EXHIBIT 10.32


                        SEPARATION AGREEMENT AND RELEASE


          The parties to this Agreement are Lyle G. Hubbard  (referred to herein
as "Mr.  Hubbard"),  an  individual  residing  at  12016  S.W.  Breyman  Avenue,
Portland,  Oregon 97219, and Gardenburger,  Inc., an Oregon corporation with its
principal place of business at 1411 S.W. Morrison,  Suite 400, Portland,  Oregon
97205 (referred to herein as the "Company").

                                    RECITALS
                                    --------

          A. Mr.  Hubbard is the Chief  Executive  Officer of the  Company.  Mr.
Hubbard and the Company  entered into an  Employment  Agreement  dated April 14,
1996, a first Agreement to Extend and Amend Employment  Agreement dated November
16, 1998,  a second  Agreement to Extend and Amend  Employment  Agreement  dated
March 5, 1999, and a Third  Amendment to Employment  Agreement dated December 9,
1999. The Employment Agreement,  as amended, shall hereinafter be referred to as
the  "Employment  Agreement."  Mr.  Hubbard and the Company  also entered into a
Retention   Incentive   Agreement   dated  November  10,  1999  (the  "Retention
Agreement"). At the commencement of his employment with the Company, Mr. Hubbard
also  executed an Employee  Proprietary  Rights,  Confidentiality  and Invention
Agreement (the "Confidentiality Agreement").

          B. The  parties  wish to amicably  and  finally  end their  employment
relationship, as fully set forth herein.

                                   AGREEMENTS
                                   ----------

          1. RESIGNATION AND  RELINQUISHMENT  OF EMPLOYMENT AND DIRECTOR RIGHTS.
Mr. Hubbard hereby  resigns his  employment  with the Company  effective as of 5
p.m.  on August 4,  2000,  and  agrees  that he has no right to any  employment,
reemployment,  or  employment  benefits  of any  kind,  except  those  expressly
described  herein.  Mr. Hubbard  hereby resigns as a director of  Gardenburger's
Board of Directors,  which resignation shall be effective  immediately,  and the
parties  agree  that this  Agreement  shall  constitute  the  written  notice of
resignation that is required under the Company's bylaws.

          2. BASE COMPENSATION. Mr. Hubbard hereby agrees to accept a payment of
the sum of $12,115.38,  less normal withholdings and deductions,  paid to him in
full satisfaction of all base compensation owing to him from the Company.

          3. PRORATED  RETENTION  INCENTIVE  AWARD. Mr. Hubbard hereby agrees to
accept  a  payment  of  the  sum  of  $321,343,  less  normal  withholdings  and
deductions,  paid to him in full  satisfaction  of any amount owing to him under
the Retention Agreement.

          4. PRORATED  INCENTIVE  BONUS.  Mr.  Hubbard hereby agrees to accept a
payment of the sum of $146,268, less normal withholdings and deductions, paid to
him in full  satisfaction  of any incentive  bonus payment owing to him from the
Company.

          5. ACCRUALS.  Mr. Hubbard hereby agrees to accept a payment of the sum
of $44,654.88,  less normal  withholdings  and  deductions,  paid to him in full

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satisfaction of any accrued  vacation pay or other form of accrued  compensation
benefits  owing to him from the Company,  except for any amounts to which he may
be entitled under the Company's 401(k) plan.

          6. SEVERANCE PAYMENT.  Mr. Hubbard hereby agrees to accept a severance
payment of the sum of $717,672, less normal withholdings and deductions, paid to
him in full satisfaction of any severance payment claims he may have against the
Company.  Mr.  Hubbard  acknowledges  that  this is an amount to which he is not
otherwise  entitled without  execution of this Agreement.  The Company is making
this payment in consideration of the covenants contained herein.

          7. OUTPLACEMENT  SERVICES.  Upon written request from Mr. Hubbard, the
Company  will  retain  a  reputable   outplacement  agency  that  is  reasonably
acceptable  to Mr.  Hubbard  to assist  Mr.  Hubbard  in  finding  another  job;
provided,  however,  that the maximum amount that the Company shall be obligated
to expend in outplacement services is $25,000.

          8.  CONFIDENTIALITY.  Mr.  Hubbard  acknowledges  that he executed the
Confidentiality  Agreement  upon his  initial  employment  with the  Company and
reaffirms his agreement to be bound thereby.

