Document:

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                                                                    EXHIBIT 10.6

                                                                 RONALD M. ROWAN
                                                             November 17th, 2000

                              CASINO DATA SYSTEMS
                              EMPLOYMENT AGREEMENT

         This Employment Agreement ("Agreement") is made and entered into
effective the 17th day of November, 2000 (the "Effective Date"), by and between
Casino Data Systems, a Nevada corporation ("CDS") and Ronald Rowan ("Employee").
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, CDS and Employee hereby agree as follows:

         1.       EMPLOYMENT: SERVICES.

                  1.1      CDS hereby hires and employs Employee and Employee
hereby accepts such hiring and employment for the position set forth on Exhibit
A (the "Position") and for the purpose of performing those services (the
"Services") which are usual and customary for the Position. Employee shall use
diligent efforts and shall devote such time and energies as may be reasonably
required to perform the Services to the best of Employee's ability. Employee's
Services also include all tasks and obligations of a general nature necessary
for the operation and maintenance of Company. The precise services of the
Employee may be extended or curtailed, from time to time, at the direction of
Company. The Employee shall assume and perform such further reasonable
responsibilities and duties as may be assigned to him from time to time by
Company.

                  1.2      Employee shall not engage in, have a relationship
with or become interested in nor have an equity or profit participation in any
business, calling, or enterprise which is in Direct Competition with the Company
(other than a passive investment not to exceed 5% of the total equity of any
entity) while Employee is employed by Company. The Company is engaged in the
following endeavors:
         1) Production of accounting, tracking and reporting software for Casino
         Floor Operations;
         2) Production of Gaming Devices for Casinos;
         3) Operation of Gaming Devices;
         4) Production of signs and displays for Casinos; and
         5) Development of tools and libraries for professional programmers
         which tools and libraries are intended for sale to end users.
For purposes of this Agreement, a business, calling or enterprise which is in
Direct Competition with the Company is one which is engaged in the endeavors
listed above in the Jurisdictions in which the Company is licensed, provided
that the Company is still actively conducting business in these areas. Employee
shall not engage in any endeavor that prevents Employee from fulfilling
Employee's obligations to the Company.

                  1.3      Employee shall report only to the person identified
in Exhibit A as the "Supervisor". Employee's Supervisor shall at all times
during the term of this Agreement have final and complete authority over
Employee with respect to all decisions related to the Services and the direction
and control of Employee. In all cases set forth in this Agreement requiring
Board action, the Board shall act by majority vote.
         2.       Term.

                  2.1      The term of this Agreement shall commence on the
Effective Date (the "Effective Date") and shall expire on November 17th, 2003,
unless terminated earlier pursuant to one or more of the following provisions:

                           2.1.1    CDS shall have the right to terminate this
Agreement and the Services by delivery of written notice to Employee, provided
that a majority of the Board has voted to terminate this Agreement. In such
case, this Agreement shall terminate thirty (30) days following the date of
delivery of such notice.

                           2.1.2    Employee shall have the right to terminate
this Agreement and the Services by delivery of written notice to CDS at any
time. In such case, this Agreement shall terminate thirty (30) days following
the date of delivery of such notice.

                                                                               1
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                                                                 RONALD M. ROWAN
                                                             November 17th, 2000

                           2.1.3    This Agreement shall terminate upon
Employee's death.

                  2.2      In the event that any of the following events occurs:

                           2.2.1    This Agreement is terminated by CDS without
"Good Cause" (defined below), or

                           2.2.2    Employee resigns for "Good Reason" (defined
below) prior to the expiration of this Agreement's term, then, in addition to
all salary, prorated bonus, and benefits due to the effective date of
termination, CDS shall also pay to Employee severance compensation as follows:

         Employee will be paid in the amount of $175,000.00, plus increases as
         determined in prior compensation reviews, plus a bonus equal to the
         previous year's bonus. In addition, during the period of severance
         payments the Employee shall continue to receive all of the Company's
         employee benefits, if eligible, and if not eligible for health
         benefits, the Company shall pay the COBRA premiums for continuation
         coverage during the period of severance payments.

                  2.3      If this Agreement is terminated by CDS prior to the
end of its term for Good Cause or if Employee resigns for other than Good
Reason, then CDS shall pay Employee's Salary, and benefits only through the
effective date of termination of employment.

