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                                                                    Exhibit 10.4

                              EMPLOYMENT AGREEMENT

     This Employment Agreement dated May 12, 1998 is made by and between Escalon
Medical Corp. (the "Company"), a California corporation with its principal
offices located at 351 East Conestoga Road, Wayne, Pennsylvania 19087, and
Richard J. DePiano (the "Executive"), an individual residing at 44 Righters Mill
Road, Gladwyne, Pennsylvania 19035.

                                   RECITALS:

     The parties hereto desire to enter into this Agreement to set forth the
terms and conditions pursuant to which the Executive will be employed as
Chairman and Chief Executive Officer of the Company and to address certain other
matters in connection with such employment.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:

     1.   EMPLOYMENT.

          1.1  POSITION AND DUTIES. The Company hereby employs the Executive as
Chairman and Chief Executive Officer of the Company upon the terms and
conditions set forth in this Agreement, and the Executive hereby accepts such
employment. Subject to the direction and control of the Board of Directors
(the "Board"), the Executive, as Chairman and Chief Executive Officer, shall
perform such executive, managerial and administrative duties as are from time
to time assigned to him by the Board and are consistent with his position as
Chairman and Chief Executive Officer.

          1.2  OBLIGATIONS OF THE EXECUTIVE. The Executive shall devote
sufficient business time, attention and energies to the business of the Company
to perform his duties hereunder. The Company understands that the Executive has
been engaged and will continue to engage in certain other business and
investment activities and agrees that the Executive may continue to engage in
such other activities provided that the Executive shall continue to fulfill the
obligations of his position with the Company as provided in the preceding
sentence.

     2.   TERM OF AGREEMENT. The initial term of this Agreement shall commence
on the date hereof and shall continue through June 30, 2001. This Agreement
shall be renewed automatically on July 1 of each year for successive terms of
three years each, unless either party notifies the other party at least 30 days
prior to such date of such party's determination not to renew this Agreement
beyond the then existing term. It is the intention of the parties that this
Agreement be "Evergreen" unless (i) either party gives written notice to the
other party of his or its intention
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not to renew this Agreement as provided above or (ii) this Agreement is
terminated pursuant to Section 7 hereof. Each reference herein to "the term of
this Agreement" shall include the initial term and any renewal term.

     3.   BASE SALARY. The Executive shall be paid, as base compensation for
all services to be rendered by the Executive hereunder, a salary at the rate of
$240,000 per year, payable on a current basis in accordance with the Company's
standard payroll practices for executives. Such annual rate of base
compensation in effect at any time during the term of this Agreement shall
hereinafter be referred to as the "Base Salary."

     4.   BONUS. At the end of each fiscal year of the Company that ends during
the term of this Agreement, the Compensation Committee of the Board shall
determine whether to pay to the Executive a bonus (the "Bonus") with respect to
such fiscal year. The award of any Bonus shall be in the sole discretion of the
Compensation Committee.

     5.   ADDITIONAL BENEFITS. While this Agreement is in effect, the Company
shall provide the following additional benefits, which benefits shall be
continued after the termination of this Agreement to the extent provided in
Section 7.2 hereof:

          5.1  VACATION. The Executive shall receive six weeks paid vacation
each calendar year.

          5.2  AUTOMOBILE OR AUTOMOBILE ALLOWANCE. The Company shall provide
the Executive with an automobile allowance of $800 per month.

          5.3  EXPENSE REIMBURSEMENT. Upon submission of proper vouchers, the
Company shall pay or reimburse the Executive for all necessary business and
entertainment expenses reasonably incurred by the Executive in connection with
the business of the Company.

          5.4  INSURANCE BENEFITS. The Company shall reimburse the Executive
medical, hospital, disability, life and other insurance benefits having a total
cost comparable to the cost of such benefits provided to the other senior
executive officers of the Company.

          5.5  RETIREMENT PLAN. The Executive shall be entitled to participate
in any profit sharing or pension plan made available to full-time employees of
the Company in accordance with the terms of such plans.

          5.6  OTHER BENEFITS. Without limiting any of the foregoing benefits,
the Executive shall receive all benefits and participate in all benefit
programs generally made available to other senior executive officers of the
Company.

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     6.   STOCK OPTIONS. Promptly after the date of this Agreement, the
Company's Board of Directors shall consider the grant to the Executive of
additional incentive stock options exercisable for the purchase of shares of the
Company's Common Stock at a per share exercise price equal to the fair market
value per share of the Company's Common Stock on the date of grant. Such stock
options shall be vested in full on the date of grant.

