Document:

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                                                                    Exhibit 10.3

                              SEPARATION AGREEMENT

        THIS AGREEMENT is entered into as of the 15th day of January, 2001 by
and between Nutraceutix, Inc., a Delaware corporation, Bio Techniques
Laboratories, Inc., a Washington corporation (the "Company") and Patricia St.
John ("St. John") in order to provide the terms and conditions of St. John's
separation of employment, and to fully and completely resolve any and all issues
that St. John might have in connection with her relationship with the Company
and any related or affiliated Companies and the termination of such
relationships.

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

1.      Separation. St. John's employment with the Company shall cease effective
        January 15th, 2001 (the "Separation Date"). All of St. John's wages and
        employee benefits (except as otherwise provided herein) will also cease
        as of the Separation Date. St. John shall be relieved of all duties as
        of January 15, 2001.

2.      Resignation. St. John hereby resigns from all employee, officer and
        director positions with the Company and its subsidiaries. Such
        resignation shall become effective as of January 15, 2001 and can be
        revoked only pursuant to the provisions of Section 15.

3.      Severance. Provided St. John is at all times in compliance with all
        terms to this Agreement, the Company shall make monthly payments to her
        in the gross amount of seven thousand, eight-three dollars and 33/100
        ($7,083.33), which is 1/12 of her current yearly base salary of
        eight-five thousand dollars ($85,000.00), for the period of January 15,
        2001 to January 15, 2002. These payments shall be subject to the general
        tax and other withholdings and deductions applicable to wages. Any
        payments made by the Company from January 15, 2001 to the date of
        execution of this Agreement shall be credited to the payments due under
        this Section 3.

4.      Medical Insurance. St. John understands that her wages and benefits
        shall cease as of January 15, 2001; provided, however, that any medical
        and other insurance benefits for which the premium was paid prior to
        January 15, 2001, shall continue until January 31, 2001. For the period
        of February 2001 through February 2002, the Company agrees to reimburse
        St. John for her health and dental premium costs incurred as a result of
        her electing COBRA continuation coverage. After February 2002, St. John
        shall be solely responsible for the payment of such medical and dental
        insurance costs without imposition by the Company of any additional
        administrative costs.

5.      Stock Options. St. John has been granted stock options (the "Options")
        exercisable for up to 94,000 shares of Nutraceutix, Inc.'s common stock.
        The terms of the Options are hereby amended as follows:

        5.1.    The Options shall become vested and immediately exercisable as
                to all shares.

        5.2.    To the extent the Options were Incentive Stock Options, they are
                hereby converted to Nonqualified Stock Options.

        5.3.    The Options shall remain exercisable until the close of business
                on January 31, 2002.

        5.4.    On January 31, 2002, any portion of the Options remaining
                unexercised shall be cancelled and shall revert back to the
                Plan.

        5.5.    St. John hereby waives any claims to any stock options beyond
                the Options. This provision shall not become effective until (a)
                approved by Nutraceutix, Inc.'s Board of Directors and (b) the
                revocation period set forth in Section 15 has expired.

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6.      Waiver of Claims. In return for the benefits conferred by this Agreement
        and other related events, St. John, on behalf of herself and her marital
        community, heirs, executors, administrators and assigns, hereby releases
        in full, and forever discharges, acquits, and holds harmless, the
        Company, including any of the Company's past or present parent,
        subsidiary or otherwise affiliated (through common ownership to any
        extent or otherwise) corporations, partnerships, or other business
        enterprises, and all of its or their past or present affiliates, related
        entities, partners, subsidiaries, insurers, predecessors, successors,
        assigns, directors, officers, shareholders, attorneys, accountants,
        representatives, agents and employees (these entities/persons together
        with the Company are collectively referred to as "Associated Persons"),
        from any and all claims, disputes, suits, demands, causes of action,
        liabilities, damages, expenses and obligations of every nature,
        character and kind (collectively "Claims") that St. John may possess,
        whether known or unknown, which may now exist or hereafter may be
        discovered, specifically including without limitation any and all Claims
        arising from or relating to St. John's employment or relationship with
        the Company, or the Separation of such employment; provided that this
        release does not include any Claims arising under the express terms of
        this Agreement and since it is the Equal Employment Opportunity
        Commission's position that a right to file a claim cannot be waived,
        this release does not include the right to file a claim with the Equal
        Employment Opportunity Commission (although St. John expressly waives
        her right to obtain any personal relief or damages related to any EEOC
        claim or charge). This release includes, but is not limited to, any
        Claims that St. John might have for additional compensation, including
        without limitation any Claim for any past, current or future wages,
        bonuses, incentive payments, severance or benefits and applies to Claims
        for damages or other personal remedies that she might have under
        federal, state and/or local law dealing with employment, contract, wage
        and hour, civil rights or any other matters, including, by way of
        example and not limitation, applicable civil rights laws, Title VII of
        the Civil Rights Act of 1965, the Post-War Civil Rights Act of 1964, the
        Post-War Civil Rights Acts (42 USC Sections 1981-1988), the Age
        Discrimination in Employment Act, the Americans with Disabilities Act,
        the Family and Medical Leave Act, the Rehabilitation Act of 1973, the
        Equal Pay Act of 1963, Executive Order 11246, Washington's Law Against
        Discrimination, Chapter 49.60 RCW, and Washington's Minimum Wage Act,
        Chapter 49.46 RCW, and any regulations under such laws. This release
        further applies to any Claims or right to personal damages or other
        personal legal or equitable remedies that St. John may have as a result
        of filing any complaint, charge or other action before any
        administrative agency. This release shall not affect any reimbursement
        rights St. John may have under any medical insurance or any accrued
        rights under any retirement savings plan and shall not affect or include
        any rights she now has or may have in the future as a shareholder or
        stockholder of the Company or any related or affiliated company or
        entity, nor does it, nor will it, affect or include any rights she may
        have to indemnification by the Company for claims against her by third
        party, and such indemnification rights (if any) shall remain in full
        force and effect beyond the term of this Agreement. ST. JOHN
        ACKNOWLEDGES AND AGREES THAT THROUGH THIS RELEASE SHE IS GIVING UP ALL
        RIGHTS AND CLAIMS OF EVERY KIND AND NATURE WHATSOEVER, KNOWN OR UNKNOWN,
        CONTINGENT OR LIQUIDATED, THAT SHE MAY HAVE AGAINST THE COMPANY,
        INCLUDING ASSOCIATED PERSONS, EXCEPT FOR THE RIGHTS SPECIFICALLY
        EXCLUDED ABOVE.