                  2.4      As used herein, "Good Cause" shall mean any of the
following:

                           2.4.1    Employee persists in taking actions
reasonably considered to be in material breach of this Agreement by CDS; or

                           2.4.2    Employee is guilty of any grave misconduct
or willful material neglect in any discharge of any of Employee's material
duties hereunder to the detriment of CDS as determined by a majority of the
Board of Directors in the reasonable exercise of their discretion; or

                           2.4.3    Employee is convicted of any serious
criminal offense which, in the reasonable opinion of the Board, affects
Employee's position as an employee of CDS; or

                           2.4.4    Employee has engaged in any conduct or has
engaged in relationships with other persons that would, in the reasonable
opinion of the Board, jeopardize any existing or future gaming licenses held or
sought by CDS.

                  2.5      As used herein, "Good Reason" shall mean one of the
following shall occur, and employee acts to terminate for Good Reason within
eighteen months of such occurrence:

                           2.5.2    Employee has been demoted; or

                           2.5.3    Employee has incurred a substantial
reduction in Employee's authority or responsibility (as that authority and/or
responsibility is defined in Exhibit 'A'); or

                           2.5.4    There has been a material change in
Employee's working hours or working days to non-normal working hours or
non-normal working days; or

                           2.5.5    Employee has incurred material reduction in
Employee's remuneration either as base pay or benefits.

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                                                                 RONALD M. ROWAN
                                                             November 17th, 2000

         3.       COMPENSATION.

                  3.1      From and after the Effective Date, CDS shall pay to
                           Employee an annual gross base salary (the "Base
                           Salary") equal to the amount set forth on Exhibit A
                           hereof which Base Salary shall be payable in
                           twenty-six equal installments. Such installments
                           shall be paid in arrears every two (2) weeks.

                  3.2      Should the Corporation reach its goal as reasonably
determined by the Board of Directors, then Employee shall receive an
annualized bonus (the "Bonus") of the amount specified on Exhibit A hereof,
payable at the end of January of each year. For any year in which employee
terminates his employment at less than a full year for Good Cause, then the
bonus shall be pro-rated at termination such that employee receives a bonus
equally to the number of whole or partial months employee is employed during any
partial year multiplied by one-twelfth of the bonus employee would have received
as determined by the most recent Financial Operations Review derived Projected
financial performance for the Company for the year, or if the practice of
Financial Operation Reviews is discontinued, its equivalent as agreed to by
Employee and the Corporation.

                  3.4      CDS shall withhold all relevant income taxes,
unemployment insurance, Social Security contributions, worker's compensation
insurance, and other customary amounts from Employee's Base Salary and Bonus, if
any, prior to distribution of the net proceeds therefrom to Employee.

                  3.5      Employee shall be eligible for any other benefits as
may be provided by CDS from time to time for its executive employees, pursuant
to CDS' policies and eligibility requirements with respect thereto. Such
benefits may be amended, changed, or terminated from time to time by the Board,
in its sole discretion, provided that CDS takes such action with respect to all
employees similarly situated as Employee and does not discriminate against
Employee in any such action.

                  3.6      CDS shall have the right to purchase "key man"
insurance covering Employee at any time. Any such policy and the proceeds
therefrom shall at all times remain the property of CDS, which shall at all
times be designated beneficiary thereunder and neither Employee nor Employee's
estate, heirs, or beneficiaries shall have any right, title or interest therein
or thereto.

                  3.7      All stock options of CDS held by Employee, whether
                           granted before or following the date of this
                           Agreement, shall, notwithstanding any other
                           conditions described in the agreements covering such
                           stock options, vest in their entirety upon a Change
                           of Control (as defined in Section 2.5.1 herein)
                           occurring during the term of this Agreement.
                  3.8      Employee shall be reimbursed for Employee's
                           authorized out-of-pocket expenses incurred on behalf
                           of Company. Employee shall maintain records in such
                           detail as Company may require in order to comply with
                           the substantiation requirements of the U.S. Internal
                           Revenue Code. Materials or items that have been
                           purchased by Employee and reimbursed by Company (or
                           which are related to items which have been reimbursed
                           by Company) shall be the property of Company.
                           Examples of such items or materials include but are
                           not limited to books, magazines, software, hardware,
                           documentation, furniture, computers, equipment,
                           clothing, and name badges.
                  3.9      Company shall pay the costs of any professional dues
                           or fees incurred by Employee. Company shall pay the
                           costs and expenses of Employee's continuing
                           education, including tuition, fees, travel and per
                           diem.

         4.       NON-COMPETITION.

                           4.1.1    This non-competition provision shall remain
                                    in effect until:

                           4.1.2    Employee dies; or
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                                                                 RONALD M. ROWAN
                                                             November 17th, 2000

                           4.1.3    Employee's employment with CDS is terminated
without Good Cause or is terminated by Employee for Good Reason; or

                           4.1.4    One year after the date of the termination
of Employee's employment by CDS for Good Cause or the termination of Employee's
employment by Employee without Good Reason; or

                           4.1.5    One year after the termination of Employee's
employment with CDS by reason of the expiration of this Agreement and Employee's
refusal at CDS's request to renew this Agreement for other than Good Reason.

