EMPLOYMENT AGREEMENT


     This Employment  Agreement (the "Agreement") is entered into by and between
SRC  Vision,   Inc.,  a  corporation  (the  "Company"),   and  James  Ewan  (the
"Executive"), as of January 1, 1997.

I.   RECITAL.

     WHEREAS, the Company desires to employ the Executive as President and Chief
Executive Officer.

     NOW,  THEREFORE,  the Company and the Executive desire to set forth in this
Agreement  the terms  and  conditions  of the  Executive's  employment  with the
Company.

II.  EMPLOYMENT.

     The Company hereby  employs the Executive and the Executive  hereby accepts
such  employment,  upon the terms and  conditions  hereinafter  set forth,  from
January 1, 1997 to and  including  December 31, 1998.  This  Agreement  shall be
automatically  renewed  for one  additional  year  unless the  Executive  or the
Company  gives  notice to the other,  in writing,  at least 30 days prior to the
expiration of this  Agreement,  of its or his desire to terminate this Agreement
or modify its terms. The Company agrees that the Executive will be located,  and
will render such services, in the Medford, Oregon area.

III. DUTIES.

     A. The  Executive  shall  serve  during  the  course of his  employment  as
President and Chief  Operating  Officer of the Company and shall have such other
similar  duties and  responsibilities  as the Board of  Directors of the Company
shall determine from time to time.

     B. The Executive agrees to devote substantially all of his time, energy and
ability  to the  business  of the  Company  and  shall  not be  involved  in the
operations or management of any other competitive business. Nothing herein shall
prevent the  Executive,  upon written  approval of the Board of Directors of the
Company,  from  serving  as a  director  or  trustee  of other  corporations  or
businesses  which are not in competition  with the business of the Company or in
competition with any present or future affiliate of the Company.

     C. For the term of this Agreement,  the Executive shall report to the Chief
Executive Officer of the Company.

IV.  COMPENSATION.

     A. Base Salary.  The Company  shall pay the  Executive a base salary at the
rate of  $225,000  per year.  Such salary  shall be earned  monthly and shall be
payable in periodic  installments  no less frequently than monthly in accordance
with the  Company's  customary  practices.  Amounts  payable shall be reduced by
standard withholding and other authorized deductions.

     B. Annual Bonus,  Incentive,  Savings and Retirement  Plans.  The Executive
shall be entitled to  participate  in all annual bonus,  incentive,  savings and
retirement plans, practices, policies and programs applicable generally to other
peer executives of the Company.

     C. Welfare Benefit Plans. The Executive shall be eligible for participation
in and shall  receive all  benefits  under  welfare  benefit  plans,  practices,
policies and programs provided by the Company to the extent applicable generally
to other peer executives of the Company.

     D.   Expenses.   The  Executive   shall  be  entitled  to  receive   prompt
reimbursement  for  all  reasonable  employment  expenses  incurred  by  him  in
accordance  with the policies,  practices and procedures as in effect  generally
with respect to other peer executives of the Company.

     E. Fringe  Benefits.  The Executive shall be entitled to fringe benefits in
accordance  with the  plans,  practices,  programs  and  policies  as in  effect
generally with respect to other peer executives of the Company.

     F. Vacation. The Executive shall be entitled to paid vacation of four weeks
per year.

     G.  Automobile.  At the Executive's  option,  the Company shall provide the
Executive with the use of a Company owned or leased  automobile or the Executive
shall be entitled to a $600.00 per month automobile allowance.

V.   TERMINATION.

     A.  Death  or  Disability.   The  Executive's  employment  shall  terminate
automatically  upon the  Executive's  death.  If the Company  determines in good
faith that disability of the Executive has occurred  (pursuant to the definition
of Disability set forth below),  it may give to the Executive  written notice of
its  intention to  terminate  the  Executive's  employment.  In such event,  the
Executive's  employment with the Company shall terminate effective on the day of
receipt  of such  notice  by the  Executive.  For  purposes  of this  Agreement,
"Disability"  shall mean the absence of the  Executive  from his duties with the
Company on the basis  provided in this  agreement  for a period of 3 months as a
result of incapacity due to mental or physical illness which is determined to be
total and  permanent by a physician  selected by the Company or its insurers and
acceptable to the Executive or his legal  representative.  "Incapacity"  as used
herein shall be limited only to such  Disability  which  substantially  prevents
Company from availing itself of the services of the Executive.

