EXHIBIT 10.3
                                  ------------

                              EMPLOYMENT AGREEMENT

           THIS EMPLOYMENT  AGREEMENT,  effectively dated as of January 1, 2001,
is made by and between Phage Therapeutics, Inc ("Company") and Richard C. Honour
("Employee").

                               W I T N E S E T H:
                               ------------------

WHEREAS,  the Company wishes to employ or continue the employment of Employee in
the position of Vice President of Research and Development; and

WHEREAS, the Employee wishes to enter into the employ of, or continue employment
with Company to fulfill the  responsibilities  of the position of Vice President
of Research and 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) Term of Employment

     Subject to the terms and conditions of this Agreement, Company shall employ
Employee,  and Employee shall serve Company in the position of Vice President of
Research  and  Development,   for  a  period   commencing  on  January  1,  2001
("Commencement   Date")  and  continuing   through  the  first   anniversary  of
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 to 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 the terms of this  Agreement.  Such term of
employment,  as it shall be extended,  is hereafter  referred to as the "Term of
Employment."

     (2) Position and Duties

     During the Term of Employment,  the Employee shall serve in the position of
Vice President of Research and  Development  with  responsibility  for research,
based on the  policies and  direction  provided by the Board of Directors or its
designated  representative.  The Employee shall,  during the Term of Employment,
serve the Company  faithfully,  diligently  and  competently  to the best of his
ability,  and shall  hold,  in addition to the  position  of Vice  President  of
Research and Development,  such other Employee  positions in Company as to which
he/she may be elected,  appointed or assigned  from time to time by the Board of
Directors,  and  shall  discharge  such  latter  additional  Employee  duties in
connection  therewith to same faith,  diligence and  competence.  Employee shall
devote all of his business  time in  performance  of his/her  duties  hereunder;
provided,  however, that nothwithstanding any provision in this Agreement to the
contrary,  Employee shall not be precluded from devoting  reasonable  periods of
time for serving as a member of  committees  or advisory  boards of companies or
organizations  not  competitive  with and not in conflict with Company  business
interests,  so long as such  memberships or activities do not interfere with the
performance of Employee's duties under this Agreement.

     c) Compensation

          a)  Salary.  Company  will,  during  the  Term of  Employment,  pay to
     Employee as compensation  for performance of his/her duties and obligations
     here-in-under,  a salary at the rate of  120,000  per  annum("Salary")  for
     full-time  employment,  with  any  additional  part-time  employment  being
     pro-rated.  Payment shall be made in approximately  equal  installments not
     less than  twice  per  month  and  otherwise  in  accordance  with  Company
     customary  payroll  practices.  Such base 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 Board of Directors of Company, or a compensation  committee
     formed by the Board of Directors of Company.


     (3) Expenses and Benefits

          1)  Expenses.  All  travel  and  other  reasonable  business  expenses
     incident February 6, 2001

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     to the rendering of services by Employee under this Agreement shall be paid
     or reimbursed  by Company  within 30 days subject to submission by Employee
     from time to time of vouchers and  receipts in  accordance  with  Company's
     then in effect Personnel policies and procedures.

          2) Benefits. During the Term of Employment, Employee shall be entitled
     to participate in all employee and fringe benefits generally provided on an
     ongoing  basis to other members of Company's  management  who are similarly
     situated,  including  without  limitation,  all pensions,  profit  sharing,
     incentives, retirement plans, insurance, health and disability benefits and
     plans in accordance with  eligibility  and other  requirements of Company's
     then effective Personnel policies and procedures.

          3) Cash and Stock Bonuses: Stock Options.  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 Company, or their
     designated  representative(s).  Cash bonuses, if any, shall be paid subject
     to achievement of specific performance milestones agreed to by both Company
     and Employee.

          4) Personal Days. During the term of this Agreement, Employee shall be
     entitled to an amount of vacation time and sick time  ("Personal  Days") as
     in  accordance  with  Company's  then  effective   Personnel  policies  and
     procedures,  or such  other  time as may be  agreed  upon  by  Company  and
     Employee,  to be taken  consistent with Company's then effective  Personnel
     policies  and  procedures  and  consistent  with  effective   discharge  of
     Employee's  duties.  Personal Days shall accrue on a pro-rata  basis during
     the term of Agreement,  and in no case shall the amount of time so accruing
     be less than 1.7 days per month. Employee shall be entitled to payment with
     respect to Personal Days  remaining at the end of the year, or if Company's
     then effective Personnel policies and procedures  provide,  and Employee so
     chooses,  time remaining shall roll over to the next one (1) year Agreement
     Period.

