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EXHIBIT 10.18

                              EMPLOYMENT AGREEMENT


         This Agreement is dated as of this 1st day of April, 1999, by and
between Stephen J. Verleye ("Executive") and Applied Microsystems Corporation, a
Washington corporation (the "Company").

RECITALS

         WHEREAS Executive is recently employed by the Company as its
President and Chief Executive Officer; and

         WHEREAS the Company and Executive desire to define certain terms and
conditions of Executive's employment with the Company;

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein, it is agreed:

1.       EMPLOYMENT.

         1.1  EXECUTIVE'S EMPLOYMENT. The Company hereby employs Executive and
Executive hereby accepts employment by the Company upon the terms and conditions
hereinafter set forth.

         1.2  TERM. The term of this Agreement shall commence as of the
Effective Date of this Agreement, and shall continue for a period of four
years from the Effective Date, unless terminated earlier as hereinafter
provided. At the end of the term, upon mutual agreement of the parties, this
Agreement may be renewed for a subsequent period and subject to mutually
agreed terms.

         1.3  POSITION AND DUTIES.

              (a) PRESIDENT AND CHIEF EXECUTIVE OFFICER. Executive shall
serve as President and Chief Executive Officer ("CEO") of the Company and shall
have such duties, responsibilities and powers as described for such office by
the Company's Bylaws and as may be assigned to Executive from time to time by
the Board of Directors of the Company. Executive shall devote his full time,
energies and best efforts to the performance of his duties hereunder, to the
exclusion of all other business activities, except personal business and
investment activities that do not conflict or interfere with the performance of
his duties under this Agreement. While serving as President and CEO, Executive
shall not engage in any other professional work within the area of his
expertise, whether compensated or not, without the Company's consent.

2.       EFFECTIVE DATE. The Effective Date of this Agreement shall be the date
referenced at the top of this Agreement.

3.       COMPENSATION.

         3.1  SALARY. In consideration of the services and duties to be
performed by Executive hereunder, the Company shall pay Executive an initial
minimum annual base salary of $215,000 (Two Hundred Fifteen Thousand
Dollars), payable in accordance with the Company's normal employee payroll


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schedule and practices for executives. The Executive's base salary as
President/CEO may be adjusted by the Compensation Committee of the Company's
Board of Directors, based on reviews to occur at the beginning of each new
fiscal year, and provided that Executive shall recuse himself from any Board
decision regarding his base salary.

         3.2  INCENTIVE.

              (a) ANNUAL BONUS. The Executive shall be entitled to an annual
bonus based upon the Company's financial performance for each fiscal year,
beginning with the 1999 fiscal year, which bonus, if earned, would be prorated
based upon the Executive's starting date. The bonus shall be in an amount and
shall be based upon criteria established by the Board of Directors at the
beginning of each year ("Board Plan"). Executive shall participate in
discussions with the Board regarding criteria established and shall recuse
himself from voting on adoption of the Board Plan. Your 1999 Board Plan is
attached to this Agreement as Attachment A.

         3.3  STOCK OPTION GRANT.

              (a) OPTION. In consideration of Executive's agreements
hereunder, the Company is granting to Executive upon signing of this Agreement,
pursuant to a Stock Option Letter Agreement of even date ("Stock Option Letter
Agreement"), a stock option to acquire 215,000 shares of the Common Stock of the
Company at a price equal to the closing price on the Executive's first day of
employment. The Stock Option Letter Agreement is attached to this Agreement as
Attachment B and its terms are incorporated herein by reference.

              (b) If the Company undergoes a Change of Control as described
in this Section 3.3(b), and Executive does not continue his employment as
President/CEO subsequent to the Change of Control, the Company shall further
limit any right to repurchase shares of stock pursuant to the Stock Option
Letter Agreement, and according to the terms and conditions of Attachment C,
attached hereto. For purposes of this Agreement, "Change of Control" shall mean
a consolidation, merger or other reorganization of the Company with or into
another corporation or other entity or person in which the Company shall not be
the continuing or surviving entity of such merger, consolidation or
reorganization, or the sale of all or substantially all of the Company's
properties and assets to any other person, or any transaction or series of
related transactions by this corporation in which an excess of 50% of this
corporation's voting power is transferred, unless the Company's stockholders of
record immediately prior to such merger, consolidation, reorganization, sale or
transaction are holders of more than 50% of the voting equity securities of the
surviving corporation.

