SEPARATION AGREEMENT

         This Agreement is made by and between EVEREST MEDICAL CORPORATION
("Employer") and R. KEITH POPPE ("Employee").

                                    RECITALS

         A.  WHEREAS,  Employee has been employed by Employer in the position of
Vice- President of Sales; and

         B. WHEREAS,  Employee has been granted incentive stock options pursuant
to Incentive Stock Option Agreements as follows:

                  (1)  Agreement  dated  February  6, 1995 for 15,000  shares of
common stock, a true and correct copy of which is attached hereto as Exhibit A;

                  (2) Agreement  dated July 19, 1994 for 25,000 shares of common
stock, a true and correct copy of which is attached hereto as Exhibit B;

                  (3)  Agreement  dated June 15, 1993 for 5,000 shares of common
stock, a true and correct copy of which is attached hereto as Exhibit C; and

                  (4) Agreement  dated July 31, 1992 for 10,000 shares of common
stock, a true and correct copy of which is attached hereto as Exhibit D; and

         C.  WHEREAS,  Employer  and  Employee  have decided that it is mutually
beneficial for their employment relationship to terminate; and

         D. WHEREAS,  the parties are mindful of the costs and  uncertainties of
litigation  and  wish to  effect  a full  and  final  resolution  of any and all
disputes between them;

         NOW THEREFORE, the parties agree as follows.

                                   AGREEMENTS

         1. In  exchange  for  and  consideration  of the  mutual  promises  and
covenants contained herein, Employer will:

                  A.  Continue to employ  Employee in his current  position with
         his current  responsibilities  at his current level of compensation and
         benefits  through October 25, 1996;  provided that Employee's last date
         of work shall be October  15,  1996 and he shall use  vacation  for the
         period October 16 through October 25, 1996;


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                  B. Pay to  Employee,  in  accordance  with  Employer's  normal
         policies and procedures,  commissions on all orders placed on or before
         October 15, 1996 including  those orders which are delivered after that
         date;

                  C. Pay, on October  25,  1996,  to  Employee  the total sum of
         $10,800.00,  less required  withholding for taxes, as and for 240 hours
         of accrued vacation pay;

                  D. Provide Employee with reasonable  amounts of time away from
         the work  premises to pursue his search for  employment  to begin after
         October 15, 1996;

                  E. Pay to Employee the total gross amount of  $4,130.00,  less
         required  withholding  for taxes,  per Employer's  normal  biweekly pay
         period during the  "Severance  Period,"  pursuant to Employer's  normal
         payroll  procedures;  provided that any payment(s) that would otherwise
         be due prior to the  Effective  Date of this  Agreement,  as defined in
         Paragraph 11 hereof, shall become due and payable on the normal payroll
         date next following that Effective Date.

                  F.  Continue to pay the employer  portion of monthly  premiums
         for  Employee's  group medical and life  insurance  policies as were in
         effect on August 1, 1996, during the "Severance  Period," provided that
         Employee  timely  exercises  his  election to continue  such  insurance
         coverages  pursuant  to those  federal  and state  laws  providing  for
         continuation  of  such  insurance  upon  separation  from   employment;
         Employer  further  agrees to provide to Employee in a timely manner the
         necessary documents to allow Employee to make such election;

                  G.  Provide  outplacement  services  to  Employee  through  an
         outplacement counseling service to be named by Employer; and

                  H.  Reimburse  Employee's  ordinary  and  reasonable  business
         expenses  provided that  documentation  of such expenses is received by
         Employer on or before  November 15, 1996;  provided that Employee shall
         not incur any such expenses  after October 15, 1996 and Employer  shall
         have no liability to reimburse Employee for any expenses incurred after
         that date.

                  I.  Issue a grant of a  non-qualified  option  to  purchase  a
         certain  number of shares of Employer's  common stock,  represented  by
         "S," in the  following  formula to be used to  calculate  the number of
         shares to be included within such option.

               (9,000N - 16,830) + (10,000N - 15,600) + (1250N - 2737.6) = S
               -----------------   ------------------   ----------------
               (     1.87      )   (      1.56      )   (     2.19     )

         "N" equals  the  market  price per share at the close of trading on the
         Effective  Date of this  Agreement  as defined in  Paragraph 11 hereof,
         which shall also be the date on which such option is granted.


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         The option will expire on December 31, 1999. In consideration therefor,
         Employee  hereby agrees to the  cancellation of and waives and releases
         any and all rights with  regard to all  nonvested  options  pursuant to
         Exhibits A through C hereof.