        Similarly, in return for the benefits conferred by this Agreement and
        other related events, the Company hereby release in full, and forever
        discharge, acquit, and hold harmless, St. John, from any and all claims,
        disputes, suits, demands, causes of action, liabilities, damages,
        expenses and obligations of every nature, character and kind
        (collectively "Claims") that the Company may possess, whether known or
        unknown, which may now exist or hereafter may be discovered,
        specifically including without limitation any and all Claims arising
        from or relating to St. John's employment with the Company, or the
        Separation of such employment and/or her role or status as an officer,
        director and agent of the Company.

7.      Dismissal of Pending Claims. St. John represents that she has filed no
        Claim or other action against The Company, including Associated Persons.

                                       -2-
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8.      Non-Admission of Liability. The Company is offering these benefits to
        St. John due to its desire to have an amicable separation of employment
        with her and in recognition of her past contributions to the Company.
        This Agreement shall not be construed as an admission by the Company of
        any liability to St. John, breach of any agreement between the parties,
        or violation by the Company of any statute or regulation. St. John is
        accepting these benefits due to her desire to have an amicable
        separation of employment from the Company. This Agreement shall not be
        construed as an admission by St. John of any liability to the Company,
        breach of any agreement between the parties, or violation by St. John of
        any statute or regulation.

9.      Non-Disparagement. The parties are entering into this Agreement, in
        part, to ensure an amicable relationship between them. St. John agrees
        not to make any negative or disparaging comments to any person or
        entity, publicly or privately, concerning the Company, its products or
        services, or its past, present or future officers, directors or
        employees. Notwithstanding this provision, she shall be free to make
        whatever comments she desires in private to her spouse. David Howard and
        Steve Moger agree not to make any negative or disparaging comments to
        any person or entity, publicly or privately, concerning St. John or her
        performance as an employee of the Company. The Company agrees to execute
        the Letter of Reference attached hereto as Exhibit A at the same time as
        the execution of this Agreement. This Agreement shall be shown to the
        Board of Directors so that they will be aware of its contents and can
        specifically approve it.

10.     Continuing Assistance. St. John agrees to provide reasonable assistance
        to the Company and its employees in a timely and reasonably responsive
        manner during the period of time during which she is receiving severance
        payments for no additional payment from the Company. It shall be the
        Company's responsibility through David Howard or other senior management
        personnel, to request such assistance when needed. Such requests shall
        not require St. John to perform more than two hours of work per week and
        such work shall be limited to that of the type and nature she performed
        when employed by the Company. St. John shall devote her best efforts and
        work in the Company's best interests whenever her assistance is
        requested pursuant to this Section. Any person requesting assistance
        from St. John will exercise reasonable efforts to avoid the disclosure
        of material non-public information to her.

11.     Consideration. St. John acknowledges that the compensation and benefits
        granted to her hereunder are in excess of that which employees normally
        receive upon separation from the Company or to which she would otherwise
        be entitled, and that no other wages are due to her. St. John further
        acknowledges that she has had the opportunity to review this Agreement
        and to consult with independent counsel regarding its content and
        present and future legal effects.

12.     Return of Property. St. John agrees to and hereby represents that she
        has returned to the Company all originals and all copies of the
        Company's documents and/or the Company's property in her possession or
        under her control including, but not limited to, any documents received
        or prepared by her in connection with her employment, laptop and key
        cards. She agrees to coordinate any visits to the company premises with
        David Howard or his designee.

13.     Confidentiality. The parties acknowledge that, by virtue of her
        employment, St. John has had access to the Company's trade secrets,
        proprietary and confidential information. St. John agrees to execute the
        Business Protection Agreement attached as Exhibit B hereto and
        incorporated herein at the same time as the execution of this Agreement.