          5) Continuing  Education.  In the even 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.

     (4) Death or Disability.

          (1) This  Agreement  shall be terminated by the death of Employee.  In
     addition, this Agreement may be terminated by Board of Directors of Company
     if Employee  shall be  rendered  incapable  by mental or physical  illness,
     injury or disease or any other  disability  from  satisfactorily  complying
     with  the  terms,   conditions  and  provisions  of  this  Agreement,   and
     obligations and  responsibilities of Employee's  position,  for a period in
     excess of ninety (90) days (whether or not conservative) or sixty (60) days
     consecutively,  as the case may be,  during any  consecutive  six (6) month
     period during the Term of Employment  ("Disability").  If this Agreement is
     terminated by reason of Disability of Employee,  Company shall give written
     notice to that effect to Employee in the manner provided in this Agreement.
     In the event that Employee receives disability  insurance benefits paid for
     by  Company  during  any  period  prior to  termination  of this  Agreement
     pursuant to this  section  5(a),  Employee's  salary shall be reduced by an
     amount equal to such disability insurance benefits during such period.

          b. In lieu of any  benefits  which  may be  payable  by  Company  with
     respect to death or Disability  of Employee,  in the event of such death or
     Disability,  the Salary payable  hereunder shall continue to be paid at the
     then current rate for nine (9) months after the  termination of employment.
     In the event of the death of  Employee  during the term of this  Agreement,
     the   sums   payable   hereunder   shall  be  paid  to   his/her   personal
     representative.

     (5) Disclosure of Information, Inventions and Discoveries.


     Employee  is  employed  to invent,  and  during the term of this  Agreement
Employee shall promptly disclose to Company all conceived,  developed working or
non-working   discoveries,   trademarks,   copyrightable  materials,  and  other
information  relating to the bacteriophage  business of Company including bu not
limited to compositions, processes, therapeutic methods of use ("Developments"),
whether or not conceived or developed  during  regular  working hours or through
use of material or facilities or Company, and Employee shall promptly deliver to
Company all memorandums,  writings,  electronic recordings,  drawings, sketches,
models and other data and records  relating to such  Developments.  In the event
any such Development shall be deemed by Company to be patentable,  copyrightable
or otherwise  registerable,  Employee shall,  at the expense of Company,  assist
Company in obtaining patents, trademarks or copyrights thereon and shall execute
all documents  necessary or supportive in obtaining such rights including patent
application continuations, continuations-in-part,  divisionals and international
filings,  and Employee shall vest all rights to any such Development in Company,
including full complete title and interest,  by executing all documents required
therefor.

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     (6) Non-Disclosure

     Employee  shall not, at any time during the Term of Employment  and for any
period  of five  (5)  years  thereafter,  divulge,  furnish  or  otherwise  make
accessible to anyone (other than in the regular course of business of Company or
as may be required by law) or use for his own account, or for the account on any
person,  any knowledge or information with respect to confidential,  proprietary
or secret process,  tradesecret,  invention,  discovery,  improvement,  formulae
plan,  marketing  plan,  sales plan,  data,  device,  idea or other  know-how or
development,  whether  patentable,  copyrightable or otherwise,  registerable or
not,  with  respect  to any  business  activity  of  Company  including  without
limitation,  publications, lists of contacts, customer lists, customer contacts,
supplier lists, contract relationships,  pricing arrangements, and the like with
customers, suppliers or contractors.


     (7) Non-Compete .

     Company and  Employee  agree that the services  rendered by Employee  under
this  Agreement are unique and  irreplaceable.  Employee  agrees that during the
Term of Employment and for a period of twelve (12) months  thereafter,  Employee
shall not: (a) conduct  business or initiate  activities,  engage or participate
for or in, directly or indirectly  (whether as an officer,  director,  employee,
partner, consultant,  holder of an equity or debt investment,  lender, advisor),
or lend his/her name (or any part or variant  thereof) to any  business,  in any
part of the  world,  which is, or as a result of the  Employee's  engagement  or
participation   would   become,   competitive   with  any  aspect  of  Company's
bacteriophage  business  including  therapies,  genetic  engineering  tools  and
methods,  expression  systems and diagnostics and therapeutic  products  derived
therefrom;  (b) deal,  directly or indirectly,  in a competitive manner with any
customers  doing business with Company during the Term of Engagement  (except in
connection  with the  performance  of the duties and  obligations of Employee to
Company  during the Term of  Employment);  (c)  solicit any  officer,  director,
employee or agent of Company to become an officer,  director,  employee or agent
of Employee,  his  respective  affiliates  or anyone else;  or, (d) engage in or
participate in,  directly,  any business  conducted under any name that shall be
the  same or  similar  to the name of the  Company  or  trade  name  used by it.
Ownership,  in the  aggregate,  of less  that 2% of the  outstanding  shares  or
capital stock of any  corporation  with one or more classes of its capital stock
listed  on  a  national   securities   exchange  or   publicly   traded  in  the
over-the-counter  market  shall not  constitute  a  violation  of the  foregoing
provision.

