EXHIBIT 10.3

                              EMPLOYMENT AGREEMENTS



Attached are the employee agreements for the following persons:



Richard Herman

Richard Honour

Tracy Honour

Doug Lee

Kenneth Lehman (2 agreements)

Larry Stylebo


Lisa Goodrich


<PAGE>


                              EMPLOYMENT AGREEMENT



EMPLOYMENT  AGREEMENT  dated  November  1,  2000  ("Agreement")   between  Phage
Therapeutics,  Inc., a Washington corporation ("Company") and Richard E. Herman,
PhD, a resident of Redmond, WA ("Employee").



                                   WITNESSETH



WHEREAS,  the  Company  wishes  to  employ  Employee  in the  position  of  Vice
President, Pharmaceutical Development; and



WHEREAS,  the Employee wishes to enter into the employ of the Company to fulfill
the   responsibilities  of  the  position  of  Vice  President,   Pharmaceutical
Development;



NOW  THEREFORE,  in  consideration  of  the  foregoing  and  of  the  respective
covenants,   obligations  and  agreements  of  the  parties  contained  in  this
Agreement, the parties, intending to be legally bound, hereby agree as follows:



1.       EMPLOYMENT



The Company shall employ  Employee,  and Employee shall accept such  employment,
upon the terms and conditions set forth in Agreement. Employee's employment with
the Company shall be subject to the Company's  general  employment  policies and
practices.  The Company reserves the right to modify such policies and practices
from time to time.



2.       DUTIES



Employee shall be employed as Vice President, Pharmaceutical Development. During
the term of this Agreement,  Employee shall devote his full time,  attention and
efforts to the conduct of the business of the Company and the performance of his
duties under this  Agreement.  Employee  shall not engage in any other  business
activity,  whether or not such  activity  is pursued  for gain,  profit or other
pecuniary  advantage;  provided  that  Employee  shall  not  be  prevented  from
investing  his  personal  assets in such form or manner as will not  require any
services on the part of Employee in the operation of the affairs of the entities
in which such investments are made.



3.     TERM





<PAGE>


Subject to the terms and conditions set forth in this  Agreement,  Company shall
employ  Employee  and  Employee  shall serve the Company in the position of Vice
President,  Pharmaceutical  Development for a period commencing November 1, 2000
("Commencement  Date")  and  continuing  through  the first  anniversary  of the
Commencement  Date,  unless such  employment  is sooner  terminated  as provided
herein.  During  this one (1) year  period,  Employee's  compensation  and other
benefits may be adjusted  annually,  or more often,  without the necessity of an
amendment of this Agreement. The Employee's term of employment shall be extended
for  additional  one (1) year  periods  and on such terms and at such  levels of
compensation  as shall be mutually agreed to in writing by Company and Employee,
unless otherwise terminated under this Agreement.



4.       COMPENSATION



For all services  rendered by Employee under this Agreement,  the Company agrees
to pay Employee and Employee agrees to accept the following:



4.1 Salary.  An annual salary of $84,000  ("Salary"),  which shall be payable at
the times and in the manner set by the Company's  standard payroll policy.  Such
Salary  shall  be  reviewed  one  (1)  month  prior  to the  anniversary  of the
Commencement Date each year, and any increase in the amount under this Agreement
for the twelve (12) month period  following the  Commencement  Date  anniversary
date shall be  determined at such time by the Board of Directors of the Company,
or a compensation committee formed by the Board of Directors.



4.2 Bonuses.  Employee shall  additionally be entitled to such cash and/or stock
bonuses  and  stock  options  as  determined  from  time to time by the Board of
Directors of the Company, or their designated representatives(s).  Cash bonuses,
if any, shall be paid subject to achievement of specific performance  milestones
agreed to by both the Company and Employee.



5.       CONTINUING EDUCATION



In the event that performance of Employee's  responsibilities  and duties within
the Company shall require or recommend  certification,  licensure, or continuing
education  to maintain  licensure,  then Company  shall upon notice,  allow time
during business hours for the required activity and shall reimburse Employee for
reasonable  expenses  associated  therewith  including at least any registration
fees, license fees, travel, lodging and per diem fees.



6.       WORKING FACILITIES



Employee shall be furnished with such facilities,  services, and supplies as are
suitable and adequate for the performance of this duties under this Agreement.



7.       EXPENSES



Employee shall be reimbursed by the Company for his reasonable expenses incurred
in connection with his employment and which are related to and in furtherance of
the Company's  business,  in accordance  with the general  policy of the Company
regarding reimbursement of expenses.



8.       BENEFITS



Employee  shall be entitled  to all rights and  benefits  for which  Employee is
eligible under any  employee-benefits  plan,  including pension,  stock or stock
option,  profit sharing,  health  (including  medical and dental),  and life and
disability  insurance  plan,  which  the  Company  provides  for  its  employees
generally.  The Company  reserves  the right to change the  benefits  offered to
employees at any time.




<PAGE>

9.       TERMINATION



Employee's  employment  with the Company shall be terminated upon the occurrence
of any of the following events:



9.1 Death of Employee. In lieu of any other benefits which may be payable by the
Company with respect to death,  in the event of such death,  the Salary  payable
hereunder  shall  continue  to be paid at the then  current  rate for  three (3)
months after the  termination  of  employment.  In the event of the death of the
Employee during the term of this Agreement,  the sums payable hereunder shall be
paid to his personal representative;



9.2 Mutual agreement of termination in writing between the Company and Employee;



9.3  Disability of Employee that prevents him from  performing  the material and
substantial  duties  of his  position  for a period of two (2)  months.  In such
event, at the Company's option, the Company shall give Employee not less than 30
days' written notice of  termination  of employment.  Employee shall continue to
render  services to the  Company  (unless  disabled)  and shall be paid his full
salary as in effect at such time up to the date of termination.  Nothing in this
Agreement,  however,  shall limit or diminish the Company's  obligations towards
Employee  with  respect  to the  Americans  with  Disabilities  Act of 1990,  as
amended,  the Family and Medical Leave Act of 1993,  as amended,  or any similar
state laws.



9.4 Written  notice by either party to the other  terminating  the employment of
Employee as follows:



          a.   Notice of  resignation  by Employee to the  Company,  at least 30
               days in advance;



          b.   Notice of  termination  of  employment by the Company to Employee
               with cause.  For purposes of this  Agreement,  the Company  shall
               have  "Cause"  to  terminate  Employee's  employment  under  this
               Agreement  upon   Employee's:   (a)  willful  breach  of  any  of
               Employee's  material  obligations  under  this  Agreement,  which
               breach shall not have been  remedied by Employee  within ten (10)
               days  after  the  Company  shall  have  given  written  notice to
               Employee of such  breach,  or which such  breach  shall have been
               repeated  after  lapse  of  such  ten-day   notice  period;   (b)
               commission  of an act which the Board of Directors of the Company
               shall reasonably have found to have involved  willful  misconduct
               or gross negligence on the part of Employee in the conduct of his
               duties under this Agreement which materially  injures the Company
               or any of its  subsidiaries or affiliates;  (c) conviction of (or
               pleading  nolo  contendere  to) any  felony  or any  misdemeanour
               involving moral turpitude which might, in the reasonable judgment
               of the Board of Directors of the Company,  cause embarrassment to
               the  Company  or any  of  its  subsidiaries  or  affiliates;  (d)
               commission of a material act of personal  dishonesty or breach of
               fiduciary duty involving  personal  profit in connection with the
               Employee's   employment   by  the   Company;   or  (e)   habitual
               absenteeism,  chronic  alcoholism,  drug  abuse or other  form of
               addiction  which,  in the  reasonable  judgment  of the  Board of
               Directors,  impairs  Employee's  ability to perform his duties or
               injures the Company.





<PAGE>


          c.   Notice of  termination  of  employment by the Company to Employee
               without cause or for good reason. For purposes of this Agreement,
               the  Company  will have  terminated  Employee's  employment  with
               Company  under the  Agreement  without cause or for "Good Reason"
               upon  Company's:  (a)  financial  inability to meet its financial
               obligations;  (b) desire to terminate  Employee's  employment for
               reasons other than for Cause as defined  above in Section  9.4.c;
               (c)  contemplation,  consideration or execution of a financial or
               business  agreement  or  transaction  that  obligates  Company to
               reduce costs or staff or Employee's  employment;  (d) termination
               of Employee's  employment within 120 days of the date of a Change
               of  Control of the  Company;  or (e)  failure to comply  with the
               terms  fo  this  Agreement.   In  the  event  of  termination  of
               Employee's  employment  under this Agreement by Employer  without
               cause or for Good Reason, Employer shall pay within ten (10) days
               of such termination a severance payment equal to the compensation
               that would have been paid to Employee for an additional three (3)
               month period,  at the same rate of pay per month as if Employee's
               employment  would not have  been  terminated.  Employee's  fringe
               benefits and other  benefits  that were provided  Employee  under
               Section 8 of this  Agreement  will be continued to the benefit of
               Employee  during the three  month  period of  compensation  after
               termination without cause or for Good Reason.



Notwithstanding  any  termination  of this  Agreement  pursuant  to  Section  9,
Employee shall remain bound by the provisions of Sections 10 and 11 below.



10.      INVENTIONS



"Inventions" made or conceived  entirely or partially by Employee while employed
by the Company shall be the exclusive property of the Company.  For the purposes
of this Agreement,  the term,  "Inventions"  includes,  without limitation,  all
creations,  whether or not patentable or copyrightable,  and all ideas, reports,
or other  creative  works  including,  without  limitation,  therapies,  genetic
engineering  tools and methods,  gene  expression  systems and  diagnostics  and
therapeutic  products  derived  therefrom,  which  related  to the  existing  or
proposed  business  of the  Company  or to any other  business  or  research  or
development  effort  conducted by the  Company.  All of  Employee's  Inventions,
whether or not  copyrightable  or patentable,  will be works for hire.  Employee
will promptly  disclose each  Inventions to the Company in writing and cooperate
with the  Company  to  patent or  copyright  all  Inventions  by  executing  all
documents  tendered by the Company for the purpose of patenting or  copyrighting
Employee's  Inventions.  This  provision  shall be construed in conformity  with
Chapter 49.44 of the Revised Code of  Washington.  This provision does not apply
to an Invention for which no equipment,  supplies,  facilities,  or trade secret
information  of the  Company  was used  and  which  was  developed  entirely  on
Employee's own time unless (i) the Invention relates directly to the business of
the Company, or to the Company's actual or demonstrably  anticipated research or
development,  or (ii) the Invention  results from any work performed by Employee
for the Company.



11.      NON-DISCLOSURE OF CONFIDENTIAL INFORMATION AND RESTRICTIVE COVENANTS



11.1  Confidential  Information.  During the course of his employment,  Employee
will acquire knowledge of trade secrets and other proprietary information of the
Company   ("Confidential   Information")  and  may  contribute  to  Confidential
Information through inventions, discoveries,  improvements or some other manner.
Confidential  Information includes, but is not limited to, nonpublic information
relating  to  the  Company's  business,  operations,  customers  or  technology,
including  customer  lists,  vendor  lists,  pricing  or  financial  information
concerning  the  Company and its vendors and  customers,  trade  secrets,  data,
documentation,  concepts techniques, processes, know-how, marketing information,
designs,  customer  information,  cost data, price lists, and pricing  policies.
Confidential  Information  does not include  information  that is already public
knowledge  or which can be obtained by  reference  to public  sources.  Employee
recognizes that all Confidential  Information is the property of the Company and
agrees that, except as required by the duties of Employee's  employment with the
Company, Employee shall never, directly or indirectly, use, publish, disseminate
or otherwise  disclose any Confidential  Information  obtained during Employee's
employment  with the Company  without the prior written  consent of the Company.
Employee  acknowledges  and agrees that the terms of this Section  shall survive
the termination of his employment with the Company.





<PAGE>


11.2  Non-Competition.  Employee further acknowledges that his position with the
Company  will give him a close  knowledge  of its  policies,  business and trade
secrets,  and that  Employee's  continued and  exclusive  service to the Company
under this  Agreement  is of a high degree of  importance  and  confidentiality.
Employee  agrees  that  for a  period  of one  year  after  the  termination  of
Employee's  employment  with  the  Company,   Employee  will  not,  directly  or
indirectly,  be employed by, engage in, consult with, or own an equity  interest
in any entity or  activities  competitive  with the  business  engaged in by the
Company during Employee's  employment under this Agreement,  without the written
consent of the Company.



11.3  Solicitation.  During the term of his employment  with the Company and for
the period of one year  thereafter,  Employee  shall not:  (i) seek to persuade,
directly  or  indirectly,  any  employee  of the  Company  to  discontinue  that
individual's  employment with the Company, or seek to persuade any such employee
to become employed in any activity similar to or competitive with the activities
of the Company, or (ii) directly or indirectly solicit from any person or entity
who was a customer of the Company and with whom  Employee had business  dealings
on behalf of the Company during the one-year  period prior to the termination of
Employee's  employment  any  business  which is  competitive  with the  business
activities of the Company,  or cause or authorize such  solicitation,  for or on
behalf of Employee or any third party.



11.4 Unfair  Competition.  Employee agrees that the provisions of Section 10 and
11 of this  Agreement  are  reasonably  necessary  to protect  the rights of the
Company and to prevent unfair competition.  The provisions of Sections 10 and 11
shall apply if  Employee's  employment  is  terminated at the end of the term of
this Agreement or otherwise.  The period of the covenants  contained in Sections
10 and 11 shall be extended by any period of time  during  which  Employee is in
violation of said covenants, if any.



11.5 Severability. The parties agree that the covenants set forth in Sections 10
and 11 of this Agreement,  including,  without limitation,  the scope, duration,
and geographic extent of such  restrictions,  are fair and reasonably  necessary
for the protection of the Company's legitimate business interest. In the event a
court or arbitrator should decline to enforce any of such provisions, they shall
be deemed to be modified to restrict  Employee to the maximum  extent  which the
court or arbitrator shall find enforceable.



11.6 Records. Upon termination of this Agreement, all documents, records, files,
notebooks,  and similar  repositories  containing the  information  described in
Sections 10 and 11 of this Agreement,  including all copies,  then in Employee's
possession,  whether  prepared  by  Employee  or  others,  shall be  immediately
returned to the Company by Employee.



12.      INJUNCTIVE RELIEF



Employee acknowledges that the breach or threatened breach of the nondisclosure,
non-competition or other agreements  contained in this Agreement would give rise
to  irreparable  injury  to the  Company,  which  injury  would be  inadequately
compensable  in money  damages.  The Company may,  therefore,  seek and obtain a
restraining  order or injunction  prohibiting the breach or threatened breach of
any provision, requirement or covenant of this Agreement, in addition to and not
in limitation of any other legal remedies that may be available.



13.      MISCELLANEOUS



13.1 Entire Agreement.  This Agreement contains the entire agreement between the
Company  and  Employee  relating  to the subject  matter of this  Agreement.  No
modification  of this Agreement shall be valid unless made in writing and signed
by both parties.



<PAGE>


13.2 Notice.  Any notice  required or permitted to be give under this  Agreement
shall be sufficient if in writing and delivered personally or sent by registered
or certified mail, receipt return requested,  to Employee at his residence or to
the Company at its principal office.



13.3  Waiver.  No waiver by the  Company or Employee of any default or breach of
any term, condition or covenant of this Agreement shall be deemed to be a wavier
of any subsequent default or breach of the same or any other term,  condition or
covenant contained in this Agreement.



13.4  Assignment and  Successors.  The rights and  obligations of Employee under
this  Agreement are personal and may not be assigned to any other  person.  This
Agreement will bind and benefit any successor of the Company, whether by merger,
sale of assets,  reorganization  or other form of  acquisition,  disposition  or
business  reorganization.  In the event of Employee's death, any benefits due or
to become due under this Agreement shall become a part of Employee's  estate and
shall be distributed to his personal representative.



13.5 Attorney's Fees. In the event of any dispute relating to  interpretation or
enforcement of this Agreement, the prevailing party shall be entitled to recover
its reasonable attorneys' fees and costs, whether or not a lawsuit,  arbitration
or other legal action is commenced.



13.6  Applicable  Law.  This  Agreement  shall be governed by and  construed  in
accordance with the laws of the State of Washington.



This Agreement is effective as of the date first above written.