4.       BENEFITS.

         4.1 BENEFIT PROGRAMS. Executive shall be eligible to participate in the
normal employee benefit programs of the Company.

         4.2 EXPENSES. The Company will reimburse Executive for reasonable
expenses for temporary housing, entertainment, travel and similar items that he
incurs on behalf of the Company in accordance with the Company's policies and
procedures for its officers, provided that Executive properly accounts therefor
in accordance with Company policy.

5. TERMINATION BY THE COMPANY OF EXECUTIVE AS PRESIDENT AND CEO.


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         5.1      DISABILITY OR DEATH OF THE EXECUTIVE.

                  (a) DISABILITY. The Company may terminate Executive's
employment if Executive has been unable through illness or other disability to
perform his duties hereunder for a period of more than three months and the
Board of Directors determines in good faith that the disability is continuing
and will materially restrict or hinder Executive in the performance of his
duties hereunder. Termination of Executive's status as an officer and employee
of the Company for disability shall be effective upon written notice of the
Board's determination or at such other time as specified in the notice, and
Executive shall receive the benefits provided by the Company's disability plan,
if any, then in effect pursuant to the terms and conditions thereof. Executive
shall not be entitled to any additional compensation following the date of
termination, provided that the Company shall pay Executive all cash employee
benefits that accrued or vested through the date of termination, and including
any and all earned but unpaid incentive compensation for the year in which such
termination for Cause or by Executive takes place, provided that Executive shall
have stock options available only as described in Executive's Stock Option
Letter Agreement.

                  (b) DEATH. If Executive shall die while employed hereunder,
the employment of Executive shall thereupon terminate and all compensation,
except that accrued to the date of death, shall thereupon cease.

                  (c) OTHER BENEFITS. The provisions of this Section 5.1 shall
not affect the entitlements of Executive's heirs, executors, administrators,
legatees, beneficiaries or assigns under any benefit plan, fund or program of
the Company.

         5.2      FOR CAUSE.  The Company shall have the right to terminate
Executive's employment hereunder at any time for Cause, as defined below. For
purposes of this Agreement, "Cause" means termination resulting from a good
faith determination by the Board of Directors, with Executive recusing himself
from participation in any such determination, that:

                  (a) Executive has willfully failed or refused in a material
respect to follow reasonable written policies or directives established by the
Board of Directors or willfully failed to attend to significant duties or
obligations under this Agreement (and other than any such failure resulting from
Executive's incapacity due to physical or mental illness), which failure or
refusal, if susceptible of being cured, is not cured by Executive within thirty
(30) days following delivery to Executive of written demand to do so; or

                  (b) There has been an act by Executive involving gross
malfeasance of office or flagrant disloyalty to the Company or its subsidiaries,
embezzlement, dishonesty, addictive use of alcohol or drugs, or a conviction of
or plea of nolo contendere to a crime involving moral turpitude. Without
limiting the foregoing, it shall be considered an act of "flagrant disloyalty"
for Executive, during the course of his employment and without the Company's
prior written consent, to "compete" with the Company, which shall mean to
directly or indirectly engage in or perform any services, whether full or
part-time, or on a consulting or advisory basis, or become financially
interested in, any business or undertaking which is competitive with the
Company's business, or to provide to any such business or undertaking any
confidential or proprietary information of the Company with respect to the
Company's products and services, PROVIDED THAT nothing herein shall be construed
to prohibit Executive from owning up to 2% of any publicly traded securities of
any business which competes with the Company.


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                  (c) Termination pursuant to Subsections (a) or (b) above
shall be effective immediately on written notice by the Board of Directors to
Executive that it has made the required determination.

         5.3  WITHOUT CAUSE. The Company shall have the right to terminate
Executive's employment without Cause immediately upon notice to Executive, which
notice shall specify the date of termination.

         5.4  BY EXECUTIVE. Executive shall have the right to terminate his
employment as President/CEO upon ninety (90) days notice to the Company.

6.       EFFECT OF TERMINATION.

         6.1 FOR CAUSE OR BY EXECUTIVE. If the Company terminates Executive's
employment as President/CEO for Cause or if Executive terminates his employment
as President/CEO, the Company shall pay Executive the full base salary under
Section 3.1 at the rate in effect on the date the notice of termination was
given through the date of termination, together with all cash employee benefits
that accrued or vested through the date of termination, and including any and
all earned but unpaid incentive compensation for the year in which such
termination for Cause or by Executive takes place, at the time such incentive
payments are distributed generally to Company executives and prorated as
described in clauses (i) and (ii) of Section 3.2(b), provided that Executive
shall have stock options available only as described in Executive's Stock Option
Letter Agreement.