          9. NONCOMPETITION AND  NONSOLICITATION.  Mr. Hubbard  acknowledges and
agrees that he agreed to certain  noncompetition and  nonsolicitation  covenants
upon his initial  employment  with the Company,  as set forth in the  Employment
Agreement, and reaffirms his agreement to be bound thereby.

          10. RELEASE OF CLAIMS.

          (a) Mr.  Hubbard hereby  releases and forever  discharges the Company,
its  predecessors,  successors and assigns,  and its past,  present,  and future
insurers, representatives,  officers, trustees, shareholders, directors, agents,
insurers,  attorneys, and employees,  and their respective successors,  assigns,
executors, and administrators  (collectively,  the "Gardenburger Releasees"), of
and from any and all claims,  charges,  complaints,  actions,  causes of action,
liability,  damages,  costs,  attorney fees,  expenses of whatever  nature,  and
demands of any kind (including without limitation those based in tort, contract,
or statute,  including without  limitation,  applicable state civil rights laws,
Title VII of the Civil Rights Act of 1964,  the  Post-Civil  War Rights Act, the
Age  Discrimination  in Employment Act ("the ADEA"),  29 ss. USC 621 et seq, the
Americans With Disabilities Act, the  Rehabilitation  Act of 1973, the Equal Pay
Act of 1963, and any  regulations  under such laws) up to and including the date
set forth below, whether known or unknown,  foreseen or unforeseen,  asserted or
unasserted.

          (b) Without  limitation on the  foregoing,  Mr. Hubbard hereby accepts
the payments set forth herein in full settlement and satisfaction of all claims,
charges, complaints,  actions, causes of action, and demands against the Company
or any of the Releasees of every nature and kind  whatsoever,  known or unknown,
suspected or  unsuspected,  past,  present or future on account of or in any way
related to or arising from the employment  relationship existing between them or
the  termination  of that  relationship.  Mr. Hubbard agrees that he is lawfully
entitled to no  payments,  wages,  compensation,  or  benefits  from the Company
except as set forth in this Agreement, and except for any amounts to which he is

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entitled under the terms of the Company's 401(k) plan and under the stock option
agreements entered into between the Company and Mr. Hubbard.

          (c) Mr. Hubbard  represents  that he has no claims against or relating
to the Company  pending or filed with any local,  state, or federal agency as of
the date this  Agreement  is signed;  and that if any such claims are pending or
filed, they will be immediately withdrawn or dismissed.  Mr. Hubbard agrees that
he will not assert any court  action,  lawsuit,  or any other claim  against the
Company  or  any  other  of  the  Gardenburger  Releasees  arising  out of or in
connection  with  any  of  the  foregoing  released  claims,  including  without
limitation any action,  lawsuit,  or claim arising out of or in connection  with
the employment  relationship existing between the Company and Mr. Hubbard or the
termination of that relationship  other than one based upon an alleged violation
of this Agreement.

          (d) Nothing  contained  in this  Agreement  will  adversely  affect or
lessen in any manner Mr. Hubbard's rights to  indemnification  as an employee or
director of the Company under the Company's  bylaws,  articles of incorporation,
the  indemnification  agreement dated February 19, 1999, between Mr. Hubbard and
the Company, or applicable law.

          (e) The Company hereby releases and forever discharges Mr. Hubbard and
his  heirs,  successors,   beneficiaries,   agents,  and  attorneys,  and  their
respective successors, assigns, executors, and administrators (collectively, the
"Hubbard  Releasees"),  of and from any and all  charges,  complaints,  actions,
causes of action, liability, damages, costs, attorney fees, expenses of whatever
nature,  and demands of any kind (including  without  limitation  those based in
tort, contract,  or statute) arising from or based on claims of which any member
of the Company's Board of Directors (excluding Mr. Hubbard) has actual knowledge
as of the date of this Agreement.

          11. NO ADMISSION OF LIABILITY. Nothing in this Agreement shall operate
or be interpreted as an admission of liability as to any of the claims, charges,
actions and lawsuits released hereby.  The Company and Mr. Hubbard,  and each of
their  respective  Releasees  and  successors,  individually  and  collectively,
expressly deny any such  liability.  Neither this Agreement nor any of its terms
may be offered or admitted into  evidence  other than in an action by one of the
parties to enforce its terms.

