SEPARATION AGREEMENT AND RELEASE

     This Separation Agreement and Release (this "Agreement") is made and
entered into as of this 30th day of March, 2001, by and between Gardenburger,
Inc., an Oregon corporation ("Gardenburger") and Peter W. Shipp ("Employee") in
order to provide the terms and conditions of Employee's termination of
employment, and to fully and completely resolve any and all issues that Employee
might have in connection with his employment with Gardenburger or the
termination thereof.

     NOW, THEREFORE, in consideration of the mutual promises and conditions
contained herein, the parties agree as follows:

1.   SEPARATION.  Employee is currently employed at Gardenburger. Employee's
employment will terminate effective March 30, 2001 (the "Termination Date").

2.   PAY.

     2.1  WAGES. From the date of this Agreement through the Termination Date,
Gardenburger will continue to pay Employee, on Gardenburger's normal bi-weekly
pay dates, all wages owing to Employee.

     2.2  SEVERANCE PAY.

          2.2.1 Gardenburger agrees to pay Employee the sum of $80,000 as
severance pay, such amount to be paid on a pro-rata basis ($13,333.33 per month)
on Gardenburger's normal bi-weekly pay dates (beginning April 6, 2001) until the
full amount is paid. No severance payment will be made to Employee until
Employee executes and delivers this Agreement to Gardenburger and the revocation
period described in Section 11 of this Agreement has expired. Employee agrees
that these severance payments represent amounts to which he is not otherwise
entitled but for this Agreement.

          2.2.2 If Employee has not found other employment by September 30,
2001, Gardenburger will continue to pay Employee $13,333.33 per month, reduced
by any amounts that Employee earns from any source (including consulting work),
on Gardenburger's normal bi-weekly pay dates, until December 31, 2001. In no
event will Gardenburger be obligated to make any payments to Employee beyond
December 31, 2001. Employee agrees that these severance payments represent
amounts to which he is not otherwise entitled but for this Agreement.

     2.3  WITHHOLDINGS. All compensation paid to Employee under this Section 2
shall be subject to the customary withholding of federal and state income tax
and other deductions required by law, or otherwise authorized, with respect to
compensation paid by a corporation to an employee.

     2.4  ACCRUALS. Employee agrees to accept a payment of the sum of $3,212.31
(to be made on March 30, 2001) in full satisfaction of any accrued vacation pay
or other form of accrued compensation benefits owing to him from Gardenburger,
except for any amounts to which he may be entitled under Gardenburger's 401(k)
plan.

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<PAGE>

     2.5  PAYMENT IN FULL. Employee acknowledges that, other than the severance
to be paid under this Agreement, Gardenburger has paid him in full any and all
sums due to him in connection with his employment with Gardenburger.

3.   STOCK OPTIONS.  Stock options, as granted, shall be administered in
accordance with Gardenburger's applicable stock option plans and stock option
agreements entered into between Gardenburger and Employee.

4.   BENEFITS. All benefits being provided to Employee, if any, shall cease as
of March 30, 2001, with the exception of Group Health COBRA coverage. As
additional consideration, Gardenburger will pay the premium for the medical
insurance coverage that Employee had with Gardenburger for himself and his
spouse as of March 30, 2001, for a period ending upon the first to occur of (a)
December 31, 2001; (b) the date on which Employee discontinues such coverage; or
(c) the date on which Employee obtains employment elsewhere.

5.   OUTPLACEMENT ASSISTANCE. Upon Employee's request, Employee will be afforded
outplacement assistance through a career transition services provider of
Gardenburger's selection at a cost not to exceed $12,000. Employee must begin
utilizing this service within 30 days after the Termination Date in order to be
eligible for this benefit.

6.   RELEASE OF CLAIMS.

     6.1  In return for the benefits conferred by this Agreement, which Employee
acknowledges that Gardenburger has no legal obligation to provide, Employee
hereby releases and forever discharges Gardenburger, 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 "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, 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.

     6.2  Without limitation on the foregoing, Employee hereby accepts the
payments set forth herein in full settlement and satisfaction of all claims,
charges, complaints, actions, causes of action, and demands against Gardenburger
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. Employee agrees that he is lawfully

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<PAGE>

entitled to no payments, wages, compensation, or benefits from Gardenburger
except as set forth in this Agreement, and except for any amounts to which he is
entitled under the terms of Gardenburger's 401(k) plan and under the stock
option agreements entered into between Gardenburger and Employee.

     6.3  Employee represents that he has no claims against or relating to
Gardenburger 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. Employee agrees that he will
not assert any court action, lawsuit, or any other claim against Gardenburger or
any other of the 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 Gardenburger and Employee or the termination of that relationship other
than one based upon an alleged violation of this Agreement.

     6.4 Gardenburger hereby releases and forever discharges Employee and his
heirs, successors, beneficiaries, agents, and attorneys, and their respective
successors, assigns, executors, and administrators, 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 current member of Gardenburger's Board of Directors
has actual knowledge as of the date of this Agreement.

7. 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, or lawsuits released hereby.

8. NO CONTACT WITH GARDENBURGER EMPLOYEES. Employee will not initiate contact or
communication with employees of Gardenburger without written permission from
Scott C. Wallace, President and Chief Executive Officer of Gardenburger ("Mr.
Wallace").

9. STATEMENTS REGARDING TERMINATION OF EMPLOYMENT. Gardenburger will inform
employees and issue a press release stating that Employee has resigned to pursue
other interests. Any statements by Employee and Mr. Wallace will be consistent
with this provision, unless Gardenburger, Mr. Wallace, or Employee is otherwise
required by law to provide additional information.