     (8) Termination for Cause

     Company shall have the right to terminate Employee's  employment under this
Agreement at any time for Cause (as hereinafter  defined).  For purposes of this
Agreement  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 Company shall have been 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) willful and continued  misconduct that
is materially  injurious,  in the reasonable judgement of the Board of Directors
of Company,  to Company or any of its subsidiaries,  shareholders or affiliates;
(c) conviction of (or pleading nolo contendere to) any felony or any misdemeanor
involving moral  turpitude which might, in the reasonable  judgment of the Board
of Directors of Company,  to 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
Company;  (e) commission of an act which the Board of Directors of 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  injuries Company; or (f) 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 injuries
the Company.  In the event of  termination  under this section 9, the  Company's
obligations  under this  Agreement  shall cease and Employee  shall  forfeit all
right to receive any future  compensation under this Agreement.  Notwithstanding
any   termination  of  this  Agreement   pursuant  to  section  9,  Employee  in
consideration  of his  employment  under  this  Agreement  to the  date  of such
termination,  shall remain bound by the provisions of sections 6, 7, 8 and 12 of
this Agreement.

     (9) Other Terminations

          (1)  Notwithstanding  any other provisions of this Agreement,  Company
     shall  have  the  right  to  terminate  Employee's  employment  under  this
     Agreement or give notice of its intent not to renew this agreement,  at any
     time without cause. Upon termination of Employee's  services or non-renewal
     of Agreement  for reasons  other than cause during the one (1) year term of
     this Agreement,  Employee will be entitled to six (6) months written notice
     of such intent to terminate,  or severance  pay at Employee's  then current
     salary for a period of nine (9) months from the date of termination.

          (2)  Notwithstanding  any other provisions of this Agreement,  Company
     may  terminate  this  Agreement  if (i) the Board of  Directors  of Company
     determines,  in good faith, that the Company's  financial  position is such
     that it is not able to meet it s obligations under this Agreement and under
     other  employment  agreements to which Company is party, and (ii) all other
     employment agreements are similarly terminated. In the event of termination
     of this Agreement under this

<PAGE>


     section  10(b),  Employee  shall  have no  right  to any  severance  pay or
     benefits  beyond the  termination  date and Company may  continue to employ
     Employee on an "at-will" basis.

     (10) Resignation

     In the event that Employee's services hereunder are terminated under any of
the provisions of this Agreement (except by death), Employee agrees that he will
deliver his written  resignation as an officer and/or director of Company to the
Board of Directors, such resignation to become effective immediately;  provided,
however, that nothing herein shall be deemed to affect the provisions of section
6, 7, 8 and 12 of this  Agreement  relating to the  survival  of those  sections
following termination of Employee's services hereunder;  and provided,  further,
that except as expressly provided in this Agreement,  Employee shall be entitled
to no further compensation hereunder.

     (11) Property

     Upon  termination  of the Term of  Employment  or  termination  pursuant to
section  5,  9  or  10  of  this   Agreement,   Employee  or  his/her   personal
representative shall promptly deliver to Company all books, memorandums,  plans,
records and written  data of every kind  relating to the business and affairs of
Company  and al other  property  owned by  Company  which is then in  Employee's
possession.

     (12) Insurance

     Company shall have the right, at its own cost and expense, to apply for and
to secure in its own name, or otherwise,  life, health or accident  insurance or
any or all of them covering Employee, and Employee agrees to submit to usual and
customary  medical  examinations  and  otherwise  to  cooperate  with Company in
connection  with  the  procurement  of  any  such  insurance,   and  any  claims
thereunder.

     (13) Specific Performance

     Employee acknowledges that, in the event of any breach of sections 5, 6, 7,
8, 10 or11 of this Agreement by Employee,  the remedy of Company at law would be
inadequate.  Employee therefore agrees that Company shall be entitled to enforce
its rights under  sections 5, 6, 7,8, 10 and 11 of this Agreement not only by an
action or actions for  damages  but also by an action or actions for  injunctive
and other equitable  relief without the necessity of providing  irreparable harm
or actual damage.