         6.2  WITHOUT CAUSE. If the Company terminates Executive's employment as
President/CEO due to disability under Section 5.2(a) or without Cause:

              (a)  The Company shall pay Executive the full base salary under
Section 3.1 at the rate in effect on the date the notice of termination was
given through the date of termination. The Company shall also pay to Executive
as severance, in lieu of any further salary payments subsequent to the date of
termination and any other amounts which may be available under the Company's
employment policies in effect from time to time, an amount equal to Executive's
base salary at the rate in effect on the date the notice of termination is given
for a period terminating six months after the date of termination less, if
termination is due to disability, any amounts received by Executive under the
Company's disability plans; PROVIDED THAT such payments shall cease at the time
Executive obtains other full-time employment, and shall cease if Executive
"competes" with the Company as described in Section 5.3(b). Such severance shall
be paid in accordance with the Company's usual payroll schedule for executives.

              (b)  In addition, the Company shall pay Executive all cash
employee benefits that accrued or vested through the date of termination, and
including any and all earned but unpaid incentive compensation for the year in
which such termination takes place, at the time such incentive payments are
distributed generally to Company executives and prorated as described in clauses
(i) and (ii) of Section 3.2(b); provided that Executive shall have stock options
available only as described in Executive's Stock Option Letter Agreement.

              (c)  The Company shall also maintain in full force and effect
for the continued benefit of Executive or Executive's designee, until the
earlier of (i), expiration of severance pursuant to paragraph (a) above, or (ii)
Executive is employed on a full-time basis or substantially equivalent thereto
by another employer, all life, medical and disability insurance executive was
entitled to receive immediately prior to the date of termination, with the
Company and the Executive each paying the same percentage portion of all
premiums which each was paying at the time of termination for such insurance and
benefits, provided that


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if under the terms of any group plan Executive and his family are no longer
eligible to participate, then the Company shall provide comparable plans and
coverage, with the premiums therefore being paid by the Company and Executive
on the same proportionate basis.

         6.3  CONTINUING OBLIGATIONS.  Executive's obligations under Section
8 of this Agreement shall survive termination of his employment as
President/CEO for any reason.

8.  CONFIDENTIALITY.  Executive shall be bound by any agreement he has executed
with regard to Company's confidential or proprietary information and inventions,
including but not limited to the Applied Microsystems Corporation Employee
Agreement.

9.  DISPUTE RESOLUTION PROCEDURE.

         9.1 The parties agree that any dispute arising out of or related to the
Employment relationship between them, including but not limited to common law or
statutory claims for discrimination, wrongful discharge, and unpaid wages, shall
be resolved by binding arbitration, except where the law specifically forbids
the use of arbitration as a final and binding remedy.

         9.2 The party claiming to be aggrieved shall furnish to the other party
a written statement of the grievance identifying any witnesses or documents that
support the grievance and the relief requested or proposed.

         9.3 If the other party does not agree to furnish the relief requested
or proposed, or otherwise does not satisfy the demand of the party claiming to
be aggrieved, the parties shall submit the dispute to non-binding mediation
before a mediator to be jointly selected by the parties. The Company will pay
the cost of the mediation.

         9.4 If the mediation does not produce a resolution of the dispute, the
parties agree that the dispute shall be resolved by final and binding
arbitration in Seattle, Washington. The parties shall attempt to agree to the
identity of an arbitrator, and, if they are unable to do so, the parties agree
to assignment of an arbitrator from Judicial Arbitration and Mediation Services
(JAMS). The arbitrator shall have the authority to determine whether the conduct
complained of in subsection (g)(ii) violates the rights of the complaining party
and, if so, to grant any relief authorized by law; provided, however, that
nothing herein shall limit the right of the Company to obtain injunctive relief
for violation of the Inventions Agreement. The arbitrator shall not have the
authority to modify, change or refuse to enforce the terms of this Agreement. In
addition, the arbitrator shall not have the authority to require the Company to
change any lawful policy or benefit plan. The hearing shall be transcribed. The
Company shall bear the costs of the arbitration if the Executive prevails. If
the Company prevails, the Executive will pay half the cost of the arbitration or
$500, whichever is less. Each party shall be responsible for paying its own
attorneys fees. Arbitration shall be the exclusive final remedy for any dispute
between the parties, and the parties agree that no dispute shall be submitted to
arbitration where the party claiming to be aggrieved has not complied with the
preliminary steps provided for in clauses (ii) and (iii) above.

         9.5 Executive acknowledges that he has carefully read this arbitration
agreement and understands it, and is entering into the agreement voluntarily
after a reasonable period of time to consider it and review it with personal
legal counsel. Executive also acknowledges he may be giving up the opportunity
to bring claims before a court or jury, and does so in order to gain the
benefits of a speedy, impartial and cost-effective resolution procedure.


