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                                                                    EXHIBIT 10.4


                           UROQUEST MEDICAL CORPORATION

                               EMPLOYMENT AGREEMENT

      This Agreement is entered into as of January 2, 1998, by and between
UroQuest Medical Corporation, a Delaware corporation (the "Company") and Terry
Spraker (the "Employee").

      WHEREAS, the Company desires to retain the Employee on a full-time basis
in the capacity of President and Chief Executive Officer of the Company and the
Employee desires to accept such employment; and

      WHEREAS the parties desire and agree to enter into an employment
relationship by means of this Agreement;

      NOW THEREFORE in consideration of the promises and mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is mutually covenanted and
agreed by and among the parties as follows:

      1. POSITION AND DUTIES. The Employee shall be employed as President and
Chief Executive Officer of the Company, reporting to the Company's Board of
Directors (the "Board") and assuming and discharging such responsibilities as
are commensurate with the Employee's position. In performing his basic duties,
the Employee shall work at his current location, although the Employee
acknowledges that frequent travel may be necessary in carrying out his duties
hereunder.

      2. EMPLOYMENT RELATIONSHIP. The Company and the Employee acknowledge that
the Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason, the
Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with the Company's established employee plans and
policies at the time of termination.

      3. COMPENSATION.

            (a) BASE SALARY. For all services to be rendered by the Employee
pursuant to this Agreement, the Employee shall receive a minimum annual base
salary of $240,000, 

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payable in accordance with the Company's normal payroll
practices (the "Base Salary"). The Base Salary may be increased from time to
time by the Board in its absolute discretion.

            (b) BONUS. For the Company's 1997 fiscal year, the Employee shall
receive a fixed bonus equal to 50% of the Base Salary pro-rated for the portion
of the year spent as CEO, subject to further review by the Compensation
Committee. For each fiscal year of the Company after the 1997 fiscal year during
the term of this Agreement, the Employee shall be eligible to receive a bonus,
based on the achievement of certain performance criteria (which shall be
determined by the Board for each fiscal year prior to the beginning of each such
fiscal year) of up to a maximum of 50% of the Base Salary.

      4. STOCK OPTIONS.

            (a) INITIAL OPTION. The Company has granted the Employee an option
(the "First Option") to purchase 120,000 shares of Common Stock of the Company.
Except as otherwise provided herein, the First Option was granted pursuant to,
and shall be governed by, the Company's 1994 Stock Plan. The First Option was
vested and exercisable as to 100% of the shares subject thereto upon Dr.
Spraker's employment commencement.

            (b) SECOND OPTION. The Company has granted the Employee a second
option (the "Second Option") to purchase 100,000 shares of Common Stock of the
Company. Except as otherwise provided herein, the Second Option was granted
pursuant to, and shall be governed by, the Company's 1994 Stock Plan. The Second
Option shall vest and become exercisable as to 100% of the shares subject
thereto on the date ten (10) years from Dr. Spraker's employment commencement;
provided, however, that on such date Employee remains employed by the Company.
Notwithstanding the foregoing, the Second Option shall vest and become
exercisable in full upon the Company obtaining U.S. regulatory approval to begin
marketing its Male On-Command Catheter product.

            (c) THIRD OPTION. The Company has granted the Employee a third
option (the "Third Option") to purchase 480,000 shares of Common Stock of the
Company. Except as otherwise provided herein, the Third Option was granted
pursuant to, and shall be governed by, the Company's 1994 Stock Plan. The Third
Option shall vest and become exercisable as to 1/4 of the shares subject thereto
on the date one year after the date hereof, and as to 1/16 of the shares subject
thereto at the end of each three (3) month period following the date hereof, so
that the Third Option shall be fully vested and exercisable on the fourth
anniversary of Dr. Spraker's employment commencement; provided, however, that on
such dates the Employee remains employed by the Company.

            (d) EXERCISE WITH PROMISSORY NOTE. The First, Second and Third
Options shall allow for payment by the Employee upon exercise to be by
full-recourse promissory note.


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      5. OTHER BENEFITS. The Employee shall be entitled to participate in the
employee benefit plans and programs of the Company, if any, to the extent that
his position, tenure, salary, age, health and other qualifications make him
eligible to participate in such plans or programs, subject to the rules and
regulations applicable thereto. The Company reserves the right to cancel or
change its benefit plans and programs at any time.

      6. EXPENSES. The Company shall reimburse the Employee for reasonable
travel, entertainment or other expenses incurred by the Employee in the
furtherance of or in connection with the performance of the Employee's duties
hereunder, in accordance with the Company's expense reimbursement policy as in
effect from time to time.

      7. CHANGE OF CONTROL.

            (a) OPTION ACCELERATION UPON A CHANGE OF CONTROL. Upon a Change of
Control, the vesting and exercisability of each option granted to the Employee
by the Company (collectively, the "Options") shall be automatically accelerated
in full.

