<PAGE>

                                                                    Exhibit 10.4

                   SEPARATION AGREEMENT AND GENERAL RELEASE


          This Separation Agreement and General Release (this "Agreement") is 
made and entered into this 9th day of October, 1998, by and between William 
L. Rush ("Rush"), a resident of the State of Minnesota, and Nutrition 
Medical, Inc. (the "Company"), a Minnesota corporation.

          WHEREAS, Rush was employed as President and Chief Executive Officer 
of the Company from July 1993 through August 31, 1998;

          WHEREAS, Rush resigned his employment with the Company effective 
August 31, 1998;

          WHEREAS, Rush and the Company are currently parties to that certain 
Executive Employment Agreement, effective as of October 1, 1996, by and 
between the Company and Rush which amended and restated in its entirety that 
certain Executive Employment Agreement dated September 18, 1996 by and 
between Rush and the Company (as so amended and restated, the "Employment 
Agreement");

          WHEREAS, pursuant to Section 4.7 of the Employment Agreement, the 
parties thereto may terminate the Employment Agreement at any time upon such 
terms or conditions as such parties may agree;

          WHEREAS, Rush has negotiated with the Company regarding the terms 
and conditions of his resignation and separation from the Company;

          WHEREAS, Rush and the Company desire to settle all disputes related 
directly or indirectly to Rush's employment with the Company, and Rush's 
resignation from employment, in accordance with the terms and conditions set 
forth in this Agreement; and

          WHEREAS, Rush desires to enter into a consulting agreement (the 
"Consulting Agreement") with GalaGen, Inc. ("GalaGen") pursuant to which Rush 
would disclose to GalaGen certain confidential information related to the 
Company's critical care business, subject to the terms and conditions set 
forth herein.

          NOW, THEREFORE, in consideration of the foregoing premises and the 
mutual covenants and agreements set forth in this Agreement and other good 
and valuable consideration, the receipt and sufficiency of which are hereby 
acknowledged, Rush and the Company agree as follows:

<PAGE>

          1.   TERMINATION OF EMPLOYMENT AGREEMENT. Pursuant to Section 4.7 
of the Employment Agreement, the parties hereto hereby terminate the 
Employment Agreement upon the terms and conditions set forth in this 
Agreement.

          2.   RESIGNATION OF RUSH. Rush agrees and acknowledges that he 
resigned voluntarily as President and Chief Executive Officer of the Company 
on August 31, 1998 and, effective as of August 31, 1998, does not serve in 
any capacity as an employee of the Company.

          3.   COMPENSATION TO RUSH. The Company will provide Rush with the 
following payments and benefits:

          (a)  The Company shall pay Rush $7,900 on the date hereof.

          (b)  The Company shall pay Rush $87,100 on October 26, 1998.

          (c)  On or prior to October 26, 1998, the Company shall transfer 
     its beneficiary rights under its key man life insurance policy on Rush 
     (Northwestern Mutual Life policy no. 13-775-828) to a designee of Rush's 
     choice.

          (d)  On or prior to October 26, 1998, and contingent upon Rush 
     assuming or obtaining a discharge of all of the Company's payment 
     obligations (such payment obligations being equal to $1,000 per month 
     from October 1998 through and including December 1998) to Rousar & 
     Associates under the International Sales Broker Agreement, dated as of 
     December 1, 1997, by and between the Company and Rousar, Rush shall 
     receive $4,000 of the cash surrender value of the Company's split dollar 
     life insurance policy on Rush (Northwestern Mutual Life policy no. 
     14-240-880).

          (e)  The Company shall pay Rush $17,642 on October 31, 1998.

          (f)  Rush shall have the option (the "Option") to purchase 25,000 
     shares of the Company's common stock, $.04 par value, at a per share 
     exercise price of $14.00, subject to the terms and conditions of the 
     Company's 1995 Long-Term Incentive and Stock Plan.  The Option was 
     granted to Rush under the terms of the Employment Agreement and was 
     fully vested as to 12,500 of such shares on April 1, 1998.  The Option 
     as to the remaining 12,500 shares will vest as of the date hereof.  The 
     Option will be canceled on the second anniversary of the date hereof 
     with respect to shares that have not been purchased by Rush prior to 
     such date pursuant to the Option.