PHAGE THERAPEUTICS, INC.  (COMPANY):





         By: /s/ Richard C. Honour/s/
         ----------------------------

         Its: President & CEO
         --------------------





EMPLOYEE (EMPLOYEE):



         /s/ Richard E. Herman /s/
         -------------------------
         Signature



         Feb. 21, 2001
         -------------
         Date





<PAGE>


                              EMPLOYMENT AGREEMENT



EMPLOYMENT  AGREEMENT  dated  November  1,  2000  ("Agreement")   between  Phage
Therapeutics,  Inc., a Washington corporation ("Company") and Richard C. Honour,
PhD, a resident of Kenmore, WA ("Employee").



                                   WITNESSETH



WHEREAS,  the Company  wishes to employ  Employee in the position of President &
CEO; and



WHEREAS,  the Employee wishes to enter into the employ of the Company to fulfill
the responsibilities of the position of President & CEO;



NOW  THEREFORE,  in  consideration  of  the  foregoing  and  of  the  respective
covenants,   obligations  and  agreements  of  the  parties  contained  in  this
Agreement, the parties, intending to be legally bound, hereby agree as follows:



1.       EMPLOYMENT



The Company shall employ  Employee,  and Employee shall accept such  employment,
upon the terms and conditions set forth in Agreement. Employee's employment with
the Company shall be subject to the Company's  general  employment  policies and
practices.  The Company reserves the right to modify such policies and practices
from time to time.



2.       DUTIES



Employee  shall  be  employed  as  President  & CEO.  During  the  term  of this
Agreement,  Employee  shall devote his full time,  attention  and efforts to the
conduct of the business of the Company and the  performance  of his duties under
this  Agreement.  Employee  shall not  engage in any  other  business  activity,
whether or not such  activity  is pursued  for gain,  profit or other  pecuniary
advantage;  provided that  Employee  shall not be prevented  from  investing his
personal  assets in such form or manner as will not require any  services on the
part of Employee in the  operation  of the affairs of the entities in which such
investments are made.



3.     TERM



Subject to the terms and conditions set forth in this  Agreement,  Company shall
employ  Employee  and  Employee  shall  serve the  Company  in the  position  of
President & CEO for a period commencing November 1, 2000  ("Commencement  Date")
and continuing  through the first  anniversary of the Commencement  Date, unless
such  employment is sooner  terminated as provided  herein.  During this one (1)
year  period,  Employee's  compensation  and  other  benefits  may  be  adjusted
annually,  or  more  often,  without  the  necessity  of an  amendment  of  this
Agreement.  The Employee's  term of employment  shall be extended for additional
one (1) year  periods  and on such terms and at such levels of  compensation  as
shall be mutually agreed to in writing by Company and Employee, unless otherwise
terminated under this Agreement.



<PAGE>


4.       COMPENSATION



For all services  rendered by Employee under this Agreement,  the Company agrees
to pay Employee and Employee agrees to accept the following:



4.1 Salary. An annual salary of $120,000  ("Salary"),  which shall be payable at
the times and in the manner set by the Company's  standard payroll policy.  Such
Salary  shall  be  reviewed  one  (1)  month  prior  to the  anniversary  of the
Commencement Date each year, and any increase in the amount under this Agreement
for the twelve (12) month period  following the  Commencement  Date  anniversary
date shall be  determined at such time by the Board of Directors of the Company,
or a compensation committee formed by the Board of Directors.



4.2 Bonuses.  Employee shall  additionally be entitled to such cash and/or stock
bonuses  and  stock  options  as  determined  from  time to time by the Board of
Directors of the Company, or their designated representatives(s).  Cash bonuses,
if any, shall be paid subject to achievement of specific performance  milestones
agreed to by both the Company and Employee.



5.       CONTINUING EDUCATION



In the event that performance of Employee's  responsibilities  and duties within
the Company shall require or recommend  certification,  licensure, or continuing
education  to maintain  licensure,  then Company  shall upon notice,  allow time
during business hours for the required activity and shall reimburse Employee for
reasonable  expenses  associated  therewith  including at least any registration
fees, license fees, travel, lodging and per diem fees.



6.       WORKING FACILITIES



Employee shall be furnished with such facilities,  services, and supplies as are
suitable and adequate for the performance of this duties under this Agreement.



7.       EXPENSES



Employee shall be reimbursed by the Company for his reasonable expenses incurred
in connection with his employment and which are related to and in furtherance of
the Company's  business,  in accordance  with the general  policy of the Company
regarding reimbursement of expenses.



8.       BENEFITS



Employee  shall be entitled  to all rights and  benefits  for which  Employee is
eligible under any  employee-benefits  plan,  including pension,  stock or stock
option,  profit sharing,  health  (including  medical and dental),  and life and
disability  insurance  plan,  which  the  Company  provides  for  its  employees
generally.  The Company  reserves  the right to change the  benefits  offered to
employees at any time.


<PAGE>




9.       TERMINATION



Employee's  employment  with the Company shall be terminated upon the occurrence
of any of the following events:



9.1 Death of Employee. In lieu of any other benefits which may be payable by the
Company with respect to death,  in the event of such death,  the Salary  payable
hereunder  shall  continue  to be paid at the then  current  rate for  three (3)
months after the  termination  of  employment.  In the event of the death of the
Employee during the term of this Agreement,  the sums payable hereunder shall be
paid to his personal representative;



9.2 Mutual agreement of termination in writing between the Company and Employee;



9.3  Disability of Employee that prevents him from  performing  the material and
substantial  duties  of his  position  for a period of two (2)  months.  In such
event, at the Company's option, the Company shall give Employee not less than 30
days' written notice of  termination  of employment.  Employee shall continue to
render  services to the  Company  (unless  disabled)  and shall be paid his full
salary as in effect at such time up to the date of termination.  Nothing in this
Agreement,  however,  shall limit or diminish the Company's  obligations towards
Employee  with  respect  to the  Americans  with  Disabilities  Act of 1990,  as
amended,  the Family and Medical Leave Act of 1993,  as amended,  or any similar
state laws.



9.4 Written  notice by either party to the other  terminating  the employment of
Employee as follows:



          a.   Notice of  resignation  by Employee to the  Company,  at least 30
               days in advance;



          b.   Notice of  termination  of  employment by the Company to Employee
               with cause.  For purposes of this  Agreement,  the Company  shall
               have  "Cause"  to  terminate  Employee's  employment  under  this
               Agreement  upon   Employee's:   (a)  willful  breach  of  any  of
               Employee's  material  obligations  under  this  Agreement,  which
               breach shall not have been  remedied by Employee  within ten (10)
               days  after  the  Company  shall  have  given  written  notice to
               Employee of such  breach,  or which such  breach  shall have been
               repeated  after  lapse  of  such  ten-day   notice  period;   (b)
               commission  of an act which the Board of Directors of the Company
               shall reasonably have found to have involved  willful  misconduct
               or gross negligence on the part of Employee in the conduct of his
               duties under this Agreement which materially  injures the Company
               or any of its  subsidiaries or affiliates;  (c) conviction of (or
               pleading  nolo  contendere  to) any  felony  or any  misdemeanour
               involving moral turpitude which might, in the reasonable judgment
               of the Board of Directors of the Company,  cause embarrassment to
               the  Company  or any  of  its  subsidiaries  or  affiliates;  (d)
               commission of a material act of personal  dishonesty or breach of
               fiduciary duty involving  personal  profit in connection with the
               Employee's   employment   by  the   Company;   or  (e)   habitual
               absenteeism,  chronic  alcoholism,  drug  abuse or other  form of
               addiction  which,  in the  reasonable  judgment  of the  Board of
               Directors,  impairs  Employee's  ability to perform his duties or
               injures the Company.





<PAGE>


          c.   Notice of  termination  of  employment by the Company to Employee
               without cause or for good reason. For purposes of this Agreement,
               the  Company  will have  terminated  Employee's  employment  with
               Company  under the  Agreement  without cause or for "Good Reason"
               upon  Company's:  (a)  financial  inability to meet its financial
               obligations;  (b) desire to terminate  Employee's  employment for
               reasons other than for Cause as defined  above in Section  9.4.c;
               (c)  contemplation,  consideration or execution of a financial or
               business  agreement  or  transaction  that  obligates  Company to
               reduce costs or staff or Employee's  employment;  (d) termination
               of Employee's  employment within 120 days of the date of a Change
               of  Control of the  Company;  or (e)  failure to comply  with the
               terms  fo  this  Agreement.   In  the  event  of  termination  of
               Employee's  employment  under this Agreement by Employer  without
               cause or for Good Reason, Employer shall pay within ten (10) days
               of such termination a severance payment equal to the compensation
               that would have been paid to Employee for an additional three (3)
               month period,  at the same rate of pay per month as if Employee's
               employment  would not have  been  terminated.  Employee's  fringe
               benefits and other  benefits  that were provided  Employee  under
               Section 8 of this  Agreement  will be continued to the benefit of
               Employee  during the three  month  period of  compensation  after
               termination without cause or for Good Reason.



Notwithstanding  any  termination  of this  Agreement  pursuant  to  Section  9,
Employee shall remain bound by the provisions of Sections 10 and 11 below.



10.      INVENTIONS



"Inventions" made or conceived  entirely or partially by Employee while employed
by the Company shall be the exclusive property of the Company.  For the purposes
of this Agreement,  the term,  "Inventions"  includes,  without limitation,  all
creations,  whether or not patentable or copyrightable,  and all ideas, reports,
or other  creative  works  including,  without  limitation,  therapies,  genetic
engineering  tools and methods,  gene  expression  systems and  diagnostics  and
therapeutic  products  derived  therefrom,  which  related  to the  existing  or
proposed  business  of the  Company  or to any other  business  or  research  or
development  effort  conducted by the  Company.  All of  Employee's  Inventions,
whether or not  copyrightable  or patentable,  will be works for hire.  Employee
will promptly  disclose each  Inventions to the Company in writing and cooperate
with the  Company  to  patent or  copyright  all  Inventions  by  executing  all
documents  tendered by the Company for the purpose of patenting or  copyrighting
Employee's  Inventions.  This  provision  shall be construed in conformity  with
Chapter 49.44 of the Revised Code of  Washington.  This provision does not apply
to an Invention for which no equipment,  supplies,  facilities,  or trade secret
information  of the  Company  was used  and  which  was  developed  entirely  on
Employee's own time unless (i) the Invention relates directly to the business of
the Company, or to the Company's actual or demonstrably  anticipated research or
development,  or (ii) the Invention  results from any work performed by Employee
for the Company.



11.      NON-DISCLOSURE OF CONFIDENTIAL INFORMATION AND RESTRICTIVE COVENANTS



11.1  Confidential  Information.  During the course of his employment,  Employee
will acquire knowledge of trade secrets and other proprietary information of the
Company   ("Confidential   Information")  and  may  contribute  to  Confidential
Information through inventions, discoveries,  improvements or some other manner.
Confidential  Information includes, but is not limited to, nonpublic information
relating  to  the  Company's  business,  operations,  customers  or  technology,
including  customer  lists,  vendor  lists,  pricing  or  financial  information
concerning  the  Company and its vendors and  customers,  trade  secrets,  data,
documentation,  concepts techniques, processes, know-how, marketing information,
designs,  customer  information,  cost data, price lists, and pricing  policies.
Confidential  Information  does not include  information  that is already public
knowledge  or which can be obtained by  reference  to public  sources.  Employee
recognizes that all Confidential  Information is the property of the Company and
agrees that, except as required by the duties of Employee's  employment with the
Company, Employee shall never, directly or indirectly, use, publish, disseminate
or otherwise  disclose any Confidential  Information  obtained during Employee's
employment  with the Company  without the prior written  consent of the Company.
Employee  acknowledges  and agrees that the terms of this Section  shall survive
the termination of his employment with the Company.





<PAGE>


11.2  Non-Competition.  Employee further acknowledges that his position with the
Company  will give him a close  knowledge  of its  policies,  business and trade
secrets,  and that  Employee's  continued and  exclusive  service to the Company
under this  Agreement  is of a high degree of  importance  and  confidentiality.
Employee  agrees  that  for a  period  of one  year  after  the  termination  of
Employee's  employment  with  the  Company,   Employee  will  not,  directly  or
indirectly,  be employed by, engage in, consult with, or own an equity  interest
in any entity or  activities  competitive  with the  business  engaged in by the
Company during Employee's  employment under this Agreement,  without the written
consent of the Company.



11.3  Solicitation.  During the term of his employment  with the Company and for
the period of one year  thereafter,  Employee  shall not:  (i) seek to persuade,
directly  or  indirectly,  any  employee  of the  Company  to  discontinue  that
individual's  employment with the Company, or seek to persuade any such employee
to become employed in any activity similar to or competitive with the activities
of the Company, or (ii) directly or indirectly solicit from any person or entity
who was a customer of the Company and with whom  Employee had business  dealings
on behalf of the Company during the one-year  period prior to the termination of
Employee's  employment  any  business  which is  competitive  with the  business
activities of the Company,  or cause or authorize such  solicitation,  for or on
behalf of Employee or any third party.



11.4 Unfair  Competition.  Employee agrees that the provisions of Section 10 and
11 of this  Agreement  are  reasonably  necessary  to protect  the rights of the
Company and to prevent unfair competition.  The provisions of Sections 10 and 11
shall apply if  Employee's  employment  is  terminated at the end of the term of
this Agreement or otherwise.  The period of the covenants  contained in Sections
10 and 11 shall be extended by any period of time  during  which  Employee is in
violation of said covenants, if any.



11.5 Severability. The parties agree that the covenants set forth in Sections 10
and 11 of this Agreement,  including,  without limitation,  the scope, duration,
and geographic extent of such  restrictions,  are fair and reasonably  necessary
for the protection of the Company's legitimate business interest. In the event a
court or arbitrator should decline to enforce any of such provisions, they shall
be deemed to be modified to restrict  Employee to the maximum  extent  which the
court or arbitrator shall find enforceable.



11.6 Records. Upon termination of this Agreement, all documents, records, files,
notebooks,  and similar  repositories  containing the  information  described in
Sections 10 and 11 of this Agreement,  including all copies,  then in Employee's
possession,  whether  prepared  by  Employee  or  others,  shall be  immediately
returned to the Company by Employee.



12.      INJUNCTIVE RELIEF



Employee acknowledges that the breach or threatened breach of the nondisclosure,
non-competition or other agreements  contained in this Agreement would give rise
to  irreparable  injury  to the  Company,  which  injury  would be  inadequately
compensable  in money  damages.  The Company may,  therefore,  seek and obtain a
restraining  order or injunction  prohibiting the breach or threatened breach of
any provision, requirement or covenant of this Agreement, in addition to and not
in limitation of any other legal remedies that may be available.



13.      MISCELLANEOUS



13.1 Entire Agreement.  This Agreement contains the entire agreement between the
Company  and  Employee  relating  to the subject  matter of this  Agreement.  No
modification  of this Agreement shall be valid unless made in writing and signed
by both parties.





<PAGE>


13.2 Notice.  Any notice  required or permitted to be give under this  Agreement
shall be sufficient if in writing and delivered personally or sent by registered
or certified mail, receipt return requested,  to Employee at his residence or to
the Company at its principal office.



13.3  Waiver.  No waiver by the  Company or Employee of any default or breach of
any term, condition or covenant of this Agreement shall be deemed to be a wavier
of any subsequent default or breach of the same or any other term,  condition or
covenant contained in this Agreement.



13.4  Assignment and  Successors.  The rights and  obligations of Employee under
this  Agreement are personal and may not be assigned to any other  person.  This
Agreement will bind and benefit any successor of the Company, whether by merger,
sale of assets,  reorganization  or other form of  acquisition,  disposition  or
business  reorganization.  In the event of Employee's death, any benefits due or
to become due under this Agreement shall become a part of Employee's  estate and
shall be distributed to his personal representative.



13.5 Attorney's Fees. In the event of any dispute relating to  interpretation or
enforcement of this Agreement, the prevailing party shall be entitled to recover
its reasonable attorneys' fees and costs, whether or not a lawsuit,  arbitration
or other legal action is commenced.



13.6  Applicable  Law.  This  Agreement  shall be governed by and  construed  in
accordance with the laws of the State of Washington.



This Agreement is effective as of the date first above written.



