EMPLOYMENT AGREEMENT

     THIS  AGREEMENT  is entered  into as of January  15,  2001,  by and between
GARDENBURGER,  INC., an Oregon  corporation ("the Company") and SCOTT C. WALLACE
("Executive").

     In consideration of the mutual covenants and the other terms and conditions
set forth in this Agreement, the parties agree as follows:

1.   EMPLOYMENT; POSITION

     The Company  agrees to employ  Executive and  Executive  agrees to serve as
President and Chief Executive  Officer of the Company.  Executive also agrees to
serve, if elected, without separate compensation,  as an officer and/or director
of the Company or any subsidiary or affiliate of the Company.

2.   DUTIES

     As President and Chief  Executive  Officer of the Company,  Executive  will
have such powers and duties appropriate to that office (a) as may be provided by
the articles  and/or bylaws of the Company and (b) as determined by the Board of
Directors  of the  Company  from  time to  time.  Executive  will  at all  times
discharge  his  duties  in  consultation  with and  under  the  supervision  and
direction of the Board of Directors of the Company. Subject to the provisions of
this  Agreement,  Executive's  duties  may be  changed  from  time to time,  and
Executive's  place of work may be relocated at the sole  discretion of the Board
of Directors of the Company.

3.   OUTSIDE ACTIVITIES

     During his employment by the Company under this  Agreement,  Executive will
devote all of his business time,  attention,  skill, and efforts to the faithful
performance  of his  duties  under this  Agreement.  Executive  will  obtain the
consent of the Board of Directors of the Company  before he engages in any other
professional or business  activities that may require an appreciable  portion of
Executive's time or effort to the detriment of the Company's business.

4.   COMPENSATION AND FRINGE BENEFITS

     4.1 BASE SALARY.  As compensation  for services under this  Agreement,  the
Company  will pay to  Executive an annual  salary of $240,000  ("Base  Salary").
Executive's  Base Salary will be payable in  accordance  with the usual  payroll
practices of the Company.  During  Executive's  employment under this Agreement,
Executive's  Base  Salary  will be  reviewed  at least  annually by the Board of
Directors of the  Company,  and the Board of Directors of the Company may in its
sole discretion adjust Executive's Base Salary from time to time.

     4.2  PERFORMANCE  BONUS.  Executive  will be  eligible to receive an annual
performance  bonus  based  on  achieving  strategic  and  financial  goals to be
determined for each year by the compensation committee of the Company's Board of
Directors;  provided,  however, that for the 2001 calendar year, such goals will


                                      -1-
<PAGE>

be determined jointly (and agreed upon in writing) by Executive and the Chair of
the  Company's  Board of  Directors.  The target  annual  performance  bonus for
Executive  will be 50  percent  of Base  Salary.  For the  2001  calendar  year,
Executive's annual performance bonus will be not less than $60,000.

     4.3 STOCK OPTION. The Company will, effective as of the first day Executive
begins  working for the Company (the  "Commencement  Date")  grant  Executive an
incentive  stock  option  under the  Company's  1992 First  Amended and Restated
Combination  Stock Option Plan (the "Initial Option") to purchase 150,000 shares
of the Company's  common stock at a purchase price equal to the per-share market
value of the  Company's  common stock on the  Commencement  Date.  The terms and
conditions of the Initial  Option are set forth in the form of option  agreement
attached  hereto as Exhibit A, which the parties will execute  contemporaneously
with their execution of this Agreement.

     4.4 OTHER BENEFIT PLANS. In addition to the  compensation  described above,
to the extent  otherwise  eligible,  Executive  will be  entitled  to receive or
participate in all such other benefits,  including  without  limitation  pension
plans,  stock option plans,  and health and welfare  plans,  as may from time to
time be made available to other senior management employees of the Company.

     4.5  VACATION.  Executive  will be  entitled  to  four  weeks  annual  paid
vacation.

     4.6  RELOCATION.  Executive will be reimbursed  for  reasonable  moving and
relocation  expenses  actually  incurred by Executive in connection  with moving
himself, his family, and his household goods from Dana Point, California, to the
Portland,  Oregon  metropolitan area, up to a maximum  reimbursement of $20,000.
Such  reimbursement  will be  subject  to  presentation  of  receipts  and other
verification reasonably requested by the Company.