10. EMPLOYEE GIVEN 21 DAYS TO CONSIDER AGREEMENT. Gardenburger hereby advises
Employee 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, Employee acknowledges that a form
of this Agreement was delivered to him on March 7, 2001. Employee understands
that he may accept this Agreement at any time during the 21-day consideration
period by signing and delivering it to Gardenburger.

11. REVOCATION. After signing the Agreement and delivering it to Scott C.
Wallace, Employee may revoke this Agreement by written notice, delivered to Mr.
Wallace, within seven days following his date of signature as set forth on page

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<PAGE>

5 of this Agreement. This Agreement becomes effective and enforceable after the
seven-day period has expired, without revocation.

12. CONFIDENTIALITY. Employee agrees to keep the terms of this Agreement,
specifically including without limitation, the amount of the severance pay, and
the fact that he received severance pay, strictly confidential. Employee may
disclose the terms of this Agreement to his spouse or significant other, or his
accountant, attorney and tax authorities only as may be necessary for his
financial affairs or as required by law.

13. NON-DISPARAGEMENT. Employee agrees to not make any derogatory statements,
written or oral, of any nature whatsoever at any time about Gardenburger, its
past or present employees, officers, or directors, or its products, operations,
or any other aspect of Gardenburger's business, either publicly or privately,
unless such statements are required by law.

14. EMPLOYEE PROPRIETARY RIGHTS AND CONFIDENTIALITY AGREEMENT, EMPLOYEE
NON-COMPETITION AGREEMENT, AND CONFIDENTIALITY AGREEMENT. Employee acknowledges
and reaffirms his obligations under the Employee Proprietary Rights and
Confidentiality Agreement dated July 13, 1998, the Employee Non-Competition
Agreement dated July 31, 1998, and the Confidentiality Agreement dated November
3, 1999. The terms of such Employee Proprietary Rights and Confidentiality
Agreement, Employee Non-Competition Agreement, and Confidentiality Agreement are
hereby incorporated herein and made a part of this Agreement. Employee agrees to
strictly comply with the terms of those agreements.

15. RETURN OF PROPERTY. Employee agrees to return to Gardenburger, by no later
than March 30, 2001, all of Gardenburger's property in his possession or under
his control.

16. MISCELLANEOUS.

     16.1 ENTIRE AGREEMENT. This document, together with the obligations of
Employee set forth in the Employee Proprietary Rights and Confidentiality
Agreement, Employee Non-Competition Agreement, and Confidentiality Agreement
described in Section 14 of this Agreement, constitutes the entire agreement of
the parties relating to the subject matter of this Agreement and supersedes and
replaces all other written and oral agreements and understandings heretofore
made or existing by and between the parties or their representatives with
respect thereto. There have been no representations or commitments by
Gardenburger to make any payment or perform any act other than those expressly
stated herein.

     16.2 WAIVER. No waiver of any provision of this Agreement shall be deemed,
or shall constitute, a waiver of any other provisions, whether or not similar,
nor shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.

     16.3 BINDING EFFECT. All rights, remedies and liabilities herein given to
or imposed upon the parties shall extend to, inure to the benefit of and bind,
as the circumstances may require, the parties and their respective heirs,
personal representatives, administrators, successors and permitted assigns;
provided, however, that the obligations of Employee are personal and shall not
be assigned by him.

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     16.4 AMENDMENT. No supplement, modification or amendment of this Agreement
shall be valid, unless the same is in writing and signed by all parties hereto.

     16.5 SEVERABILITY. In the event any provision or portion of this Agreement
is held to be unenforceable or invalid by any court of competent jurisdiction,
the remainder of this Agreement shall remain in full force and effect and shall
in no way be affected or invalidated thereby.

     16.6 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
in the arbitration shall also be entitled to recover such amount for its costs
and reasonable 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 resorting 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.

     16.7 KNOWING AND VOLUNTARY AGREEMENT; NO PRESSURE OR COERCION. Employee
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 and financial counsel of his
choosing, that he fully understands its final and binding effect, and that he is
signing this Agreement voluntarily, with the full intent of releasing
Gardenburger from all claims, and without any undue pressure or coercion from
Gardenburger.

                                              GARDENBURGER, INC.


/s/ Peter W. Shipp                            By: /s/ Scott C. Wallace
------------------------------                    ------------------------------
Peter W. Shipp                                    Scott C. Wallace
                                                  President and Chief Executive
                                                  Officer


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<PAGE>


STATE OF OREGON            )
                           )SS
COUNTY OF MULTNOMAH        )


On this 30th day of March, 2001, Peter W. Shipp personally appeared before me, a
notary public for said county and state. Peter W. Shipp is known to be the same
person described herein and he executed the foregoing instrument and
acknowledged to me that he executed the same freely and voluntarily for the uses
and purposes therein stated.

          IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed
my official seal.


[SEAL]
                                        /s/ Richard C. Busse
                                        ---------------------------------
                                        Notary Public for Oregon
                                        My commission expires:   12/21/03



STATE OF OREGON                                               )
                                                              )SS
COUNTY OF MULTNOMAH                                           )


On this 2nd day of April, 2001, Scott Wallace personally appeared before me, a
notary public for said county and state. Scott Wallace is the President and
Chief Executive Officer of Gardenburger, Inc., and he executed the foregoing
instrument on the authority of its board of directors and acknowledged to me
that he executed the same for the uses and purposes therein stated.

          IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed
my official seal.



[SEAL]                                  /s/ Amanda L. Cole
                                        ------------------------------
                                        Notary Public for Oregon
                                        My commission expires:  7/7/02






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