PHAGE THERAPEUTICS, INC.  (COMPANY):





         By: /s/ Darren Pylot/s/
         -----------------------

         Its: Director
         -------------





EMPLOYEE (EMPLOYEE):



         /s/ Richard Honour /s/
         ----------------------

         Signature



         Feb. 21, 2001
         -------------


         Date





<PAGE>


                              EMPLOYMENT AGREEMENT



EMPLOYMENT  AGREEMENT  dated  November  1,  2000  ("Agreement")   between  Phage
Therapeutics,  Inc., a Washington corporation  ("Company") and Tracy Honour, MS,
LAC, a resident of Seattle, WA ("Employee").



                                   WITNESSETH



WHEREAS, the Company wishes to employ Employee in the position of Manager,  Data
Base Management Systems; and



WHEREAS,  the Employee wishes to enter into the employ of the Company to fulfill
the responsibilities of the position of Manager, Data Base Management Systems;



NOW  THEREFORE,  in  consideration  of  the  foregoing  and  of  the  respective
covenants,   obligations  and  agreements  of  the  parties  contained  in  this
Agreement, the parties, intending to be legally bound, hereby agree as follows:



1.       EMPLOYMENT



The Company shall employ  Employee,  and Employee shall accept such  employment,
upon the terms and conditions set forth in Agreement. Employee's employment with
the Company shall be subject to the Company's  general  employment  policies and
practices.  The Company reserves the right to modify such policies and practices
from time to time.



2.       DUTIES



Employee shall be employed as Manager, Data Base Management Systems.  During the
term of this  Agreement,  Employee  shall  devote his full time,  attention  and
efforts to the conduct of the business of the Company and the performance of his
duties under this  Agreement.  Employee  shall not engage in any other  business
activity,  whether or not such  activity  is pursued  for gain,  profit or other
pecuniary  advantage;  provided  that  Employee  shall  not  be  prevented  from
investing  his  personal  assets in such form or manner as will not  require any
services on the part of Employee in the operation of the affairs of the entities
in which such investments are made.



3.     TERM





<PAGE>


Subject to the terms and conditions set forth in this  Agreement,  Company shall
employ Employee and Employee shall serve the Company in the position of Manager,
Data  Base  Management  Systems  for  a  period  commencing   November  1,  2000
("Commencement  Date")  and  continuing  through  the first  anniversary  of the
Commencement  Date,  unless such  employment  is sooner  terminated  as provided
herein.  During  this one (1) year  period,  Employee's  compensation  and other
benefits may be adjusted  annually,  or more often,  without the necessity of an
amendment of this Agreement. The Employee's term of employment shall be extended
for  additional  one (1) year  periods  and on such terms and at such  levels of
compensation  as shall be mutually agreed to in writing by Company and Employee,
unless otherwise terminated under this Agreement.



4.       COMPENSATION



For all services  rendered by Employee under this Agreement,  the Company agrees
to pay Employee and Employee agrees to accept the following:



4.1 Wage. An hourly wage of $25.00 ("Wage"), which shall be payable at the times
and in the manner set by the  Company's  standard  payroll  policy.  Such Salary
shall be reviewed  one (1) month prior to the  anniversary  of the  Commencement
Date each year,  and any  increase in the amount  under this  Agreement  for the
twelve (12) month period following the Commencement  Date anniversary date shall
be  determined  at such  time by the Board of  Directors  of the  Company,  or a
compensation committee formed by the Board of Directors.



4.2 Bonuses.  Employee shall  additionally be entitled to such cash and/or stock
bonuses  and  stock  options  as  determined  from  time to time by the Board of
Directors of the Company, or their designated representatives(s).  Cash bonuses,
if any, shall be paid subject to achievement of specific performance  milestones
agreed to by both the Company and Employee.



5.       CONTINUING EDUCATION



In the event that performance of Employee's  responsibilities  and duties within
the Company shall require or recommend  certification,  licensure, or continuing
education  to maintain  licensure,  then Company  shall upon notice,  allow time
during business hours for the required activity and shall reimburse Employee for
reasonable  expenses  associated  therewith  including at least any registration
fees, license fees, travel, lodging and per diem fees.



6.       WORKING FACILITIES



Employee shall be furnished with such facilities,  services, and supplies as are
suitable and adequate for the performance of this duties under this Agreement.



7.       EXPENSES



Employee shall be reimbursed by the Company for his reasonable expenses incurred
in connection with his employment and which are related to and in furtherance of
the Company's  business,  in accordance  with the general  policy of the Company
regarding reimbursement of expenses.



8.       BENEFITS



Employee  shall be entitled  to all rights and  benefits  for which  Employee is
eligible under any  employee-benefits  plan,  including pension,  stock or stock
option,  profit sharing,  health  (including  medical and dental),  and life and
disability  insurance  plan,  which  the  Company  provides  for  its  employees
generally.  The Company  reserves  the right to change the  benefits  offered to
employees at any time.




<PAGE>



9.       TERMINATION



Employee's  employment  with the Company shall be terminated upon the occurrence
of any of the following events:



9.1 Death of Employee. In lieu of any other benefits which may be payable by the
Company with respect to death,  in the event of such death,  the Salary  payable
hereunder  shall  continue  to be paid at the then  current  rate for  three (3)
months after the  termination  of  employment.  In the event of the death of the
Employee during the term of this Agreement,  the sums payable hereunder shall be
paid to his personal representative;



9.2 Mutual agreement of termination in writing between the Company and Employee;



9.3  Disability of Employee that prevents him from  performing  the material and
substantial  duties  of his  position  for a period of two (2)  months.  In such
event, at the Company's option, the Company shall give Employee not less than 30
days' written notice of  termination  of employment.  Employee shall continue to
render  services to the  Company  (unless  disabled)  and shall be paid his full
salary as in effect at such time up to the date of termination.  Nothing in this
Agreement,  however,  shall limit or diminish the Company's  obligations towards
Employee  with  respect  to the  Americans  with  Disabilities  Act of 1990,  as
amended,  the Family and Medical Leave Act of 1993,  as amended,  or any similar
state laws.



9.4 Written  notice by either party to the other  terminating  the employment of
Employee as follows:



          a.   Notice of  resignation  by Employee to the  Company,  at least 30
               days in advance;



          b.   Notice of  termination  of  employment by the Company to Employee
               with cause.  For purposes of this  Agreement,  the Company  shall
               have  "Cause"  to  terminate  Employee's  employment  under  this
               Agreement  upon   Employee's:   (a)  willful  breach  of  any  of
               Employee's  material  obligations  under  this  Agreement,  which
               breach shall not have been  remedied by Employee  within ten (10)
               days  after  the  Company  shall  have  given  written  notice to
               Employee of such  breach,  or which such  breach  shall have been
               repeated  after  lapse  of  such  ten-day   notice  period;   (b)
               commission  of an act which the Board of Directors of the Company
               shall reasonably have found to have involved  willful  misconduct
               or gross negligence on the part of Employee in the conduct of his
               duties under this Agreement which materially  injures the Company
               or any of its  subsidiaries or affiliates;  (c) conviction of (or
               pleading  nolo  contendere  to) any  felony  or any  misdemeanour
               involving moral turpitude which might, in the reasonable judgment
               of the Board of Directors of the Company,  cause embarrassment to
               the  Company  or any  of  its  subsidiaries  or  affiliates;  (d)
               commission of a material act of personal  dishonesty or breach of
               fiduciary duty involving  personal  profit in connection with the
               Employee's   employment   by  the   Company;   or  (e)   habitual
               absenteeism,  chronic  alcoholism,  drug  abuse or other  form of
               addiction  which,  in the  reasonable  judgment  of the  Board of
               Directors,  impairs  Employee's  ability to perform his duties or
               injures the Company.





<PAGE>


          c.   Notice of  termination  of  employment by the Company to Employee
               without cause or for good reason. For purposes of this Agreement,
               the  Company  will have  terminated  Employee's  employment  with
               Company  under the  Agreement  without cause or for "Good Reason"
               upon  Company's:  (a)  financial  inability to meet its financial
               obligations;  (b) desire to terminate  Employee's  employment for
               reasons other than for Cause as defined  above in Section  9.4.c;
               (c)  contemplation,  consideration or execution of a financial or
               business  agreement  or  transaction  that  obligates  Company to
               reduce costs or staff or Employee's  employment;  (d) termination
               of Employee's  employment within 120 days of the date of a Change
               of  Control of the  Company;  or (e)  failure to comply  with the
               terms  fo  this  Agreement.   In  the  event  of  termination  of
               Employee's  employment  under this Agreement by Employer  without
               cause or for Good Reason, Employer shall pay within ten (10) days
               of such termination a severance payment equal to the compensation
               that would have been paid to Employee for an additional three (3)
               month period,  at the same rate of pay per month as if Employee's
               employment  would not have  been  terminated.  Employee's  fringe
               benefits and other  benefits  that were provided  Employee  under
               Section 8 of this  Agreement  will be continued to the benefit of
               Employee  during the three  month  period of  compensation  after
               termination without cause or for Good Reason.



Notwithstanding  any  termination  of this  Agreement  pursuant  to  Section  9,
Employee shall remain bound by the provisions of Sections 10 and 11 below.



10.      INVENTIONS



"Inventions" made or conceived  entirely or partially by Employee while employed
by the Company shall be the exclusive property of the Company.  For the purposes
of this Agreement,  the term,  "Inventions"  includes,  without limitation,  all
creations,  whether or not patentable or copyrightable,  and all ideas, reports,
or other  creative  works  including,  without  limitation,  therapies,  genetic
engineering  tools and methods,  gene  expression  systems and  diagnostics  and
therapeutic  products  derived  therefrom,  which  related  to the  existing  or
proposed  business  of the  Company  or to any other  business  or  research  or
development  effort  conducted by the  Company.  All of  Employee's  Inventions,
whether or not  copyrightable  or patentable,  will be works for hire.  Employee
will promptly  disclose each  Inventions to the Company in writing and cooperate
with the  Company  to  patent or  copyright  all  Inventions  by  executing  all
documents  tendered by the Company for the purpose of patenting or  copyrighting
Employee's  Inventions.  This  provision  shall be construed in conformity  with
Chapter 49.44 of the Revised Code of  Washington.  This provision does not apply
to an Invention for which no equipment,  supplies,  facilities,  or trade secret
information  of the  Company  was used  and  which  was  developed  entirely  on
Employee's own time unless (i) the Invention relates directly to the business of
the Company, or to the Company's actual or demonstrably  anticipated research or
development,  or (ii) the Invention  results from any work performed by Employee
for the Company.



11.      NON-DISCLOSURE OF CONFIDENTIAL INFORMATION AND RESTRICTIVE COVENANTS



11.1  Confidential  Information.  During the course of his employment,  Employee
will acquire knowledge of trade secrets and other proprietary information of the
Company   ("Confidential   Information")  and  may  contribute  to  Confidential
Information through inventions, discoveries,  improvements or some other manner.
Confidential  Information includes, but is not limited to, nonpublic information
relating  to  the  Company's  business,  operations,  customers  or  technology,
including  customer  lists,  vendor  lists,  pricing  or  financial  information
concerning  the  Company and its vendors and  customers,  trade  secrets,  data,
documentation,  concepts techniques, processes, know-how, marketing information,
designs,  customer  information,  cost data, price lists, and pricing  policies.
Confidential  Information  does not include  information  that is already public
knowledge  or which can be obtained by  reference  to public  sources.  Employee
recognizes that all Confidential  Information is the property of the Company and
agrees that, except as required by the duties of Employee's  employment with the
Company, Employee shall never, directly or indirectly, use, publish, disseminate
or otherwise  disclose any Confidential  Information  obtained during Employee's
employment  with the Company  without the prior written  consent of the Company.
Employee  acknowledges  and agrees that the terms of this Section  shall survive
the termination of his employment with the Company.





<PAGE>


11.2  Non-Competition.  Employee further acknowledges that his position with the
Company  will give him a close  knowledge  of its  policies,  business and trade
secrets,  and that  Employee's  continued and  exclusive  service to the Company
under this  Agreement  is of a high degree of  importance  and  confidentiality.
Employee  agrees  that  for a  period  of one  year  after  the  termination  of
Employee's  employment  with  the  Company,   Employee  will  not,  directly  or
indirectly,  be employed by, engage in, consult with, or own an equity  interest
in any entity or  activities  competitive  with the  business  engaged in by the
Company during Employee's  employment under this Agreement,  without the written
consent of the Company.



11.3  Solicitation.  During the term of his employment  with the Company and for
the period of one year  thereafter,  Employee  shall not:  (i) seek to persuade,
directly  or  indirectly,  any  employee  of the  Company  to  discontinue  that
individual's  employment with the Company, or seek to persuade any such employee
to become employed in any activity similar to or competitive with the activities
of the Company, or (ii) directly or indirectly solicit from any person or entity
who was a customer of the Company and with whom  Employee had business  dealings
on behalf of the Company during the one-year  period prior to the termination of
Employee's  employment  any  business  which is  competitive  with the  business
activities of the Company,  or cause or authorize such  solicitation,  for or on
behalf of Employee or any third party.



11.4 Unfair  Competition.  Employee agrees that the provisions of Section 10 and
11 of this  Agreement  are  reasonably  necessary  to protect  the rights of the
Company and to prevent unfair competition.  The provisions of Sections 10 and 11
shall apply if  Employee's  employment  is  terminated at the end of the term of
this Agreement or otherwise.  The period of the covenants  contained in Sections
10 and 11 shall be extended by any period of time  during  which  Employee is in
violation of said covenants, if any.



11.5 Severability. The parties agree that the covenants set forth in Sections 10
and 11 of this Agreement,  including,  without limitation,  the scope, duration,
and geographic extent of such  restrictions,  are fair and reasonably  necessary
for the protection of the Company's legitimate business interest. In the event a
court or arbitrator should decline to enforce any of such provisions, they shall
be deemed to be modified to restrict  Employee to the maximum  extent  which the
court or arbitrator shall find enforceable.



11.6 Records. Upon termination of this Agreement, all documents, records, files,
notebooks,  and similar  repositories  containing the  information  described in
Sections 10 and 11 of this Agreement,  including all copies,  then in Employee's
possession,  whether  prepared  by  Employee  or  others,  shall be  immediately
returned to the Company by Employee.



12.      INJUNCTIVE RELIEF



Employee acknowledges that the breach or threatened breach of the nondisclosure,
non-competition or other agreements  contained in this Agreement would give rise
to  irreparable  injury  to the  Company,  which  injury  would be  inadequately
compensable  in money  damages.  The Company may,  therefore,  seek and obtain a
restraining  order or injunction  prohibiting the breach or threatened breach of
any provision, requirement or covenant of this Agreement, in addition to and not
in limitation of any other legal remedies that may be available.



13.      MISCELLANEOUS



13.1 Entire Agreement.  This Agreement contains the entire agreement between the
Company  and  Employee  relating  to the subject  matter of this  Agreement.  No
modification  of this Agreement shall be valid unless made in writing and signed
by both parties.



<PAGE>


13.2 Notice.  Any notice  required or permitted to be give under this  Agreement
shall be sufficient if in writing and delivered personally or sent by registered
or certified mail, receipt return requested,  to Employee at his residence or to
the Company at its principal office.



13.3  Waiver.  No waiver by the  Company or Employee of any default or breach of
any term, condition or covenant of this Agreement shall be deemed to be a wavier
of any subsequent default or breach of the same or any other term,  condition or
covenant contained in this Agreement.



13.4  Assignment and  Successors.  The rights and  obligations of Employee under
this  Agreement are personal and may not be assigned to any other  person.  This
Agreement will bind and benefit any successor of the Company, whether by merger,
sale of assets,  reorganization  or other form of  acquisition,  disposition  or
business  reorganization.  In the event of Employee's death, any benefits due or
to become due under this Agreement shall become a part of Employee's  estate and
shall be distributed to his personal representative.



13.5 Attorney's Fees. In the event of any dispute relating to  interpretation or
enforcement of this Agreement, the prevailing party shall be entitled to recover
its reasonable attorneys' fees and costs, whether or not a lawsuit,  arbitration
or other legal action is commenced.



13.6  Applicable  Law.  This  Agreement  shall be governed by and  construed  in
accordance with the laws of the State of Washington.



This Agreement is effective as of the date first above written.