     4.7 SALE BONUS

     (a) After the completion of a "Sale  Transaction,"  as defined  below,  the
Company  will  pay  Executive  a "Sale  Bonus,"  as  described  below,  provided
Executive remains as President and Chief Executive Officer of the Company during
the  negotiation  of and through the closing of the Sale  Transaction.  The Sale
Bonus  will be  payable  to  Executive  after all  post-closing  adjustments  in
connection with the Sale Transaction have been determined.

     (b) For purposes of this paragraph 4.7:

          (i) A "Sale  Transaction"  means a single  transaction  or a series of
     related  transactions  approved  by the Board of  Directors  of the Company
     resulting in:

          o    A  sale  or  other   disposition   by  the   Company  of  all  or
               substantially all its assets;

          o    A  sale,  stock  exchange,   or  other   disposition  of  all  or
               substantially all the capital stock of the Company;

                                      -2-
<PAGE>


          o    A merger,  consolidation,  or other corporate  transaction with a
               third party in which the  Company's  shareholders  receive  cash,
               stock, securities, or any other consideration (or any combination
               of the foregoing) in exchange for their stock in the Company.

          (ii) The "Sale  Bonus" is an amount  equal to the sum of (i) 1 percent
     of the portion of the "Total  Consideration" (as defined below) equal to or
     less than $100  million,  plus (ii) 2 percent  of the  portion of the Total
     Consideration in excess of $100 million; and

          (iii) The "Total  Consideration" in connection with a Sale Transaction
     means:

          o    The amount of cash and the  aggregate  market  value of all other
               consideration  received by the Company in connection  with a sale
               or other disposition of its assets (exclusive of any indebtedness
               or  liabilities  of the  Company  to which the  assets  taken are
               subject or which are assumed by the  purchaser or other  acquirer
               of the Company's assets); or

          o    The aggregate  amount of cash and the  aggregate  market value of
               all other consideration received by the Company's shareholders in
               any sale, share exchange,  or other  disposition of the Company's
               stock or any merger, consolidation, or similar transaction.

     4.8  WITHHOLDING  AND PAYROLL TAXES.  All amounts payable by the Company to
Executive  pursuant to this  Agreement,  including  without  limitation all cash
compensation,  any Sale Bonus, and any settlement of stock options,  are subject
to and will be reduced by amounts the  Company is  required to withhold  for all
applicable federal, state, and local income and payroll taxes.

5.   EXPENSES

     The Company will  reimburse  Executive  for all  reasonable  and  necessary
expenses  incurred by Executive in carrying out his duties under this Agreement.
Executive  will present to the Company from time to time an itemized  account of
such expenses in such form as may be required by the Company.

6.   PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION

     6.1  SEVERANCE  PAYMENT.  Upon  involuntary  termination  by the Company of
Executive's   employment   (other  than  for  "Cause,"  or  in  connection  with
Executive's  death or  "Disability,"  as those  terms are  defined  below),  the
Company will pay Executive his Base Salary through the date of  termination  and
will pay Executive severance pay equal to one year's Base Salary (payable over a
12-month  period in accordance  with the Company's  normal  payroll  practices).
Executive  agrees,  as a condition to payment and receipt of such severance pay,
to execute a full and complete  release,  in form and substance  satisfactory to
the Company,  of any and all claims of every kind and nature whatsoever  against
the Company.

                                      -3-
<PAGE>


     6.2  DEFINITIONS. For purposes of this Section 6:

     (a) "Cause" for termination of Executive's  employment  means (i) any fraud
or dishonesty by Executive  involving  the Company;  (ii) willful  misconduct or
gross negligence by Executive in connection with Executive's  performance of his
duties for the Company;  (iii)  Executive's  conviction  for having  committed a
felony;  (iv) the commission by Executive of any act in direct  competition with
or materially  detrimental to the best interests of the Company;  or (v) willful
and continued failure by Executive to substantially  perform his duties provided
herein  after a written  demand for  substantial  performance  is  delivered  to
Executive by the Chair of the Board of  Directors  of the Company,  which demand
identifies  with  reasonable  specificity  the manner in which Executive has not
substantially performed his duties.

