Document:

<PAGE>   1
                                                                   Exhibit 10.31

                              REDEMPTION AGREEMENT

        This Redemption Agreement (this "Agreement") is effective November 3,
2000 (the "Effective Date"), by and between N2H2, Inc., a Washington corporation
("N2H2"), and John F. Duncan (the "Shareholder").

                                    RECITALS

        A. Shareholder has borrowed $600,000 from N2H2 and, as of the date
hereof, owes N2H2 $611,967.13 of principle and accrued interest (the
"Outstanding Debt").

        B. Shareholder agrees to repay a portion of the Outstanding Debt by
selling 358,549 shares of N2H2's common stock (the "Shares") to N2H2, and N2H2
desires to redeem the Shares in partial repayment of the Debt and to forgive the
remaining balance thereof.

                                    AGREEMENT

        NOW THEREFORE, in consideration of the mutual promises set forth herein,
the parties agree as follows:

        1. Redemption. The Shareholder agrees to sell and surrender to N2H2 for
redemption and N2H2 agrees to purchase and redeem from Shareholder the Shares
pursuant to the terms and subject to the conditions set forth in this Agreement.

        2. Purchase Price and Loan Forgiveness. The purchase price for the
Shares shall be $538,648.16, which is the product obtained by multiplying
$1.5023 (the average high and low daily final trading price of N2H2's common
stock on the NASDAQ National Market of the last 20 trading days prior to the
Effective Date) by 358,549, the number of Shares (the "Purchase Price"). N2H2
agrees to forgive the remaining portion of the Outstanding Debt.

        3. Payment. Subject to the terms and conditions of this Agreement and in
reliance on the representations, warranties and agreements of Shareholder, N2H2
shall, at closing, pay the Purchase Price by reducing the amount of Outstanding
Debt by the Purchase Price against delivery of the Shares to N2H2 with stock
powers properly endorsed by the Shareholder.

        4. Closing. The "Closing" of the transaction contemplated herein shall
take place at the offices of N2H2, at 5:00 p.m., on the Effective Date.

        5. Representations and Warranties of Shareholder. Shareholder represents
and warrants to N2H2 as follows:

               a. Title. At Closing, upon delivery of the certificates
representing the Shares properly endorsed by Shareholder, ownership of the
Shares will vest in N2H2 free and clear of all claims, rights, liens and
encumbrances whatsoever.

<PAGE>   2

               b. Access to Information. Shareholder currently serves as the
Chief Financial Officer of N2H2. As a result of that office, the Shareholder has
been afforded full opportunity (i) to meet with, ask questions of, and receive
answers from N2H2 and the management of N2H2 in connection with a determination
by the Shareholder to enter into this Agreement and to consummate the
transactions contemplated by this Agreement and all such questions have been
answered to the full satisfaction of the Shareholder; and (ii) to examine N2H2's
financial and corporate records.

               c. Opportunity to Consult Independent Counsel. Shareholder
acknowledges that N2H2 has recommended that he obtain the advice of independent
legal and tax counsel with respect to the transaction contemplated herein.

               d. No Reliance. Shareholder is not relying on any statement,
representation or warranty of N2H2 or any of its shareholders, officers,
directors, employees or agents in entering into this transaction.

               e. No Claims. Shareholder does not have any claim whatsoever
against N2H2 or against any of its officers or directors relating, in any way,
to N2H2.

               F. SHAREHOLDER'S RELEASE. THE SHAREHOLDER HEREBY RELEASES AND
FOREVER DISCHARGES N2H2 AND ITS SUBSIDIARIES AND THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS FROM AND AGAINST ALL
DAMAGES, LIABILITIES, COSTS, EXPENSES, (INCLUDING REASONABLE ATTORNEYS AND
ACCOUNTANTS FEES) AND ACTIONS, CAUSES OF ACTION, OR SUITS OF ANY KIND OR NATURE
WHATSOEVER, WHICH MAY HAVE ARISEN OR WHICH MAY ARISE OUT OF HIS OWNERSHIP OF THE
SHARES EXCEPT THAT N2H2, INC.WILL INDEMNIFY DUNCAN IN CONNECTION WITH HIS
ACTIVITIES AS AN EMPLOYEE AND OFFICER OF THE CORPORATION TO THE FULL EXTENT
PROVIDED UNDER ANY N2H2 APPLICABLE INSURANCE POLICIES NOW IN EFFECT, OR THAT
BECOME EFFECT IN THE FUTURE AND RELATE TO EVENTS DURING DUNCAN'S EMPLOYMENT.