            (b) INVOLUNTARY TERMINATION IN CONNECTION WITH A CHANGE OF Control.
If the Employee's employment with the Company terminates in an Involuntary
Termination within [TWELVE (12) MONTHS] of a Change of Control, then, subject to
Section 9, the Employee shall be entitled to receive a lump-sum cash severance
payment equal to the Employee's Current Compensation.

            (c) OTHER TERMINATION. If the Employee's employment terminates other
than in an Involuntary Termination within twelve (12) months of a Change of
Control, then the Employee shall not be entitled to receive severance benefits
pursuant to Section 7(b) of this Agreement, but may be eligible for those
benefits (if any) as may then be established under the Company's severance and
benefits plans and policies existing at the time of such termination.

      8. DEFINITIONS.

            (a) CAUSE. "Cause" shall mean the occurrence of any one or more of
the following: (i) the Employee's conviction by, or entry of a plea of guilty or
nolo contendere in, a court of final jurisdiction for any crime which
constitutes a felony in the jurisdiction involved (other than a felony traffic
offense); (ii) the Employee's misappropriation of funds or commission of a
material act of fraud, whether prior or subsequent to the date hereof, upon the
Company; (iii) gross negligence by the Employee in the scope of the Employee's
services to the Company; (iv) a willful breach by the Employee of a material
provision of this Agreement; or (v) a willful failure of the Employee to
substantially perform his duties


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hereunder. Notwithstanding the foregoing, the Employee shall not be deemed to
have been terminated for Cause under clause (iii), (iv) or (v) of this Section
8(a) unless the Board delivers a written notice to the Employee setting forth
the reasons for the Company's intention to terminate for Cause and specifically
identifying the manner in which the Board believes that the Employee has engaged
in such conduct, which conduct is not substantially corrected by the Employee
within 10 days following his receipt of such notice, and provides the Employee
with an opportunity, together with his counsel, if any, to be heard before the
Board.

            (b) CHANGE OF CONTROL. "Change of Control" shall mean the occurrence
of any of the following events:

                (i) the approval by shareholders of the Company of a merger or
consolidation of the Company with any other entity, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;

                (ii) any approval by the shareholders of the Company of a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets;

                (iii) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) becoming the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 50% or more of the total
voting power represented by the Company's then outstanding voting securities; or

                (iv) a change in the composition of the Board occurring within a
two-year period, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" shall mean directors who either (A)
are directors of the Company as of the date hereof, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of at least a
majority of those directors whose election or nomination was not in connection
with any transaction described in subsections (i), (ii) or (iii) or in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company.

            (c) CURRENT COMPENSATION. "Current Compensation" shall mean an
amount equal to the Employee's annual base salary and annual bonus for the
fiscal year preceding the fiscal year in which severance benefits become payable
to the Employee pursuant to Section 7(b).


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            (d) INVOLUNTARY TERMINATION. "Involuntary Termination" shall mean
(i) without the Employee's express written consent, a reduction by the Board of
the Employee's duties, position or responsibilities relative to the Employee's
duties, position or responsibilities in effect immediately prior to such
reduction, or the removal of the Employee from such position, duties and
responsibilities, unless the Employee is provided with comparable duties,
position and responsibilities; (ii) without the Employee's express written
consent, a reduction by the Board of the Base Salary or the Employee's bonus
opportunity (as set forth in Section 3(b)) in effect immediately prior to such
reduction; (iii) a reduction by the Board in the kind or level of employee
benefits to which the Employee is entitled immediately prior to such reduction,
with the result that the Employee's overall benefits package is significantly
reduced; (iv) without the Employee's express written consent, the relocation of
the Employee by the Board to a facility or a location more than thirty-five (35)
miles from his current location; (v) any purported termination of the Employee
by the Board which is not effected for Cause or for which the grounds relied
upon are not valid; or (vi) the failure of the Company to obtain the assumption
of this Agreement by any successors contemplated in Section 11 below; provided,
however, that an event described above shall not constitute Involuntary
Termination unless it is communicated by the Employee to the Company in writing
and is not corrected by the Company in a manner that is reasonably satisfactory
to the Employee (including full retroactive correction with respect to any
monetary matter) within ten (10) days of the Company's receipt of such written
notice from the Employee.

      9. GOLDEN PARACHUTE EXCISE TAX.

            (a) BENEFITS CAP. In the event that the benefits under this
Agreement, when aggregated with any other payments or benefits received by the
Employee, or to be received by the Employee, would (i) constitute "parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), and (ii) but for this provision, would be subject
to the excise tax imposed by Section 4999 of the Code or any similar or
successor provision (the "Excise Tax"), then the Employee's benefits shall be
either delivered in full or delivered to such lesser amount or degree as would
result in no portion of such benefits being subject to the Excise Tax, whichever
of the foregoing amounts, taking into account the applicable federal, state and
local income taxes and the Excise Tax, results in the receipt by the Employee on
an after-tax basis, of the greatest amount of benefits, notwithstanding that all
or some portion of such benefits may be subject to the Excise Tax.