The term of this non-competition provision shall expire as specified in the
applicable subsection above upon the happening of the first of any of the above
events to occur.

                  4.2      During the term of this non-competition provision,
                           Employee shall not, either directly or indirectly,
                           for or on behalf of Employee or for or in conjunction
                           with any other person, company, or other entity,
                           whether as an employee, independent contractor,
                           consultant, shareholder, owner, or otherwise, engage
                           in any business, calling, or enterprise which is in
                           Direct Competition with the Company (as that term is
                           defined above) in any jurisdiction in which Company
                           does business. Without limiting the generality of the
                           foregoing, during the term of this
                           non-competition provision, Employee shall not call
                           upon any customer or potential customer of CDS or any
                           related entity of CDS, perform any of the Services or
                           other activities which Employee performed while in
                           the employ of CDS for a competitor of CDS or its
                           related entities, solicit orders for any products or
                           services similar to those products or services of
                           CDS, divert or take away any customer or business
                           opportunity of CDS or any related entity of CDS,
                           entice or hire away any employee from CDS or any
                           related entity of CDS, or otherwise compete with CDS
                           in any manner during the term of this Agreement.

                  4.3      Furthermore, during the term of this Agreement and
                           for a period of one year after termination of or
                           separation from employment Employee shall not
                           disrupt, damage, impair or interfere with the
                           business or operations of Company.

         5.       CONFIDENTIALITY; PROPRIETARY RIGHTS OF CDS; DISCLAIMER OF
RIGHTS TO TECHNOLOGY AND INTELLECTUAL PROPERTY.

                  5.1      At all times during the term of this Agreement and
from and after the termination of this Agreement, whether such termination takes
place in accordance with the provisions of this Agreement or for any other
reason, and whether this Agreement is terminated for or without cause, Employee
shall keep strictly confidential and secret any and all proprietary or
confidential information related to CDS or CDS' business, whether such
information is obtained by Employee in the course of Employee's employment or
otherwise. Without limiting the generality of the foregoing, Employee shall not
disclose to any other person, company, or entity (except in connection with
Employee's duties and obligations consistent wit the terms of this Agreement and
the scope of the Services) any aspect of CDS' business methods, manufacturing
processes, business secrets, business systems or products, customer names,
prospective customers, accounting systems, computer software or hardware
systems, or marketing or business plans (collectively, the "Confidential
Information").

                           The Employee recognizes that the disclosure of
Confidential Information or trade secrets by the Employee may give rise to
irreparable injury to Company, which may not be adequately compensated by
damages. Accordingly, in the event of a breach or threatened breach by the

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                                                                 RONALD M. ROWAN
                                                             November 17th, 2000

Employee of any provision of this section, Company shall be entitled to an
injunction restraining the Employee from disclosing, in whole or in part, the
confidential information defined in this paragraph, or from rendering any
services to any person, firm corporation, association or other entity to whom
such confidential information, in whole or in part, has been disclosed or is
threatened to be disclosed. Nothing herein shall be construed as prohibiting
Company from pursuing any other remedies available to Company for such breach or
threatened breach, including the recovery of damages from the Employee. The
undertaking set forth in this section shall survive the termination or
cancellation of this Agreement or of the separation of Employee's employment.

                           The Employee may not remove any Confidential
Information or trade secrets from the premises of Company without the written
consent of Company, except to enable Employee, if Employee so desires, to work
at home or another convenient location. The Employee promises and agrees to
protect and maintain the confidentiality of any materials removed from the
Company's premises, and to promptly return any such information to the Company's
premises.

Notwithstanding the foregoing, Company understands that Employee has years of
experience in the same or similar businesses as Company and that Employee
has the right to use such pre-acquired knowledge for Employee's own benefit and
to earn a living and enjoy a career in the future, either as a principal or
employee with another organization.

                  5.2      The foregoing notwithstanding, Confidential
Information does not include any of the following:

                           5.2.1    Information which through no wrongful act or
failure to act on the part of the Employee becomes generally known or available,
or

                           5.2.2    Information which is furnished to others by
CDS without restriction on disclosure, or

                           5.2.3    Information which is hereafter furnished to
Employee by third parties as a matter of right and without restriction on
disclosure, or

                           5.2.4    Information which is known to others in the
                                    industry or is ascertainable from other
                                    sources without a breach by the other
                                    sources of any nondisclosure agreement on
                                    their part.