               g. Indemnification. Each party (an "Indemnitor") shall hold
harmless, indemnify and defend the other party against and from any damage,
loss, expense or liability, including reasonable attorneys' and accountants'
fees, resulting from or arising out of a breach or default in the performance by
the breaching or defaulting party of any of the terms, covenants,
representations, warranties or conditions of this Agreement.

               h. Survival of Representations and Warranties. The
representations and warranties of the Shareholder in this Agreement will survive
the Closing.

        6. Miscellaneous.

               6.1 Entire Agreement. This Agreement contains the entire
agreement among the parties with respect to the transactions contemplated
hereby, and supersedes all prior agreements, documents and understandings,
written or oral, with respect thereto.

                                       2
<PAGE>   3

               6.2 Governing Law. This Agreement and the rights and obligations
of the parties hereto shall be governed by, and construed and enforced in
accordance with, the laws of the State of Washington applicable to agreements
made and to be performed therein by residents thereof.

               6.3 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns and legal representatives.

               6.4 No Third-Party Beneficiaries. Nothing in this Agreement is
intended or shall be construed to give any person, other than the parties
hereto, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein.

               6.5 Construction of This Agreement. The article, section and
paragraph headings in this Agreement are for convenience only, and shall not
control or affect the meaning or construction of any provision of this
Agreement. This Agreement shall not be interpreted or construed against the
drafter hereof by reason of being the drafter hereof.

               6.6 Remedies. The parties hereto agree that money damages or
other remedies at law would not be sufficient or adequate remedy for any breach
or violation of, or a default under, this Agreement by them and that, in
addition to all other remedies available to them, each of them shall be entitled
to an injunction restraining such breach, violation or default or threatened
breach, violation or default and to any other equitable relief, including
specific performance, without bond or other security being required.

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

N2H2, INC.:                                       SHAREHOLDER:

<TABLE>

<S>                                               <C>
By: /s/ PETER H. NICKERSON                         /s/ JOHN F. DUNCAN
   -------------------------------------------    --------------------------------------
      Peter H. Nickerson, Ph.D.                   John F. Duncan
      President and Chief Executive Officer

                                                   /s/ VIRGINIA B. DUNCAN
                                                  --------------------------------------
                                                              Duncan (spouse)
                                                  ------------
</TABLE>

                                       3<PAGE>   1
                                                                   Exhibit 10.32

                        EMPLOYMENT SEPARATION AGREEMENT

        John Duncan ("Duncan") is employed by N2H2, Inc. ("N2H2") pursuant to an
Executive Employment Agreement (the "Employment Agreement") dated May 10, 1999.
N2H2 and Duncan have agreed that Duncan's employment and all relationships with
N2H2 are terminating, according to the following terms.

        1. DUNCAN'S LOAN IS REPAID IN FULL.

        On or about August 2, 2000, Duncan executed a Promissory Note (the
"Note") in favor of N2H2 in the principal amount of $600,000. Pursuant to the
terms of the Redemption Agreement, this loan is repaid in full.

        2. DUNCAN'S RESIGNATION.

        Duncan resigns his employment with N2H2 effective November 15, 2000.

        3. PAYMENT BY N2H2 TO DUNCAN.

        N2H2 agrees to pay Duncan $75,000.00, less lawful deductions, payable as
follows: a) four payments of $6,250.00, less lawful deductions, through December
31, 2000, on N2H2's ordinary pay days and b) a lump sum payment on January 5,
2001 of $50,000.00, less lawful deductions.