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10.      MISCELLANEOUS.

         10.1 SETOFF. The Company shall be entitled to set off and reduce any
amounts payable to Executive under this Agreement by the amount of any
obligation of Executive to the Company.

         10.2 AMENDMENTS. This Agreement may be changed, waived, discharged, or
terminated only by a writing signed by the party against which enforcement is
sought.

         10.3 PARTIES IN INTEREST. Executive's obligations under this Agreement
are personal in nature and may not be assigned or transferred. The Company may
assign this Agreement and it shall be binding upon and inure to the benefit of
any successor or successors of the Company, whether by merger, consolidation,
sale of assets, or otherwise, and reference herein to the Company shall be
deemed to include any such successor.

         10.4 GOVERNING LAW AND VENUE. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Washington.
Subject to the requirements of Section 9 above, in any legal proceeding brought
on or in connection with this Agreement, venue for such action shall be in
Seattle.

         10.5 NOTICES. All notices, requests, and other communications hereunder
shall be in writing and shall be deemed to be duly given if delivered or mailed
by prepaid mail addressed to:

           If to Executive, to:         Stephen J. Verleye

           If to the Company, to:       Applied Microsystems Corporation
                                        5020 - 148th Avenue NE
                                        Redmond, WA 98073-9702
                                        Attention:  Chairman

        or to such other address as the addressee may direct in writing.

         10.6 CAPTIONS. The captions applied to the paragraphs of this Agreement
are for convenience only and shall not affect their meaning or construction.

         10.7 WAIVER. The failure of either party to insist in any instance on
performance of any term of this Agreement shall not be construed as a waiver of
future performance of any such term.

         10.8 SEVERABILITY. If any portion of this Agreement is held invalid or
unenforceable, the remainder thereof shall remain in full force and effect, and
if the invalidity or unenforceability is due to the unreasonableness of time or
geographical restrictions, such covenants and restrictions shall be effective
for such period of time and for such area as may be determined to be reasonable
by a court of competent jurisdiction.

         10.9 INTEGRATION. This Agreement, together with the Executive's offer
of employment letter (Attachment D), Executive Stock Option Letter Agreement,
the Board Forecast and Plan, and the Applied Microsystems Corporation Employee
Agreement supersedes all other agreements and understandings, whether written or
oral, and contains the entire agreement of the parties relating to the
employment of Executive by the Company.


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         10.10  REVIEW. By the execution of this Agreement Executive
acknowledges he has carefully read the terms of this Agreement and that he
has had the opportunity to be advised by counsel of his choice.

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


EXECUTIVE                                      APPLIED MICROSYSTEMS CORPORATION



By   /s/ Stephen J. Verleye                    By     /s/ Anthony Miadich
   ---------------------------                    -----------------------------
        Stephen J. Verleye                          Anthony Miadich, Chairman








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                                   ATTACHMENT A

                           1999 MANAGEMENT BONUS PROGRAM

The purpose of the Applied Microsystems Management Bonus Program is to reward
participants for helping to achieve the financial goals of the Company.

FEATURES OF THE 1999 PROGRAM:

1.   Bonuses are earned relative to Forecast & Plan financial criteria.
2.   Bonus percentage potential based on salary. For Forecast achievement, bonus
     is 50% of base salary; for Plan achievement, bonus is 100% of base salary.
3.   The Forecast and Plan targets remain cumulative; i.e., 1st quarter results
     are compared to 1st quarter targets; 2nd quarter year-to-date (YTD) results
     to 2nd quarter YTD targets; and so on. Shortfalls to targets can be made up
     until the year is completed.
4.   Bonuses can be paid quarterly based on successful achievement of YTD target
     objectives (Forecast or Plan).
5.   50% of the (prorated) bonus amount will be tied to the Company achieving
     quarterly Revenue targets.
6.   50% of the (prorated) bonus amount will be tied to the Company achieving
     quarterly EPS targets.
7.   If any quarter's earned bonus is at or below total Forecast for that
     quarter, bonus payments will be disbursed within 45 days of the close of
     that quarter (within 60 days after year-end). If any quarter's earned
     bonus exceeds total Forecast, the Compensation Committee of the Board must
     have an expectation that such results are sustainable or a one quarter's
     holdback of bonus amounts over Forecast will be required. In no
     circumstances will the holdback be more than one quarter in arrears. In
     addition, at the end of the fiscal year, all holdback amounts will be paid
     (within 60 days after year-end).