14.     Miscellaneous.

        14.1.  Entire Agreement. This document is the entire, final and complete
               agreement and understanding of the parties with respect to the
               subject matter hereof, and supersedes and replaces all 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 The Company or St. John to make any payment or
               perform any act other than those expressly stated herein.

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        14.2.   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.

        14.3.   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. The Company's
                merger into another entity where immediately following the
                completion of such merger, the Company's shareholders do not
                continue to hold more than 50% of the outstanding securities of
                the surviving corporation or The Company's sale or transfer of
                all or substantially all of its assets shall entitle St. John to
                acceleration and immediate payment of the sum provided for in
                Section 3.

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

        14.5.   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.

        14.6.   Enforcement. In the event that there is a breach of this
                Agreement by either party or noncompliance with the terms
                contained herein, the nondefaulting or prevailing party shall be
                entitled to recovery of any reasonable attorney's fees and costs
                incurred in enforcing this Agreement.

        14.7.   Governing Law and Venue. This Agreement and the rights of the
                parties hereunder shall be governed, construed and enforced in
                accordance with the laws of the State of Washington, without
                regard to its conflict of law principles. Any suit or action
                arising out of or in connection with this Agreement, or any
                breach hereof, shall be brought and maintained in the federal or
                state courts in Seattle, Washington. The parties hereby
                irrevocably submit to the jurisdiction of such courts for the
                purpose of such suit or action and hereby expressly and
                irrevocably waive, to the fullest extent permitted by law, any
                objection it may now or hereafter have to the venue of any such
                suit or action in any such court and any claim that any such
                suit or action has been brought in an inconvenient forum.

        14.8.   Counterparts. This Agreement may be executed by the parties
                individually or in separate counterparts, each of which shall be
                an original, and each of which taken together shall constitute
                one in the same agreement.

        14.9.   Further Acts. The parties agree to execute such additional
                documents and take such other actions as are reasonably
                necessary to implement the terms of this Agreement.

15.     No Pressure or Coercion. St. John acknowledges that she has read this
        Agreement and is being given an opportunity to consider it for up to
        twenty-one days, although she may sign it and deliver it to the Company
        during the twenty-one day period. St. John has been advised to discuss
        it with financial and legal counsel of her choice. The parties further
        acknowledge that she may revoke this Agreement within seven (7) days
        after she has signed and delivered it. Only after that seven-day period
        has passed, will the obligations under this Agreement become effective.

        IN WITNESS WHEREOF, the parties have executed this agreement freely,
voluntarily and with a complete understanding of its terms and present and
future effect as of the date set forth above.

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PATRICIA ST. JOHN                        NUTRACEUTIX, INC.

    /s/ Patricia A. St. John             By: /s/ David T. Howard
-----------------------------------         ------------------------------------
                                         Title: President & CEO
Date:   March 23, 2001                         ---------------------------------
                                         Date: 3/24/01
                                              ----------------------------------

                                         BIO TECHNIQUES LABORATORIES, INC.

                                         By: David T. Howard
                                            ------------------------------------
                                         Title: President
                                               ---------------------------------
                                         Date: 3/24/01
                                              ----------------------------------

                                       -5-<PAGE>   1
                                                                     Exhibit 4.1

                          BUSINESS PROTECTION AGREEMENT

This Business Protection Agreement ("Agreement") is entered into as of the 15th
day of January, 2001, at Seattle, Washington, by and between Nutraceutix, Inc./
Bio Techniques Laboratories, Inc, (the "Company") a Delaware corporation, and
Patricia A. St. John ("St. John"), an individual resident of the State of
Washington.

        WHEREAS, St. John was employed by Company from 1985 to January 15, 2001
in various capacities, including Director of Corporate Relations and Vice
President of Administration; and

        WHEREAS, in her various capacities as an employee, officer and director
of the Company, St. John had access to Company confidential information, trade
secrets and inventions which are unique to the Company and may be critical to
its continued success including, without limitation, formulas, processes,
methods and procedures for fermenting and manufacturing probiotics and drug
delivery technologies (the "Technology"), as more fully described in Exhibit A.

        WHEREAS, the parties have entered into Separation Agreement entered into
as of January 15, 2001 ("Separation Agreement") setting forth the terms
governing St. John's separation from employment by the Company and the those
under which St. John will provide assistance to the Company in the future;

        NOW THEREFORE, in consideration of amounts previously paid to her by the
Company in connection with her employment, the execution of the Separation
Agreement and the compensation to be paid to St. John in accordance with the
Separation Agreement ("Compensation"), and the execution of the separation
agreement between the Company and William D. St. John, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, St. John agrees as follows:

1.      ACKNOWLEDGEMENT OF COMPANY RIGHTS AND TRANSFER.

        1.1     Ownership of Company Property. St. John acknowledges and agrees
                that the Company is the sole and exclusive owner of all:

                (a)     Inventions, discoveries and improvements, patentable or
                        unpatentable, made or conceived or first reduced to
                        practice by St. John, alone or with others during her
                        employment by the Company, including without limitation
                        the Technology, the patents and applications listed in
                        Exhibit A and any other patent applications (and
                        resulting patents) filed (or that may be filed) anywhere
                        in the world relating to such discoveries or
                        improvements and any reissues, reexaminations, renewals,
                        extensions, divisions, continuations-in-part or
                        continuations thereof (collectively, the "Inventions");