        4. PALM PILOT AND LAPTOP.

        N2H2 agrees to permit Duncan to keep the Palm Pilot and laptop he has
been most recently using in connection with his employment.

        5. STOCK REDEMPTION.

        Duncan agrees to tender to N2H2 shares of stock pursuant to the Stock
Redemption Agreement attached hereto.

        6. STOCK OPTION.

        N2H2 hereby grants and Duncan accepts, an option to purchase 50,000
shares of N2H2's Common Stock at an exercise price of $1.50 per share. This
option vests immediately and will expire on November 15, 2005. Such exercise
will be made by tendering the exercise price to N2H2, at its offices, along with
a letter stating Duncan's intent to so exercise.

        7. MUTUAL RELEASE OF ALL CLAIMS.

        Duncan hereby agrees to fully and forever release, acquit, and discharge
N2H2 and its past and present parent, subsidiary and affiliated corporations,
divisions, and business entities, and N2H2's and their past and present
officers, directors, trustees, employees and agents from

<PAGE>   2

any and all liability for any and all injuries, claims, demands, damages,
actions or suits of any kind or nature, including attorneys' fees and costs,
based on any facts in existence in whole or in part at the time of the signing
of this Agreement, and whether known or unknown at the time this Agreement is
executed by Duncan.

        Included, without limitation, in this Release of All Claims is any claim
of violation of the federal Age Discrimination in Employment Act, or the
Washington state law against age discrimination, or breach of contract or
entitlement to or promise of additional compensation or benefits of any kind
while employed at or upon ceasing employment with N2H2. The list of claims in
this paragraph is merely illustrative of the claims being released by Duncan; he
intends by signing this Agreement to release any and all claims he has against
N2H2.

        8. INDEMNIFICATION. N2H2 agrees that it will indemnify Duncan in
connection with his activities as an employee and officer of the Corporation to
the full extent provided under any N2H2 applicable insurance policies now in
effect, or that become effect in the future and relate to events during Duncan's
employment.

         9. ALL ACCRUED UNUSED VACATION, EXPENSE REIMBURSEMENTS, AND BONUSES TO
BE CASHED OUT. On January 5, N2H2 will pay Duncan a) the value of all unused
vacation pay accrued through November 15, 2000, which totals $20,563.80, less
lawful deductions and b) the value of any bonus calculated pro rata through
November 10, 2000, less lawful deductions. N2H2 will also promptly pay Duncan to
reimburse him for business expenses incurred by him through November 15, 2000,
provided Duncan submits to N2H2 expense reports for all such expenses by
December 15, 2000. Duncan acknowledges that, except for the payments he will be
paid hereunder or in the Redemption Agreement, as of the time he signed this
Agreement, N2H2 has provided to him all other payments, if any, to which he had
any claim or right or entitlement in whole or in part as of the date he signed
the Agreement. In short, Duncan acknowledges that, excepting as provided herein,
N2H2 has cashed him out in full in any and all benefits and obligations to which
he had any legal or equitable claim in whole or in part involving N2H2.

        10. COBRA COVERAGE. As part of the severance package and in return for
Employee's release herein, Employer agrees to pay Employee and dependent's COBRA
group medical coverage until April 30, 2000.

        11. ENTIRE AGREEMENT AND NO ORAL MODIFICATIONS. This Employment
Separation Agreement contains the full agreement between Duncan and N2H2
concerning the cessation of his employment with N2H2. There are no oral
agreements or understandings between Duncan and N2H2 which are not set out in
this written Separation Agreement. No portion of this Agreement may be changed,
deleted or added to, except by a written confirmation signed and dated by Duncan
and N2H2.

        12. NULLIFICATION OF EMPLOYMENT AGREEMENT.

        The parties acknowledge and agree the Employment Agreement is hereby
null and void and replaced in its entirety by this Agreement.

