<PAGE>
 
                                                                    Exhibit 10.3

                    SEPARATION AGREEMENT AND GENERAL RELEASE
                    ----------------------------------------

         This Separation Agreement and General Release ("Agreement") is between
Katia P. Breslawec ("you") and Integ Incorporated (the "Company"). You have
voluntarily resigned your employment effective August 31, 1998. The Company will
provide you with severance pay in consideration of your signing this Agreement.

         You and the Company agree as follows:

         1. Resignation of Employment. You have resigned your employment
effective August 31, 1998. In consideration of the Company's agreement to pay
the severance pay referenced in Section 3 of this Agreement, you agree to remain
employed by the Company through August 31, 1998. You agree to devote your full
time, attention, knowledge, and skill exclusively to the loyal service of the
Company through that date, and to use your best efforts to carry out all of the
duties and responsibilities that are or may be assigned to you.

         2. Nondisclosure of Resignation. You agree to keep your resignation
strictly confidential. You agree not to disclose your resignation at any time
prior to August 14, 1998, to any other person, whether within the Company or
outside of the Company, including to any current or former employee of the
Company, or to any prospective employer. This Section is subject to the
exceptions specified in Section 13, below.

         If the Company believes that you have breached your nondisclosure
obligations contained in this Section 2, it will provide written notice to you
of such belief. You and the Company agree to submit the issue of your alleged
breach to binding arbitration under the applicable rules of the American
Arbitration Association, within 60 days of the Company's written notice. The
Company will have the burden in the arbitration to prove by a preponderance of
the evidence that you breached your nondisclosure obligations. If the Company
proves such a breach, you will not be entitled to any severance pay under this
Agreement, and you agree to repay any severance pay already paid to you, within
60 days of the arbitrator's decision.

         3. Severance Pay. The Company will continue, as severance pay, your
salary in effect on August 31, 1998, for a period of twelve months following
August 31, 1998, subject to required tax withholding. Such severance pay shall
be paid in installments over the twelve-month period, in accordance with the
Company's normal payroll practices. The Company will also pay to you for 1998 a
pro rata portion of any bonus to which you would have been entitled had you
remained employed for the entire calendar year; such pro rata portion of such
bonus will be based upon the period from January 1, 1998, to August 31, 1998,
provided you remain employed through August 31, 1998, and perform your duties in
accordance with Section 1 of this Agreement.
<PAGE>
 
         You have no duty or obligation to find other employment during the
twelve-month severance pay period. However, if and to the extent that you earn
income related to new employment or other work, including consulting work,
performed by you during the twelve-month severance pay period, the severance pay
provided for in this Section will be reduced by the amount of such income. You
agree to promptly and fully disclose to the Company in writing the nature and
amount of any such earned income related to new employment or other work for
purposes of mitigation and reduction of the Company's obligations hereunder, and
you will be liable to repay any amounts paid by the Company which would have
been reduced but for your failure to make such disclosure.

         You acknowledge that you are not entitled to the severance pay
referenced in this Section 3 unless you sign this Agreement.

         4. Release. In consideration of the severance pay specified in Section
3, you fully release and discharge the following entities and persons from all
legal claims, known or unknown: the Company, its related or affiliated
companies, and all of the respective officers, shareholders, directors,
employees, agents, and insurers of the Company and its related or affiliated
companies.

         You understand that by releasing all of your legal claims against these
entities and persons, you are releasing all of your rights to bring any claims
against them based on any actions, decisions, or events occurring through the
date of your signing of this Agreement, including the terms and conditions of
your employment and your resignation of your employment. Your release includes
any claims based upon:

         *        Federal, state or local employment discrimination laws,
                  regulations or requirements, including the Minnesota Human
                  Rights Act, Minn. Stat. Ch. 363; Minn. Stat. ss.181.81; Title
                  VII of the Civil Rights Act, 42 U.S.C. ss.2000e, et seq.; the
                  Age Discrimination in Employment Act, 29 U.S.C. ss.621, et
                  seq.; and the Americans with Disabilities Act, 42 U.S.C.
                  ss.12101, et seq.;

         *        Any other statute, ordinance, or regulation;

         *        Any contract, quasi-contract or promissory estoppel, including
                  any claim based upon the Change in Control Agreement between
                  you and the Company dated May 1, 1996, or the Employment
                  Agreement between you and the Company dated April 6, 1998;


                                        2
<PAGE>
 
         *        Any tort, including wrongful discharge, misrepresentation,
                  fraud, infliction of emotional distress, or defamation; or

         *        Any other theory, whether developed or undeveloped.

         Your release of claims does not apply to any rights you may have under
COBRA to insurance continuation coverage.