                (b)     Work product, tangible or intangible, created, produced
                        or prepared by St. John during her employment by Company
                        (including Technology) whether or not subject to
                        protection under federal copyright or other law ("Work
                        Product");

                (c)     Trademarks used by the Company including, without
                        limitation those listed in Exhibit A ("Trademarks");

                (d)     Information treated by the Company as confidential,
                        including information relating to (i) the Inventions;
                        (ii) Ensuing Inventions (as defined below);

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                        and (iii) the Company's business, finances, marketing
                        plans, customers, vendors, licenses, contract terms,
                        products, software (including source code), ideas,
                        inventions, methods, processes, research, development,
                        operations, systems, algorithms, improvements, know-how
                        and opportunities, including without limitation all such
                        information disclosed in writing, or other fixed media
                        or disclosed in any other manner, including without
                        limitation oral, visual, or electronic disclosure,
                        ("Confidential Information"); and

                (e)     All Intellectual Property Rights in the Inventions, Work
                        Product, Trademarks and Confidential Information, all of
                        which is collectively referred to herein as "Company
                        Property". For purposes of this Agreement, "Intellectual
                        Property Rights" shall mean any and all (by whatever
                        term known or designated) tangible and intangible, now
                        known or hereafter existing rights associated with (i)
                        works of authorship throughout the universe, including
                        but not limited to all exclusive exploitation rights,
                        copyrights, neighboring rights and moral rights; (ii)
                        trade secret rights; (iii) trademarks; (iv) patents,
                        designs, algorithms and other industrial property
                        rights; (v) all other proprietary rights of every kind
                        and nature throughout the universe, however designated
                        (including without limitation, logos, character rights,
                        "rental" rights and rights to remuneration), whether
                        arising by operation of law, contract, license or
                        otherwise now or hereafter in force throughout the
                        universe.

        1.2     Transfer. St. John hereby disclaims any and all interest in any
                Company Property and, to the extent St. John had or has any
                proprietary or other interest of any kind in any Company
                Property, St. John hereby forever, irrevocably and
                unconditionally transfers, assigns and conveys all of her right,
                title and interest, whether by way of copyright, trade secret,
                patent or otherwise, in the Company Property to the Company,
                free and clear of any and all mortgages, liens or other
                encumbrances.

        1.3     Execution of Documents. St. John covenants and agrees, without
                further consideration, to perform all lawful acts and execute,
                acknowledge and deliver all instruments necessary to vest in the
                Company the entire right, title and interest in the Company
                Property, and to enable the Company to prepare, file and
                prosecute applications for, obtain and defend all applicable
                patents, copyrights, trademarks and other registrations
                pertaining to the Company Property.

        1.4     No Inconsistent Acts. St. John covenants and agrees that she
                will not, directly or indirectly, (a) dispute or contest the
                Company's exclusive ownership of the Company Property; (b) aid,
                abet or encourage the infringement of any of Company's rights in
                the Company Property; or (c) otherwise take or do any act that
                could reasonably be expected to interfere with Company's rights
                in the Company Property.

        1.5     No Further Use. St. John covenants and agrees, as of the
                effective date of this Agreement, to discontinue all use of
                Company Property and, thereafter, not to make any use, directly
                or indirectly, of any Company Property, or any part thereof, for
                any purpose without the prior written consent of the Company.

2.      WARRANTY. St. John represents and warrants that all Inventions and Work
        Product, or any part thereof, are original and are not copied from or
        derivative of any works of any third party. St. John further represents
        and warrants that (a) she is not aware of any

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<PAGE>   3

        facts which, if true, would cause any of the Inventions, Work Product,
        or any part thereof, to infringe the copyright, patent, trade secret or
        other proprietary rights of any third party; (b) she has not disclosed
        any Confidential Information to any person (other than employees of the
        Company who required such information in performance of their assigned
        duties for the Company) or entity without the prior approval of the
        Company's board of directors; (c) except for the property referred to in
        Section 5 to be returned upon execution of this Agreement, she has
        returned to the Company all Work Product and all papers, records,
        memoranda, notes, or other documents of any kind in her possession or
        under her control referring to any Company Property; (d) she has not
        transferred, assigned, or otherwise conveyed or granted any interest in
        the Company Property to any person or entity (other than the Company);
        and (e) to the best of her knowledge, the execution and performance of
        this Agreement by St. John does not (and will not) violate any
        contractual right of any third party.

3.      NON-DISCLOSURE AND NON-USE.

        3.1     Trade Secrets and Business Contacts. St. John acknowledges and
                agrees that the Inventions (other than those elements disclosed
                in the issued patents listed in Exhibit A), Work Product and
                Confidential Information constitute the Company's valuable trade
                secret property. St. John covenants and agrees not to (a) copy,
                use or disclose any information or materials containing or
                referring to such Inventions, Work Product or Confidential
                Information for any purpose without the prior written consent of
                the Company; (b) take advantage of any business opportunity
                which, as the result of St. John's access to such Inventions,
                Work Product or Confidential Information, St. John knows or
                should know Company was or was likely to consider as of January
                15, 2001; (c) remove any information or materials containing or
                referring to any such Inventions, Work Product or Confidential
                Information from the Company's premises without the Company's
                prior written permission; (d) solicit Company's employees or
                customers to work with other companies; or (e) accept or solicit
                any work, services, goods, employment or other business from any
                Company business contact if doing so could reasonably be
                expected to negatively impact Company's business relationship
                with the business contact.