PHAGE THERAPEUTICS, INC.  (COMPANY):





         By: /s/ Richard C. Honour/s/
         ----------------------------

         Its: President & CEO
         --------------------





EMPLOYEE (EMPLOYEE):



         /s/ Tracy Honour /s/
         --------------------
         Signature



         Feb. 21, 2001
         -------------

         Date







<PAGE>


                              EMPLOYMENT AGREEMENT



EMPLOYMENT  AGREEMENT  dated  November  1,  2000  ("Agreement")   between  Phage
Therapeutics,  Inc., a Washington  corporation  ("Company") and Douglas Lee, MS,
MBA, a resident of Seattle, WA ("Employee").



                                   WITNESSETH



WHEREAS,  the  Company  wishes  to employ  Employee  in the  position  of Senior
Scientist; and



WHEREAS,  the Employee wishes to enter into the employ of the Company to fulfill
the responsibilities of the position of Senior Scientist;



NOW  THEREFORE,  in  consideration  of  the  foregoing  and  of  the  respective
covenants,   obligations  and  agreements  of  the  parties  contained  in  this
Agreement, the parties, intending to be legally bound, hereby agree as follows:



1.       EMPLOYMENT



The Company shall employ  Employee,  and Employee shall accept such  employment,
upon the terms and conditions set forth in Agreement. Employee's employment with
the Company shall be subject to the Company's  general  employment  policies and
practices.  The Company reserves the right to modify such policies and practices
from time to time.



2.       DUTIES



Employee  shall  be  employed  as  Senior  Scientist.  During  the  term of this
Agreement,  Employee  shall devote his full time,  attention  and efforts to the
conduct of the business of the Company and the  performance  of his duties under
this  Agreement.  Employee  shall not  engage in any  other  business  activity,
whether or not such  activity  is pursued  for gain,  profit or other  pecuniary
advantage;  provided that  Employee  shall not be prevented  from  investing his
personal  assets in such form or manner as will not require any  services on the
part of Employee in the  operation  of the affairs of the entities in which such
investments are made.



3.     TERM



Subject to the terms and conditions set forth in this  Agreement,  Company shall
employ  Employee and Employee  shall serve the Company in the position of Senior
Scientist for a period  commencing  November 1, 2000  ("Commencement  Date") and
continuing  through the first anniversary of the Commencement  Date, unless such
employment  is sooner  terminated as provided  herein.  During this one (1) year
period,  Employee's compensation and other benefits may be adjusted annually, or
more  often,  without the  necessity  of an  amendment  of this  Agreement.  The
Employee's  term of  employment  shall be extended for  additional  one (1) year
periods  and on such  terms  and at such  levels  of  compensation  as  shall be
mutually  agreed  to in  writing  by  Company  and  Employee,  unless  otherwise
terminated under this Agreement.



<PAGE>


4.       COMPENSATION



For all services  rendered by Employee under this Agreement,  the Company agrees
to pay Employee and Employee agrees to accept the following:



4.1 Salary.  An annual salary of $60,000  ("Salary"),  which shall be payable at
the times and in the manner set by the Company's  standard payroll policy.  Such
Salary  shall  be  reviewed  one  (1)  month  prior  to the  anniversary  of the
Commencement Date each year, and any increase in the amount under this Agreement
for the twelve (12) month period  following the  Commencement  Date  anniversary
date shall be  determined at such time by the Board of Directors of the Company,
or a compensation committee formed by the Board of Directors.



4.2 Bonuses.  Employee shall  additionally be entitled to such cash and/or stock
bonuses  and  stock  options  as  determined  from  time to time by the Board of
Directors of the Company, or their designated representatives(s).  Cash bonuses,
if any, shall be paid subject to achievement of specific performance  milestones
agreed to by both the Company and Employee.



5.       CONTINUING EDUCATION



In the event that performance of Employee's  responsibilities  and duties within
the Company shall require or recommend  certification,  licensure, or continuing
education  to maintain  licensure,  then Company  shall upon notice,  allow time
during business hours for the required activity and shall reimburse Employee for
reasonable  expenses  associated  therewith  including at least any registration
fees, license fees, travel, lodging and per diem fees.



6.       WORKING FACILITIES



Employee shall be furnished with such facilities,  services, and supplies as are
suitable and adequate for the performance of this duties under this Agreement.



7.       EXPENSES



Employee shall be reimbursed by the Company for his reasonable expenses incurred
in connection with his employment and which are related to and in furtherance of
the Company's  business,  in accordance  with the general  policy of the Company
regarding reimbursement of expenses.



8.       BENEFITS



Employee  shall be entitled  to all rights and  benefits  for which  Employee is
eligible under any  employee-benefits  plan,  including pension,  stock or stock
option,  profit sharing,  health  (including  medical and dental),  and life and
disability  insurance  plan,  which  the  Company  provides  for  its  employees
generally.  The Company  reserves  the right to change the  benefits  offered to
employees at any time.

<PAGE>


9.       TERMINATION



Employee's  employment  with the Company shall be terminated upon the occurrence
of any of the following events:



9.1 Death of Employee. In lieu of any other benefits which may be payable by the
Company with respect to death,  in the event of such death,  the Salary  payable
hereunder  shall  continue  to be paid at the then  current  rate for  three (3)
months after the  termination  of  employment.  In the event of the death of the
Employee during the term of this Agreement,  the sums payable hereunder shall be
paid to his personal representative;



9.2 Mutual agreement of termination in writing between the Company and Employee;



9.3  Disability of Employee that prevents him from  performing  the material and
substantial  duties  of his  position  for a period of two (2)  months.  In such
event, at the Company's option, the Company shall give Employee not less than 30
days' written notice of  termination  of employment.  Employee shall continue to
render  services to the  Company  (unless  disabled)  and shall be paid his full
salary as in effect at such time up to the date of termination.  Nothing in this
Agreement,  however,  shall limit or diminish the Company's  obligations towards
Employee  with  respect  to the  Americans  with  Disabilities  Act of 1990,  as
amended,  the Family and Medical Leave Act of 1993,  as amended,  or any similar
state laws.



9.4 Written  notice by either party to the other  terminating  the employment of
Employee as follows:



          a.   Notice of  resignation  by Employee to the  Company,  at least 30
               days in advance;



          b.   Notice of  termination  of  employment by the Company to Employee
               with cause.  For purposes of this  Agreement,  the Company  shall
               have  "Cause"  to  terminate  Employee's  employment  under  this
               Agreement  upon   Employee's:   (a)  willful  breach  of  any  of
               Employee's  material  obligations  under  this  Agreement,  which
               breach shall not have been  remedied by Employee  within ten (10)
               days  after  the  Company  shall  have  given  written  notice to
               Employee of such  breach,  or which such  breach  shall have been
               repeated  after  lapse  of  such  ten-day   notice  period;   (b)
               commission  of an act which the Board of Directors of the Company
               shall reasonably have found to have involved  willful  misconduct
               or gross negligence on the part of Employee in the conduct of his
               duties under this Agreement which materially  injures the Company
               or any of its  subsidiaries or affiliates;  (c) conviction of (or
               pleading  nolo  contendere  to) any  felony  or any  misdemeanour
               involving moral turpitude which might, in the reasonable judgment
               of the Board of Directors of the Company,  cause embarrassment to
               the  Company  or any  of  its  subsidiaries  or  affiliates;  (d)
               commission of a material act of personal  dishonesty or breach of
               fiduciary duty involving  personal  profit in connection with the
               Employee's   employment   by  the   Company;   or  (e)   habitual
               absenteeism,  chronic  alcoholism,  drug  abuse or other  form of
               addiction  which,  in the  reasonable  judgment  of the  Board of
               Directors,  impairs  Employee's  ability to perform his duties or
               injures the Company.





<PAGE>


          c.   Notice of  termination  of  employment by the Company to Employee
               without cause or for good reason. For purposes of this Agreement,
               the  Company  will have  terminated  Employee's  employment  with
               Company  under the  Agreement  without cause or for "Good Reason"
               upon  Company's:  (a)  financial  inability to meet its financial
               obligations;  (b) desire to terminate  Employee's  employment for
               reasons other than for Cause as defined  above in Section  9.4.c;
               (c)  contemplation,  consideration or execution of a financial or
               business  agreement  or  transaction  that  obligates  Company to
               reduce costs or staff or Employee's  employment;  (d) termination
               of Employee's  employment within 120 days of the date of a Change
               of  Control of the  Company;  or (e)  failure to comply  with the
               terms  fo  this  Agreement.   In  the  event  of  termination  of
               Employee's  employment  under this Agreement by Employer  without
               cause or for Good Reason, Employer shall pay within ten (10) days
               of such termination a severance payment equal to the compensation
               that would have been paid to Employee for an additional three (3)
               month period,  at the same rate of pay per month as if Employee's
               employment  would not have  been  terminated.  Employee's  fringe
               benefits and other  benefits  that were provided  Employee  under
               Section 8 of this  Agreement  will be continued to the benefit of
               Employee  during the three  month  period of  compensation  after
               termination without cause or for Good Reason.



Notwithstanding  any  termination  of this  Agreement  pursuant  to  Section  9,
Employee shall remain bound by the provisions of Sections 10 and 11 below.



10.      INVENTIONS



"Inventions" made or conceived  entirely or partially by Employee while employed
by the Company shall be the exclusive property of the Company.  For the purposes
of this Agreement,  the term,  "Inventions"  includes,  without limitation,  all
creations,  whether or not patentable or copyrightable,  and all ideas, reports,
or other  creative  works  including,  without  limitation,  therapies,  genetic
engineering  tools and methods,  gene  expression  systems and  diagnostics  and
therapeutic  products  derived  therefrom,  which  related  to the  existing  or
proposed  business  of the  Company  or to any other  business  or  research  or
development  effort  conducted by the  Company.  All of  Employee's  Inventions,
whether or not  copyrightable  or patentable,  will be works for hire.  Employee
will promptly  disclose each  Inventions to the Company in writing and cooperate
with the  Company  to  patent or  copyright  all  Inventions  by  executing  all
documents  tendered by the Company for the purpose of patenting or  copyrighting
Employee's  Inventions.  This  provision  shall be construed in conformity  with
Chapter 49.44 of the Revised Code of  Washington.  This provision does not apply
to an Invention for which no equipment,  supplies,  facilities,  or trade secret
information  of the  Company  was used  and  which  was  developed  entirely  on
Employee's own time unless (i) the Invention relates directly to the business of
the Company, or to the Company's actual or demonstrably  anticipated research or
development,  or (ii) the Invention  results from any work performed by Employee
for the Company.



11.      NON-DISCLOSURE OF CONFIDENTIAL INFORMATION AND RESTRICTIVE COVENANTS



11.1  Confidential  Information.  During the course of his employment,  Employee
will acquire knowledge of trade secrets and other proprietary information of the
Company   ("Confidential   Information")  and  may  contribute  to  Confidential
Information through inventions, discoveries,  improvements or some other manner.
Confidential  Information includes, but is not limited to, nonpublic information
relating  to  the  Company's  business,  operations,  customers  or  technology,
including  customer  lists,  vendor  lists,  pricing  or  financial  information
concerning  the  Company and its vendors and  customers,  trade  secrets,  data,
documentation,  concepts techniques, processes, know-how, marketing information,
designs,  customer  information,  cost data, price lists, and pricing  policies.
Confidential  Information  does not include  information  that is already public
knowledge  or which can be obtained by  reference  to public  sources.  Employee
recognizes that all Confidential  Information is the property of the Company and
agrees that, except as required by the duties of Employee's  employment with the
Company, Employee shall never, directly or indirectly, use, publish, disseminate
or otherwise  disclose any Confidential  Information  obtained during Employee's
employment  with the Company  without the prior written  consent of the Company.
Employee  acknowledges  and agrees that the terms of this Section  shall survive
the termination of his employment with the Company.





<PAGE>


11.2  Non-Competition.  Employee further acknowledges that his position with the
Company  will give him a close  knowledge  of its  policies,  business and trade
secrets,  and that  Employee's  continued and  exclusive  service to the Company
under this  Agreement  is of a high degree of  importance  and  confidentiality.
Employee  agrees  that  for a  period  of one  year  after  the  termination  of
Employee's  employment  with  the  Company,   Employee  will  not,  directly  or
indirectly,  be employed by, engage in, consult with, or own an equity  interest
in any entity or  activities  competitive  with the  business  engaged in by the
Company during Employee's  employment under this Agreement,  without the written
consent of the Company.



11.3  Solicitation.  During the term of his employment  with the Company and for
the period of one year  thereafter,  Employee  shall not:  (i) seek to persuade,
directly  or  indirectly,  any  employee  of the  Company  to  discontinue  that
individual's  employment with the Company, or seek to persuade any such employee
to become employed in any activity similar to or competitive with the activities
of the Company, or (ii) directly or indirectly solicit from any person or entity
who was a customer of the Company and with whom  Employee had business  dealings
on behalf of the Company during the one-year  period prior to the termination of
Employee's  employment  any  business  which is  competitive  with the  business
activities of the Company,  or cause or authorize such  solicitation,  for or on
behalf of Employee or any third party.



11.4 Unfair  Competition.  Employee agrees that the provisions of Section 10 and
11 of this  Agreement  are  reasonably  necessary  to protect  the rights of the
Company and to prevent unfair competition.  The provisions of Sections 10 and 11
shall apply if  Employee's  employment  is  terminated at the end of the term of
this Agreement or otherwise.  The period of the covenants  contained in Sections
10 and 11 shall be extended by any period of time  during  which  Employee is in
violation of said covenants, if any.



11.5 Severability. The parties agree that the covenants set forth in Sections 10
and 11 of this Agreement,  including,  without limitation,  the scope, duration,
and geographic extent of such  restrictions,  are fair and reasonably  necessary
for the protection of the Company's legitimate business interest. In the event a
court or arbitrator should decline to enforce any of such provisions, they shall
be deemed to be modified to restrict  Employee to the maximum  extent  which the
court or arbitrator shall find enforceable.



11.6 Records. Upon termination of this Agreement, all documents, records, files,
notebooks,  and similar  repositories  containing the  information  described in
Sections 10 and 11 of this Agreement,  including all copies,  then in Employee's
possession,  whether  prepared  by  Employee  or  others,  shall be  immediately
returned to the Company by Employee.



12.      INJUNCTIVE RELIEF



Employee acknowledges that the breach or threatened breach of the nondisclosure,
non-competition or other agreements  contained in this Agreement would give rise
to  irreparable  injury  to the  Company,  which  injury  would be  inadequately
compensable  in money  damages.  The Company may,  therefore,  seek and obtain a
restraining  order or injunction  prohibiting the breach or threatened breach of
any provision, requirement or covenant of this Agreement, in addition to and not
in limitation of any other legal remedies that may be available.



13.      MISCELLANEOUS



13.1 Entire Agreement.  This Agreement contains the entire agreement between the
Company  and  Employee  relating  to the subject  matter of this  Agreement.  No
modification  of this Agreement shall be valid unless made in writing and signed
by both parties.





<PAGE>


13.2 Notice.  Any notice  required or permitted to be give under this  Agreement
shall be sufficient if in writing and delivered personally or sent by registered
or certified mail, receipt return requested,  to Employee at his residence or to
the Company at its principal office.



13.3  Waiver.  No waiver by the  Company or Employee of any default or breach of
any term, condition or covenant of this Agreement shall be deemed to be a wavier
of any subsequent default or breach of the same or any other term,  condition or
covenant contained in this Agreement.



13.4  Assignment and  Successors.  The rights and  obligations of Employee under
this  Agreement are personal and may not be assigned to any other  person.  This
Agreement will bind and benefit any successor of the Company, whether by merger,
sale of assets,  reorganization  or other form of  acquisition,  disposition  or
business  reorganization.  In the event of Employee's death, any benefits due or
to become due under this Agreement shall become a part of Employee's  estate and
shall be distributed to his personal representative.



13.5 Attorney's Fees. In the event of any dispute relating to  interpretation or
enforcement of this Agreement, the prevailing party shall be entitled to recover
its reasonable attorneys' fees and costs, whether or not a lawsuit,  arbitration
or other legal action is commenced.



13.6  Applicable  Law.  This  Agreement  shall be governed by and  construed  in
accordance with the laws of the State of Washington.



This Agreement is effective as of the date first above written.