                  5.3      Employee agrees that upon request by Company, and in
any event upon termination of or separation from employment, Employee shall turn
over to Company all equipment, tools, furnishings, materials, documents, papers,
discs or any other property, real or personal, tangible or intangible, in any
media whatsoever, which property is in the Employee's possession or under
Employee's control and which property rightfully belongs to Company. In
addition, upon request by Company, and in any event upon termination of or
separation from employment, Employee shall immediately turn over to Company any
documents, materials, discs or writings of any kind whatsoever in any media
whatsoever, including all duplicates, which may contain or be derived from
Confidential Information or any of the Intellectual Property, together with all
documents, notes or other work product which is connected with or derived from
Employee's services to Company. Employee agrees that the Employee shall have no
proprietary interest in any work product developed for Company in the course of
employment and arising out of Employee's employment by Company.

                  5.4      At all times during the term of this Agreement and
                           from and after the termination of this Agreement,
                           Employee shall hold in a fiduciary capacity for the
                           benefit of CDS and shall disclose fully to CDS
                           immediately upon origination, discovery, invention or
                           acquisition, any and all inventions, discoveries,
                           improvements, apparatus, processes, compounds,
                           formulae, computer programs, patents, licenses,
                           copyrights and trademarks made,

                                                                               5
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                                                                 RONALD M. ROWAN
                                                             November 17th, 2000

                           invented, discovered, developed or secured by
                           Employee during his employment by CDS, solely or
                           jointly with others, or otherwise, and which may be
                           directly or indirectly useful in, or relate to, the
                           manufacture, production, sale, development, or use of
                           any product or service of CDS, and all of the
                           foregoing shall be owned exclusively by CDS. Employee
                           agrees and acknowledges that the compensation paid to
                           Employee under this Agreement is full and adequate
                           consideration for Employee's covenants under Section
                           5.4 and that employee shall not be entitled to
                           receive any other compensation, fee, commissions,
                           royalty or other amount in connection therewith.

                  5.5      All work performed by Employee while in the employ of
Company, (during business hours or not) in any language, on any platform, for
any operating system, in any media or in any form whatsoever (including but not
limited to any of the Confidential Information), shall be deemed to have been
done at the instruction of the Company, shall be a "Work Made for Hire" within
the meaning of the Copyright Act, shall be the property of Company and may not
be used by Employee for any purpose except the benefit of the Company. Any and
all such property shall be forthwith delivered to the Company upon the Company's
request.

The only exception to the above paragraph concerning all work being property of
the Company shall be work prepared by the Employee, which meets all of the
following conditions;

         (a) The work is performed on the Employee's own time,
         (b) The work does not compete with any past or present project or
         product of Company,
         (c) The work does not relate at the time of conception or reduction to
         practice of the work or Invention to the Company's business, or actual
         or demonstrably anticipated research or development of the Company,
         (d) The work does not interfere with Employee's work for Company, even
         if Employee is required to work after hours or longer than the regular
         hours of business for Company and
         (e) Employee has not used any of Company's equipment, supplies,
         facilities, trade secret information, Confidential Information, or
         Intellectual Property for any purpose not related to the business of
         Company without the Company's express written consent.

         Any exceptions to this section shall be in writing.

         Employee shall, from time to time as may be requested by Company, do
all things which may be necessary to establish or document Company's ownership
of any work or work product which is properly the Property of Company,
including, but not limited to execution of appropriate copyright applications,
copyright assignments, transfers, sales, releases or any and all other documents
or writings. Employee hereby waives any power Employee may have to control,
cause to modify or otherwise effect the Intellectual Property, and hereby
transfers all such powers, including but not limited to any powers of Droit
Morale, to Company. Employee hereby irrevocably appoints Company as his attorney
in fact empowered solely to execute any documents necessary to establish
Company's ownership rights, rights to maintain, rights to defend and rights to
control any of the Intellectual Property and/or Confidential Property.

         6.       INDEMNITY; SURVIVAL.

                  6.1      Each of Employee and CDS shall indemnify, defend, and
hold harmless the other from and against any and all loss, cost, damage,
liability, or expense, as a result of malicious conduct of the other, or a
willful breach of a duty of good faith. As to Employee, this indemnity shall
only apply to Employee's actions and duties as an employee of CDS. This
indemnity is not intended to nor shall it be interpreted to alter, amend or in
any way effect Employee's actions or duties as a member of the Board (if
applicable), or the respective indemnification provisions affecting or relating
to all Directors of CDS.
                  6.2      The provisions of Articles 4, 5 and 6 of this
Agreement shall survive the termination of this Agreement.