                                       2
<PAGE>   3

        13. ARBITRATION OF BREACHES OF OR DISPUTES ABOUT THE SEPARATION
AGREEMENT. In the event that N2H2 or Duncan contend that any portion of this
Agreement has been breached or in the event of any dispute between N2H2 and
Duncan about the terms or interpretation of any portion of this Agreement, N2H2
and Duncan that their respective remedy will be to have an arbitrator, selected
and acting pursuant to the Rules of the American Arbitration Association,
promptly consider the claimed breach or dispute, and issue a decision. The
arbitrator shall have the authority to interpret this Agreement, but shall have
no authority to add to, delete from or modify this Agreement. N2H2 agrees to pay
seventy-five percent of the cost of the arbitrator's services provided Duncan
pays twenty-five percent of such cost. Each party will bear its own costs of
preparing for and presenting their case at the arbitration, including attorneys'
fees. The decision of the arbitrator shall be final and binding, and shall be
enforceable in a court of competent jurisdiction.

        14. NOTICES. Every notice required by the terms of this Employment
Separation Agreement shall be given in writing by serving the notice upon the
party to whom it was addressed personally or by registered or certified mail,
return receipt requested, at the address set forth below or at such other
address as may hereafter be designated by notice given in compliance with the
terms of this Agreement. Notice which is given in accordance with this provision
shall be deemed to have been completed on the date the notice is personally
served, in the event of personal service, or on the third calendar day after the
notice is placed in the U.S. Mails with proper postage and addressing.

        If to Duncan:                       John F. Duncan
                                            10638 South Beach Drive
                                            Bainbridge Island, WA 98110

        If to N2H2:                         N2H2, Inc.
                                            900 4th Avenue
                                            Suite 3400
                                            Seattle, Washington 98164
                                            Attn:  Chief Executive Officer

        15. WAIVER. No waiver of any of the provisions hereof shall be valid
unless in writing, signed by the party against whom such claim or waiver is
sought to be enforced, nor shall failure to enforce any right hereunder
constitute a continuing waiver of the same or a waiver of any other right
hereunder.

        16. SEPARABILITY. If any paragraph, sentence, term or provision of this
Agreement or the application of the Agreement is found by a court of competent
jurisdiction or the AAA arbitrator designated in paragraph 12, to be invalid or
unenforceable, that determination shall not affect, impair or invalidate the
remainder of this Agreement or the application of the Agreement. Each paragraph,
sentence, term, and provision not directly designated to be invalid or
unenforceable shall be valid and enforceable to the fullest extent permitted by
law.

        17. ASSIGNMENT. N2H2 may assign any benefits it has under this Agreement
to the entity of its choice.

                                       3
<PAGE>   4

        18. WASHINGTON STATE LAW GOVERNS. This Employment Separation Agreement
shall be construed according to the laws of the state of Washington.

        19. OLDER WORKERS BENEFIT PROTECTION ACT: NOTICE TO CONSULT ATTORNEY,
WAITING PERIOD, AND RIGHT OF RESCISSION. Duncan acknowledges that he has been
informed that he has been instructed to seek the independent advice and counsel
of an attorney before deciding whether to sign this Agreement, that he has had
an opportunity to have an attorney review this Agreement and advise him about it
prior to signing.

        Duncan understands, acknowledges, and agrees that he may consider this
Employment Separation Agreement for a period of twenty-one (21) days after first
receiving the unsigned Agreement. Up to seven (7) days after the Agreement has
been signed by Duncan and delivered to N2H2, he may revoke the Agreement by
notifying N2H2 in writing of his revocation of the Agreement.

November 14, 2000                /s/ JOHN DUNCAN
----------------------------     ------------------------------
Date                             John F. Duncan

                                 N2H2, Inc.

November 14, 2000                By /s/ PETER H. NICKERSON
----------------------------       ----------------------------
Date                                Peter H. Nickerson
                                 ------------------------------
                                 (print name)

                                 Its President
                                    ---------------------------

                                        4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00019-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00019-of-00352.parquet"}]]