PHAGE THERAPEUTICS, INC.  (COMPANY):





         By: /s/ Richard C. Honour/s/
         ----------------------------

         Its: President & CEO
         --------------------





EMPLOYEE (EMPLOYEE):



         /s/ Doug Lee /s/
         ----------------

         Signature



         Feb. 21, 2001
         -------------

         Date





<PAGE>


                              EMPLOYMENT AGREEMENT



EMPLOYMENT  AGREEMENT  dated  November  1,  2000  ("Agreement")   between  Phage
Therapeutics,  Inc., a Washington corporation ("Company") and Kenneth E. Lehman,
MBA, a resident of Kenmore, WA ("Employee").



                                   WITNESSETH



WHEREAS,  the Company  wishes to employ  Employee in the position of Controller;
and



WHEREAS,  the Employee wishes to enter into the employ of the Company to fulfill
the responsibilities of the position of Controller;



NOW  THEREFORE,  in  consideration  of  the  foregoing  and  of  the  respective
covenants,   obligations  and  agreements  of  the  parties  contained  in  this
Agreement, the parties, intending to be legally bound, hereby agree as follows:



1.       EMPLOYMENT



The Company shall employ  Employee,  and Employee shall accept such  employment,
upon the terms and conditions set forth in Agreement. Employee's employment with
the Company shall be subject to the Company's  general  employment  policies and
practices.  The Company reserves the right to modify such policies and practices
from time to time.



2.       DUTIES



Employee  shall be employed as  Controller.  During the term of this  Agreement,
Employee shall devote his full time, attention and efforts to the conduct of the
business of the Company and the  performance of his duties under this Agreement.
Employee  shall not engage in any other business  activity,  whether or not such
activity is pursued for gain, profit or other pecuniary advantage; provided that
Employee shall not be prevented from investing his personal  assets in such form
or  manner as will not  require  any  services  on the part of  Employee  in the
operation of the affairs of the entities in which such investments are made.



3.     TERM



Subject to the terms and conditions set forth in this  Agreement,  Company shall
employ  Employee  and  Employee  shall  serve the  Company  in the  position  of
Controller for a period commencing  November 1, 2000  ("Commencement  Date") and
continuing  through the first anniversary of the Commencement  Date, unless such
employment  is sooner  terminated as provided  herein.  During this one (1) year
period,  Employee's compensation and other benefits may be adjusted annually, or
more  often,  without the  necessity  of an  amendment  of this  Agreement.  The
Employee's  term of  employment  shall be extended for  additional  one (1) year
periods  and on such  terms  and at such  levels  of  compensation  as  shall be
mutually  agreed  to in  writing  by  Company  and  Employee,  unless  otherwise
terminated under this Agreement.



<PAGE>


4.       COMPENSATION



For all services  rendered by Employee under this Agreement,  the Company agrees
to pay Employee and Employee agrees to accept the following:



4.1 Salary.  An annual salary of $84,000  ("Salary"),  which shall be payable at
the times and in the manner set by the Company's  standard payroll policy.  Such
Salary  shall  be  reviewed  one  (1)  month  prior  to the  anniversary  of the
Commencement Date each year, and any increase in the amount under this Agreement
for the twelve (12) month period  following the  Commencement  Date  anniversary
date shall be  determined at such time by the Board of Directors of the Company,
or a compensation committee formed by the Board of Directors.



4.2 Bonuses.  Employee shall  additionally be entitled to such cash and/or stock
bonuses  and  stock  options  as  determined  from  time to time by the Board of
Directors of the Company, or their designated representatives(s).  Cash bonuses,
if any, shall be paid subject to achievement of specific performance  milestones
agreed to by both the Company and Employee.



5.       CONTINUING EDUCATION



In the event that performance of Employee's  responsibilities  and duties within
the Company shall require or recommend  certification,  licensure, or continuing
education  to maintain  licensure,  then Company  shall upon notice,  allow time
during business hours for the required activity and shall reimburse Employee for
reasonable  expenses  associated  therewith  including at least any registration
fees, license fees, travel, lodging and per diem fees.



6.       WORKING FACILITIES



Employee shall be furnished with such facilities,  services, and supplies as are
suitable and adequate for the performance of this duties under this Agreement.



7.       EXPENSES



Employee shall be reimbursed by the Company for his reasonable expenses incurred
in connection with his employment and which are related to and in furtherance of
the Company's  business,  in accordance  with the general  policy of the Company
regarding reimbursement of expenses.



8.       BENEFITS



Employee  shall be entitled  to all rights and  benefits  for which  Employee is
eligible under any  employee-benefits  plan,  including pension,  stock or stock
option,  profit sharing,  health  (including  medical and dental),  and life and
disability  insurance  plan,  which  the  Company  provides  for  its  employees
generally.  The Company  reserves  the right to change the  benefits  offered to
employees at any time.

<PAGE>


9.       TERMINATION



Employee's  employment  with the Company shall be terminated upon the occurrence
of any of the following events:



9.1 Death of Employee. In lieu of any other benefits which may be payable by the
Company with respect to death,  in the event of such death,  the Salary  payable
hereunder  shall  continue  to be paid at the then  current  rate for  three (3)
months after the  termination  of  employment.  In the event of the death of the
Employee during the term of this Agreement,  the sums payable hereunder shall be
paid to his personal representative;



9.2 Mutual agreement of termination in writing between the Company and Employee;



9.3  Disability of Employee that prevents him from  performing  the material and
substantial  duties  of his  position  for a period of two (2)  months.  In such
event, at the Company's option, the Company shall give Employee not less than 30
days' written notice of  termination  of employment.  Employee shall continue to
render  services to the  Company  (unless  disabled)  and shall be paid his full
salary as in effect at such time up to the date of termination.  Nothing in this
Agreement,  however,  shall limit or diminish the Company's  obligations towards
Employee  with  respect  to the  Americans  with  Disabilities  Act of 1990,  as
amended,  the Family and Medical Leave Act of 1993,  as amended,  or any similar
state laws.



9.4 Written  notice by either party to the other  terminating  the employment of
Employee as follows:



          a.   Notice of  resignation  by Employee to the  Company,  at least 30
               days in advance;



          b.   Notice of  termination  of  employment by the Company to Employee
               with cause.  For purposes of this  Agreement,  the Company  shall
               have  "Cause"  to  terminate  Employee's  employment  under  this
               Agreement  upon   Employee's:   (a)  willful  breach  of  any  of
               Employee's  material  obligations  under  this  Agreement,  which
               breach shall not have been  remedied by Employee  within ten (10)
               days  after  the  Company  shall  have  given  written  notice to
               Employee of such  breach,  or which such  breach  shall have been
               repeated  after  lapse  of  such  ten-day   notice  period;   (b)
               commission  of an act which the Board of Directors of the Company
               shall reasonably have found to have involved  willful  misconduct
               or gross negligence on the part of Employee in the conduct of his
               duties under this Agreement which materially  injures the Company
               or any of its  subsidiaries or affiliates;  (c) conviction of (or
               pleading  nolo  contendere  to) any  felony  or any  misdemeanour
               involving moral turpitude which might, in the reasonable judgment
               of the Board of Directors of the Company,  cause embarrassment to
               the  Company  or any  of  its  subsidiaries  or  affiliates;  (d)
               commission of a material act of personal  dishonesty or breach of
               fiduciary duty involving  personal  profit in connection with the
               Employee's   employment   by  the   Company;   or  (e)   habitual
               absenteeism,  chronic  alcoholism,  drug  abuse or other  form of
               addiction  which,  in the  reasonable  judgment  of the  Board of
               Directors,  impairs  Employee's  ability to perform his duties or
               injures the Company.





<PAGE>


          c.   Notice of  termination  of  employment by the Company to Employee
               without cause or for good reason. For purposes of this Agreement,
               the  Company  will have  terminated  Employee's  employment  with
               Company  under the  Agreement  without cause or for "Good Reason"
               upon  Company's:  (a)  financial  inability to meet its financial
               obligations;  (b) desire to terminate  Employee's  employment for
               reasons other than for Cause as defined  above in Section  9.4.c;
               (c)  contemplation,  consideration or execution of a financial or
               business  agreement  or  transaction  that  obligates  Company to
               reduce costs or staff or Employee's  employment;  (d) termination
               of Employee's  employment within 120 days of the date of a Change
               of  Control of the  Company;  or (e)  failure to comply  with the
               terms  fo  this  Agreement.   In  the  event  of  termination  of
               Employee's  employment  under this Agreement by Employer  without
               cause or for Good Reason, Employer shall pay within ten (10) days
               of such termination a severance payment equal to the compensation
               that would have been paid to Employee for an additional three (3)
               month period,  at the same rate of pay per month as if Employee's
               employment  would not have  been  terminated.  Employee's  fringe
               benefits and other  benefits  that were provided  Employee  under
               Section 8 of this  Agreement  will be continued to the benefit of
               Employee  during the three  month  period of  compensation  after
               termination without cause or for Good Reason.



Notwithstanding  any  termination  of this  Agreement  pursuant  to  Section  9,
Employee shall remain bound by the provisions of Sections 10 and 11 below.



10.      INVENTIONS



"Inventions" made or conceived  entirely or partially by Employee while employed
by the Company shall be the exclusive property of the Company.  For the purposes
of this Agreement,  the term,  "Inventions"  includes,  without limitation,  all
creations,  whether or not patentable or copyrightable,  and all ideas, reports,
or other  creative  works  including,  without  limitation,  therapies,  genetic
engineering  tools and methods,  gene  expression  systems and  diagnostics  and
therapeutic  products  derived  therefrom,  which  related  to the  existing  or
proposed  business  of the  Company  or to any other  business  or  research  or
development  effort  conducted by the  Company.  All of  Employee's  Inventions,
whether or not  copyrightable  or patentable,  will be works for hire.  Employee
will promptly  disclose each  Inventions to the Company in writing and cooperate
with the  Company  to  patent or  copyright  all  Inventions  by  executing  all
documents  tendered by the Company for the purpose of patenting or  copyrighting
Employee's  Inventions.  This  provision  shall be construed in conformity  with
Chapter 49.44 of the Revised Code of  Washington.  This provision does not apply
to an Invention for which no equipment,  supplies,  facilities,  or trade secret
information  of the  Company  was used  and  which  was  developed  entirely  on
Employee's own time unless (i) the Invention relates directly to the business of
the Company, or to the Company's actual or demonstrably  anticipated research or
development,  or (ii) the Invention  results from any work performed by Employee
for the Company.



11.      NON-DISCLOSURE OF CONFIDENTIAL INFORMATION AND RESTRICTIVE COVENANTS



11.1  Confidential  Information.  During the course of his employment,  Employee
will acquire knowledge of trade secrets and other proprietary information of the
Company   ("Confidential   Information")  and  may  contribute  to  Confidential
Information through inventions, discoveries,  improvements or some other manner.
Confidential  Information includes, but is not limited to, nonpublic information
relating  to  the  Company's  business,  operations,  customers  or  technology,
including  customer  lists,  vendor  lists,  pricing  or  financial  information
concerning  the  Company and its vendors and  customers,  trade  secrets,  data,
documentation,  concepts techniques, processes, know-how, marketing information,
designs,  customer  information,  cost data, price lists, and pricing  policies.
Confidential  Information  does not include  information  that is already public
knowledge  or which can be obtained by  reference  to public  sources.  Employee
recognizes that all Confidential  Information is the property of the Company and
agrees that, except as required by the duties of Employee's  employment with the
Company, Employee shall never, directly or indirectly, use, publish, disseminate
or otherwise  disclose any Confidential  Information  obtained during Employee's
employment  with the Company  without the prior written  consent of the Company.
Employee  acknowledges  and agrees that the terms of this Section  shall survive
the termination of his employment with the Company.





<PAGE>


11.2  Non-Competition.  Employee further acknowledges that his position with the
Company  will give him a close  knowledge  of its  policies,  business and trade
secrets,  and that  Employee's  continued and  exclusive  service to the Company
under this  Agreement  is of a high degree of  importance  and  confidentiality.
Employee  agrees  that  for a  period  of one  year  after  the  termination  of
Employee's  employment  with  the  Company,   Employee  will  not,  directly  or
indirectly,  be employed by, engage in, consult with, or own an equity  interest
in any entity or  activities  competitive  with the  business  engaged in by the
Company during Employee's  employment under this Agreement,  without the written
consent of the Company.



11.3  Solicitation.  During the term of his employment  with the Company and for
the period of one year  thereafter,  Employee  shall not:  (i) seek to persuade,
directly  or  indirectly,  any  employee  of the  Company  to  discontinue  that
individual's  employment with the Company, or seek to persuade any such employee
to become employed in any activity similar to or competitive with the activities
of the Company, or (ii) directly or indirectly solicit from any person or entity
who was a customer of the Company and with whom  Employee had business  dealings
on behalf of the Company during the one-year  period prior to the termination of
Employee's  employment  any  business  which is  competitive  with the  business
activities of the Company,  or cause or authorize such  solicitation,  for or on
behalf of Employee or any third party.



11.4 Unfair  Competition.  Employee agrees that the provisions of Section 10 and
11 of this  Agreement  are  reasonably  necessary  to protect  the rights of the
Company and to prevent unfair competition.  The provisions of Sections 10 and 11
shall apply if  Employee's  employment  is  terminated at the end of the term of
this Agreement or otherwise.  The period of the covenants  contained in Sections
10 and 11 shall be extended by any period of time  during  which  Employee is in
violation of said covenants, if any.



11.5 Severability. The parties agree that the covenants set forth in Sections 10
and 11 of this Agreement,  including,  without limitation,  the scope, duration,
and geographic extent of such  restrictions,  are fair and reasonably  necessary
for the protection of the Company's legitimate business interest. In the event a
court or arbitrator should decline to enforce any of such provisions, they shall
be deemed to be modified to restrict  Employee to the maximum  extent  which the
court or arbitrator shall find enforceable.



11.6 Records. Upon termination of this Agreement, all documents, records, files,
notebooks,  and similar  repositories  containing the  information  described in
Sections 10 and 11 of this Agreement,  including all copies,  then in Employee's
possession,  whether  prepared  by  Employee  or  others,  shall be  immediately
returned to the Company by Employee.



12.      INJUNCTIVE RELIEF



Employee acknowledges that the breach or threatened breach of the nondisclosure,
non-competition or other agreements  contained in this Agreement would give rise
to  irreparable  injury  to the  Company,  which  injury  would be  inadequately
compensable  in money  damages.  The Company may,  therefore,  seek and obtain a
restraining  order or injunction  prohibiting the breach or threatened breach of
any provision, requirement or covenant of this Agreement, in addition to and not
in limitation of any other legal remedies that may be available.



13.      MISCELLANEOUS



13.1 Entire Agreement.  This Agreement contains the entire agreement between the
Company  and  Employee  relating  to the subject  matter of this  Agreement.  No
modification  of this Agreement shall be valid unless made in writing and signed
by both parties.





<PAGE>


13.2 Notice.  Any notice  required or permitted to be give under this  Agreement
shall be sufficient if in writing and delivered personally or sent by registered
or certified mail, receipt return requested,  to Employee at his residence or to
the Company at its principal office.



13.3  Waiver.  No waiver by the  Company or Employee of any default or breach of
any term, condition or covenant of this Agreement shall be deemed to be a wavier
of any subsequent default or breach of the same or any other term,  condition or
covenant contained in this Agreement.



13.4  Assignment and  Successors.  The rights and  obligations of Employee under
this  Agreement are personal and may not be assigned to any other  person.  This
Agreement will bind and benefit any successor of the Company, whether by merger,
sale of assets,  reorganization  or other form of  acquisition,  disposition  or
business  reorganization.  In the event of Employee's death, any benefits due or
to become due under this Agreement shall become a part of Employee's  estate and
shall be distributed to his personal representative.



13.5 Attorney's Fees. In the event of any dispute relating to  interpretation or
enforcement of this Agreement, the prevailing party shall be entitled to recover
its reasonable attorneys' fees and costs, whether or not a lawsuit,  arbitration
or other legal action is commenced.



13.6  Applicable  Law.  This  Agreement  shall be governed by and  construed  in
accordance with the laws of the State of Washington.



This Agreement is effective as of the date first above written.