     (b) "Disability"  has the meaning in the Company's then current  disability
plan or program  or, if no such plan or  program  is then in effect,  Disability
means the condition of being permanently  unable to perform  Executive's  duties
for the  Company  by  reason  of a  medically  determinable  physical  or mental
impairment  that can be expected to result in death or that has lasted or can be
reasonably expected to last for a continuous period of at least 12 months.

     6.3 NATURE OF EMPLOYMENT  STATUS.  Notwithstanding  the  provisions of this
Agreement,  including this Section 6, Executive will be an "at will" employee of
the Company.  The provisions of this Section 6 specify  Executive's  contractual
rights in the event of termination,  but are not intended to limit the Company's
right  and power to  terminate  Executive's  employment  at any time and for any
reason (or for no reason).

7.   MATERIALS PREPARED AND INVENTIONS MADE DURING EMPLOYMENT

     The Company shall be the exclusive  owner of all materials,  concepts,  and
inventions Executive prepares, develops, or makes (whether alone or jointly with
others) within the scope of his employment, and of all related rights (including
copyrights,   trademarks,   and  patents)  and  proceeds.   Without  limitation,
materials, concepts, and inventions that (a) relate to the Company's business or
actual or demonstrably  anticipated research or development,  or (b) result from
any work performed by Executive for the Company,  shall be considered within the
scope of Executive's  employment.  Executive  shall  promptly  disclose all such
materials,  concepts,  and inventions to the Company.  Executive  shall take all
action reasonably  requested by the Company to vest ownership of such materials,
consents,  and  inventions  in the  Company  and to permit the Company to obtain
copyright, trademark, patent, or similar protection in its name.

                                      -4-
<PAGE>

8.   CONFIDENTIAL INFORMATION

     8.1  DEFINED.  "Confidential  Information"  is  all  nonpublic  information
relating to the Company or its business  that is disclosed  to  Executive,  that
Executive  produces,  or that Executive  otherwise  obtains  during  employment.
"Confidential Information" also includes information received from third parties
that the Company has agreed to treat as  confidential.  Examples of Confidential
Information are:

     (a) Marketing plans.

     (b) Customer lists.

     (c) Product design and manufacturing information.

     (d) Financial information.

     "Confidential  Information"  does not include  information  which (a) is or
becomes generally available to the public other than as a result of a disclosure
by Executive; (b) becomes available to Executive on a nonconfidential basis from
a source  other than the  Company  or its  representatives,  provided  that such
source is not known by Executive to be bound by a confidentiality agreement with
the Company or its representatives or otherwise prohibited from transmitting the
information to Executive by a contractual,  legal, or fiduciary obligation;  (c)
can be demonstrated  by written  evidence or other  convincing  evidence to have
been known by Executive on a  nonconfidential  basis prior to its  disclosure to
Executive  by  the  Company  or  one  of  its  representatives;  or  (d)  can be
demonstrated by written or other  convincing  evidence to have been developed by
Executive in good faith and independent of Confidential Information.

     8.2 ACCESS TO INFORMATION. Executive acknowledges that in the course of his
employment  he  will  have  access  to  Confidential   Information,   that  such
information  is a valuable  asset of the  Company,  and that its  disclosure  or
unauthorized use will cause the Company substantial harm.

     8.3 OWNERSHIp.  Executive  acknowledges  that all Confidential  Information
shall  continue to be the exclusive  property of the Company (or the third party
that  disclosed it to the Company),  whether or not prepared in whole or in part
by  Executive  and whether or not  disclosed  to  Executive  or entrusted to his
custody in connection with his employment by the Company.

     8.4 NONDISCLOSURE AND NONUSE. Unless authorized or instructed in writing by
the Company, or required by legally constituted  authority,  Executive will not,
except as required in the course of the Company's business,  during or after his
employment,  disclose to others or use any Confidential Information,  unless and
until,  and then only to the extent  that,  such items  become  available to the
public through no fault of Executive.

     8.5 RETURN OF CONFIDENTIAL INFORMATION.  Upon request by the Company during
or after his  employment,  and without  request upon  termination  of employment
pursuant to this  Agreement,  Executive will deliver  immediately to the Company
all written or tangible materials  containing  Confidential  Information without
retaining any excerpts or copies.

                                      -5-
<PAGE>


     8.6  DURATION.  The  obligations  set forth in this Section 8 will continue
beyond the term of  employment  of  Executive  by the Company and for so long as
Executive possesses Confidential Information.