     B. Cause.  The Company may terminate the Executive's  employment for Cause.
For purposes of this Agreement,  "Cause" shall mean that the Company,  acting in
good faith based upon the information then known to the Company, determines that
the  Executive  has: (1)  committed an act of fraud upon,  or an act  evidencing
material dishonesty toward the Company; or (2) been convicted of a felony, which
conviction  through lapse of time or otherwise is not subject to appeal;  or (3)
willfully  refused to perform material required duties and  responsibilities  or
performed them with gross negligence or willful misconduct.

     C.  Obligations  of the  Company  upon  Termination  Based  upon  Death  or
Disability or Cause.

          1. Death or Disability. If the Executive's employment is terminated by
     reason  of the  Executive's  Death  or  Disability,  this  Agreement  shall
     terminate  without  further  obligations  to the  Executive  or  his  legal
     representatives under this Agreement, other than for (a) payment of the sum
     of (i) the  Executive's  annual base salary through the date of termination
     to the extent not theretofore paid, (ii) reasonable employment expenses, as
     provided  herein,  through  the  date  of  termination  to the  extent  not
     theretofore  paid and (iii) any  accrued  vacation  pay to the  extent  not
     theretofore paid (the sum of the amounts described in clauses (i), (ii) and
     (iii) shall be hereinafter referred to as the "Accrued Obligations"), which
     shall be paid to the Executive or his estate or beneficiary, as applicable,
     in a lump sum in cash  within  30 days of the date of  termination  and (b)
     payment to the Executive or his estate or beneficiary,  as applicable,  any
     amounts  due  pursuant  to the terms of any  applicable  welfare or pension
     benefit plans.

          2. Cause. If the  Executive's  employment is terminated by the Company
     for Cause,  this Agreement shall terminate  without further  obligations to
     the Executive other than for the timely payment of Accrued  Obligations and
     any amounts due pursuant to the terms of any applicable  welfare or pension
     benefit plans.

     D.  Obligations  of the Company  upon  Termination  without  Cause.  If the
Executive's  employment  is  terminated by the Company other than for cause then
the Company shall pay Executive the Accrued Obligations and, in addition,  shall
pay the  Executive  an amount  equal to two years' base salary in equal  monthly
installments  unless such  termination  follows a "change of  control," in which
case the Company will  immediately  pay the  Executive  such amount in cash.  In
addition,  the Company shall continue to pay the Executive's  health and medical
benefits for a period of two years following the termination,  at which time the
Executive will be entitled to pursue, at the Executive's cost,  applicable COBRA
benefits.  Moreover,  all of the Executive's employee stock options shall become
fully vested.

     For purposes of this  Agreement,  a change of control  shall mean:  (a) any
transfer or series of transfers of capital stock of the Company, other than as a
result of a sale of capital stock of the Company  pursuant to a public  offering
registered  under the Securities  Act of 1933, as amended,  as a result of which
the holders of capital  stock of the Company prior to such transfer or transfers
become, collectively, the legal or beneficial holders of less than fifty percent
(50%) of the capital stock of the Company; (b) the consummation of any merger or
consolidation of the Company with another corporation;  provided,  however, that
no Change in Control shall be deemed to have occurred if, immediately  following
such merger or  consolidation,  legal or beneficial  holders of capital stock of
the Company prior to such merger or consolidation shall own or control, directly
or  indirectly,   through  one  or  more   intermediaries,   equity   securities
representing  the power to vote or direct the voting of more than fifty  percent
(50%) of the voting power of all classes of equity  securities  entitled to vote
in the election of directors of the  corporation  resulting  from such merger or
consolidation;  or (c) any transfer of all or substantially  all of the business
and assets of the Company to another  corporation;  provided,  however,  that no
Change in Control  shall be deemed to have  occurred if the legal or  beneficial
holders of capital  stock of the  Company  prior to such  transfer  of  control,
retain directly or indirectly through one or more  intermediaries,  the power to
vote or direct the voting of more than fifty  percent  (50%) of the voting power
of all  classes  of  equity  securities  entitled  to  vote in the  election  of
directors of such corporation to which all or substantially  all of the business
and assets of the Company are transferred.

     In addition,  in the event that William J. Young leaves the  employment  of
ARC Capital on or before  December 31,  1997,  other than being  terminated  for
cause,  then the  Executive  shall  have  the  option  for a  period  of 30 days
following the  termination of Mr. Young's  employment to treat this Agreement as
being terminated without cause but not involving a change of control.

     E. Special  Severance.  Following the expiration of this Agreement,  if the
Executive's employment at any time is terminated without cause, then the Company
shall pay the Executive as special severance compensation an amount equal to two
years  base  salary,  payable in 24 equal  monthly  installments.  This  special
severance payment shall be reduced by standard  withholding and other authorized
deductions.