          (g)  On or prior to October 26, 1998, the Company shall pay Rush 
     for all accrued but unpaid vacation pay.

Notwithstanding the foregoing, the Company shall have no obligation to make the
payments required by, or transfer its beneficiary rights pursuant to, paragraphs
3(b), 3(c), 3(d), 3(e) and 


                                      -2-

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3(g) if Rush exercises his right to rescind or revoke this Agreement as far 
as it extends to potential claims under Minn. Stat. Ch. 363 or the Age 
Discrimination in Employment Act pursuant to Paragraph 10(a) or 10(c), 
respectively.

          4.   NO LEGAL ENTITLEMENT TO COMPENSATION AND BENEFITS. Rush agrees 
and acknowledges that the Company has no legal obligation absent an agreement 
between the parties hereto to provide the compensation and benefits described 
in Paragraph 3 and that the Company has agreed to provide Rush such 
compensation and benefits to reach an expeditious and amicable resolution 
regarding the terms and conditions of Rush's resignation. Rush agrees that he 
was not entitled to any of the compensation and benefits specified in 
Paragraph 3 absent his execution of this Agreement.

          5.   INCLUSIVE OF ALL INCOME AND OTHER BENEFITS. Rush agrees that 
the compensation and benefits described in Paragraph 3 shall take the place 
of, and discharge, any obligations of the Company to Rush for compensation or 
any other expectations of payment or benefit on the part of Rush, including, 
without limitation, all obligations of the Company to Rush under the 
Employment Agreement.

          6.   PROPRIETARY INFORMATION. Rush acknowledges that during his 
employment with the Company, he has been exposed to and acquired 
confidential, proprietary and trade secret information belonging to the 
Company and the Company's customers ("Confidential Information"), including, 
without limitation, designs, processes, formulae, plans, devices and 
material, directly or indirectly, useful in any aspect of the Company's 
business, past, current or anticipated products or services, customer and 
supplier lists, development and research work, business strategies, plans and 
proposals, financial, employee and personnel data and information and 
purchasing, accounting, marketing, selling and services information. Rush 
understands and agrees that such Confidential Information has been disclosed 
to him in confidence and for the sole benefit of the Company. Rush agrees 
that beginning on the date of this Agreement he, Medical Nutrition, Inc. and 
any other entity directly or indirectly controlled by Rush will (i) 
diligently protect the confidentiality of all Confidential Information; (ii) 
not disclose or communicate any Confidential Information to any third party 
without the consent of the Company; and (iii) not make use of Confidential 
Information on his own behalf or on behalf of any third party.  Rush agrees 
that any unauthorized disclosure or use of such Confidential Information to 
or on behalf of third parties would cause irreparable harm to the 
confidential status of such information and to the Company, and, therefore, 
the Company shall be entitled to an injunction prohibiting any such 
disclosure, use, or threatened disclosure or use. The foregoing obligations 
of confidentiality shall not apply to any knowledge or information that is 
now or subsequently becomes generally publicly known, other than as a direct 
or indirect result of a breach of this Agreement by Rush. Notwithstanding the 
foregoing, Rush may disclose to GalaGen, pursuant to the Consulting 
Agreement, Confidential Information related to the Company's critical care 
business; provided, however, that if the Company does not sell its critical 
care business to GalaGen prior to December 31, 1998, Rush may no longer 
disclose such information.


                                      -3-

<PAGE>

          Rush expressly acknowledges that the terms of this Paragraph 6 
shall survive the expiration or termination of other agreements or duties in 
this Agreement.

          7.   COMPANY PROPERTY.  Rush represents that he has not and will 
not remove any Confidential Information or other property from the Company's 
premises, including, without limitation, all documents, reports, manuals, 
business plans, minutes, memoranda, computer software, computer databases, 
computer print-outs, member or customer lists, credit cards, keys, 
identification, products, access cards, and all other tangible property 
relating in any way to the business of the Company, even if Rush authored, 
created or assisted in authoring or creating such property.  Rush agrees that 
within fifteen (15) days of the date of this Agreement, he will return to the 
Company all Confidential Information and other Company property currently in 
his possession or under his control.