9.   NONCOMPETITION

     9.1  COVENANTS.  Executive  covenants,  in  consideration  of  his  initial
employment by the Company,  that the Executive  will not,  throughout the United
States or in any  other  country  in which the  Company  sells its  products  or
services,  either  individually or as a director,  officer,  partner,  employee,
agent,  representative,  or consultant with any business, directly or indirectly
during the term of employment and for two years thereafter:

     (a) Engage or  prepare to engage in any  business  that sells  products  or
services  competing with those sold by the Company as of the date of Executive's
termination of employment with the Company;

     (b)  Induce or attempt  to induce  any  person  who is an  employee  of the
Company to leave the employ of the Company; or

     (c) Solicit,  divert,  or accept  orders for products or services  that are
substantially competitive with the products or services sold by the Company from
any customer of the Company, or suggest,  request, or encourage any suppliers or
customers of the Company to curtail,  reduce, or cancel their business done with
the Company,  or otherwise solicit for himself or any other person or entity any
business of the Company.

     9.2  SEVERABILITY.  While  Executive  acknowledges  that  the  restrictions
contained  herein are reasonable,  if any term or condition of this Section 9 is
determined to be unenforceable because of its scope, duration, geographical area
or similar factor,  the court or arbitrator making such  determination will have
the power to reduce or limit such scope,  duration,  area, or other factor,  and
such covenant will then be enforceable in its reduced or limited form.

10.  GENERAL TERMS AND CONDITIONS

     10.1  EFFECT  ON PRIOR  AGREEMENTS.  This  Agreement  contains  the  entire
understanding  between  the  parties  concerning  the  subject  matter  of  this
Agreement  and  supersedes  any prior  agreements  (express or implied,  oral or
written) concerning the subject matter of this Agreement.

     10.2  SUCCESSORS  AND ASSIGNS.  This Agreement will inure to the benefit of
any successors or assigns of the Company.

     10.3 MODIFICATION AND WAIVER.

     (a) This Agreement may be modified or amended only by a written  instrument
signed by both parties.

     (b) No term or  condition  of this  Agreement  will be  deemed to have been
waived,  nor will there be any estoppel against the enforcement of any provision
of this Agreement,  except by a written  instrument  signed by the party charged

                                      -6-
<PAGE>

with such waiver or estoppel. No such written waiver will be deemed a continuing
waiver unless  specifically  stated  therein,  and each such waiver will operate
only as to the  specific  term or  condition  waived and will not  constitute  a
waiver of such term or  condition  for the  future as to any act other than that
specifically waived.

     10.4 SEVERABILITY.  If, for any reason, any provision of this Agreement, or
any part of any provision,  is held invalid, such invalidity will not affect any
other  provision  of this  Agreement or any part of such  provision  not held so
invalid,  and each such other provision and part thereof will to the full extent
consistent with law continue in full force and effect.

     10.5  HEADINGS FOR  REFERENCE  ONLY.  The  headings of sections  herein are
included solely for convenience of reference and will not control the meaning or
interpretation of any of the provisions of this Agreement.

     10.6  GOVERNING  LAW.  This  Agreement  will be governed by the laws of the
state of Oregon.

     10.7  ARBITRATION

     (a) All claims,  disputes,  or controversies,  except for those excluded by
Section  10.7(b),  whether or not arising out of Executive's  employment (or its
termination),  that the Company may have against the Executive or that Executive
may have against the Company or against its  officers,  directors,  employees or
agents,  in their capacity as such or otherwise,  shall be resolved by mandatory
arbitration  in  accordance  with  the  then  effective   arbitration  rules  of
Arbitration  Service of Portland,  Inc.,  or American  Arbitration  Association,
whichever organization is selected by the party that first initiates arbitration
by  filing  a claim in  accordance  with the  filing  rules of the  organization
selected,  and any judgment upon the award rendered pursuant to such arbitration
may be  entered  in any court  having  jurisdiction  thereof.  Unless  otherwise
agreed,  arbitration  shall be conducted in  Portland,  Oregon,  before a single
arbitrator.