         5. Additional Release. You agree to execute the additional release
attached as Exhibit A on or after August 31, 1998.

         6. Previous Agreements Superseded. This Agreement supersedes the
Employment Agreement entered into between you and the Company dated April 6,
1998, and the Change in Control Agreement entered into between you and the
Company dated May 1, 1996, except that the Non-Competition and Non-Solicitation
provisions contained in Section 5 of the Change in Control Agreement are
incorporated herein by reference, and shall continue in full force and effect.

         7. Your Continuing Obligations Under the Agreement Relating to
Improvements, Confidential Information, Trade Secrets, Know-How and Related
Matters. You acknowledge that the Integ Incorporated Agreement Relating to
Improvements and Inventions, Confidential Information, Trade Secrets, Know-how
and Related Matters that you entered into on May 1, 1996, remains in full force
and effect, and you agree to comply with your continuing obligations under that
agreement. Nothing in this Agreement supersedes or negates any provision of that
May 1, 1996 agreement.

         8. Employment References. You agree to refer all inquiries by
prospective employers regarding your candidacy for employment to Lisa Brezonik
or any successor to her duties. The Company agrees that, if a prospective
employer contacts Ms. Brezonik (or her successor) seeking a reference for you,
Ms. Brezonik (or her successor) will respond with the statement contained in
Exhibit B.

         9. Acceptance Period. The terms of this Agreement will be open for
acceptance by you for a period of 21 days, during which time you may consider
whether or not to accept this Agreement and seek counsel to advise you regarding
this Agreement. You agree that changes to this Agreement, whether material or
immaterial, will not restart this acceptance period.



                                        3
<PAGE>
 
         10. Right to Revoke. You have the right to revoke this Agreement within
fifteen (15) calendar days following your signing of it. To be effective, your
revocation must be in writing and hand-delivered to the Company or, if sent by
mail, postmarked within the fifteen-day time period and sent by certified mail,
return receipt requested. Your revocation must be delivered or sent to the
following address: Lisa Brezonik, Manager of Human Resources, Integ
Incorporated, 2800 Patton Road, Roseville, MN 55113.

         You agree that if you exercise your right of revocation, this Agreement
will be null and void, and neither party will have any rights or obligations
under this Agreement.

         11. Return of Company Property. You agree that you will deliver to the
Company, within 15 days after August 31, 1998, all Company property, including
all Company computers, credit cards, security cards, records, manuals, books,
documents (including all customer lists, letters, memoranda, notes, notebooks,
and reports) and other data, and all copies thereof, and all other tangible
Company property, which is in your possession or under your control.

         12. Passwords and Password-Protected Documents. You agree to promptly
provide to the Company all of your computer passwords, a list of any documents
that you created or of which you are otherwise aware that are
password-protected, and the password(s) necessary to access such
password-protected documents.

         13. Confidentiality. You agree to keep the terms of this Agreement
confidential. You agree not to disclose any information concerning this
Agreement to any person, including any present or former employee of the
Company. These confidentiality provisions are subject to the following
exceptions: you may disclose this Agreement to your present or future attorneys,
accountants, tax advisors or immediate family, in the course of legal
proceedings involving the Company, or in response to a court order, subpoena or
inquiry by a government agency.

         14. No Admission. This Agreement is not an admission by the Company
that it has acted wrongfully toward you or anyone else, and shall not be
interpreted as such.

         15. Successors and Assigns. This Agreement is personal to you and may
not be assigned by you. The payments to be provided to you shall be made to your
estate in the event of your death prior to your receipt thereof. The rights and
obligations of the Company under this Agreement shall inure to the benefit of
and be binding upon the successors (by purchase, merger, consolidation, or
otherwise) and assigns of the Company.

                                        4
<PAGE>
 
         16. Governing Law; Severability. This Agreement shall be governed by
the laws of the State of Minnesota. If any part of this Agreement is construed
to be in violation of any law, such part shall be stricken or, if possible,
modified to achieve the objective of the parties to the fullest extent
permitted, and the balance of this Agreement shall remain in full force and
effect.

         17. Entire Agreement. You agree that this Agreement, including those
provisions of the Change in Control Agreement that are incorporated herein by
reference, and the Integ Incorporated Agreement Relating to Improvements and
Inventions, Confidential Information, Trade Secrets, Know-how and Related
Matters, are the entire agreement between you and the Company with respect to
your separation from employment and that there are no other promises or
understandings with respect to your separation. Any modification of or addition
to this Agreement must be in a writing signed by you and the Company.

         18. ACKNOWLEDGMENT. YOU AFFIRM THAT YOU HAVE READ THIS AGREEMENT. YOU
ARE HEREBY ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS AGREEMENT.
YOU AGREE THAT THE PROVISIONS OF THIS AGREEMENT ARE UNDERSTANDABLE TO YOU AND
THAT YOU HAVE ENTERED INTO THIS AGREEMENT FREELY AND VOLUNTARILY.