PHAGE THERAPEUTICS, INC.  (COMPANY):





         By: /s/ Richard C. Honour/s/
         ----------------------------

         Its: President & CEO
         --------------------




EMPLOYEE (EMPLOYEE):



         /s/ Kenneth E. Lehman /s/
         -------------------------
         Signature



         Feb. 21, 2001
         -------------

         Date







<PAGE>


                              EMPLOYMENT AGREEMENT



EMPLOYMENT  AGREEMENT  dated  November  1,  2000  ("Agreement")   between  Phage
Therapeutics,  Inc., a Washington corporation ("Company") and Kenneth M. Lehman,
a resident of Kenmore, WA ("Employee").



                                   WITNESSETH



WHEREAS,  the Company  wishes to employ  Employee in the position of  Facilities
Manager; and



WHEREAS,  the Employee wishes to enter into the employ of the Company to fulfill
the responsibilities of the position of Facilities Manager;



NOW  THEREFORE,  in  consideration  of  the  foregoing  and  of  the  respective
covenants,   obligations  and  agreements  of  the  parties  contained  in  this
Agreement, the parties, intending to be legally bound, hereby agree as follows:



1.       EMPLOYMENT



The Company shall employ  Employee,  and Employee shall accept such  employment,
upon the terms and conditions set forth in Agreement. Employee's employment with
the Company shall be subject to the Company's  general  employment  policies and
practices.  The Company reserves the right to modify such policies and practices
from time to time.



2.       DUTIES



Employee  shall be  employed  as  Facilities  Manager.  During  the term of this
Agreement,  Employee  shall devote his full time,  attention  and efforts to the
conduct of the business of the Company and the  performance  of his duties under
this  Agreement.  Employee  shall not  engage in any  other  business  activity,
whether or not such  activity  is pursued  for gain,  profit or other  pecuniary
advantage;  provided that  Employee  shall not be prevented  from  investing his
personal  assets in such form or manner as will not require any  services on the
part of Employee in the  operation  of the affairs of the entities in which such
investments are made.



3.     TERM



Subject to the terms and conditions set forth in this  Agreement,  Company shall
employ  Employee  and  Employee  shall  serve the  Company  in the  position  of
Facilities  Manager  for a period  commencing  November  1, 2000  ("Commencement
Date") and continuing  through the first  anniversary of the Commencement  Date,
unless such employment is sooner terminated as provided herein.  During this one
(1) year  period,  Employee's  compensation  and other  benefits may be adjusted
annually,  or  more  often,  without  the  necessity  of an  amendment  of  this
Agreement.  The Employee's  term of employment  shall be extended for additional
one (1) year  periods  and on such terms and at such levels of  compensation  as
shall be mutually agreed to in writing by Company and Employee, unless otherwise
terminated under this Agreement.



<PAGE>


4.       COMPENSATION



For all services  rendered by Employee under this Agreement,  the Company agrees
to pay Employee and Employee agrees to accept the following:



4.1 Wage. An hourly wage of $17.00 ("Wage"), which shall be payable at the times
and in the manner set by the  Company's  standard  payroll  policy.  Such Salary
shall be reviewed  one (1) month prior to the  anniversary  of the  Commencement
Date each year,  and any  increase in the amount  under this  Agreement  for the
twelve (12) month period following the Commencement  Date anniversary date shall
be  determined  at such  time by the Board of  Directors  of the  Company,  or a
compensation committee formed by the Board of Directors.



4.2 Bonuses.  Employee shall  additionally be entitled to such cash and/or stock
bonuses  and  stock  options  as  determined  from  time to time by the Board of
Directors of the Company, or their designated representatives(s).  Cash bonuses,
if any, shall be paid subject to achievement of specific performance  milestones
agreed to by both the Company and Employee.



5.       CONTINUING EDUCATION



In the event that performance of Employee's  responsibilities  and duties within
the Company shall require or recommend  certification,  licensure, or continuing
education  to maintain  licensure,  then Company  shall upon notice,  allow time
during business hours for the required activity and shall reimburse Employee for
reasonable  expenses  associated  therewith  including at least any registration
fees, license fees, travel, lodging and per diem fees.



6.       WORKING FACILITIES



Employee shall be furnished with such facilities,  services, and supplies as are
suitable and adequate for the performance of this duties under this Agreement.



7.       EXPENSES



Employee shall be reimbursed by the Company for his reasonable expenses incurred
in connection with his employment and which are related to and in furtherance of
the Company's  business,  in accordance  with the general  policy of the Company
regarding reimbursement of expenses.



8.       BENEFITS



Employee  shall be entitled  to all rights and  benefits  for which  Employee is
eligible under any  employee-benefits  plan,  including pension,  stock or stock
option,  profit sharing,  health  (including  medical and dental),  and life and
disability  insurance  plan,  which  the  Company  provides  for  its  employees
generally.  The Company  reserves  the right to change the  benefits  offered to
employees at any time.


<PAGE>

9.       TERMINATION



Employee's  employment  with the Company shall be terminated upon the occurrence
of any of the following events:



9.1 Death of Employee. In lieu of any other benefits which may be payable by the
Company with respect to death,  in the event of such death,  the Salary  payable
hereunder  shall  continue  to be paid at the then  current  rate for  three (3)
months after the  termination  of  employment.  In the event of the death of the
Employee during the term of this Agreement,  the sums payable hereunder shall be
paid to his personal representative;



9.2 Mutual agreement of termination in writing between the Company and Employee;



9.3  Disability of Employee that prevents him from  performing  the material and
substantial  duties  of his  position  for a period of two (2)  months.  In such
event, at the Company's option, the Company shall give Employee not less than 30
days' written notice of  termination  of employment.  Employee shall continue to
render  services to the  Company  (unless  disabled)  and shall be paid his full
salary as in effect at such time up to the date of termination.  Nothing in this
Agreement,  however,  shall limit or diminish the Company's  obligations towards
Employee  with  respect  to the  Americans  with  Disabilities  Act of 1990,  as
amended,  the Family and Medical Leave Act of 1993,  as amended,  or any similar
state laws.



9.4 Written  notice by either party to the other  terminating  the employment of
Employee as follows:



          a.   Notice of  resignation  by Employee to the  Company,  at least 30
               days in advance;



          b.   Notice of  termination  of  employment by the Company to Employee
               with cause.  For purposes of this  Agreement,  the Company  shall
               have  "Cause"  to  terminate  Employee's  employment  under  this
               Agreement  upon   Employee's:   (a)  willful  breach  of  any  of
               Employee's  material  obligations  under  this  Agreement,  which
               breach shall not have been  remedied by Employee  within ten (10)
               days  after  the  Company  shall  have  given  written  notice to
               Employee of such  breach,  or which such  breach  shall have been
               repeated  after  lapse  of  such  ten-day   notice  period;   (b)
               commission  of an act which the Board of Directors of the Company
               shall reasonably have found to have involved  willful  misconduct
               or gross negligence on the part of Employee in the conduct of his
               duties under this Agreement which materially  injures the Company
               or any of its  subsidiaries or affiliates;  (c) conviction of (or
               pleading  nolo  contendere  to) any  felony  or any  misdemeanour
               involving moral turpitude which might, in the reasonable judgment
               of the Board of Directors of the Company,  cause embarrassment to
               the  Company  or any  of  its  subsidiaries  or  affiliates;  (d)
               commission of a material act of personal  dishonesty or breach of
               fiduciary duty involving  personal  profit in connection with the
               Employee's   employment   by  the   Company;   or  (e)   habitual
               absenteeism,  chronic  alcoholism,  drug  abuse or other  form of
               addiction  which,  in the  reasonable  judgment  of the  Board of
               Directors,  impairs  Employee's  ability to perform his duties or
               injures the Company.





<PAGE>


          c.   Notice of  termination  of  employment by the Company to Employee
               without cause or for good reason. For purposes of this Agreement,
               the  Company  will have  terminated  Employee's  employment  with
               Company  under the  Agreement  without cause or for "Good Reason"
               upon  Company's:  (a)  financial  inability to meet its financial
               obligations;  (b) desire to terminate  Employee's  employment for
               reasons other than for Cause as defined  above in Section  9.4.c;
               (c)  contemplation,  consideration or execution of a financial or
               business  agreement  or  transaction  that  obligates  Company to
               reduce costs or staff or Employee's  employment;  (d) termination
               of Employee's  employment within 120 days of the date of a Change
               of  Control of the  Company;  or (e)  failure to comply  with the
               terms  fo  this  Agreement.   In  the  event  of  termination  of
               Employee's  employment  under this Agreement by Employer  without
               cause or for Good Reason, Employer shall pay within ten (10) days
               of such termination a severance payment equal to the compensation
               that would have been paid to Employee for an additional three (3)
               month period,  at the same rate of pay per month as if Employee's
               employment  would not have  been  terminated.  Employee's  fringe
               benefits and other  benefits  that were provided  Employee  under
               Section 8 of this  Agreement  will be continued to the benefit of
               Employee  during the three  month  period of  compensation  after
               termination without cause or for Good Reason.



Notwithstanding  any  termination  of this  Agreement  pursuant  to  Section  9,
Employee shall remain bound by the provisions of Sections 10 and 11 below.



10.      INVENTIONS



"Inventions" made or conceived  entirely or partially by Employee while employed
by the Company shall be the exclusive property of the Company.  For the purposes
of this Agreement,  the term,  "Inventions"  includes,  without limitation,  all
creations,  whether or not patentable or copyrightable,  and all ideas, reports,
or other  creative  works  including,  without  limitation,  therapies,  genetic
engineering  tools and methods,  gene  expression  systems and  diagnostics  and
therapeutic  products  derived  therefrom,  which  related  to the  existing  or
proposed  business  of the  Company  or to any other  business  or  research  or
development  effort  conducted by the  Company.  All of  Employee's  Inventions,
whether or not  copyrightable  or patentable,  will be works for hire.  Employee
will promptly  disclose each  Inventions to the Company in writing and cooperate
with the  Company  to  patent or  copyright  all  Inventions  by  executing  all
documents  tendered by the Company for the purpose of patenting or  copyrighting
Employee's  Inventions.  This  provision  shall be construed in conformity  with
Chapter 49.44 of the Revised Code of  Washington.  This provision does not apply
to an Invention for which no equipment,  supplies,  facilities,  or trade secret
information  of the  Company  was used  and  which  was  developed  entirely  on
Employee's own time unless (i) the Invention relates directly to the business of
the Company, or to the Company's actual or demonstrably  anticipated research or
development,  or (ii) the Invention  results from any work performed by Employee
for the Company.



11.      NON-DISCLOSURE OF CONFIDENTIAL INFORMATION AND RESTRICTIVE COVENANTS



11.1  Confidential  Information.  During the course of his employment,  Employee
will acquire knowledge of trade secrets and other proprietary information of the
Company   ("Confidential   Information")  and  may  contribute  to  Confidential
Information through inventions, discoveries,  improvements or some other manner.
Confidential  Information includes, but is not limited to, nonpublic information
relating  to  the  Company's  business,  operations,  customers  or  technology,
including  customer  lists,  vendor  lists,  pricing  or  financial  information
concerning  the  Company and its vendors and  customers,  trade  secrets,  data,
documentation,  concepts techniques, processes, know-how, marketing information,
designs,  customer  information,  cost data, price lists, and pricing  policies.
Confidential  Information  does not include  information  that is already public
knowledge  or which can be obtained by  reference  to public  sources.  Employee
recognizes that all Confidential  Information is the property of the Company and
agrees that, except as required by the duties of Employee's  employment with the
Company, Employee shall never, directly or indirectly, use, publish, disseminate
or otherwise  disclose any Confidential  Information  obtained during Employee's
employment  with the Company  without the prior written  consent of the Company.
Employee  acknowledges  and agrees that the terms of this Section  shall survive
the termination of his employment with the Company.





<PAGE>


11.2  Non-Competition.  Employee further acknowledges that his position with the
Company  will give him a close  knowledge  of its  policies,  business and trade
secrets,  and that  Employee's  continued and  exclusive  service to the Company
under this  Agreement  is of a high degree of  importance  and  confidentiality.
Employee  agrees  that  for a  period  of one  year  after  the  termination  of
Employee's  employment  with  the  Company,   Employee  will  not,  directly  or
indirectly,  be employed by, engage in, consult with, or own an equity  interest
in any entity or  activities  competitive  with the  business  engaged in by the
Company during Employee's  employment under this Agreement,  without the written
consent of the Company.



11.3  Solicitation.  During the term of his employment  with the Company and for
the period of one year  thereafter,  Employee  shall not:  (i) seek to persuade,
directly  or  indirectly,  any  employee  of the  Company  to  discontinue  that
individual's  employment with the Company, or seek to persuade any such employee
to become employed in any activity similar to or competitive with the activities
of the Company, or (ii) directly or indirectly solicit from any person or entity
who was a customer of the Company and with whom  Employee had business  dealings
on behalf of the Company during the one-year  period prior to the termination of
Employee's  employment  any  business  which is  competitive  with the  business
activities of the Company,  or cause or authorize such  solicitation,  for or on
behalf of Employee or any third party.



11.4 Unfair  Competition.  Employee agrees that the provisions of Section 10 and
11 of this  Agreement  are  reasonably  necessary  to protect  the rights of the
Company and to prevent unfair competition.  The provisions of Sections 10 and 11
shall apply if  Employee's  employment  is  terminated at the end of the term of
this Agreement or otherwise.  The period of the covenants  contained in Sections
10 and 11 shall be extended by any period of time  during  which  Employee is in
violation of said covenants, if any.



11.5 Severability. The parties agree that the covenants set forth in Sections 10
and 11 of this Agreement,  including,  without limitation,  the scope, duration,
and geographic extent of such  restrictions,  are fair and reasonably  necessary
for the protection of the Company's legitimate business interest. In the event a
court or arbitrator should decline to enforce any of such provisions, they shall
be deemed to be modified to restrict  Employee to the maximum  extent  which the
court or arbitrator shall find enforceable.



11.6 Records. Upon termination of this Agreement, all documents, records, files,
notebooks,  and similar  repositories  containing the  information  described in
Sections 10 and 11 of this Agreement,  including all copies,  then in Employee's
possession,  whether  prepared  by  Employee  or  others,  shall be  immediately
returned to the Company by Employee.



12.      INJUNCTIVE RELIEF



Employee acknowledges that the breach or threatened breach of the nondisclosure,
non-competition or other agreements  contained in this Agreement would give rise
to  irreparable  injury  to the  Company,  which  injury  would be  inadequately
compensable  in money  damages.  The Company may,  therefore,  seek and obtain a
restraining  order or injunction  prohibiting the breach or threatened breach of
any provision, requirement or covenant of this Agreement, in addition to and not
in limitation of any other legal remedies that may be available.



13.      MISCELLANEOUS



13.1 Entire Agreement.  This Agreement contains the entire agreement between the
Company  and  Employee  relating  to the subject  matter of this  Agreement.  No
modification  of this Agreement shall be valid unless made in writing and signed
by both parties.





<PAGE>


13.2 Notice.  Any notice  required or permitted to be give under this  Agreement
shall be sufficient if in writing and delivered personally or sent by registered
or certified mail, receipt return requested,  to Employee at his residence or to
the Company at its principal office.



13.3  Waiver.  No waiver by the  Company or Employee of any default or breach of
any term, condition or covenant of this Agreement shall be deemed to be a wavier
of any subsequent default or breach of the same or any other term,  condition or
covenant contained in this Agreement.



13.4  Assignment and  Successors.  The rights and  obligations of Employee under
this  Agreement are personal and may not be assigned to any other  person.  This
Agreement will bind and benefit any successor of the Company, whether by merger,
sale of assets,  reorganization  or other form of  acquisition,  disposition  or
business  reorganization.  In the event of Employee's death, any benefits due or
to become due under this Agreement shall become a part of Employee's  estate and
shall be distributed to his personal representative.



13.5 Attorney's Fees. In the event of any dispute relating to  interpretation or
enforcement of this Agreement, the prevailing party shall be entitled to recover
its reasonable attorneys' fees and costs, whether or not a lawsuit,  arbitration
or other legal action is commenced.



13.6  Applicable  Law.  This  Agreement  shall be governed by and  construed  in
accordance with the laws of the State of Washington.



This Agreement is effective as of the date first above written.