          8.   DISCLOSURE AND ASSIGNMENT OF INVENTIONS AND OTHER WORKS.  Rush 
shall promptly disclose to the Company in writing (i) all ideas, improvement 
and discoveries, whether or not such are patentable or copyrightable, and 
whether or not in writing or reduced to practice ("Inventions") and (ii) all 
writings, drawings, diagrams, charts, tables, databases, software (in object 
or source code and recorded on any medium), and any other works of 
authorship, whether or not such are copyrightable ("Works of Authorship"), 
which are conceived, made, discovered, written or created by Rush alone or 
jointly with another person, group or entity, whether during the normal hours 
of his employment at the Company or on his own time, during the term of 
Rush's employment with the Company and until August 31, 1998.  Rush hereby 
assigns all rights to all such Inventions and Works of Authorship to the 
Company.  Rush will give the Company all the assistance it reasonably 
requires for the Company to perfect, protect, and use its rights to such 
Inventions and Works of Authorship.  Rush shall sign all such documents, take 
all such actions and supply all such information that the Company considers 
necessary or desirable to transfer or record the transfer of Rush's entire 
right, title and interest in such Inventions and Works of Authorship and to 
enable the Company to obtain exclusive patent, copyright, or other legal 
protection for Inventions and Works of Authorship anywhere in the world, 
provided the Company shall bear all reasonable expenses of Rush in rendering 
such cooperation.  Notwithstanding the above, the following shall not be 
deemed Inventions or Works of Authorship assigned to the Company by Rush 
hereunder: any invention or work of authorship for which no equipment, 
supplies, facility or Confidential Information of the Company was used and 
which was developed entirely on Rush's own time, and which (a) does not 
relate (i) directly to the business of the Company or (ii) to which the 
Company's actual or demonstrably anticipated research or development, or (b) 
which does not result from any work performed by Rush for the Company.

          9.   FULL COMPROMISE AND GENERAL RELEASE.

          (a)  Full Compromise.  Rush agrees that the payment and acceptance 
     of the consideration described in Paragraph 3 is in full, final, and 
     complete compromise, settlement, and satisfaction of any and all claims 
     relating directly or indirectly to (i) 


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     Rush's hiring by the Company, (ii) Rush's employment with the Company, 
     (iii) Rush's resignation from employment with the Company, and (iv) 
     claims Rush could have asserted in any litigation against the Company or 
     any of the "Released Parties" as that term is defined in Paragraph 9(b).

          (b)  General Release.  For the considerations expressed in this 
     Agreement, Rush, for and on behalf of himself and his heirs, 
     administrators, executors, successors and assigns, agrees to, and hereby 
     does, release, acquit, and forever discharge the Company and its 
     affiliates, subsidiaries, and related companies, and the current and 
     former directors, officers, members, agents, attorneys, servants, 
     independent contractors and employees of the Company and all of its 
     related entities (the "Released Parties"), from any and all claims, 
     whether direct or indirect, fixed or contingent, known or unknown, which 
     Rush ever had, has, or may claim to have, for, upon, or by reason of any 
     matter, act or thing prior to the date of this Agreement, including, but 
     not limited to, any cause of action Rush could have asserted in any 
     litigation against any of the Released Parties, any cause of action or 
     claim relating to Rush's association with or employment by the Company, 
     and/or any cause of action or claim relating to Rush's decision to 
     resign.  The General Release of this Paragraph 9 specifically 
     encompasses, but is not limited to, claims that could be brought under 
     the Minnesota Human Rights Act, Minn. Stat. Section 363.01 et seq.; 
     Title VII of the Civil Rights Act, 42 U.S.C. Section 2000e, et seq., as 
     amended by the Civil Rights Act of 1991; the Age Discrimination in 
     Employment Act, 29 U.S.C. Section 621 et seq. (the "Age Discrimination 
     in Employment Act"); the Americans With Disabilities Act, 42 U.S.C. 
     Sections 12101-12213; the Employee Retirement Income Security Act 
     (ERISA), 29 U.S.C. Section 1001, et seq.; the Fair Labor Standards Act, 
     29 U.S.C. Section 201, et seq.; the National Labor Relations Act, 29 
     U.S.C. Section 151, et seq.; the Worker Adjustment Retraining and 
     Notification Act, 29 U.S.C. Section 2101, et seq.; and any other federal 
     or state statute, or local ordinance, including any attorneys' fees, 
     liquidated damages, punitive damages, costs or disbursements that could 
     be awarded in connection with these or any other statutory claims.