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                                  ATTACHMENT B

                          STOCK OPTION LETTER AGREEMENT

                                  APRIL 1, 1999

Stephen J. Verleye

Dear Stephen:

We are pleased to inform you that you have been selected by the Compensation
Committee of the Board of Directors of Applied Microsystems Corporation (the
"Company") to receive a stock option for the purchase of the number of shares of
Applied Microsystems Corporation Common Stock at the exercise price set forth on
the signature page. The grant of the option is being made pursuant to Applied
Microsystems Corporation's 1992 Performance Stock Plan, as amended to date (the
"Plan"), a copy of which is attached and incorporated into this Agreement by
reference.

The terms of the option are as set forth in the Plan and this Agreement. The
most important terms are summarized as follows:

         TERM:  Ten years from date of grant, unless sooner terminated.

         EARLY TERMINATION: Thirty days after termination of employment with
         the Company, or one year if termination occurs as a result of death
         or disability.

         VESTING: The option is immediately exercisable, subject to the terms
         and conditions of the Plan, other than the vesting schedule in Section
         7(a) of the Plan, which shall not apply.

         REPURCHASE: The Company or its assignee may repurchase any shares you
         purchase upon exercise of this option if your employment terminates for
         any reason during the first year after the date of grant of this
         option. A number of shares equal to twenty five percent (25%) of the
         total number of shares purchasable under this option will be free from
         this repurchase right after the first full year, and an additional
         twenty-five percent (25%) will be free after each subsequent full year,
         so that all shares will be free from any repurchase rights after the
         fourth full year from the date of grant of this option. The repurchase
         price will be the per share exercise price, as adjusted for any stock
         split, stock dividend, or similar change in capitalization. The
         repurchase rights will not apply if your employment terminates on
         account of death or disability.

         TRANSFER OF OPTION:  The option is not transferable.

This option does not include stock appreciation rights, as described in
Section 11 of the Plan.


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Stephen J. Verleye
April 1, 1999
Page -2-


YOUR PARTICULAR ATTENTION IS DIRECTED TO SECTION 16 OF THE PLAN WHICH DESCRIBES
CERTAIN IMPORTANT CONDITIONS RELATING TO FEDERAL AND STATE SECURITIES LAWS THAT
MUST BE SATISFIED PRIOR TO THE ISSUANCE OF ANY SHARES PURSUANT TO THIS OPTION.

Please execute the Acceptance and Acknowledgment set forth below on the enclosed
copy of this Agreement and return it to the undersigned.

Very truly yours,

APPLIED MICROSYSTEMS CORPORATION


By   /s/ Anthony Miadich
   ---------------------------
    Anthony Miadich, Chairman

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

ACCEPTANCE AND ACKNOWLEDGMENT

I accept the option described in the above Stock Option Letter Agreement and in
the Plan and acknowledge receipt of a copy of this Agreement, including a copy
of the Plan. I have read and understand the Plan, including the provisions of
Section 16.

Dated:      April 1, 1999                      /s/ Stephen J. Verleye
       ------------------------          ----------------------------------

A.       Total Number of shares:    215,000

B.       Price per share:   $2.5000

C.       Date of grant:   April 1, 1999

D.       This is intended to be an Incentive Stock Option to the extent
         possible; otherwise, this is a Non-qualified Stock Option

THE EXERCISE OF THIS OPTION AND THE DISPOSITION OF ANY SHARES THUS ACQUIRED MAY
AFFECT YOUR INCOME TAX OBLIGATIONS SIGNIFICANTLY. IF THIS IS A NOT AN INCENTIVE
STOCK OPTION, YOU SHOULD CONSIDER MAKING AN ELECTION PURSUANT TO SECTION 83(b)
OF THE INTERNAL REVENUE CODE AT THE TIME THE OPTION IS EXERCISED. YOU ARE URGED
TO CONSULT YOUR TAX ADVISOR ON THESE MATTERS




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                                  ATTACHMENT C

              REPURCHASE RIGHTS SUBSEQUENT TO A CHANGE OF CONTROL.

Pursuant to the terms of Section 3.3(b) of this Agreement, the Company agrees to
further restrict its Repurchase Rights identified in Executive's Stock Option
Letter Agreement (Attachment B herein) as follows:

1.   If a Change of Control occurs within the first year of Executive's
     employment, the Company may elect to repurchase no more than 50% of the
     shares granted to Executive.

2.   If a Change of Control occurs between the first and second years of
     Executive's employment, the Company may elect to repurchase no more than
     25% of the shares granted to Executive.

3.   If a Change of Control occurs after the second year of Executive's
     employment, the Company may not elect to repurchase any of the shares
     granted to Executive.




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