VI.  ARBITRATION.

     Any controversy or claim arising out of or relating to this Agreement,  its
enforcement or  interpretation,  or because of an alleged  breach,  default,  or
misrepresentation  in connection with any of its provisions,  shall be submitted
to arbitration,  to be held in Medford,  Oregon in accordance with the rules and
procedures of the American  Arbitration  Association.  In the event either party
institutes  arbitration  under this  Agreement,  the costs and  expenses of such
arbitration  (including counsel fees) shall be borne by each of the parties,  or
as the arbitrator(s) may determine at the request of either party.

VII. CONFIDENTIAL INFORMATION.

     The  Executive  shall hold in a fiduciary  capacity  for the benefit of the
Company all secret or  confidential  information,  knowledge or data relating to
the Company or any of its affiliated companies, and their respective businesses,
which shall have been  obtained by the  Executive  during his  employment by the
Company  or any of its  affiliated  companies  and which  shall not be or become
public knowledge (other than by acts by the Executive or his  representatives in
violation of this Agreement).  After  termination of the Executive's  employment
with the  company,  he shall  not,  without  the prior  written  consent  of the
Company, or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it.

VIII. SUCCESSORS.

     A. This  Agreement is personal to the Executive and shall not,  without the
prior written consent of the Company, be assignable by the Executive.

     B. This  Agreement  shall inure to the  benefit of and be binding  upon the
Company and its  successors and assigns and any such successor or assignee shall
be deemed  substituted for the Company under the terms of this Agreement for all
purposes.  As used herein,  "successor" and "assignee" shall include any person,
firm,  corporation  or other  business  entity  which at any  time,  whether  by
purchase, merger or otherwise,  directly or indirectly acquires the stock of the
Company or to which the Company  assigns  this  Agreement by operation of law or
otherwise.

IX.  WAIVER.

     No waiver of any breach of any term or provision of this Agreement shall be
construed to be, nor shall be, a waiver of any other  breach of this  Agreement.
No waiver shall be binding unless in writing and signed by the party waiving the
breach.

X.   MODIFICATION.

     This  Agreement  may not be  amended  or  modified  other than by a written
agreement executed by the Executive and the Board of Directors of the Company.

XI.  SAVINGS CLAUSE.

     If any  provision  of this  Agreement  or the  application  thereof is held
invalid, the invalidity shall not affect other provisions or applications of the
Agreement  which  can  be  given  effect  without  the  invalid   provisions  or
applications and to this end the provisions of this Agreement are declared to be
severable.

XII. COMPLETE AGREEMENT.

     This  instrument   constitutes  and  contains  the  entire   agreement  and
understanding  concerning  the  Executive's  employment  and the  other  subject
matters  addressed  herein between the parties,  and supersedes and replaces all
prior negotiations and all agreements proposed or otherwise,  whether written or
oral, concerning the subject matters hereof. This is an integrated document.

XIII. GOVERNING LAW.

     This Agreement  shall be deemed to have been executed and delivered  within
the State of California, and the rights and obligations of the parties hereunder
shall be construed and enforced in accordance with, and governed by, by the laws
of the State of California without regard to principles of conflict of laws.

XIV. CONSTRUCTION.

     Each  party  has  cooperated  in  the  drafting  and  preparation  of  this
Agreement.  Hence, in any  construction  to be made of this Agreement,  the same
shall not be  construed  against  any party on the basis  that the party was the
drafter.  The captions of this Agreement are not part of the  provisions  hereof
and shall have no force or effect.

XV.  COMMUNICATIONS.

     All notices,  requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered or if mailed
by registered or certified mail, postage prepaid,  addressed to the Executive at
_______________________________________________,  or addressed to the Company at
2067 Commerce  Road,  Medford,  OR,  97504.  Any party may change the address at
which notice shall be given by written notice given in the above manner.

XVI. EXECUTION.

     This Agreement is being executed in one or more counterparts, each of which
shall be deemed an original,  but all of which together shall constitute one and
the same instrument. Photographic copies of such signed counterparts may be used
in lieu of the originals for any purpose.

XVII. LEGAL COUNSEL.

     The  Executive  and the Company  recognize  that this is a legally  binding
contract and acknowledge and agree that they have had the opportunity to consult
with legal counsel of their choice.

     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.



SRC VISION, INC.                                   JAMES EWAN



By__________________________                       _____________________________

Its_________________________