        3.2     Exceptions. The restrictions on use and disclosure of
                information set forth in Paragraph 3.1 above shall not apply to
                any information which (a) becomes available to St. John after
                the effective date of this Agreement on a non-confidential basis
                from a source other than Company or its representatives,
                provided that such source is not and was not bound by a
                confidentiality agreement with or other contractual, legal or
                fiduciary obligation of confidentiality to Company or any other
                party with respect to such information; (b) St. John can
                document was independently developed by St. John after the
                effective date of this Agreement and without reference to
                Confidential Information; or (c) is in the public domain as of
                the effective date of this Agreement or subsequently enters the
                public domain, provided that such information entered the public
                domain with Company's authorization and approval and not through
                any act by St. John or any other person in violation of any
                contractual, legal or fiduciary obligation to the Company.

        3.3     Required Disclosure. If St. John becomes legally obligated to
                disclose Confidential Information to any governmental entity
                with jurisdiction over St. John, she will give Company written
                notice of such obligation within two (2) days after St. John's
                receipt of notice thereof. St. John agrees to disclose only such
                information as St. John is legally required to disclose, and to
                use her reasonable

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<PAGE>   4

                best efforts to obtain confidential treatment for any
                Confidential Information she is required to disclose.

4.      ADDITIONAL PROTECTIONS. St. John acknowledges that if she could not
        perform services for or provide information or assistance to any person
        or entity (other than the Company), directly or indirectly, relating to
        the fermentation or manufacture of probiotics or any other aspect of the
        Technology, without using or being influenced by the Confidential
        Information. St. John acknowledges that all such information is critical
        to the Company's success and gives the Company an advantage over its
        competitors. St. John understands that such information would be
        extremely valuable to a customer or competitor of the Company since it
        would permit a customer to manufacture Company products directly and
        allow a competitor to wrongfully benefit from the Company's research and
        development efforts and anticipate and potentially pre-empt the
        Company's future business plans, all of which would seriously damage the
        Company's business. Accordingly, St. John agrees:

        (a)     The Company shall own all right, title and interest (including
                all Intellectual Property Rights) in and to any inventions,
                discoveries and improvements, patentable or unpatentable, which
                relate to the Technology or Inventions and are made, conceived
                or first reduced to practice by St. John, alone or with others,
                during the one (1) year period following the effective date of
                this Agreement, including without limitation any patent
                applications (and resulting patents) filed (or that may be
                filed) anywhere in the world relating to such inventions,
                discoveries or improvements and any reissues, reexaminations,
                renewals, extensions, divisions, continuations-in-part or
                continuations thereof (collectively, the "Ensuing Inventions").
                St. John agrees that Ensuing Inventions shall be deemed to be
                included within the definition of Company Property and to
                promptly disclose to Company in writing any such Ensuing
                Inventions to the Company and to execute all documents and take
                such other acts as required under Paragraph 1.3 above to vest
                exclusive title in any Ensuing Inventions in the Company. St.
                John agrees to notify any employer or third party for whom St.
                John performs services following the effective date of this
                Agreement of the terms of this Paragraph and the other
                provisions of this Agreement.

        (b)     St. John will not, for a period of three (3) years after the
                effective date of this Agreement (the "Window Period"): (i)
                enter into any agreement with any person to provide services
                that would place St. John in a position in which her knowledge
                of the Company's Confidential Information and/or proprietary
                information could influence St. John's actions or otherwise be
                used for the benefit of any such person; (ii) provide services
                relating to the fermentation or manufacture of probiotics or any
                other aspect of the Technology to the Company's existing
                customers or suppliers or identified potential customers or
                suppliers as of the effective date of this Agreement; or (iii)
                directly or indirectly own, operate, provide financial,
                technical or other assistance or services to, or be connected
                with as stockholder or owner of any other instrument convertible
                to stock (other than as an owner of less than 5% of the stock of
                a publicly held corporation whose stock is traded on a national
                securities exchange or in the over-the-counter market) any
                company involved in the fermentation or manufacture or
                probiotics or the development of drug delivery technology,
                including without limitation the entities listed in Exhibit B
                and the parents, subsidiaries and affiliates of any of such
                entities. St. John understands and agrees that the Company
                conducts business throughout the United States and in many
                foreign countries, and that the restriction contained in this
                Paragraph is intended to protect the Company in all of the
                geographical areas in which the

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<PAGE>   5

                Company currently does business or contemplates doing business.
                St. John also agrees that she is a talented and skilled
                individual and that this limited restriction will not prevent
                St. John from earning a living.

        St John acknowledges that the provisions of this Section 4 are
        reasonable and necessary to protect the Company's rights in the Company
        Property and that she has received additional payments under the terms
        of his Separation Agreement in consideration of the rights and
        restrictions set forth above.