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                                                                 RONALD M. ROWAN
                                                             November 17th, 2000

         7.       MISCELLANEOUS PROVISIONS.

                  7.1      FILES. All records contained in the files of CDS
(other than Employee's personal background and financial information) shall be
the property of CDS and Employee shall not remove such records upon termination
of Employee's employment with CDS. Upon such termination, and at Employee's
written request, CDS shall provide Employee with copies of all of Employee's
personal background and financial information then held by CDS and CDS shall
destroy all remaining copies including any electronic form of such information.

                  7.2      INTEGRATION: AMENDMENTS. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements between the parties with respect
thereto. This Agreement may not be altered, amended, changed, terminated or
modified in any respect or particular unless the same shall be in writing and
signed by the part to be changed.

                  7.3      ATTORNEY'S FEES. In the event of any action for or
breach of, to enforce the provisions of, or otherwise arising out of or in
connection with this Agreement, the prevailing party in such action, as
determined by the court in such action, shall be entitled to receive its
reasonable attorney's fees and costs from the other party. If a party
voluntarily dismisses an action, a reasonable sum as attorney's fees shall be
awarded to the other party.

                  7.4      NEVADA LAW; JURISDICTION AND VENUE. This Agreement,
including Exhibit A attached hereto, shall be governed by and construed in
accordance with the law of the State of Nevada. The parties hereby consent to
the personal jurisdiction of any court of competent jurisdiction with the State
of Nevada. The exclusive venue for any action or proceeding relating to or
arising out of this Agreement shall be Clark County, Nevada.

                  7.5      BINDING EFFECT. Employee acknowledges that the
Employee's obligations and duties under this Agreement are unique personal
services benefiting CDS and shall not be delegated in any manner or respect nor
shall this Agreement be assigned by Employee. This Agreement may not be assigned
by CDS without Employee's prior consent, except in connection with any sale or
transfer of all or part of CDS's business, in which case no consent of Employee
shall be required. This Agreement shall be binding upon and inure to the benefit
of any permitted heirs, successors, and assigns.

                  7.6      VALIDITY. Wherever possible, each provision of this
Agreement shall be interpreted in such a manner as to be valid based upon
applicable law. But, if any provision or part of any provision of this Agreement
shall be held by a court of competent jurisdiction to be invalid or prohibited
thereunder, such provision or part of any such provision shall be ineffective
only to the extent of such invalidity or prohibition, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.

                  7.7      HEADINGS. The headings of the sections of this
Agreement are inserted solely for convenience of reference and are not part of
and are not intended to govern, limit or aid in the construction of any item or
provision of this Agreement.

                  7.8      NOTICES. Any notice required or permitted to be given
under this Agreement shall be in writing and delivered in person to the other
party, or sent by certified United States Mail, with postage prepaid.

                  7.9      WAIVER. The failure of either party to enforce any of
its rights or remedies in connection with a breach of this Agreement by the
other party or in any other case shall not be deemed to be a waiver of said
first party's rights or remedies with respect thereto or with respect to any
other breach of this Agreement by the other party. No such waiver of rights or
remedies shall exist unless the same shall be in writing and signed by the party
to be charged.

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                                                                 RONALD M. ROWAN
                                                             November 17th, 2000

                  7.10     REMEDIES. Employee acknowledges that CDS' remedy at
law for any breach or threatened breach by Employee of Articles 4 and 5 hereof
will be inadequate. Therefore, CDS shall be entitled to injunctive and other
equitable relief restraining Employee from violating those requirements, in
addition to any other remedies that may be available to CDS under this Agreement
or applicable law.

         IN WITNESS WHEREOF, CDS and Employee have executed this Agreement as of
the date first set forth above.

CASINO DATA SYSTEMS,                        EMPLOYEE
A Nevada corporation

BY:/s/ Steven A. Weiss                      /s/ Ronald Rowan
   -----------------------                  --------------------
   Its: CEO/Chairman
   -----------------------

                                                                               8

<PAGE>

                                                                 RONALD M. ROWAN
                                                             November 17th, 2000

                                                                       EXHIBIT A

Employee:         Ronald M. Rowan

Position:         Chief Financial Officer Supervisor: Steve Weiss or Nominee
                  Compensation Continuation
Period:  One Year

Base Salary:      One Hundred and Seventy-Five Thousand, annually, plus
increases as determined in compensation reviews.