PHAGE THERAPEUTICS, INC.  (COMPANY):





         By: /s/ Richard C. Honour/s/
         ----------------------------
         Its: President & CEO
         ----------------------------




EMPLOYEE (EMPLOYEE):



         /s/ Kenneth Lehman /s/
         ----------------------
         Signature



         Feb. 21, 2001
         -------------

         Date







<PAGE>


                              EMPLOYMENT AGREEMENT



EMPLOYMENT  AGREEMENT  dated  December  6,  2000  ("Agreement")   between  Phage
Therapeutics,  Inc., a Washington corporation ("Company") and Larry Syltebo, BS,
MT (ASCP), a resident of Everett, WA ("Employee").



                                   WITNESSETH



WHEREAS,  the  Company  wishes to employ  Employee  in the  position of Manager,
Quality Assurance & Quality Control; and



WHEREAS,  the Employee wishes to enter into the employ of the Company to fulfill
the  responsibilities  of the position of Manager,  Quality  Assurance & Quality
Control;



NOW  THEREFORE,  in  consideration  of  the  foregoing  and  of  the  respective
covenants,   obligations  and  agreements  of  the  parties  contained  in  this
Agreement, the parties, intending to be legally bound, hereby agree as follows:



1.       EMPLOYMENT



The Company shall employ  Employee,  and Employee shall accept such  employment,
upon the terms and conditions set forth in Agreement. Employee's employment with
the Company shall be subject to the Company's  general  employment  policies and
practices.  The Company reserves the right to modify such policies and practices
from time to time.



2.       DUTIES



Employee  shall be  employed as Manager,  Quality  Assurance & Quality  Control.
During  the  term of this  Agreement,  Employee  shall  devote  his  full  time,
attention  and  efforts to the  conduct of the  business  of the Company and the
performance of his duties under this Agreement. Employee shall not engage in any
other  business  activity,  whether or not such  activity  is pursued  for gain,
profit  or other  pecuniary  advantage;  provided  that  Employee  shall  not be
prevented from investing his personal  assets in such form or manner as will not
require any services on the part of Employee in the  operation of the affairs of
the entities in which such investments are made.



3.     TERM





<PAGE>


Subject to the terms and conditions set forth in this  Agreement,  Company shall
employ Employee and Employee shall serve the Company in the position of Manager,
Quality  Assurance & Quality  Control for a period  commencing  December 6, 2000
("Commencement  Date")  and  continuing  through  the first  anniversary  of the
Commencement  Date,  unless such  employment  is sooner  terminated  as provided
herein.  During  this one (1) year  period,  Employee's  compensation  and other
benefits may be adjusted  annually,  or more often,  without the necessity of an
amendment of this Agreement. The Employee's term of employment shall be extended
for  additional  one (1) year  periods  and on such terms and at such  levels of
compensation  as shall be mutually agreed to in writing by Company and Employee,
unless otherwise terminated under this Agreement.



4.       COMPENSATION



For all services  rendered by Employee under this Agreement,  the Company agrees
to pay Employee and Employee agrees to accept the following:



4.1 Salary.  An annual salary of $60,000  ("Salary"),  which shall be payable at
the times and in the manner set by the Company's  standard payroll policy.  Such
Salary  shall  be  reviewed  one  (1)  month  prior  to the  anniversary  of the
Commencement Date each year, and any increase in the amount under this Agreement
for the twelve (12) month period  following the  Commencement  Date  anniversary
date shall be  determined at such time by the Board of Directors of the Company,
or a compensation committee formed by the Board of Directors.



4.2 Bonuses.  Employee shall  additionally be entitled to such cash and/or stock
bonuses  and  stock  options  as  determined  from  time to time by the Board of
Directors of the Company, or their designated representatives(s).  Cash bonuses,
if any, shall be paid subject to achievement of specific performance  milestones
agreed to by both the Company and Employee.



5.       CONTINUING EDUCATION



In the event that performance of Employee's  responsibilities  and duties within
the Company shall require or recommend  certification,  licensure, or continuing
education  to maintain  licensure,  then Company  shall upon notice,  allow time
during business hours for the required activity and shall reimburse Employee for
reasonable  expenses  associated  therewith  including at least any registration
fees, license fees, travel, lodging and per diem fees.



6.       WORKING FACILITIES



Employee shall be furnished with such facilities,  services, and supplies as are
suitable and adequate for the performance of this duties under this Agreement.



7.       EXPENSES



Employee shall be reimbursed by the Company for his reasonable expenses incurred
in connection with his employment and which are related to and in furtherance of
the Company's  business,  in accordance  with the general  policy of the Company
regarding reimbursement of expenses.



8.       BENEFITS




Employee  shall be entitled  to all rights and  benefits  for which  Employee is
eligible under any  employee-benefits  plan,  including pension,  stock or stock
option,  profit sharing,  health  (including  medical and dental),  and life and
disability  insurance  plan,  which  the  Company  provides  for  its  employees
generally.  The Company  reserves  the right to change the  benefits  offered to
employees at any time.

<PAGE>


9.       TERMINATION



Employee's  employment  with the Company shall be terminated upon the occurrence
of any of the following events:



9.1 Death of Employee. In lieu of any other benefits which may be payable by the
Company with respect to death,  in the event of such death,  the Salary  payable
hereunder  shall  continue  to be paid at the then  current  rate for  three (3)
months after the  termination  of  employment.  In the event of the death of the
Employee during the term of this Agreement,  the sums payable hereunder shall be
paid to his personal representative;



9.2 Mutual agreement of termination in writing between the Company and Employee;



9.3  Disability of Employee that prevents him from  performing  the material and
substantial  duties  of his  position  for a period of two (2)  months.  In such
event, at the Company's option, the Company shall give Employee not less than 30
days' written notice of  termination  of employment.  Employee shall continue to
render  services to the  Company  (unless  disabled)  and shall be paid his full
salary as in effect at such time up to the date of termination.  Nothing in this
Agreement,  however,  shall limit or diminish the Company's  obligations towards
Employee  with  respect  to the  Americans  with  Disabilities  Act of 1990,  as
amended,  the Family and Medical Leave Act of 1993,  as amended,  or any similar
state laws.



9.4 Written  notice by either party to the other  terminating  the employment of
Employee as follows:



          a.   Notice of  resignation  by Employee to the  Company,  at least 30
               days in advance;



          b.   Notice of  termination  of  employment by the Company to Employee
               with cause.  For purposes of this  Agreement,  the Company  shall
               have  "Cause"  to  terminate  Employee's  employment  under  this
               Agreement  upon   Employee's:   (a)  willful  breach  of  any  of
               Employee's  material  obligations  under  this  Agreement,  which
               breach shall not have been  remedied by Employee  within ten (10)
               days  after  the  Company  shall  have  given  written  notice to
               Employee of such  breach,  or which such  breach  shall have been
               repeated  after  lapse  of  such  ten-day   notice  period;   (b)
               commission  of an act which the Board of Directors of the Company
               shall reasonably have found to have involved  willful  misconduct
               or gross negligence on the part of Employee in the conduct of his
               duties under this Agreement which materially  injures the Company
               or any of its  subsidiaries or affiliates;  (c) conviction of (or
               pleading  nolo  contendere  to) any  felony  or any  misdemeanour
               involving moral turpitude which might, in the reasonable judgment
               of the Board of Directors of the Company,  cause embarrassment to
               the  Company  or any  of  its  subsidiaries  or  affiliates;  (d)
               commission of a material act of personal  dishonesty or breach of
               fiduciary duty involving  personal  profit in connection with the
               Employee's   employment   by  the   Company;   or  (e)   habitual
               absenteeism,  chronic  alcoholism,  drug  abuse or other  form of
               addiction  which,  in the  reasonable  judgment  of the  Board of
               Directors,  impairs  Employee's  ability to perform his duties or
               injures the Company.





<PAGE>


          c.   Notice of  termination  of  employment by the Company to Employee
               without cause or for good reason. For purposes of this Agreement,
               the  Company  will have  terminated  Employee's  employment  with
               Company  under the  Agreement  without cause or for "Good Reason"
               upon  Company's:  (a)  financial  inability to meet its financial
               obligations;  (b) desire to terminate  Employee's  employment for
               reasons other than for Cause as defined  above in Section  9.4.c;
               (c)  contemplation,  consideration or execution of a financial or
               business  agreement  or  transaction  that  obligates  Company to
               reduce costs or staff or Employee's  employment;  (d) termination
               of Employee's  employment within 120 days of the date of a Change
               of  Control of the  Company;  or (e)  failure to comply  with the
               terms  fo  this  Agreement.   In  the  event  of  termination  of
               Employee's  employment  under this Agreement by Employer  without
               cause or for Good Reason, Employer shall pay within ten (10) days
               of such termination a severance payment equal to the compensation
               that would have been paid to Employee for an additional three (3)
               month period,  at the same rate of pay per month as if Employee's
               employment  would not have  been  terminated.  Employee's  fringe
               benefits and other  benefits  that were provided  Employee  under
               Section 8 of this  Agreement  will be continued to the benefit of
               Employee  during the three  month  period of  compensation  after
               termination without cause or for Good Reason.



Notwithstanding  any  termination  of this  Agreement  pursuant  to  Section  9,
Employee shall remain bound by the provisions of Sections 10 and 11 below.



10.      INVENTIONS



"Inventions" made or conceived  entirely or partially by Employee while employed
by the Company shall be the exclusive property of the Company.  For the purposes
of this Agreement,  the term,  "Inventions"  includes,  without limitation,  all
creations,  whether or not patentable or copyrightable,  and all ideas, reports,
or other  creative  works  including,  without  limitation,  therapies,  genetic
engineering  tools and methods,  gene  expression  systems and  diagnostics  and
therapeutic  products  derived  therefrom,  which  related  to the  existing  or
proposed  business  of the  Company  or to any other  business  or  research  or
development  effort  conducted by the  Company.  All of  Employee's  Inventions,
whether or not  copyrightable  or patentable,  will be works for hire.  Employee
will promptly  disclose each  Inventions to the Company in writing and cooperate
with the  Company  to  patent or  copyright  all  Inventions  by  executing  all
documents  tendered by the Company for the purpose of patenting or  copyrighting
Employee's  Inventions.  This  provision  shall be construed in conformity  with
Chapter 49.44 of the Revised Code of  Washington.  This provision does not apply
to an Invention for which no equipment,  supplies,  facilities,  or trade secret
information  of the  Company  was used  and  which  was  developed  entirely  on
Employee's own time unless (i) the Invention relates directly to the business of
the Company, or to the Company's actual or demonstrably  anticipated research or
development,  or (ii) the Invention  results from any work performed by Employee
for the Company.



11.      NON-DISCLOSURE OF CONFIDENTIAL INFORMATION AND RESTRICTIVE COVENANTS



11.1  Confidential  Information.  During the course of his employment,  Employee
will acquire knowledge of trade secrets and other proprietary information of the
Company   ("Confidential   Information")  and  may  contribute  to  Confidential
Information through inventions, discoveries,  improvements or some other manner.
Confidential  Information includes, but is not limited to, nonpublic information
relating  to  the  Company's  business,  operations,  customers  or  technology,
including  customer  lists,  vendor  lists,  pricing  or  financial  information
concerning  the  Company and its vendors and  customers,  trade  secrets,  data,
documentation,  concepts techniques, processes, know-how, marketing information,
designs,  customer  information,  cost data, price lists, and pricing  policies.
Confidential  Information  does not include  information  that is already public
knowledge  or which can be obtained by  reference  to public  sources.  Employee
recognizes that all Confidential  Information is the property of the Company and
agrees that, except as required by the duties of Employee's  employment with the
Company, Employee shall never, directly or indirectly, use, publish, disseminate
or otherwise  disclose any Confidential  Information  obtained during Employee's
employment  with the Company  without the prior written  consent of the Company.
Employee  acknowledges  and agrees that the terms of this Section  shall survive
the termination of his employment with the Company.





<PAGE>


11.2  Non-Competition.  Employee further acknowledges that his position with the
Company  will give him a close  knowledge  of its  policies,  business and trade
secrets,  and that  Employee's  continued and  exclusive  service to the Company
under this  Agreement  is of a high degree of  importance  and  confidentiality.
Employee  agrees  that  for a  period  of one  year  after  the  termination  of
Employee's  employment  with  the  Company,   Employee  will  not,  directly  or
indirectly,  be employed by, engage in, consult with, or own an equity  interest
in any entity or  activities  competitive  with the  business  engaged in by the
Company during Employee's  employment under this Agreement,  without the written
consent of the Company.



11.3  Solicitation.  During the term of his employment  with the Company and for
the period of one year  thereafter,  Employee  shall not:  (i) seek to persuade,
directly  or  indirectly,  any  employee  of the  Company  to  discontinue  that
individual's  employment with the Company, or seek to persuade any such employee
to become employed in any activity similar to or competitive with the activities
of the Company, or (ii) directly or indirectly solicit from any person or entity
who was a customer of the Company and with whom  Employee had business  dealings
on behalf of the Company during the one-year  period prior to the termination of
Employee's  employment  any  business  which is  competitive  with the  business
activities of the Company,  or cause or authorize such  solicitation,  for or on
behalf of Employee or any third party.



11.4 Unfair  Competition.  Employee agrees that the provisions of Section 10 and
11 of this  Agreement  are  reasonably  necessary  to protect  the rights of the
Company and to prevent unfair competition.  The provisions of Sections 10 and 11
shall apply if  Employee's  employment  is  terminated at the end of the term of
this Agreement or otherwise.  The period of the covenants  contained in Sections
10 and 11 shall be extended by any period of time  during  which  Employee is in
violation of said covenants, if any.



11.5 Severability. The parties agree that the covenants set forth in Sections 10
and 11 of this Agreement,  including,  without limitation,  the scope, duration,
and geographic extent of such  restrictions,  are fair and reasonably  necessary
for the protection of the Company's legitimate business interest. In the event a
court or arbitrator should decline to enforce any of such provisions, they shall
be deemed to be modified to restrict  Employee to the maximum  extent  which the
court or arbitrator shall find enforceable.



11.6 Records. Upon termination of this Agreement, all documents, records, files,
notebooks,  and similar  repositories  containing the  information  described in
Sections 10 and 11 of this Agreement,  including all copies,  then in Employee's
possession,  whether  prepared  by  Employee  or  others,  shall be  immediately
returned to the Company by Employee.



12.      INJUNCTIVE RELIEF



Employee acknowledges that the breach or threatened breach of the nondisclosure,
non-competition or other agreements  contained in this Agreement would give rise
to  irreparable  injury  to the  Company,  which  injury  would be  inadequately
compensable  in money  damages.  The Company may,  therefore,  seek and obtain a
restraining  order or injunction  prohibiting the breach or threatened breach of
any provision, requirement or covenant of this Agreement, in addition to and not
in limitation of any other legal remedies that may be available.



13.      MISCELLANEOUS



13.1 Entire Agreement.  This Agreement contains the entire agreement between the
Company  and  Employee  relating  to the subject  matter of this  Agreement.  No
modification  of this Agreement shall be valid unless made in writing and signed
by both parties.



<PAGE>


13.2 Notice.  Any notice  required or permitted to be give under this  Agreement
shall be sufficient if in writing and delivered personally or sent by registered
or certified mail, receipt return requested,  to Employee at his residence or to
the Company at its principal office.



13.3  Waiver.  No waiver by the  Company or Employee of any default or breach of
any term, condition or covenant of this Agreement shall be deemed to be a wavier
of any subsequent default or breach of the same or any other term,  condition or
covenant contained in this Agreement.



13.4  Assignment and  Successors.  The rights and  obligations of Employee under
this  Agreement are personal and may not be assigned to any other  person.  This
Agreement will bind and benefit any successor of the Company, whether by merger,
sale of assets,  reorganization  or other form of  acquisition,  disposition  or
business  reorganization.  In the event of Employee's death, any benefits due or
to become due under this Agreement shall become a part of Employee's  estate and
shall be distributed to his personal representative.



13.5 Attorney's Fees. In the event of any dispute relating to  interpretation or
enforcement of this Agreement, the prevailing party shall be entitled to recover
its reasonable attorneys' fees and costs, whether or not a lawsuit,  arbitration
or other legal action is commenced.



13.6  Applicable  Law.  This  Agreement  shall be governed by and  construed  in
accordance with the laws of the State of Washington.



This Agreement is effective as of the date first above written.