     (b) Claims arising out of Sections 8 and 9 of this Agreement or relating to
workers'  compensation or unemployment  compensation  benefits are excluded from
mandatory  arbitration  under Section 10.7(a).  Such excluded claims may include
but are not  limited  to claims  by the  Company  for  injunctive  and/or  other
equitable  relief for  unfair  competition  and/or  the use and/or  unauthorized
disclosure of trade secrets or Confidential  Information,  as to which Executive
understands  and agrees that the Company may seek and obtain relief from a court
of competent jurisdiction.

     10.8  ATTORNEY  FEES.  In the event of any suit or  action  or  arbitration
proceeding to enforce or interpret any provision of this  Agreement (or which is
based on this Agreement),  the prevailing party will be entitled to recover,  in
addition to other costs, the reasonable attorney fees incurred by the prevailing
party in connection with such suit,  action,  or arbitration,  and in any appeal
therefrom.  The  determination  of who is the prevailing party and the amount of
reasonable  attorney fees to be paid to the prevailing  party will be decided by
the arbitrator or  arbitrators  (with respect to attorney fees incurred prior to
and during the arbitration  proceedings)  and by the court or courts,  including
any appellate courts, in which the matter is tried, heard, or decided, including

                                      -7-
<PAGE>

the court which hears any exceptions  made to an arbitration  award submitted to
it for  confirmation  as a judgment  (with  respect to attorney fees incurred in
such confirmation proceedings).

     10.9  INITIAL  EMPLOYMENT.  Executive  acknowledges  that  he  signed  this
agreement upon his initial employment with the Company.

     The parties have executed this  Employment  Agreement as of the date stated
above.

                                             GARDENBURGER, INC.


By: /s/ Scott C. Wallace                     By: /s/ Ronald C. Kesselman
    --------------------------------             -------------------------------
    Scott C. Wallace                             Ronald C. Kesselman
                                                 Chair of the Board of Directors







                                      -8-

<PAGE>

                                                         Option No.      _______
                                                         No. of Shares   150,000


                               GARDENBURGER, INC.
                           INCENTIVE STOCK OPTION AND

                        INCENTIVE STOCK OPTION AGREEMENT

     This  Incentive  Stock  Option is granted and this  Incentive  Stock Option
Agreement (the  "Agreement") is executed by and between  Gardenburger,  Inc., an
Oregon  corporation  (the  "Company"),   and  Scott  Wallace  (the  "Optionee"),
effective January 15, 2001.

                                    RECITALS

     A. The Company has duly adopted that certain Gardenburger, Inc., 1992 First
Amended and Restated  Combination Stock Option Plan, a copy of which is attached
hereto as Exhibit A (the "Plan").

     B. The Plan  authorizes a committee  appointed by the Board of Directors of
the Company (the "Administrative Committee") to grant incentive stock options to
officers and employees of the Company.

     C. The  Administrative  Committee  has  selected the Optionee to receive an
incentive stock option under the Plan.


NOW, THEREFORE, THE COMPANY AND THE OPTIONEE COVENANT AND AGREE AS FOLLOWS:

     1. NUMBER OF SHARES SUBJECT TO OPTION AND OPTION PRICE.  The Company hereby
grants to the Optionee an incentive stock option (the "Option") to purchase from
the Company  150,000 shares of the no par value common stock of the Company (the
"Common  Stock")  at an  exercise  price of  $______  per  share.  The Option is
exercisable upon the terms and conditions contained herein.

     2. ADDITIONAL TERMS OF THE OPTION. Subject to the provisions of Paragraph 3
below, the Option shall have the following

terms:

          2.1 The  effective  date of the grant of the Option  shall be the date
first set forth above.

                                                                       EXHIBIT A
                                                                          Page 1
--------------------------------
Incentive Stock Option Agreement

<PAGE>

          2.2 The Option shall vest as follows:

                                                    Cumulative
                     Date                           Percentage Vested
                     ----                           -----------------

               January 15, 2002                          25%

               January 15, 2003                          50%

               January 15, 2004                          75%

               January 15, 2005                         100%

          2.3 The foregoing vesting schedule notwithstanding,  this Option shall
immediately vest as to any Option shares that have not then become vested upon:

          (i)  the  termination of the employment of the Optionee by the Company
               as a result of the Optionee's  death or "Disability"  (as defined
               in Optionee's Employment Agreement dated as of January 15, 2001);
               or