                  J. To pay one-half of Employee's  reasonable  attorney's  fees
         and costs  incurred by Employee for legal  services in connection  with
         review  and  execution  of this  Separation  Agreement;  provided  that
         Employer's  obligation  under  this  Paragraph  1.K.  shall not  exceed
         $250.00.  Payment  shall be made to Joseph A. O'Brien on the  thirtieth
         day following Employer's receipt of a statement  delineating such fees,
         or on the Effective Date of this Agreement as described in Paragraph 11
         hereof, whichever date occurs later.

         2. In  exchange  for  and  consideration  of the  mutual  promises  and
covenants contained herein, Employee will:

                  A. Remain  employed by Employer as provided in Paragraphs 1.A.
         and  1.B.   hereof   and  use  his  best   efforts   to   fulfill   the
         responsibilities of that position;

                  B. Notify Employer promptly when Employee becomes  re-employed
         and  eligible  for group  health  insurance  coverage  through  his new
         employer.

                  C. Return to Employer, by the close of business on October 15,
         1996, all of Employer's  property within Employee's custody or control;
         provided  that the  parties  agree that  Employee  may keep  Employer's
         laptop computer which is currently  assigned to Employee and within his
         possession.

                  D. Take no action which would in any way cause any question to
         arise with respect to the validity of any patent held by Employer.

         3. The parties further agree that Employee shall remain  available,  at
times which are reasonably convenient to Employee, during the "Severance Period"
to respond to Employer's  inquiries and provide  services to Employer related to
those services which he has provided during the term of his employment.

         4. The  parties  further  agree that the  "Severance  Period"  shall be
defined as the period of October 26, 1996 through  April 25, 1997  provided that
Employer  shall have no  obligation  to make any payment of salary or  insurance
premiums on behalf of Employee in that event that  Employee  (a) ceases prior to
October 15, 1996, to provide services to Employer as provided in Paragraphs 1, 2
and 3 hereof or (b) violates the terms of Paragraph 5 hereof.

         5. Restriction Against Competition. Employee acknowledges that Employee
has been  employed in a position of trust and  confidence  and has had access to


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and become  familiar with the unique  methods,  services and procedures  used by
Employer  and  that  as  part  of  Employee's  duties,  Employee  developed  and
maintained  close working  relationships  with  Employer's  customers.  Employee
further  acknowledges  that  disclosure  of any of  Employer's  confidential  or
proprietary  information,   trade  secrets  or  other  information  relating  to
operation  of  Employer's  business or use of or access to such  information  by
Employer's  competitors,  would have a serious detrimental effect upon Employer,
the monetary loss from which would be difficult, if not impossible,  to measure.
In consequence of the foregoing acknowledgements, Employee agrees:

                  A.  Employee  will not at any time  during his  employment  by
         Employer or  thereafter,  disclose  the list of  Employer's  customers,
         trade  secrets,   information  about  Employer's  marketing,   pricing,
         merchandising,  products in research  and  development,  sales plans or
         strategies or information about Employer's  business  operations deemed
         to be confidential,  to any person, firm, corporation,  association, or
         other entity for any reason or purpose whatsoever.

                  B. For the period of October  16,  1996  through  October  15,
         1997,  Employee  agrees that Employee will not, at any place within the
         United States, directly or indirectly,  own, manage, operate,  control,
         be employed by,  participate  in or be connected in any manner with the
         ownership,  management, operation or control of any business engaged in
         the development,  manufacture,  marketing,  sale and or distribution of
         bipolar surgical instruments which compete directly with the current or
         demonstrably anticipated products of Everest Medical Corporation.  Such
         restriction  shall be limited to the  following  market  segments;  (i)
         gastroenterological   endoscopic  procedures,   (ii)  general  surgical
         laparoscopic procedures,  (iii) gynecological  laparoscopic procedures,
         and (iv) cardiovascular thoracoscopic procedures specifically including
         saphenous  vein  harvesting for cardiac  bypass  surgery.  Demonstrably
         anticipated  shall mean products which are currently in development and
         are  scheduled to be released to the market  within  twelve (12) months
         from the date of this Agreement.

                  C. Employee agrees that Employee will not at any time from the
         date of during his  employment by Employer or during the period October
         16, 1996 through October 15, 1997, directly or indirectly, either as an
         individual  for his own  account,  or on  behalf of  another  person or
         persons, corporation, partnership, or other entity, solicit any present
         or future  employee of Employer for any purpose of hiring or attempting
         to hire such employee.

                  D.  In  the  event  that  Employee  shall  violate  any of the
         foregoing  provisions of this Paragraph 6, then Employer shall have the
         right to seek  injunctive  relief or any other remedy  allowed to it in
         law or equity, and to collect from the Employee a reasonable attorney's
         fee incurred in bringing  such legal or  equitable  action or otherwise
         enforcing the terms and conditions of this Agreement.  Disputes arising
         under  this  Paragraph  6 shall not be  subject  to the  provisions  of
         
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         Section  10.  In  the  event  of  a  court  of  competent  jurisdiction
         determines that the provisions of this Paragraph 6 are unreasonable, it
         may limit such  provision  to the extent it deems  reasonable,  without
         declaring the provision invalid in its entirety.