Dated: June 23, 1998                    /s/ Katia P. Breslawec
                                        ----------------------------------
                                        Katia P. Breslawec


Dated: June 22, 1998                    INTEG INCORPORATED


                                        By /s/ S.L. Critzer
                                          --------------------------------

                                        Its Interim President
                                           -------------------------------



                                        5
<PAGE>
 
              EXHIBIT A TO SEPARATION AGREEMENT AND GENERAL RELEASE
              -----------------------------------------------------

         In consideration of the severance pay specified in Section 3 of the
attached Separation Agreement and General Release, you fully release and
discharge the following entities and persons from all legal claims, known or
unknown: the Company, its related or affiliated companies, and all of the
respective officers, shareholders, directors, employees, agents, and insurers of
the Company and its related or affiliated companies.

         You understand that by releasing all of your legal claims against these
entities and persons, you are releasing all of your rights to bring any claims
against them based on any actions, decisions, or events occurring through the
date of your signing of this Exhibit A, including the terms and conditions of
your employment and your resignation of your employment. Your release includes
any claims based upon:

         *        Federal, state or local employment discrimination laws,
                  regulations or requirements, including the Minnesota Human
                  Rights Act, Minn. Stat. Ch. 363; Minn. Stat. ss.181.81; Title
                  VII of the Civil Rights Act, 42 U.S.C. ss.2000e, et seq.; the
                  Age Discrimination in Employment Act, 29 U.S.C. ss.621, et
                  seq.; and the Americans with Disabilities Act, 42 U.S.C.
                  ss.12101, et seq.;

         *        Any other statute, ordinance, or regulation;

         *        Any contract, quasi-contract or promissory estoppel, including
                  any claim based upon the Change in Control Agreement between
                  you and the Company dated May 1, 1996, or the Employment
                  Agreement between you and the Company dated April 6, 1998;

         *        Any tort, including wrongful discharge, misrepresentation,
                  fraud, infliction of emotional distress, or defamation; or

         *        Any other theory, whether developed or undeveloped.

         Your release of claims does not apply to any rights you may have under
COBRA to insurance continuation coverage.

         You have the right to revoke your release of Age Discrimination in
Employment Act claims under this Exhibit A (but not your release of such claims
under the attached Separation Agreement and General Release) within seven (7)
calendar days following your signing of this Exhibit A. You likewise have the
right to revoke your release of
<PAGE>
 
Minnesota Human Rights Act claims under this Exhibit A (but not your release of
such claims under the attached Separation Agreement and General Release) within
fifteen (15) calendar days following your signing of this Exhibit A.

         Any revocation must be in writing and hand-delivered to the Company or,
if sent by mail, postmarked within the applicable time period and sent by
certified mail, return receipt requested. Any revocation must be delivered or
sent to the following address: Lisa Brezonik, Manager of Human Resources, Integ
Incorporated, 2800 Patton Road, Roseville, MN 55113.

         You agree that if you exercise either or both of your rights of
revocation, the Company may at its option either nullify the attached Separation
Agreement and General Release in its entirety, or keep it in effect in all
respects other than as to that portion of your release in this Exhibit A that
you have revoked (Age Discrimination in Employment Act and/or Minnesota Human
Rights Act claims). If the Company opts to keep the Agreement in effect in all
respects other than as to that portion of your release in this Exhibit A that
you have revoked, your release of claims contained in the Separation Agreement
and General Release (including your release of claims under the Age
Discrimination in Employment Act and Minnesota Human Rights Act) will not in any
way be affected by your revocation, but rather shall continue in full force and
effect.

YOU AFFIRM THAT YOU HAVE READ THIS EXHIBIT A. YOU ARE HEREBY ADVISED TO CONSULT
WITH AN ATTORNEY PRIOR TO SIGNING THIS EXHIBIT A. YOU AGREE THAT THE PROVISIONS
OF THIS EXHIBIT A ARE UNDERSTANDABLE TO YOU AND THAT YOU HAVE ENTERED INTO THIS
EXHIBIT A FREELY AND VOLUNTARILY.


Dated:  June 23, 1998                  /s/ Katia P. Breslawec
                                       ------------------------------------
                                       Katia P. Breslawec


                                       ii
<PAGE>
 
              EXHIBIT B TO SEPARATION AGREEMENT AND GENERAL RELEASE
              -----------------------------------------------------

         *        Katia Breslawec was employed at Integ Incorporated from April
                  1996 to August 1998 as Vice President, Quality and Regulatory.

         *        She served as the chief clinical, regulatory, quality and
                  safety officer dealing with both internal and external aspects
                  of the business.

         *        She developed and implemented the regulatory, quality,
                  clinical and safety programs at Integ and was the primary
                  interface with state and federal regulatory agencies.

         *        She was responsible for all administrative and financial
                  functions of these departments, including 15 direct reports
                  and a budget exceeding $3 million.

         *        Katia voluntarily resigned from the Company.