          (ii) following  a "Change  in  Control"  of the  Company  (as  defined
               below),  (x) the termination of the employment of the Optionee by
               the Company  other than for  "Cause"  (as  defined in  Optionee's
               Employment  Agreement  dated as of January  15,  2001),  death or
               Disability  or (y) the  occurrence  of a material  diminution  in
               Optionee's position or  responsibilities  with or compensation by
               the Company.  For purposes  hereof,  a "Change in Control" of the
               Company shall be deemed to have occurred upon the earlier of:


               (a)  the date  that any  "person"  (as that  term is  defined  in
                    Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act
                    of 1934,  as amended (the  "Act")),  other than a trustee or
                    other fiduciary holding securities under an employee benefit
                    plan of the Company,  becomes a beneficial owner (within the
                    meaning of Rule 13d-3 promulgated  under the Act),  directly
                    or indirectly, of securities of the Company representing 25%
                    or more of the combined  voting power of the Company's  then
                    outstanding securities; or

                                                                       EXHIBIT A
                                                                          Page 2
--------------------------------
Incentive Stock Option Agreement

<PAGE>


               (b)  the date of any annual or special meeting of stockholders at
                    which a  majority  of the  directors  then  elected  are not
                    individuals nominated by the Company's then incumbent Board;
                    or

               (c)  the date of approval by the stockholders of the Company of a
                    plan of merger or consolidation of the Company in which such
                    stockholders  will  not hold at  least  75% of the  combined
                    voting power of the resulting entity  immediately  following
                    such  merger  or  consolidation,  or  the  approval  by  the
                    stockholders   of  the   Company  of  a  plan  of   complete
                    liquidation  of the Company or an agreement  for the sale of
                    substantially all of the Company's assets.

     2.4 The Option shall expire on January 15, 2011 (the "Expiration Date").

     2.5 To the extent  vested,  the Option may be exercised in whole or in part
at any time and from time to time prior to the Expiration Date.

     2.6 The  Option  must be  exercised,  if at all,  as to a whole  number  of
shares.

     3.  INCORPORATION BY REFERENCE OF THE TERMS AND CONDITIONS OF THE PLAN. The
terms and  conditions  of this  Option  shall be subject to all of the terms and
conditions of the Plan, which terms and conditions are expressly incorporated by
reference  into this Agreement to the same extent and with the same effect as if
such terms and conditions  were set forth herein.  In the event of a conflict or
inconsistency  between the terms and  conditions set forth in this Agreement and
the terms and conditions of the Plan, those of the Plan shall control.

     4. EXERCISE OF THE OPTION; DELIVERY OF CERTIFICATEs.


          4.1 The Option may be exercised only in accordance  with the terms and
conditions  of  Section 9 of the Plan and by (1)  delivery  to the  Company of a
Notice  of  Exercise  substantially  in the form of  Exhibit B  attached  hereto
specifying  the number of shares of Common Stock for which the exercise is to be
effective, and (2) tendering full payment of the Option Price for such shares.

          4.2  Within a  reasonable  time after its  receipt  of the  Optionee's
Notice of Exercise,  the Company shall deliver to the Optionee a certificate for
the shares of Common Stock for which exercise of the Option was effective.


                                                                       EXHIBIT A
                                                                          Page 3
--------------------------------
Incentive Stock Option Agreement

<PAGE>

     5.  TRANSFERABILITY  OF THE  OPTION.  The  Option is  transferable  only in
accordance with Section 10 of the Plan.

     6.  WARRANTIES  AND  REPRESENTATIONS  OF THE  OPTIONEE.  By executing  this
Agreement,  the Optionee accepts the Option and agrees to be bound by all of the
terms of this  Agreement  and the Plan. In addition,  the Optionee  acknowledges
that exercise of the Option and the sale of the shares of Common Stock  acquired
upon exercise  thereof may have tax  implications  for which the Optionee should
seek individual advice by his or her own tax counselor or advisor.

     7.  INDEMNIFICATION  BY THE OPTIONEE.  The Optionee agrees to indemnify and
hold the Company harmless from any loss or damage,  including attorney's fees or
other  legal  expenses,  incurred  in the  defense  or payment of any such claim
against  the  Company   resulting   from  a  breach  by  the   Optionee  of  the
representations, warranties or provisions contained in this Agreement.