Annual Bonus:     A base of Forty Percent of annual salary, plus any increases
added by the compensation committee. A percentage of the base bonus amount equal
to the percentage of the EBITDA target (as established by the Board of
Directors) achieved by the Company is awarded to the employee if annual EBITDA
equals or exceeds 90% the EBITDA target. No bonus is paid if the Company fails
to achieve at least 90% of the EBITDA target.

Additional Terms:          Employee agrees to keep confidential and not disclose
to any third party, information concerning Employee's personnel records,
including financial and background information, except as may be required by law
or by gaming regulatory authorities.

Responsibilities: The principal Chief Financial Officer and Corporate Secretary
for the consolidated Company reporting to the CEO and responsible for management
of all aspects of treasury, financial management and reporting, investor
relations and the administrative functions of the Company including Human
Resources, Information Technologies and Business Policies and Procedures. In
carrying out these duties, serves as primary interface with stock and industry
analysts, banks and the financial press. Expected to routinely make
presentations at investor conferences and to the Board of Directors.<PAGE>

                                                                   EXHIBIT 10.7

                                                              February 23, 2001

Mr. Mathew M. Perlot
P.O. Box 4217
Sunriver, OR 97707

              RE: RETIREMENT AGREEMENT AND MUTUAL RELEASE OF CLAIMS

Dear Mat:

         This Retirement Agreement and Mutual Release of Claims (the
"Agreement") between you and SMC Corporation (the "Company") contains the terms
and conditions of your retirement from your capacity as CEO with the Company and
your continuing role as an employee of the Company. As used in this Agreement,
"the Company" includes all of its related entities, including, without
limitation, all parent, subsidiary, affiliate, predecessor and successor
organizations, and all current or former corporate officers, directors,
employees, shareholders, insurers, attorneys, agents or assigns for all
organizations and corporations referred to in this paragraph.

1.       RETIREMENT; APPOINTMENT AS AN EMPLOYEE ADVISOR.

         Following your retirement as CEO, you will continue your role as
Chairman of the Board of Directors, further, the Company shall appoint you as an
employee advisor. As an employee advisor, you shall provide advisory services
and such other services to the Company as the Chief Executive Officer or the
President of the Company may from time to time request. You shall serve as an
employee advisor to the Company for so long as you continue to live. You
acknowledge that you will not have any rights, authority or privileges
associated with this title except as provided expressly in this Agreement.

         Your position as an employee advisor shall be advisory in nature only,
and you shall have no vote or right to consent on any action taken by the Board
of Directors. As an employee advisor, you shall have no duties or obligations to
the Corporation or its shareholders as a director of the Corporation, whether
pursuant to the Oregon Business Corporation Act or the Investment Company Act of
1940 or otherwise; nor shall you have any rights as a director under the Oregon
Business Corporations Act, the Company's Articles or Bylaws, or otherwise.

                                       1

<PAGE>

         ADVISING COMPENSATION. As an employee advisor providing advisory
services to the Company, you will receive compensation in an amount equal to
$20,000 per year continuing until your death. Additionally, as an employee, your
company paid health benefits will also continue until your death.

2.       RETIREMENT BENEFITS.

         The following benefits will be provided to you upon your execution of
this Agreement and the expiration of the revocation period identified in
paragraph 8, provided you have not revoked the terms of this Agreement.

         2.1 RETIREMENT PAYMENTS. The Company has agreed to pay you retirement
payments in accordance with the following schedule, all subject to the terms and
conditions of this Agreement and applicable tax withholding:

         2.1.1 $280,000 on an annualized basis, payable on regular Company
paydays commencing on or about the later of March 1, 2001, or 8 days after you
sign this Agreement and continuing with the last payment to be made on or about
February 1, 2002; and

         2.1.2 $220,000 on an annualized basis, payable on regular Company
paydays commencing on or about March 1, 2002, and continuing with the last
payment to be made on or about February 1, 2003; and

         2.1.3 $100,000 on an annualized basis, payable on regular Company pay
days commencing on or about March 1, 2003, and continuing until your death.

         With the exception of the first installment payment, payment of all
installments of retirement pay identified in subparagraphs 2.1.1, 2.1.2 and
2.1.3 will be made by depositing the same in the United States Mail (or by
direct deposit if you have previously made such arrangements) on regular Company
pay days. Payment of retirement pay shall automatically cease in the event of
your death.

         2.2 AUTOMOBILE. Upon your retirement as CEO, the company will transfer
legal title to you of the 1999 Lincoln you are presently driving for company use
for $100.

         2.3 COMPUTERS AND ASSOCIATED EQUIPMENT. Upon your retirement, the two
computers and associated equipment currently in your possession, including but
not limited to the docking system (collectively, the "Computers and Associated
Equipment") will become your personal property.