     (14) Successors, Binding Agreement

          (1) This  Agreement  shall be binding upon and inure to the benefit of
     the  parties  to  this  Agreement,   their  heirs,  legal  representatives,
     successors and assigns.

          (2)  Employee  may not  delegate  the  performance  of any  duties  or
     responsibilities imposed nor assign any rights and benefits created by this
     Agreement;  provided,  however, than any amounts which are due and owing to
     Employee at the time of his/her death shall be paid in accordance  with the
     terms of this  Agreement to Employee's  devisee,  legatee or other designee
     or, if there is no such designee, to the Employee's estate.

          (3)  Employee  represents  that the  execution  and  delivery  of this
     Agreement and the performance of his/her duties  hereunder do not and shall
     not conflict  with the terms of any  agreement or  obligation  to his prior
     employer or to any other party.

     (15) Notices

     All notices  required or permitted under this Agreement shall be in writing
and delivered by any method for providing proof of delivery. Any notice shall be
deemed to have been given on the date of receipt.  Notices shall be delivered to
the  parties of the  following  addresses  until a  different  address  has been
designated by notice to the other party:

  1.        If to Employee:          2.         If to Company:
  -------------------------         -------------------------
  Richard C. Honour                  Phage Therapeutics, Inc
  19211 64th Place NE                19017 - 120th Avenue NE, Suite 102
  Seattle, WA 98155                  Bothell, WA 98011

     (16) Miscellaneous


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     No  provisions  of this  Agreement  may be modified,  waived or  discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by Company and  Employee.  No waiver by either party to this  Agreement,  at any
time,  of any breach by the other party to this  Agreement,  at any time, of any
breach  by the  other  party to this  Agreement  of,  or  compliance  with,  any
provision of this Agreement to be performed by such other party, shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or  representations,  oral or otherwise,
express or implied,  with respect to the subject  matter of this  Agreement have
been made by either  party or any other party which are not set forth  expressly
in this Agreement. The validity, interpretation, construction and performance of
this  Agreement  shall  be  governed  by the  laws of the  State  of  Washington
applicable when agreements are made and entirely performed in such State.

     (17) Arbitration

     Any  controversy  or  claim  arising  out  of or in  connection  with  this
Agreement  shall be settled by arbitration  in accordance  with the rules of the
American Arbitration Association then in effect in the State of Washington,  and
judgement upon such award rendered by the arbitrator may be entered in any court
having  jurisdiction  in the State of  Washington.  Either  party shall  provide
written  notice of any claim to the other  party  within one year of the date of
the alleged act or omission giving rise to the claim; otherwise, the claim shall
be void and waived,  even though there may be statute of limitations  that would
have provided more time to pursue the claim.  The  arbitration  shall be held in
the  State  of  Washington.  The  arbitration  award  shall  include  reasonable
attorney's fees and costs to the prevailing party.

     (18) Validity

     It is the  intention of Employee and Company  that the  provisions  of this
Agreement (including, without limitations, those of sections 5, 6, 7, 8 and 9 of
this  Agreement  shall be enforced to the fullest extent  permissible  under the
laws and public  policies  of each  jurisdiction  in which such  enforcement  is
sought. The validity or  unenforceability of any provision or provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement,  which shall remain in full force and effect. If any tribunal
of  competent  jurisdiction  shall  decide  that nay of the  provisions  of this
Agreement should be deemed illegal or unenforceable,  then only those provisions
shall be deemed  invalid  (or shall be  approximately  modified  to the  maximum
extent permissible in keeping shall continue in full force and effect.

     (19) Survival

     The  provisions of section 5, 6, 7, 8, 12, and 18 of this  Agreement  shall
survive  the  termination  of this  Agreement  and  shall  be  binding  upon the
Employee's  personal  or  legal  representatives,   executors,   administrators,
successors, heirs, distributees, devisees and legatees.

     21. Headings

     The headings of this  Agreement are for  convenience  of reference only and
are not part of the substance of this Agreement.

     22. Counterparts

     This Agreement may be executed in one or more  counterparts,  each of which
shall be deemed to be an original but al of which  together will  constitute one
and the same instrument.

     IN WITNESS  WHEREOF,  the parties have executed this  Agreement on the date
and year first above written.


                     Phage Therapeutics International, Inc



                     By:
                         ------------------------------------------
                     Name: Darren Pylot
                     Title: President, Board of Directors



                     ----------------------------------------------
                     Richard C. Honour (Employee)