         6. The parties  further  agree that the terms of this  Agreement  shall
remain  confidential  provided  that  Employer  may  disclose  such  terms as is
necessary to effectuate  the terms of the Agreement  and/or for the operation of
its business and that  Employee may disclose  such terms to his spouse,  tax and
financial advisers and attorney.  Provided further,  that the provisions of this
Paragraph 6 shall not apply to the terms contained in Paragraph 5 hereof.

         7. The  parties  further  agree  that not to make  any  disparaging  or
defamatory statements concerning one another. For the purposes of this Paragraph
7, Employer shall be defined as the officers, directors and managerial employees
of Employer.

         8. Employee further agrees in consideration of and exchange for all the
mutual promises and covenants and promises  contained  herein to and hereby does
release,  agree not to sue and forever discharge Employer,  its past and present
officers,   directors,   shareholders,   employees,   consultants,   agents  and
representatives,  from all claims and demands he has or might have  against them
or any of them, whether in law or equity, contract or tort, arising out of or in
connection  with  his  employment  by  Employer,  or  the  termination  of  that
employment or otherwise. This release includes,  without limiting the generality
of the  foregoing,  any  claims he may have for wages,  commissions,  penalties,
vacation  pay or other  benefit,  defamation  or  improper  discharge  (based on
contract,  at  common  law or under  any  federal,  state or  local  statute  or
ordinance prohibiting  discrimination in employment particularly  discrimination
based on race,  sex,  national  origin,  age, color,  religion,  marital status,
disability  or  affectional  preference,  including  the Age  Discrimination  in
Employment  Act) or attorney's fees or other costs or expenses and any claims he
may have with  respect to  intellectual  property  including  but not limited to
patents,  copyrights,   inventions,  trademarks  or  the  registration  thereof;
provided  that  nothing  herein  shall  release or waive any right or claim that
Employee has or may have arising under that Agreement attached hereto as Exhibit
D.

         9. All disputes  arising out of or in  connection  with this  Agreement
and/or with  Employee's  employment or  termination  of  employment,  other than
disputes  arising  under  Paragraph 5, shall be  determined  by  arbitration  in
accordance  with the commercial  arbitration  rules of the American  Arbitration
Association.   The  arbitration   proceedings  shall  be  held  in  Minneapolis,
Minnesota, or at such other place as may be mutually agreeable to the parties.

         10. Employee  acknowledges  that he has been advised to consult with an
attorney prior to signing this Agreement.  Employee further acknowledges that he
has had at least 21 days to consider whether to sign this Agreement.


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         11. Employee  acknowledges that he may rescind,  that is, cancel,  this
Agreement by delivering  written  notice of that  rescission by certified  mail,
return  receipt  requested,  postmarked  within  fifteen days of his signing the
Agreement.  The notice of rescission must be addressed to John Shannon,  Everest
Medical Corporation, 13755 First Avenue North, Minneapolis, MN 55441-5454, or by
hand delivery to John Shannon at the same address within the 15-day period.  The
sixteenth  day following  Employee's  execution of this  Agreement  shall be the
Effective Date.

         12.  Employee  acknowledges  that  Employer  shall  have no  obligation
hereunder,  except with respect to Paragraphs  1.A., 1.B., 1.C., and 1.H., prior
to the Effective Date of this Agreement, as defined in Paragraph 11 hereof.

         13. No purported  amendment,  modification  or waiver of any  provision
hereof shall be binding unless set forth in a writing signed by both parties (in
the case of amendments or  modifications)  or by the party to be charged thereby
(in the case of waivers).

         14.  Any  waiver  shall  be  limited  to  the  circumstances  or  event
specifically referenced in the written waiver document and shall not be deemed a
waiver of any other term of this Agreement or of the same  circumstance or event
upon any recurrence thereof.

         15.  This  Agreement,  together  with  the  Exhibits  attached  hereto,
constitutes the entire Agreement  between the parties and supersedes any and all
prior and  contemporaneous  oral or written  understandings  between the parties
relating to the subject matter hereof.


                                       EVEREST MEDICAL CORPORATION



Date: October 12, 1996                 By: /s/ John L. Shannon, Jr.
                                       Its President & Chief Executive Officer
                                                                  "Employer"



                                       R. KEITH POPPE



Date: October 12, 1996                 /s/ R. Keith Poppe
                                       R. Keith Poppe
                                                                  "Employee"



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