         2.4 STOCK OPTIONS. As you will remain an employee, all stock options in
your stock

                                       2

<PAGE>

option agreements dated October 20, 1994 and February 27, 1998 (the "Option
Agreements") shall not be terminated by reason of your retirement from the
Company. Your options shall otherwise be governed by the terms of the Option
Agreements and the Plan.

         2.5 TAX TREATMENT OF BENEFITS. The retirement, advisory employee and
other benefits identified in this paragraph 2 and provided to you under the
terms and conditions of this Agreement (collectively, the "Benefits") are
subject to applicable payroll deductions and tax withholding and may constitute
taxable income to you. YOU ARE RESPONSIBLE FOR ALL TAX OBLIGATIONS AND SHOULD
CONSULT WITH YOUR OWN TAX ADVISOR REGARDING THE TAX TREATMENT OF THE BENEFITS.

3.       EFFECT OF AGREEMENT.

         Upon your retirement, except as otherwise specified in this Agreement,
you will cease participation in all plans and benefits generally provided to
Company officers and employees and will not receive any other compensation or
employee benefits, including, without limitation, any benefits under any
severance, compensation or other plan, policy or practice maintained by the
Company. You further acknowledge and agree that the Benefits provided to you
under this Agreement are in lieu of, and not in addition to, any Company
severance plan or any other plan, policy or practice that otherwise might be
applicable to you.

4.       CONDITIONS FOR RECEIPT OF CONSIDERATION UNDER THIS AGREEMENT.

         You will be eligible to receive the pay and benefits described in
paragraph 2 only if you satisfy all of the following conditions:

         4.1 ACCEPTANCE PERIOD. You execute this ("Acceptance Period") and you
do not later revoke it during the Acceptance Period.

         4.2 COMPANY PROPERTY. Except with respect to the 1999 Lincoln and the
Computers and Associated Equipment and any other equipment you are entitled to
use or keep in accordance with the provisions of paragraphs 1 and 2, you must
return all other Company tangible personal property in your possession
immediately.

         4.3 NO BREACH. You do not breach any of the terms of this Agreement.

         4.4 ASSISTANCE IN DEFENSE OF LITIGATION OF CLAIMS. If the Company
requests your assistance, you agree to assist in the defense or prosecution of
litigation, claims or administrative proceedings about which you have knowledge,
without additional compensation following your retirement. You will, however, be
reimbursed for reasonable out-of-pocket expenses approved in advance by the
Company. The Company will reasonably accommodate your scheduling needs and will
provide you with reasonable advance notice of a request for such assistance.

                                      3

<PAGE>

         4.5 CONFIDENTIALITY. You agree that you will not use the Company's
confidential information in any manner unless authorized in writing by the
Company or required by court order or similar order of any legally constituted
authority. In addition, you agree to use reasonable good faith efforts to
prevent accidental or negligent loss or release to any unauthorized person of
the confidential information.

5.       REMEDIES FOR BREACH.

         You acknowledge that if you breach any material term of this Agreement
during or after receiving Benefits under this Agreement, the Company may suffer
irreparable injury. In such an event, the Company may seek an injunction or
other equitable relief enjoining any breach of the above-referenced provisions.
In any action necessary to enforce the provisions of this agreement, the
prevailing party shall be entitled to recover reasonable costs and attorneys'
fees, including costs of appeal.

6.       MUTUAL RELEASE OF CLAIMS

         6.1 The Company hereby releases and forever discharges you from any
claims, demands, actions, suits, causes of action, debts, accounts or
controversies of any nature whatsoever, known or unknown, arising out of, or in
any way related to, your employment by, or service as a director of, the
Company, including, without limitation, all claims that were asserted or could
have been asserted by the Company, and any and all actions or omissions by you
up to and including the date of this Agreement; PROVIDED, HOWEVER, that this
release shall not apply to any criminal or fraudulent actions taken by you.

         6.2 You hereby release and forever discharge the Company from any and
all claims, demands, actions, suits, causes of action, debts, accounts or
controversies of any nature whatsoever, known or unknown, arising out of, or in
any way related to, your employment by, or service as a director of, the Company
or the termination of that employment or service as a director, including,
without limitation, all claims that were asserted or could have been asserted by
you, and any and all actions or omissions by the Company up to and including the
date of this Agreement; PROVIDED, HOWEVER, that this release shall not apply to
any criminal or fraudulent actions taken by the Company.