          The General Release of this Paragraph 9 also specifically 
     encompasses any and all claims grounded in contract or tort theories, 
     including, but not limited to, breach of contract; tortious interference 
     with contractual relations; promissory estoppel; breach of the implied 
     covenant of good faith and fair dealing; breach of employee handbooks, 
     manuals or other policies; wrongful discharge; wrongful discharge in 
     violation of public policy; assault; battery; fraud; false imprisonment; 
     invasion of privacy; intentional or negligent misrepresentation; 
     defamation, including libel and slander, discharge defamation and 
     self-defamation; intentional or negligent infliction of emotional 
     distress; negligence; breach of fiduciary duty; negligent hiring, 
     retention or supervision; whistleblower claims; and/or any other 
     contract or tort theory based on either intentional or negligent conduct 
     of any kind, including any attorneys' fees, liquidated damages, punitive 
     damages, costs or disbursements that could be awarded in connection with 
     these or any other common law claims.  The Company and Rush agree that, 
     by signing this


                                      -5-

<PAGE>

     Agreement, Rush does not waive any claims arising after the execution of 
     this Agreement.

          10.  RIGHT TO CONSIDER AND RESCIND THIS AGREEMENT.

          (a)  Right to Rescind or Revoke under Minn. Stat. Ch. 
363.  Rush has been informed of his right to rescind this Agreement 
as far as it extends to potential claims under Minn. Stat. Ch. 363 
(prohibiting discrimination in employment) by written notice to the 
Company within fifteen (15) calendar days following his execution of 
this Agreement. To be effective, such written notice must be 
delivered either by hand or by mail, to Richard J. Hegstrand, 9850 
51st Avenue North, Suite 110, Minneapolis, Minnesota 55442 (phone 
number:  612-551-9595), within the 15-day period. If a notice of 
rescission is delivered by mail, it must be:  (i) postmarked within 
the 15-day period, (ii) properly addressed to Richard J. Hegstrand 
at the above address and (iii) sent by certified mail, return 
receipt requested.

          (b)  Right to Consider under the Age Discrimination in Employment 
     Act. Rush understands that he has twenty-one (21) days to consider 
     whether he should agree to release his claims, if any, under the Age 
     Discrimination in Employment Act.  Rush further understands, however, 
     that he is not required to take the entire 21-day period to decide 
     whether he wishes to release his claims, if any, under the Age 
     Discrimination in Employment Act, and that he may do so on an 
     accelerated basis without prejudice to his own or the Company's rights 
     under this Agreement.

          (c)  Right to Rescind or Revoke under the Age Discrimination in 
     Employment Act .  Rush understands that he has the right to rescind the 
     release of his claims, if any, under the Age Discrimination in 
     Employment Act, for any reason, within seven (7) days after he signs 
     this Agreement. Rush understands that the release of his claims, if any, 
     under the Age Discrimination in Employment Act, will not become 
     effective or enforceable unless and until he executes this Agreement  
     and the applicable rescission period has expired.  Rush understands that 
     if he wishes to rescind, the rescission must be in writing and must be 
     hand-delivered or mailed to the Company.  To be effective, such written 
     notice must be delivered either by hand or by mail, to Richard J. 
     Hegstrand, 9850 51st Avenue North, Suite 110, Minneapolis, Minnesota 
     55442 (phone number:  612-551-9595), within the 7-day period. If a 
     notice of rescission is delivered by mail, it must be: (i) postmarked 
     within the 7-day period, (ii) properly addressed to Richard J. Hegstrand 
     at the above address and (iii) sent by certified mail, return receipt 
     requested.

          Rush understands that even if he elects to rescind his agreement to 
release his claims, if any, under the Age Discrimination in Employment Act or 
Minn. Stat. Ch. 363 (prohibiting discrimination in employment), this 
rescission shall have no effect or consequence whatsoever on the release of 
any other claims Rush released pursuant to this Agreement, as set forth above.