5.      RETURN OF COMPANY PROPERTY. Upon execution of this Agreement or upon
        demand by Company, and except as otherwise provided under the Separation
        Agreement, St. John agrees to return to Company all Company property in
        St. John's possession or control, including but not limited to: all
        papers, records, memoranda, notes, or other documents of any kind; all
        video and audio tapes; all computer software or hardware in any form,
        all computer tapes, disks and other magnetic media; any and all copies
        of any of the above; all equipment; all credit cards; all keys; and any
        other property that belongs to Company, whether or not generated by
        Company.

6.      SURVIVAL. St. John acknowledges that, in addition to any restrictions
        contained in this Agreement, the Company Property may be subject to
        other limitations on use and disclosure as the result of patent,
        copyright, trademark, and trade secret and other applicable laws. St.
        John acknowledges and agrees that expiration of the Window Period and/or
        expiration or termination of the Separation Agreement shall not be
        interpreted or construed as granting St. John any right or license to
        use the Company Property and that all restrictions on the use of Company
        Property arising under patent, copyright, trademark, and trade secret
        and other applicable laws survive the expiration of the Window Period
        and the termination or expiration of the Separation Agreement.

7.      INJUNCTIVE RELIEF. St. John acknowledges and agrees that disclosure or
        use of any Inventions, Ensuing Inventions, Work Product or Confidential
        Information or violation of the terms of this Agreement would
        irreparably injure the Company, which injury could not adequately be
        compensated by money damages. Accordingly, St. John agrees that the
        Company may seek and obtain injunctive relief from the breach or
        threatened breach of any provision, requirement or covenant of this
        Agreement.

8.      ADDITIONAL REMEDIES. St. John acknowledges and agrees that, in addition
        to any other remedies available at law or equity, in the event of breach
        of any provision, requirement or covenant of this Agreement by St. John
        or any person acting under her direction or control, the Company shall
        be entitled to withhold, without liability, any amounts due to be paid
        to St. John under the Separation Agreement as a setoff against damages
        incurred by the Company as the result of such breach. St. John further
        agrees that the Company may withhold payments as provided in this
        Section 8 if the Company has reasonable grounds to believe that St. John
        (or any person acting under her direction or control) may breach any
        provision, requirement or covenant of this Agreement and St. John fails
        to provide the Company with adequate assurance of her compliance with
        this Agreement within ten (10) days after receiving a written demand
        therefore from the Company.

9.      ST. JOHN REMEDIES. St. John acknowledges and agrees that the rights
        granted to the Company and the obligations undertaken by St. John under
        this Agreement shall not be affected by any breach or threatened breach
        of the Separation Agreement by the Company or the termination or
        expiration of the Separation Agreement. In the event of any such breach
        or termination, St. John's sole and exclusive remedy shall be a claim
        for damages for amounts due and unpaid. In no event shall St. John have
        the right to

                                    Page - 5
<PAGE>   6
        rescind, revoke or otherwise limit or terminate the Company's exclusive
        rights in the Company Property.

10.     INDEMNITY. St. John agrees to indemnify and hold the Company harmless
        from and against any and all claims, demands, losses, damages, causes of
        action, suits, and liability of every kind, including all expenses of
        litigation, court costs, and attorneys' fees, in any way arising out of,
        or in connection with St. John's breach of any of the terms of this
        Agreement.

11.     ATTORNEYS FEES, GOVERNING LAW, AND JURISDICTION. In any action to
        enforce this Agreement, including, as applicable, gaining injunctive
        relief, the prevailing party shall be entitled to recover, in addition
        to all other relief, its reasonable attorneys' fees, costs and expenses
        incurred in such enforcement action. This Agreement shall be construed
        and enforced in accordance with the laws of the State of Washington,
        without giving effect to its choice of law provisions. The parties agree
        that the state and federal courts located in King County, Washington
        shall have exclusive jurisdiction with respect to any dispute arising
        out of this Agreement, and further agree to submit to the jurisdiction
        of the state and federal courts located in King County, Washington;
        provided that, Company may bring suit against St. John in any
        jurisdiction in which St. John is subject to personal jurisdiction, if
        Company is also bringing suit against a subsequent employer of St. John
        or third party with which St. John has entered into a contract, in such
        jurisdiction.

12.     ENTIRE UNDERSTANDING. This Agreement and the Separation Agreement set
        forth the entire agreement of the parties with respect to its subject
        matter and supersedes all previous agreements between the parties
        pertaining to its subject matter. The parties hereby agree that (a)
        Confidential Information disclosed or learned; (b) Inventions made,
        conceived or first reduced to practice; and (c) Work Product created
        prior to the date of this Agreement shall be subject to the provisions
        of this Agreement.

13.     CAPTIONS. Headings and captions contained in this Agreement are for
        convenience of reference only and shall not be considered in the
        interpretation or construction hereof.

14.     WAIVER. No delay or omission by either party to this Agreement in the
        exercise or enforcement of any of its powers or rights hereunder shall
        constitute a waiver of such power or right. A waiver by either party of
        any provision of this Agreement must be in writing and signed by such
        party, and shall not imply a subsequent waiver of that or any other
        provision.

15.     SEVERABILITY. If any provision of this Agreement shall be held by a
        court of competent jurisdiction to be illegal, invalid or unenforceable,
        the remaining provisions shall remain in full force and effect.