          12. MR.  HUBBARD  GIVEN 21 DAYS TO  CONSIDER  AGREEMENT.  The  Company
hereby advises Mr. Hubbard in writing to consult with an attorney before signing
this Agreement and that he has a period of at least 21 days to consider  whether
to execute this  Agreement.  For  purposes of this 21-day  period,  Mr.  Hubbard
acknowledges  that a form of this  Agreement  was  delivered  to him on July 31,
2000.

          13.  REVOCATION.  After signing the Agreement and  delivering it to E.
Kay Stepp ("Ms.  Stepp"),  Chair of the Board of Directors  of the Company,  Mr.
Hubbard may revoke this  Agreement by written  notice,  delivered to Ms.  Stepp,
within seven days following his date of signature as set forth on page 6 of this
Agreement.  This Agreement becomes effective and enforceable after the seven-day
period has expired, without revocation,  and payment of the sums provided for in
paragraphs 2 through 6 above shall thereupon become  immediately due and payable
to Mr. Hubbard.

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          14.  NONDISPARAGEMENT.  Mr.  Hubbard agrees not to make any derogatory
statements,  written  or oral,  about the  Company,  its  products,  operations,
employees,  or  directors,  or any other aspect of the Company's  business.  The
Company agrees not to make any derogatory statements, written or oral, about Mr.
Hubbard.  When announcing the resignation of Mr. Hubbard, the Company will issue
a statement in substantially the same form as that attached hereto as Exhibit A.

          15. CONFIDENTIALITY OF THIS AGREEMENT. Except as specifically provided
below,  the parties to this  Agreement  will keep its terms  confidential.  This
promise of confidentiality  extends to all terms of this Agreement.  The parties
will not disclose the terms of this  Agreement to any firm,  person,  or entity,
except that:

          (a) To the  extent  necessary  to  receive  professional  advice,  the
     parties  may  disclose  the  terms of this  Agreement  to their  respective
     attorneys,  accountants,  tax  preparers,  tax  consultants,  and financial
     planners.  Mr.  Hubbard may  disclose  the terms of this  Agreement  to his
     spouse.

          (b) The parties may disclose the terms of this  Agreement if compelled
     to do so under a court or  administrative  order or to  enforce  any of its
     terms  in a  court  or  administrative  proceeding  or  arbitration,  or as
     required  by law or the terms of any  contract  to which the  Company  is a
     party, or to regulatory authorities,  including self-regulating bodies. The
     Company may disclose this  Agreement and the terms thereof to the extent it
     believes that it is required by law or regulation to do so, including,  but
     not limited to, in its audited or interim  financial  statements and in its
     proxy  statements  and  reports  filed  with the  Securities  and  Exchange
     Commission and other regulatory bodies.

          (c) The Company may disclose the terms of this  Agreement to its Board
     and  management  or as necessary to implement any term or condition of this
     Agreement.

          16.  STOCK OPTION  AGREEMENTS.  For  purposes of Mr.  Hubbard's  stock
option agreements with the Company, his resignation  hereunder will be deemed to
be a termination without cause.

          17.  HEALTH  BENEFITS.   If  Mr.  Hubbard  elects  COBRA  continuation
coverage, the Company will pay the premium for the coverage that he had with the
Company as of July 31, 2000,  for a period ending upon the first to occur of (a)
the date which is 18 months  after the date of this  Agreement,  (b) the date on
which  Mr.  Hubbard  discontinues  such  coverage,  or (c) the date on which Mr.
Hubbard becomes  eligible for group health  insurance  benefits from a different
employer.

          18. ARBITRATION.  Any dispute between the parties, including,  without
limitation,  any dispute  concerning or arising under this  Agreement,  shall be
settled by binding arbitration using the Arbitration Service of Portland,  Inc.,
and the rules and  procedures  thereof.  The  arbitration  shall be conducted in
Portland,  Oregon, before a single arbitrator.  A party substantially prevailing

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in the  arbitration  shall also be entitled to recover such amount for its costs
and  attorney  fees  incurred in  connection  with the  arbitration  as shall be
determined by the arbitrator. Judgment upon the arbitration award may be entered
in any court having jurisdiction.  Nothing herein, however, shall prevent either
party from resort to a court of competent  jurisdiction in those instances where
injunctive  relief may be  appropriate.  In the event of such  litigation in the
courts,  the  prevailing  party  shall be  entitled  to recover  its  reasonable
attorney  fees and other  costs  incurred  in  connection  with  that  action or
proceeding,  including such costs and attorney fees incurred in connection  with
any appeal or petition for review.