                                      -6-

<PAGE>

          11.  TERMINATION OF RIGHT TO INCUR EXPENSES, OBLIGATIONS OR 
LIABILITIES.  Rush understands and agrees that effective August 31, 1998, he 
was and is no longer authorized to incur any expenses, obligations or 
liabilities on behalf of the Company, and, if contacted by suppliers or 
customers of the Company, Rush will inform such entities that he is no longer 
authorized to act on behalf of the Company.

          12.  NO ADMISSION OF FAULT.  Rush and the Company agree that their 
willingness to enter into this Agreement does not constitute and should not 
be construed as any admission of liability or fault on the part of Rush or 
the Company or any of the Released Parties, and the Company specifically 
disclaims any liability to, or wrongful acts against, Rush or any other 
person, on the part of itself and the Released Parties.

          13.  TERMINATION OF THIS AGREEMENT.  It is agreed that the 
compensation and benefits specified in Paragraph 3 of this Agreement are 
subject to immediate termination in the event that Rush takes any action or 
engages in any conduct which is injurious to the Company.  For the purposes 
of this Paragraph 13, conduct by Rush that is injurious to the Company is 
defined as (i) deliberate disclosure of Confidential Information; (ii) 
deliberate misrepresentation of the affairs, practices, or financial 
condition of the Company or its officers, directors or employees; (iii) the 
deliberate failure to cooperate in such manner as the Company may reasonably 
request in the location and/or transfer of records relating to the Company 
which were entrusted to, or in the control of, Rush while employed by the 
Company.

          14.  CONFIDENTIALITY.  Rush agrees that it is the intent of the 
parties to maintain the complete confidentiality of the terms of this 
Agreement and the negotiations leading to this Agreement. Therefore, Rush 
agrees that he will not publicize, and will take all prudent steps to ensure 
the confidentiality of, this Agreement. The only comment Rush will make about 
his resignation from the Company is that he resigned voluntarily and that all 
matters relating to his employment with the Company have been resolved to the 
mutual satisfaction of the parties.  Notwithstanding the terms of this 
Paragraph 14, Rush shall be entitled to disclose the terms of this Agreement 
to his lawyers, tax advisors, accountants, and immediate family if required 
by law or on the condition that those to whom such disclosure is made also 
will be bound by the terms of this Paragraph 14.

          15.  COMPLETE AGREEMENT.  This Agreement contains the entire 
agreement between the parties.  Rush hereby affirms that his rights to 
compensation and/or benefits from the Company are specified exclusively and 
completely in this Agreement.  Any modification of, or addition to, this 
Agreement must be in a writing signed by Rush and by an authorized 
representative of the Company.

          16.  SEVERABILITY.  Rush and the Company agree that should any 
provision of this Agreement be held invalid or illegal, such illegality shall 
not invalidate the whole of this Agreement, but rather, the Agreement shall 
be construed as if it did not contain the illegal part, and the rights and 
obligations of the parties shall be construed accordingly.


                                      -7-

<PAGE>

          17.  EFFECT ON SUCCESSORS.  This Agreement is personal to Rush and 
may not be assigned by Rush without the written agreement of the Company.  
This Agreement shall be binding on the Company, its successors and assigns.

          18.  GOVERNING LAW.  This Agreement shall be governed by, and 
interpreted in accordance with, the laws of the State of Minnesota.

          19.  KNOWING AND VOLUNTARY AGREEMENT.  Rush agrees that he has 
entered into this Agreement knowingly and voluntarily.  Rush further 
acknowledges that he has had the opportunity to be represented by counsel in 
connection with the negotiation and preparation of this Agreement and have 
any terms of this Agreement explained to him.  Rush also acknowledges that 
the Company has recommended that he consult legal counsel to assist him in 
understanding all terms of this Agreement before executing this Agreement.  
Rush further affirms that he understands the meaning of the terms of this 
Agreement and their effect and agrees that the provisions set forth in the 
Agreement, including, but not limited, to Paragraphs 2, 3, 9 and 10 are 
written in language understandable to Rush.


                                      -8-

<PAGE>

          IN WITNESS WHEREOF, the parties have executed this Agreement by 
their signatures below.

Dated: October 9, 1998                      /s/ William L. Rush
                                            ----------------------------------
                                            William L. Rush


                                            NUTRITION MEDICAL, INC.


                                            By /s/ Richard J. Hegstrand
                                               -------------------------------
                                             Its  Chief Operating Officer
                                                 -----------------------------