PHAGE THERAPEUTICS, INC.  (COMPANY):





         By: /s/ Richard C. Honour/s/
         ----------------------------
         Its: President & CEO
         --------------------




EMPLOYEE (EMPLOYEE):



         /s/ Larry Sytlebo /s/
         ---------------------
         Signature



         Feb. 21, 2001
         -------------

         Date

<PAGE>




                              EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT dated May 1, 2001 ("Agreement") between Phage Therapeutics,
Inc., a Washington corporation  ("Company") and Lisa M. Goodrich, BS, a resident
of Bothellt, WA ("Employee").

                                   WITNESSETH

WHEREAS,  the  Company  wishes to employ  Employee  in the  position of Manager,
Microbiology; and

WHEREAS,  the Employee wishes to enter into the employ of the Company to fulfill
the responsibilities of the position of Manager, Microbiology;

NOW  THEREFORE,  in  consideration  of  the  foregoing  and  of  the  respective
covenants,   obligations  and  agreements  of  the  parties  contained  in  this
Agreement, the parties, intending to be legally bound, hereby agree as follows:

1.       EMPLOYMENT

The Company shall employ  Employee,  and Employee shall accept such  employment,
upon the terms and conditions set forth in Agreement. Employee's employment with
the Company shall be subject to the Company's  general  employment  policies and
practices.  The Company reserves the right to modify such policies and practices
from time to time.

2.       DUTIES

Employee  shall be employed as  Manager,  Microbiology.  During the term of this
Agreement,  Employee  shall devote her full time,  attention  and efforts to the
conduct of the business of the Company and the  performance  of her duties under
this  Agreement.  Employee  shall not  engage in any  other  business  activity,
whether or not such  activity  is pursued  for gain,  profit or other  pecuniary
advantage;  provided that  Employee  shall not be prevented  from  investing her
personal  assets in such form or manner as will not require any  services on the
part of Employee in the  operation  of the affairs of the entities in which such
investments are made.

(3)      TERM

Subject to the terms and conditions set forth in this  Agreement,  Company shall
employ Employee and Employee shall serve the Company in the position of Manager,
Microbiology  for a period  commencing  May 1, 2001  ("Commencement  Date")  and
continuing  through the first anniversary of the Commencement  Date, unless such
employment  is sooner  terminated as provided  herein.  During this one (1) year
period,  Employee's compensation and other benefits may be adjusted annually, or
more  often,  without the  necessity  of an  amendment  of this  Agreement.  The
Employee's  term of  employment  shall be extended for  additional  one (1) year
periods  and on such  terms  and at such  levels  of  compensation  as  shall be
mutually  agreed  to in  writing  by  Company  and  Employee,  unless  otherwise
terminated under this Agreement.

4.       COMPENSATION

For all services  rendered by Employee under this Agreement,  the Company agrees
to pay Employee and Employee agrees to accept the following:

4.1 Salary.  An annual salary of $40,000  ("Salary"),  which shall be payable at
the times and in the manner set by the Company's  standard payroll policy.  Such
Salary  shall  be  reviewed  one  (1)  month  prior  to the  anniversary  of the
Commencement Date each year, and any increase in the amount under this Agreement
for the twelve (12) month period  following the  Commencement  Date  anniversary
date shall be  determined at such time by the Board of Directors of the Company,
or a compensation committee formed by the Board of Directors.

4.2 Bonuses.  Employee shall  additionally be entitled to such cash and/or stock
bonuses  and  stock  options  as  determined  from  time to time by the Board of
Directors of the Company, or their designated representatives(s).  Cash bonuses,
if any, shall be paid subject to achievement of specific performance  milestones
agreed to by both the Company and Employee.

5.       CONTINUING EDUCATION

In the event that performance of Employee's  responsibilities  and duties within
the Company shall require or recommend  certification,  licensure, or continuing
education  to maintain  licensure,  then Company  shall upon notice,  allow time
during business hours for the required activity and shall reimburse Employee for
reasonable  expenses  associated  therewith  including at least any registration
fees, license fees, travel, lodging and per diem fees.

6.       WORKING FACILITIES

Employee shall be furnished with such facilities,  services, and supplies as are
suitable and adequate for the performance of her duties under this Agreement.

7.       EXPENSES

Employee shall be reimbursed by the Company for her reasonable expenses incurred
in connection with her employment and which are




<PAGE>



related to and in furtherance of the Company's business,  in accordance with the
general policy of the Company regarding reimbursement of expenses.

8.       BENEFITS

Employee  shall be entitled  to all rights and  benefits  for which  Employee is
eligible under any  employee-benefits  plan,  including pension,  stock or stock
option,  profit sharing,  health  (including  medical and dental),  and life and
disability  insurance  plan,  which  the  Company  provides  for  its  employees
generally.  The Company  reserves  the right to change the  benefits  offered to
employees at any time.

9.       TERMINATION

Employee's  employment  with the Company shall be terminated upon the occurrence
of any of the following events:

9.1 Death of Employee. In lieu of any other benefits which may be payable by the
Company with respect to death,  in the event of such death,  the Salary  payable
hereunder  shall  continue  to be paid at the then  current  rate for  three (3)
months after the  termination  of  employment.  In the event of the death of the
Employee during the term of this Agreement,  the sums payable hereunder shall be
paid to her personal representative;

9.2 Mutual agreement of termination in writing between the Company and Employee;

9.3  Disability of Employee that prevents her from  performing  the material and
substantial  duties  of her  position  for a period of two (2)  months.  In such
event, at the Company's option, the Company shall give Employee not less than 30
days' written notice of  termination  of employment.  Employee shall continue to
render  services to the  Company  (unless  disabled)  and shall be paid her full
salary as in effect at such time up to the date of termination.  Nothing in this
Agreement,  however,  shall limit or diminish the Company's  obligations towards
Employee  with  respect  to the  Americans  with  Disabilities  Act of 1990,  as
amended,  the Family and Medical Leave Act of 1993,  as amended,  or any similar
state laws.

9.4 Written  notice by either party to the other  terminating  the employment of
Employee as follows:

     a.   Notice of resignation by Employee to the Company,  at least 30 days in
          advance;

     b.   Notice of  termination  of  employment by the Company to Employee with
          cause. For purposes of this Agreement,  the Company shall have "Cause"
          to  terminate   Employee's   employment   under  this  Agreement  upon
          Employee's:   (a)  willful  breach  of  any  of  Employee's   material
          obligations  under this  Agreement,  which  breach shall not have been
          remedied by Employee within ten (10) days after the Company shall have
          given written notice to Employee of such breach,  or which such breach
          shall have been repeated  after lapse of such ten-day  notice  period;
          (b)  commission  of an act which the Board of Directors of the Company
          shall  reasonably  have found to have involved  willful  misconduct or
          gross  negligence on the part of Employee in the conduct of her duties
          under this Agreement  which  materially  injures the Company or any of
          its  subsidiaries  or affiliates;  (c) conviction of (or pleading nolo
          contendere  to)  any  felony  or  any  misdemeanour   involving  moral
          turpitude  which  might,  in the  reasonable  judgment of the Board of
          Directors of the Company, cause embarrassment to the Company or any of
          its  subsidiaries  or affiliates;  (d) commission of a material act of
          personal  dishonesty or breach of fiduciary  duty  involving  personal
          profit in connection with the Employee's employment by the Company; or
          (e) habitual absenteeism, chronic alcoholism, drug abuse or other form
          of  addiction  which,  in the  reasonable  judgment  of the  Board  of
          Directors, impairs Employee's ability to perform her duties or injures
          the Company.

     c.   Notice of termination of employment by the Company to Employee without
          cause or for good reason. For purposes of this Agreement,  the Company
          will have  terminated  Employee's  employment  with Company  under the
          Agreement  without  cause or for "Good  Reason"  upon  Company's:  (a)
          financial inability to meet its financial  obligations;  (b) desire to
          terminate  Employee's  employment  for reasons other than for Cause as
          defined above in Section 9.4.c;  (c)  contemplation,  consideration or
          execution of a financial or business  agreement  or  transaction  that
          obligates  Company to reduce costs or staff or Employee's  employment;
          (d) termination of Employee's  employment  within 120 days of the date
          of a Change of Control of the  Company;  or (e) failure to comply with
          the terms fo this Agreement. In the event of termination of Employee's
          employment  under this Agreement by Employer without cause or for Good
          Reason,  Employer shall pay within ten (10) days of such termination a
          severance  payment equal to the compensation that would have been paid
          to Employee for an additional three (3) month period, at the same rate
          of pay per  month as if  Employee's  employment  would  not have  been
          terminated.  Employee's  fringe  benefits and other benefits that were
          provided  Employee under Section 8 of this Agreement will be continued
          to  the  benefit  of  Employee   during  the  three  month  period  of
          compensation after termination without cause or for Good Reason.

Notwithstanding  any  termination  of this  Agreement  pursuant  to  Section  9,
Employee shall remain bound by the provisions of Sections 10 and 11 below.

10)      INVENTIONS

"Inventions" made or conceived  entirely or partially by Employee while employed
by the Company shall be the exclusive property of the Company.  For the purposes
of this Agreement,  the term,  "Inventions"  includes,  without limitation,  all
creations,  whether or not patentable or copyrightable,  and all ideas, reports,
or other  creative  works  including,  without  limitation,  therapies,  genetic
engineering  tools and methods,  gene  expression  systems and  diagnostics  and
therapeutic  products  derived  therefrom,  which  related  to the  existing  or
proposed




<PAGE>



business  of the Company or to any other  business  or  research or  development
effort conducted by the Company.  All of Employee's  Inventions,  whether or not
copyrightable  or  patentable,  will be works for hire.  Employee  will promptly
disclose  each  Inventions  to the  Company in writing  and  cooperate  with the
Company  to patent or  copyright  all  Inventions  by  executing  all  documents
tendered by the Company for the purpose of patenting or copyrighting  Employee's
Inventions.  This provision  shall be construed in conformity with Chapter 49.44
of the Revised Code of Washington. This provision does not apply to an Invention
for which no equipment, supplies, facilities, or trade secret information of the
Company was used and which was developed  entirely on Employee's own time unless
(i) the  Invention  relates  directly to the business of the Company,  or to the
Company's actual or demonstrably  anticipated  research or development,  or (ii)
the Invention results from any work performed by Employee for the Company.

11)      NON-DISCLOSURE OF CONFIDENTIAL INFORMATION AND RESTRICTIVE COVENANTS

11.1  Confidential  Information.  During the course of her employment,  Employee
will acquire knowledge of trade secrets and other proprietary information of the
Company   ("Confidential   Information")  and  may  contribute  to  Confidential
Information through inventions, discoveries,  improvements or some other manner.
Confidential  Information includes, but is not limited to, nonpublic information
relating  to  the  Company's  business,  operations,  customers  or  technology,
including  customer  lists,  vendor  lists,  pricing  or  financial  information
concerning  the  Company and its vendors and  customers,  trade  secrets,  data,
documentation,  concepts techniques, processes, know-how, marketing information,
designs,  customer  information,  cost data, price lists, and pricing  policies.
Confidential  Information  does not include  information  that is already public
knowledge  or which can be obtained by  reference  to public  sources.  Employee
recognizes that all Confidential  Information is the property of the Company and
agrees that, except as required by the duties of Employee's  employment with the
Company, Employee shall never, directly or indirectly, use, publish, disseminate
or otherwise  disclose any Confidential  Information  obtained during Employee's
employment  with the Company  without the prior written  consent of the Company.
Employee  acknowledges  and agrees that the terms of this Section  shall survive
the termination of her employment with the Company.

11.2  Non-Competition.  Employee further acknowledges that her position with the
Company  will give her  close  knowledge  of its  policies,  business  and trade
secrets,  and that  Employee's  continued and  exclusive  service to the Company
under this  Agreement  is of a high degree of  importance  and  confidentiality.
Employee  agrees  that  for a  period  of one  year  after  the  termination  of
Employee's  employment  with  the  Company,   Employee  will  not,  directly  or
indirectly,  be employed by, engage in, consult with, or own an equity  interest
in any entity or  activities  competitive  with the  business  engaged in by the
Company during Employee's  employment under this Agreement,  without the written
consent of the Company.

11.3  Solicitation.  During the term of her employment  with the Company and for
the period of one year  thereafter,  Employee  shall not:  (i) seek to persuade,
directly  or  indirectly,  any  employee  of the  Company  to  discontinue  that
individual's  employment with the Company, or seek to persuade any such employee
to become employed in any activity similar to or competitive with the activities
of the Company, or (ii) directly or indirectly solicit from any person or entity
who was a customer of the Company and with whom  Employee had business  dealings
on behalf of the Company during the one-year  period prior to the termination of
Employee's  employment  any  business  which is  competitive  with the  business
activities of the Company,  or cause or authorize such  solicitation,  for or on
behalf of Employee or any third party.

11.4 Unfair  Competition.  Employee agrees that the provisions of Section 10 and
11 of this  Agreement  are  reasonably  necessary  to protect  the rights of the
Company and to prevent unfair competition.  The provisions of Sections 10 and 11
shall apply if  Employee's  employment  is  terminated at the end of the term of
this Agreement or otherwise.  The period of the covenants  contained in Sections
10 and 11 shall be extended by any period of time  during  which  Employee is in
violation of said covenants, if any.

11.5 Severability. The parties agree that the covenants set forth in Sections 10
and 11 of this Agreement,  including,  without limitation,  the scope, duration,
and geographic extent of such  restrictions,  are fair and reasonably  necessary
for the protection of the Company's legitimate business interest. In the event a
court or arbitrator should decline to enforce any of such provisions, they shall
be deemed to be modified to restrict  Employee to the maximum  extent  which the
court or arbitrator shall find enforceable.

11.6 Records. Upon termination of this Agreement, all documents, records, files,
notebooks,  and similar  repositories  containing the  information  described in
Sections 10 and 11 of this Agreement,  including all copies,  then in Employee's
possession,  whether  prepared  by  Employee  or  others,  shall be  immediately
returned to the Company by Employee.

12.      INJUNCTIVE RELIEF

Employee acknowledges that the breach or threatened breach of the nondisclosure,
non-competition or other agreements  contained in this Agreement would give rise
to  irreparable  injury  to the  Company,  which  injury  would be  inadequately
compensable  in money  damages.  The Company may,  therefore,  seek and obtain a
restraining  order or injunction  prohibiting the breach or threatened breach of
any provision, requirement or covenant of this Agreement, in addition to and not
in limitation of any other legal remedies that may be available.

13.      MISCELLANEOUS

13.1 Entire Agreement.  This Agreement contains the entire agreement between the
Company  and  Employee  relating  to the subject  matter of this  Agreement.  No
modification  of this Agreement shall be valid unless made in writing and signed
by both parties.

13.2 Notice.  Any notice  required or permitted to be give under this  Agreement
shall be sufficient if in writing and delivered personally or sent by registered
or certified mail, receipt return requested,  to Employee at her residence or to
the Company at its principal office.

13.3  Waiver.  No waiver by the  Company or Employee of any default or breach of
any term, condition or covenant of this Agreement shall




<PAGE>



be deemed to be a wavier of any subsequent  default or breach of the same or any
other term, condition or covenant contained in this Agreement.

13.4  Assignment and  Successors.  The rights and  obligations of Employee under
this  Agreement are personal and may not be assigned to any other  person.  This
Agreement will bind and benefit any successor of the Company, whether by merger,
sale of assets,  reorganization  or other form of  acquisition,  disposition  or
business  reorganization.  In the event of Employee's death, any benefits due or
to become due under this Agreement shall become a part of Employee's  estate and
shall be distributed to her personal representative.

13.5 Attorney's Fees. In the event of any dispute relating to  interpretation or
enforcement of this Agreement, the prevailing party shall be entitled to recover
its reasonable attorneys' fees and costs, whether or not a lawsuit,  arbitration
or other legal action is commenced.

13.6  Applicable  Law.  This  Agreement  shall be governed by and  construed  in
accordance with the laws of the State of Washington.

This Agreement is effective as of the date first above written.

PHAGE THERAPEUTICS, INC.  (COMPANY):


         By: /s/ Richard C. Honour/s/
         Its: President & CEO
         May 4, 2001


EMPLOYEE (EMPLOYEE):

         /s/ Lisa Goodrich /s/
         Signature

         May 4, 2001
         Date