                                    Page - 6
<PAGE>   7

16.     BINDING EFFECT. By executing this Agreement below, the parties agree to
        be bound by the terms of this Agreement, effective as of the date set
        forth below.

IN WITNESS of their understanding and agreement, the parties have executed this
Agreement this ______ day of ______________, 2001.

NUTRACEUTIX, INC.                          PATRICIA A. ST. JOHN

By:  /s/ David T. Howard                   By: /s/ Patricia A. St. John
    --------------------------                ----------------------------------

Title: President & CEO
      ------------------------
Date: 3/24/01                              Date:  March 23, 2001
     -------------------------                  --------------------------------

The foregoing instrument was acknowledged before me this 23rd day of
March, 2001, by Patricia A. St. John.

My commission expires on 3/10/2002. Witness my hand and official seal.

Notary Public  /s/ Deborah L. Cadieux

                                    Page - 7
<PAGE>   8

                                SPOUSE'S CONSENT

I acknowledge that I have read the foregoing Agreement and that I know its
contents. I am aware that by signing its provisions my spouse has assigned all
her right, title and interest in and to the Inventions, Ensuing Inventions, Work
Product, Trademark and Confidential Information and all Intellectual Property
Rights therein to Nutraceutix, Inc., including my community property interest
therein, and agreed to take other actions in connection therewith. I hereby
consent to such assignment and transfer, approve the provisions of the
Agreement, and agree that the Inventions, Ensuing Inventions, Work Product,
Trademark and Confidential Information and all Intellectual Property Rights
therein and my interest in them are subject to the provisions of the Agreement.
I will take no action at any time to hinder the operation of the Agreement on
the transfer of the Inventions, Ensuing Inventions, Work Product, Trademark and
Confidential Information and all Intellectual Property Rights therein to
Nutraceutix, Inc., or the use thereof by Nutraceutix, Inc.

William D. St. John

/s/ William D. St. John
-----------------------------
(Signature)

William D. St. John
-----------------------------
(Print Name)

3/23/01
-----------------------------
(Date)

The foregoing instrument was acknowledged before me this 23rd day of
March, 2001, by William D. St. John.

My commission expires on 3/10/2002. Witness my hand and official seal.

/s/ Deborah L. Cadieux

                                    Page - 8
<PAGE>   9

                                    EXHIBIT A

Technology includes, without limitation, formulas, processes, methods and
procedures for fermenting and manufacturing probiotics and drug delivery
technologies used, developed, conceived or under consideration by Company
(including its employees, contractors and agents) alone, or jointly with others,
and any licensed to the Company as of the effective date of this Agreement,
relating to any of the following:

1.      Fermentation of Probiotics

        1.1    media and media formulas
        1.2    identification of strains
        1.3    use of enzymes in media
        1.4    use of cryoprotectants
        1.5    optimization of variables in fermentation process for
               Lactobaccilus
        1.6    use of centrifuge in harvesting micro-organisms (protect against
               damage)
        1.7    probiotic blend formulas
        1.8    ability to grow 26 organisms

2.      Manufacturing of Probiotics

        2.1    Cool-Tab process
        2.2    Livebac process
        2.3    product formulations
        2.4    knowledge of excipients used to enhance probiotic stability and
               micro-organism viability

3.      MDT (Molecular Dispersion Technology)

        3.1    formulas used in androsteine, nor-androsteine, androsteindiol,
               nor-androsteinediol, Sports Nutrition Supplements
        3.2    MDT manufacturing process
        3.3    MDT/CDT (Controlled Delivery Technology) layering - manufacturing
               know-how and product formulas

4.      SET (Self Emulsifying Technology)

        4.1    SET manufacturing process
        4.2    formulas and Bills of Materials for products manufactured using
               SET

5.      CDT (Controlled Delivery Technology)

        5.1    manufacture and formulas for CDT thermogenic and weight-loss
               products
        5.2    formulas incorporating CDT technology
        5.3    know-how in producing CDT preblends

Patents

See Schedule A-1

Trademarks

See Schedule A-2

                                    Page A-1
<PAGE>   10

                                  SCHEDULE A-1
                                    (PATENTS)

U.S. PATENTS ISSUED

U.S. NO. 5,139,792          METHOD AND SYSTEM FOR DISPENSING LIVE BACTERIA INTO
                            ANIMAL FEED AND DRINKING WATER
Issue Date:                 August 18, 1992
Inventors:                  D.R. Ware, R.E. Herman and L.A. Walter

U.S. NO. 5,179,020          ANTIBIOTIC RESISTANT STRAIN OF LACTOBACILLUS
                            ACIDOPHILUS
Issue  Date:                January 12, 1993
Strain:                     Bio Techniques No. BT1389
                            ATCC No. 55221
Inventors:                  R.E. Herman, D.R. Ware and J.E. Clarke

U.S. NO. 5,256,425          ANTIBIOTIC RESISTANT STRAIN OF LACTOBACILLUS
                            ACIDOPHILUS
Issue Date:                 October 26, 1993
Strain:                     Bio Techniques No. BT1389
                            ATCC No. 55221
Inventors:                  R.E. Herman, D.R. Ware and J.E. Clarke

U.S. NO. 5,358,145          DISPENSER FOR DELIVERING MICROINGREDIENTS FROM
                            CARTRIDGES
Issue Date:                 October 25, 1994
Inventors:                  S.H. Smith, et al.