          19. ENTIRE AGREEMENT. This Agreement, those portions of the Employment
Agreement  relating  to  Mr.  Hubbard's   nondisclosure,   noncompetition,   and
nonsolicitation obligations, the Confidentiality Agreement, and the stock option
agreements between Mr. Hubbard and the Company,  constitute the entire agreement
of the  parties  relating to the subject  matter of this  Agreement.  All of the
agreements, covenants, representations, and warranties, express or implied, oral
or written,  concerning  the subject  matter of this  Agreement are contained in
this  Agreement.  All prior  and  contemporaneous  conversations,  negotiations,
agreements,  representations,  covenants,  and warranties concerning the subject
matter of this Agreement are merged into or replaced by this Agreement.

          20. CONSTRUCTION OF AGREEMENT. Each of the parties hereto has reviewed
and negotiated or had the  opportunity to negotiate the terms,  conditions,  and
language of this Agreement.  The rule of construction that ambiguities are to be
resolved  against the drafting party shall not be applied in  interpreting  this
Agreement.  Section  and  paragraph  titles  in  this  Agreement  are  used  for
convenience  only and are not  intended  to and  shall  not in any way  enlarge,
define,  limit, or extend the rights or obligations of the parties or affect the
interpretation of this Agreement.

          21. COUNTERPARTS.  For the purpose of facilitating this Agreement, and
for other purposes,  this Agreement may be executed simultaneously in any number
of  counterparts.  Each counterpart  shall be deemed to be an original,  and all
such counterparts shall constitute one and the same instrument.

          22. GOVERNING LAW. This Agreement shall be construed, interpreted, and
enforced  in  accordance  with the laws of the  State of Oregon  and  applicable
federal law. Any legal action or other judicial proceeding brought in connection
with this Agreement or any provision thereof shall be instituted only in federal
or state courts located in the state of Oregon.

          23.  SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon and
inure to the  benefit  of both  parties  and  their  respective  successors  and
assigns,  including any corporation  with which or into which the Company may be
merged or which may succeed to its assets or business,  provided,  however, that
the obligations of Mr. Hubbard are personal and shall not be assigned by him.

          24. NO WAIVER.  No delay or omission by the Company or Mr.  Hubbard in
exercising any right under this  Agreement  shall operate as a waiver of that or
any other right.  A waiver or consent given by the Company or Mr. Hubbard on any
one occasion shall be effective only in that instance and shall not be construed
as a bar or waiver of any right on any other occasion.

SEPARATION AGREEMENT AND RELEASE - Page 5 of 6

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          25.  KNOWING AND VOLUNTARY  AGREEMENT.  Mr. Hubbard  acknowledges  and
agrees  that the only  consideration  for this  Agreement  is the  consideration
expressly  described  herein,  that he has carefully read the entire  Agreement,
that he has had the opportunity to review this Agreement and to have it reviewed
and explained to him by an attorney of his choosing,  that he fully  understands
the final and binding effect, and that he is signing this Agreement voluntarily,
and with the full intent of releasing the Company from all claims.

          DATED this 4th day of August, 2000.


                                          GARDENBURGER, INC.


/s/ Lyle G. Hubbard                       By:    /s/ E. Kay Stepp
--------------------------------              ----------------------------------
Lyle G. Hubbard                                  E. Kay Stepp
                                                 Chair of the Board of Directors



SEPARATION AGREEMENT AND RELEASE - Page 6 of 6
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                                    EXHIBIT A



Contact:     Steve Bryant, (206) 270-4664
             sbryant@publicis-usa.com



                  GARDENBURGER ANNOUNCES MANAGEMENT TRANSITION


LYLE G. HUBBARD RESIGNS; COMPANY LAUNCHES NATIONAL SEARCH FOR NEW PRESIDENT/CEO

PORTLAND,  ORE. (August 6, 2000) -- Gardenburger,  Inc. (Nasdaq:GBUR)  announced
that it has  accepted the  resignation  of  President  and CEO Lyle G.  Hubbard,
effective Friday,  August 4. Hubbard leaves his executive  position and his seat
on the board of  directors  after close to five years at the helm,  during which
time  Gardenburger  sales doubled and the brand achieved market share leadership
in the grocery, food service, natural, and club channels.