     8. NO RIGHT TO CONTINUED RELATIONSHIP. Nothing herein shall confer upon the
Optionee the right to continue as an officer or employee of or with the Company,
nor affect any right which the Company may have to  terminate  its  relationship
with the Optionee.

     9.  RIGHTS  AS  SHAREHOLDERS.  The  Optionee  shall  have  no  rights  as a
shareholder  of the Company on account of the Option nor on account of shares of
Common Stock subject hereto until such time as the Company shall have issued and
delivered stock certificates to the Optionee.


     10. FURTHER ASSURANCES.  From time to time and upon request by the Company,
the  Optionee  agrees to execute  such  additional  documents as the Company may
reasonably  require  in  order  to  effect  the  purposes  of the  Plan and this
Agreement.

     11. BINDING  EFFECT.  This Agreement shall be binding upon the Optionee and
the Optionee's heirs, successors and assigns,  including the Qualified Successor
of the Optionee (as that term is defined in Section 10.2 of the Plan).

     12. WAIVERS/MODIFICATIONS. No waivers, alterations or modifications of this
Agreement  shall be valid  unless  in  writing  and duly  executed  by the party
against whom  enforcement of such waiver,  alteration or modification is sought.
The  failure of any party to enforce  any of its rights  against the other party
for breach of any of the terms of this Agreement shall not be construed a waiver
of such rights as to any continued or subsequent breach.

     13.  GOVERNING  LAW.  This  Agreement  shall be governed by the laws of the
State of Oregon.


                                                                       EXHIBIT A
                                                                          Page 4
--------------------------------
Incentive Stock Option Agreement

<PAGE>


     IN WITNESS WHEREOF,  the parties have executed this Agreement as of the day
and year first above written.

GARDENBURGER, INC.:                         OPTIONEE:


By: /s/Alexander P. Coleman                 /s/ Scott C. Wallace
    --------------------------------        ------------------------------------
    Alexander P. Coleman                        Scott C. Wallace
    Administrative Committee Member




















                                                                       EXHIBIT A
                                                                          Page 5
--------------------------------
Incentive Stock Option Agreement


<PAGE>




                                    Exhibit B

                     NOTICE OF EXERCISE OF INCENTIVE OPTION

                          Under the Gardenburger, Inc.,
          1992 First Amended and Restated Combination Stock Option Plan

I,  _________________,  hereby exercise the option to purchase ________shares of
no par value common stock (the "Shares"), of Gardenburger, Inc. (the "Company"),
granted to me pursuant to the terms and  conditions of the  Gardenburger,  Inc.,
1992 First Amended and Restated  Combination  Stock Option Plan (the "Plan") and
the  Incentive  Stock  Option  and  Incentive   Stock  Option   Agreement  dated
__________, 2001, bearing Option No. ___ (the "Option").

Accompanying this Notice is: [select one]

o    cash, certified or cashier's check in the amount of $________,

o    _____ shares of the Company's  Common Stock valued at $_______  (their fair
     market value as of this date), or

o    I  hereby  request  that  this  Option  be  exercised  through  a  cashless
     transaction  and have provided the name and address of my broker  below.  I
     understand that if I elect a cashless transaction, the Company will request
     and authorize its stock transfer agent to issue the  certificate(s)  in the
     name of my broker to facilitate the completion of the transaction.

         _______________________                              Date:  _________
         (Optionee's Signature)

         Optionee's Name:_____________________________
         Optionee's Address:__________________________
                            __________________________


                                         Broker's Name:_________________________
                                         Broker's Address:______________________
                                                          ______________________




                                                                       EXHIBIT A
                                                                          Page 6
--------------------------------
Incentive Stock Option Agreement - Exhibit B

<PAGE>


                          RECEIPT FOR STOCK CERTIFICATE

         I hereby  acknowledge  receipt  of Stock  Certificate  No.___  from the
Company on _________, 2001_,  representing  ___ shares of the  Company's  common
stock acquired upon exercise of the Option bearing Option No. ___.



                  _______________________                     Date:  ___________
                  Optionee Signature













                                                                       EXHIBIT A
                                                                          Page 7
--------------------------------
Incentive Stock Option Agreement - Exhibit B