            (b) DETERMINATION. Unless the Company and the Employee otherwise
agree in writing, any determination required under this Section shall be made in
writing by the Company's primary independent public accounting firm (the
"Accountants"), whose determination shall be conclusive and binding upon the
Employee and the Company for all purposes. For purposes of making the
calculations required by this Section, the Accountants 


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may make reasonable assumptions and approximations concerning applicable taxes
and may rely on reasonable, good faith interpretations concerning the
application of Sections 280G and 4999 of the Code. The Company and the Employee
shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make any determination under this
Section. The Company shall bear all costs the Accountants may reasonably incur
in connection with any calculations contemplated by this Section.

      10. RIGHT TO ADVICE OF COUNSEL. The Employee acknowledges that he has had
the right to consult with counsel and is fully aware of his rights and
obligations under this Agreement.

      11. LEGAL FEES AND EXPENSES. The Company shall pay, or reimburse the
Employee for, all reasonable legal fees and expenses incurred by the Employee in
connection with negotiating, drafting and executing this Agreement and an
associated Estate Plan; provided, however, that the Company shall not be
obligated to reimburse such legal fees and expenses in excess of $5,000.

      12. SUCCESSORS.

            (a) COMPANY'S SUCCESSORS. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the obligations under this Agreement and agree
expressly to perform the obligations under this Agreement in the same manner and
to the same extent as the Company would be required to perform such obligations
in the absence of a succession. For all purposes under this Agreement, the term
"Company," shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this
subsection (a) or which becomes bound by the terms of this Agreement by
operation of law.

            (b) EMPLOYEE'S SUCCESSORS. Without the written consent of the
Company, the Employee shall not assign or transfer this Agreement or any right
or obligation under this Agreement to any other person or entity.
Notwithstanding the foregoing, the terms of this Agreement and all rights of the
Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.

      13. ARBITRATION.

            (a) Employee agrees that any dispute or controversy arising out of,
relating to, or in connection with this Agreement, or the interpretation,
validity, construction, performance, breach, or termination thereof, shall be
settled by binding arbitration to be held 


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in San Francisco, California in accordance with the National Rules for the
Resolution of Employment Disputes then in effect of the American Arbitration
Association (the "Rules"). The arbitrator may grant injunctions or other relief
in such dispute or controversy. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgment may be
entered on the arbitrator's decision in any court having jurisdiction.

            (b) The arbitrator(s) shall apply California law to the merits of
any dispute or claim, without reference to rules of conflicts of law. The
arbitration proceedings shall be governed by federal arbitration law and by the
Rules, without reference to state arbitration law. The Employee hereby consents
to the personal jurisdiction of the state and federal courts located in
California for any action or proceeding arising from or relating to this
Agreement or relating to any arbitration in which the parties are participants.

            (c) COSTS AND FEES OF ARBITRATION. Employee shall pay the initial
arbitration filing fee (not to exceed $200.00), and the Company shall pay the
remaining costs and expenses of such arbitration (unless Employee requests that
each party pay one-half of the costs and expenses of such arbitration). The
Company and Employee shall each pay separately its counsel fees and expenses
unless otherwise required by law. The Company will reimburse the Employee for
reasonable counsel fees and expenses actually incurred in connection with any
arbitration pursuant to this section, provided however, such reimbursement will
not exceed $5,000.

            (c) EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES
ARBITRATION. EMPLOYEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EMPLOYEE
AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH
THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE,
BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION
CLAUSE CONSTITUTES A WAIVER OF EMPLOYEE'S RIGHT TO A JURY TRIAL AND RELATES TO
THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE
RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, DISCRIMINATION CLAIMS.

      14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal substantive laws, but not the choice of law rules,
of the state of California.

      15. SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement, or any terms hereof, shall not affect the validity or
enforceability of any other provision or term of this Agreement.


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      16. INTEGRATION. This Agreement represents the entire agreement and
understanding between the parties as to the subject matter herein and supersedes
all prior or contemporaneous agreements whether written or oral. No waiver,
alteration, or modification of any of the provisions of this Agreement shall be
binding unless in writing and signed by duly authorized representatives of the
parties hereto.

      17. TAXES. All payments made pursuant to this Agreement shall be subject
to withholding of applicable income and employment taxes.

      IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by a duly authorized officer, as of the day and year
first above written.

                                       UROQUEST MEDICAL CORPORATION

                                       By:     /s/ JEFFREY L. KAISER
                                               ---------------------------------
                                       Title:  Vice President, 
                                               Chief Financial Officer,
                                               Secretary and Treasurer


                                       TERRY E. SPRAKER, PH.D.:

                                       /s/ TERRY E. SPRAKER, PH.D.
                                       -----------------------------------------


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