         The company's board of directors has engaged the executive  search firm
SpencerStuart to conduct a national search for a new president and CEO. The role
of interim  president  and CEO will be assumed  by James W.  Linford,  currently
senior vice president of supply chain and operations for Gardenburger, Inc.

         "Lyle Hubbard  assumed his leadership  role with a clear agenda to take
the company from the natural foods niche to nationwide retail  leadership," said
Kay Stepp,  who has long chaired the company's  board.  "He achieved that aim on
the strength of a series of successful  new products and strong  marketing  that
succeeded in 'branding the category.'"

         Stepp said the company has since  refocused  its  strategy on achieving
sustained growth and profitability in all channels of distribution without heavy
marketing spending.

         "In my  nearly  five  years  as CEO of  Gardenburger,  I have  had  the
pleasure of working with excellent  management talent," Hubbard commented.  "Our
plans were bold, and I want to thank our Board of Directors and Paul Wenner, the
inventor and visionary who created The Original  Gardenburger(R)  veggie burger,
for their support and encouragement.  While I greatly care about the Company and
all its stakeholders, I am looking forward to spending more time with my family.
I  am  proud  of  our  return  to  positive   operating  income.  I  believe  in
Gardenburger's ability to reach the next level of growth and profitability."

         According to Stepp, Linford was the obvious choice for an interim role.


<PAGE>


Management Transition
Page 2

         For  more  than 15  years,  Linford  has held  senior-level  management
positions in the food manufacturing industry,  including posts with HJ Heinz and
Oceanspray  Cranberries,  Inc. He was responsible for developing  Gardenburger's
world-class  manufacturing  plant in Utah,  as well as research and  development
efforts  that have  spawned  products  currently  accounting  for 40  percent of
Gardenburger sales.

         Most recently,  Linford spearheaded the development of a patent-pending
flame-grilling  process that allowed  Gardenburger's  most  significant  product
enhancement to date. The resulting Gardenburger Flame Grilled(TM) veggie patties
are currently outselling all other Gardenburger  products in the 12 introductory
regions.

         "Jim's  achievements at Gardenburger  and his experience at other major
food makers make him  exceptionally  well  prepared for this interim  leadership
role," said Stepp.

         Linford emphasized the company's continued growth potential.

         "Considerable  opportunities  remain for  providing  a variety of great
tasting,  healthy  meatless foods, and making them available  everywhere,"  said
Linford.

         Late last month  Gardenburger  reported a return to positive  operating
income,  recording $1.1 million in the quarter ended June 30, 2000,  compared to
an operating loss of $16.1 million for the quarter ended June 30, 1999.

         Founded in 1985 by GardenChef Paul Wenner(TM), Gardenburger, Inc. is an
innovator  in meatless,  low-fat  food  products.  The company  distributes  its
flagship  Gardenburger(R)  veggie patty to more than 35,000 food service outlets
throughout  the United  States and Canada.  Retail  customers  include more than
30,000  grocery,  natural food and club stores.  Based in Portland,  Ore.,  with
manufacturing  facilities  in  Clearfield,  UT, the  company  currently  employs
approximately 190 people.

                                      # # #

Statements in this press release about future events or performance  are forward
looking  statements that are necessarily  subject to risk and  uncertainty.  The
company's actual results could be quite different.  Important factors that could
affect  results  include  the  company's  reliance  on product  acceptance,  the
company's ability to execute its retail distribution plan,  effectiveness of the
company's  sales and marketing  efforts,  and intense  competition in the veggie
patty and other meat  alternatives  industry,  which the company  believes  will
increase. Other important factors that could affect results are set forth in the
company's  Annual Report on Form 10-K for the year ended  September 30, 1999 and
the  company's  1999 Annual  Report to  shareholders.  Although  forward-looking
statements help provide complete information about the company, investors should
keep in mind that  forward-looking  statements are inherently less reliable than
historical information.