall be entitled, without loss of
compensation, to the amount of vacation per year generally available or later
made generally available to senior officers of NTI.

          3.3 Retention Bonus. In exchange for Freiman's commitment to the Term
of this Agreement, NTI shall pay Freiman a Retention Bonus ("Retention Bonus")
of $250,000 on the Effective Date of this Agreement. Freiman acknowledges and
agrees that payment of the Retention Bonus is a material element of this
Agreement and is in consideration for Freiman's commitment, and without such
commitment, NTI would not have paid the Retention Bonus. Freiman acknowledges
his obligation to refund the entire Retention Bonus as provided for in Sections
2.3 and 2.5 of this Agreement.

          3.4 Bonus. Freiman shall participate in any management bonus plan
adopted by NTI on terms comparable to other senior officers of NTI.

     4. Miscellaneous.

          4.1 Waiver. The waiver of the breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of the same or other provision hereof.

          4.2 Notices. All notices and other communications under this Agreement
shall be in writing and shall be given by personal or courier delivery,
facsimile or first class mail, certified or registered with return receipt
requested, and shall be deemed to have been duly given upon receipt if
personally delivered or delivered by courier, on the date of transmission if
transmitted by facsimile, or three days after mailing if mailed, to the
addresses of NTI and Freiman contained in the records of NTI at the time of such
notice. Any party may change such party's address for notices by notice duly
given pursuant to this Section 4.2.

          4.3 Term of the Agreement; Renewal of the Agreement. The Term of this
Agreement ("Term") will commence on the Effective Date and will continue for a
period of one year. Not less than 90 days prior to expiration of this Agreement,
the parties agree to negotiate in good faith with regard to potential renewal of
this Agreement under similar terms and conditions.

                                       3

<PAGE>

          4.4 Headings. The section headings used in this Agreement are intended
for convenience of reference and shall not by themselves determine the
construction or interpretation of any provision of this Agreement.

          4.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to contracts
entered into and wholly to be performed within the State of California by
California residents.

          4.6 Arbitration. Any controversy or claim arising out of, or relating
to, this Agreement or the breach of this Agreement will be settled by
arbitration by, and in accordance with the applicable National Rules for the
Resolution of Employment Disputes of the American Arbitration Association and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction. The arbitrator(s) will have the right to assess,
against a party or among the parties, as the arbitrator(s) deem reasonable, (a)
administrative fees of the American Arbitration Association, (b) compensation,
if any, to the arbitrator(s) and (c) attorneys' fees incurred by a party.
Arbitration hearings will be held in San Francisco, California. The provisions
of California Code of Civil Procedure Section 1283.05 will apply to any
arbitration.

          4.7 Survival of Obligations. This Agreement shall be binding upon and
inure to the benefit of the executors, administrators, heirs, successors, and
assigns of the parties; provided, however, that except as herein expressly
provided, this Agreement shall not be assignable either by NTI (except to an
affiliate or successor of NTI) or by Freiman without the prior written consent
of the other party.

          4.8 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.

          4.9 Withholding. All sums payable to Freiman hereunder shall be
reduced by all federal, state, local, and other withholdings and similar taxes
and payments required by applicable law.

          4.10 Enforcement. If any portion of this Agreement is determined to be
invalid or unenforceable, such portion shall be adjusted, rather than voided, to
achieve the intent of the parties to the extent possible, and the remainder
shall be enforced to the maximum extent possible.

          4.11 Entire Agreement; Modifications. Except as otherwise provided
herein or in the exhibits hereto, this Agreement represents the entire
understanding among the parties with respect to the subject matter of this
Agreement, and this Agreement supersedes any and all prior and contemporaneous
understandings, agreements, plans, and negotiations, whether written or oral,
with respect to the subject matter hereof, including, without limitation, any
understandings, agreements, or obligations respecting any past or future
compensation, bonuses, reimbursements, or other payments to Freiman from NTI.
All modifications to the Agreement must be in writing and signed by each of the
parties hereto.

                                       4

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date set forth in the first paragraph.

                               NEUROBIOLOGICAL TECHNOLOGIES, INC.

                               By:      /s/Abraham Cohen
                                  -----------------------------------------

                               Title:   Chairman of the Board
                                     --------------------------------------

                               /s/ Paul E. Freiman
                               -----------------------------------
                               Paul E. Freiman

                                       5

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