FOREIGN PATENTS ISSUED

CANADIAN NO. 1,298,799      STRAINS OF LACTOBACILLUS ACIDOPHILUS
Issue Date:                 April 14, 1992
Inventors:                  Eugene T. Manfredi and Robert E. Miller

LICENSED TO NUTRACEUTIX, INC.

From BioChemix

U.S. NO. 4,845,123          REDUCTION IN VIVO OF THE INAPPROPRIATE LEVELS OF
                            ENDOGENOUS AND ENVIRONMENTAL - DERIVED COMPOUNDS BY
                            SUSTAINED-RELEASE INHIBITORS OF B-GLUCURONIDASE
Issue Date:                 July 4, 1989
Inventors:                  Zbigniew Walaszek, Malgorzata Hgnausek-Walaszek,
                            Thomas E. Webb and John P. Minton

From Temple University of the Commonwealth System of Higher Education

SERIAL NO. 08/958,470       MATRIX FOR CONTROLLED DELIVERY OF HIGHLY SOLUBLE
                            PHARMACEUTICAL AGENTS
Filed:                      October 27, 1997
Inventors                   Reza Fassihi, et al.

U.S. NO. 6,090,411          MONOLITHIC TABLET FOR CONTROLLED DRUG RELEASE
Issue Date:                 July 18, 2000

                                    Page A-2
<PAGE>   11

Inventors:                  Viness Pillay and Reza Fassihi

PCT INT'L PUB. NO.          MONOLITHIC TABLET FOR CONTROLLED DRUG RELEASE
WO 99/45887
Issue Date:                 September 16, 1999
Inventors:                  Viness Pillay and Reza Fassihi

                                    Page A-3
<PAGE>   12

                                  SCHEDULE A-2
                                  (TRADEMARKS)

<TABLE>
<CAPTION>
      Trademark Name              Country          Registration Number          Expiration
      --------------              -------          -------------------          ----------
<S>                             <C>                <C>                    <C>
Cobactin Plus                        US                 1,801,374         October 26, 2003
Cobactin Plus II                     US                 1,711,123         September 2002
Cobactin                             US                 1,402,806         July 29, 2006
Cobactin                          Benelux                419,823          February 10, 2007
Cobactin                           Canada                334,740          November 27, 2002
Cobactin                           France               1,352,178         April 26, 2006
Cobactin                             UK                 1,264,735         April 15, 2007
Bio Techniques                    Benelux                510,287          September 1, 2002
Bio Techniques                     France               92,407,893        February 27, 2002
Bio Techniques                       US                 1,730,602         November 10, 2002
Bio Techniques                       US                 1,392,081         May 6, 2006
Bio Power                            US                 1,375,452         December 17, 2005
Bio Power                          Canada                332,557          October 2, 2002
Bio Power                            UK                 B1,264,642        April 14, 2007
Bio Power                            US                 2,300,000         December 14, 2009
Live-Bac                             US                 1,405,455         August 19, 2006
Nutraceutix                          US                 74/621,937        August 18, 2008
BT 1386                              US                 2,205,553         November 24, 2008
Nu-Trax                              US                 75/593,041        Pending
CDT                                  US                 75/607,270        Pending
BaCCine                              US                 75/768,230        Pending
Molecular Strength                   US                 75/610,907        Pending
S.E.T.                               US                 75/903,260        Pending
S.E.T.                             Canada               In Process        Pending
S.E.T.                             Mexico               In Process        Pending
S.E.T.                          Europe; CTM             In Process        Pending
Cool-Tab                             US                 75/903,320        Pending
Cool-Tab                           Canada               In Process        Pending
Cool-Tab                           Mexico               In Process        Pending
Cool-Tab                        Europe; CTM             In Process        Pending
Bio-Tract                            US                 75/902,816        Pending
Bio-Tract                          Canada               In Process        Pending
Bio-Tract                          Mexico               In Process        Pending
Bio-Tract                       Europe; CTM             In Process        Pending
MDT                                  US                 76/070,803        Pending
</TABLE>

                                    Page A-4
<PAGE>   13

<TABLE>
<CAPTION>
      Trademark Name              Country          Registration Number          Expiration
      --------------              -------          -------------------          ----------
<S>                             <C>                <C>                    <C>
Cobactin E                           US                 In Process        Pending
Co-Epo                               US                 76/046,466        Pending
Co-Epo                             Canada               In Process        Pending
Co-Epo                             Mexico               In Process        Pending
Co-Epo                          Europe; CTM             In Process        Pending
The Future of Nutrition              US                 76/046,474        Pending
N and Design                         US                 76/005,969        Pending
D-Glucarate                          US                 76/005,969        Pending
</TABLE>

                                    Page A-5
<PAGE>   14

                                    EXHIBIT B

Chr. Hansen, Inc.
Institut Rosell-Lallemand
BioGaia Biologics AB
Harmonimum International Inc.
Al Pharma
UAS Laboratories

                                    Page B-1

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