         6.3 The release set forth in subparagraph 6.2 includes, without
limitation, any and all claims under any state, federal or local law or other
authority, including, but not limited to, any claim for additional
compensation in any form, any claim arising under any statutes or regulations
pertaining to wages, conditions of employment or discrimination in
employment, including, without limitation, the Employee Separation Income
Security Act; Title VII of the Civil Rights Act of 1964; the Family and
Medical Leave Act; the Age Discrimination in Employment Act; the Older
Workers' Benefit Protection Act; the Post-Civil War Civil Rights Acts
(42 U.S.C. Section 1981-1988); the Civil Rights Act of 1991, 42 U.S.C.
Section 1981, et seq.; the Equal Pay Act of 1963; the Fair Labor Standards Act;
the Occupational Safety and Health Act of 1970;

                                      4

<PAGE>

the Rehabilitation Act of 1973; Sections 503 and 504 of the Vocational
Rehabilitation Act of 1973; the Americans with Disabilities Act, 42 U.S.C.
Section 12101, et seq.; the Uniform Services Employment and Reemployment
Rights Act; the Davis-Bacon Act; the Walsh-Healey Act; the Contract Work
Hours and Safety Standards Act; Executive Order 11246; ORS Chapters 652, 653,
654 and 659; federal and state securities laws; and any regulations under or
amendments of such authorities. In addition, this release extends to all
claims of any kind under any contract, tort or other common law, equitable or
statutory theories.

7.       ADVICE TO CONSULT WITH ATTORNEY.

YOU HAVE BEEN, AND HEREBY ARE, ADVISED TO CONSULT WITH AN ATTORNEY REGARDING
THIS AGREEMENT AND TO CAREFULLY CONSIDER THE TERMS OF THIS AGREEMENT, INCLUDING
THE TERMS REGARDING THE RELEASE OF CLAIMS SET FORTH IN PARAGRAPH 6.

8.       OLDER WORKERS' BENEFIT PROTECTION ACT NOTICE.

         8.1 In accordance with the Older Workers' Benefit Protection Act, you
acknowledge: you have been advised in writing of your right to consult with an
attorney prior to executing this Agreement (including the release); you have
read this Agreement and understand that you are releasing legal rights; you are
aware of certain rights to which you may be entitled under certain statutes and
laws identified in subparagraph 6.3 of this Agreement; you have had adequate
time to consider this Agreement; and that as consideration for executing this
Agreement (including the release), you have received additional benefits and
compensation of value to which you would not otherwise be entitled.

         8.2 This offer shall remain open for your consideration until March 23,
2001. You acknowledge that you received this written offer on February 23, 2001,
and that the offer provides you with an Acceptance Period of at least 21 days
from the date of receipt for your consideration of the offer. You may execute
this Agreement at any time during the Acceptance Period. If you have not
executed this Agreement by the close of business on March 23, 2001, this offer
shall expire. You are free, of course, to accept this offer earlier by executing
this Agreement.

         Once you execute this Agreement, you will have 7 days from the date
immediately following the date of your execution of this Agreement in which you
may revoke it, in your sole discretion (Acceptance Period). Notice of revocation
of this Agreement shall be made by you in writing to:

         Bill Rich
         Chief Financial Officer
         SMC Corporation
         20545 Murray Road
         P.O. Box 5639
         Bend, OR 97708

                                      5

<PAGE>

         If you do not exercise your right to revoke this Agreement, it will
become effective on the eighth day following your execution of the Agreement.
You understand that if you do not sign this Agreement on or before the end of
the Acceptance Period, or if you revoke it, you will not be entitled to the
Benefits offered in this Agreement.

9.       ENTIRE AGREEMENT.

         You acknowledge that no representations have been made to you by the
Company other than those set forth herein.

         You acknowledge and agree that this Agreement supersedes and replaces
all remaining obligations, if any, contained in any agreement, promise or offer.
You also acknowledge and agree that the compensation and benefits provided under
this Agreement are in lieu of, and not in addition to, the compensation and
benefits, if any, provided under any other agreement, promise or offer or any
policy, plan or practice maintained by the Company.

         If you agree to the terms and conditions of this Agreement, please sign
and return the enclosed copy of this Agreement, on or before March 23, 2001.

                                   Sincerely,

                                   /s/ MICHAEL R. JACQUE
                                   -------------------------------------
                                   Michael R. Jacque
                                   President and Chief Operating Officer

ACKNOWLEDGMENT AND AGREEMENT:

I have read this Agreement and consulted with my attorney before signing. I
understand that by signing below, I am entering a legal agreement and releasing
legal rights, including any claims I may have against the Company. I have chosen
voluntarily to enter this Agreement after careful consideration.

MATHEW M. PERLOT                            Date             3/6/01
----------------------------------------    --------------------------
Mathew M. Perlot

                                      6

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