     7.   TERMINATION.

          7.1  TERMINATION UPON DEATH. The Executive's employment hereunder and
any and all rights under this Agreement or otherwise as an employee of the
Company shall terminate upon the death of the Executive, and thereafter the
Company shall have no liability or obligation to the Executive's estate or legal
representatives hereunder, provided that the Executive shall be entitled to
receive the Base Salary, Bonus and other compensation earned by the Executive,
but not paid, prior to his death.

     7.2  OTHER TERMINATION. The Company may terminate the Executive's
employment at any time, with or without cause. If the Company terminates the
Executive's employment during the term of this Agreement, the Company shall pay
to the Executive, as severance pay or liquidated damages or both, salary
continuance equal to his full Base Salary that would have been paid to the
Executive had the Executive's employment continued hereunder for a period of one
year from the date of termination of service. If a termination of the
Executive's employment occurs pursuant to this Section 7.2, the Company shall
continue to provide the benefits described in Section 5 hereof for one year
after the date of termination unless the Executive is paid such severance
amounts in a lump sum, in which event all entitlement to benefit continuation
shall cease upon the payment of such lump sum.

     8.   CONFIDENTIALITY; PUBLIC STATEMENTS. The Company may, pursuant to the
Executive's employment hereunder, provide to him and confide in him business
methods and systems, techniques and methods of operation developed at great
expense by the Company ("Trade Secrets") and which the Executive recognizes to
be unique assets of the Company hereunder, directly or indirectly, in any manner
utilize or disclose to any person, firm, corporation, association or other
entity, except to directors, consultants or employees of the Company in the
course of his duties and where required by law: (a) any such Trade Secrets, (b)
any sales prospects, customers lists, products, research or data of any kind, or
(c) any information relating to strategic plans, sales costs, profits or the
financial condition of the Company or any of its customers or prospective
customers, which are not generally known to the public or recognized as standard
practice in the industries in which the Company shall be engaged. The Executive
further covenants and agrees that he will promptly deliver to the Company all
tangible evidence of the knowledge and information described in (a), (b)
and (c), above, prior to or at the termination of the Executive's employment.


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     9.   Entire Agreement. Except for any agreement evidencing the stock
options to be granted pursuant to Section 6 hereof, this Agreement constitutes
the full and complete understanding and agreement of the Executive and the
Company respecting the subject matter hereof, and supersedes all prior
understandings and agreements, oral or written, express or implied. This
Agreement may not be modified or amended orally, but only by an agreement in
writing, signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.

     10.  Headings. The section headings of this Agreement are for convenience
of reference only and are not to be considered in the interpretation of the
terms and conditions of this Agreement.

     11.  Definition of Company. The Company is governed by its Board and,
accordingly, all references in this Agreement to the actions and discretion of
the Company are meant and deemed to refer to the actions and discretion of the
Board.

     12.  Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when sent
by certified mail, postage prepaid, addressed as follows:

          If to the Company:

               Escalon Medical Corp.
               351 East Conestoga Road
               Wayne, PA 19087
               Attn: Compensation Committee Chairman

          If to the Executive, at his personal residence as set forth above.

Any party may change the persons and address to which notices or other
communications are to be sent by giving written notice of such change to the
other party in the manner provided herein for giving notice.

     13.  Waiver of Breach. No waiver by either party of any condition or of the
breach by the other of any term or covenant contained in this Agreement, whether
by conduct or otherwise, in any one or more instances shall be deemed or
construed as a further or continuing waiver of any such condition or breach or a
waiver of any other condition, or of the breach of any other term or covenant
set forth in this Agreement. Moreover, the failure of either party to exercise
any right hereunder shall not bar the later exercise thereof.

     14.  Inure and Bind; Nonalienation. This Agreement shall inure to the
benefit of and be binding on the parties and their respective successors in
interest. The Executive shall not pledge, hypothecate, anticipate or in any way
create a lien




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upon any amounts provided under this Agreement. This Agreement and the benefits
payable hereunder shall not be assignable by either party without the prior
written consent of the other; provided, however, that nothing in this Section
shall preclude the Executive from designating a beneficiary to receive any
benefit payable hereunder upon his death, or the executors, administrators or
other legal representatives of the Executive or his estate from assigning any
rights hereunder to which they become entitled to the person or persons
entitled thereto.

    15. GOVERNING LAW. This Agreement is entered into and shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania.

    16. INVALIDITY OR UNENFORCEABILITY. If any term of provision of this
Agreement is held to be invalid or unenforceable, for any reason, such
invalidity or unenforceability shall not affect any other term or provision
hereof and this Agreement shall continue in full force and effect as if such
invalid or unenforceable term or provision (to the extent of the invalidity or
unenforceability) had not been contained herein.

     17. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, or the breach hereof, shall be settled by arbitration in
Philadelphia, Pennsylvania, in accordance with the laws of the Commonwealth of
Pennsylvania by three arbitrators, one of whom shall be appointed by the
Company, one by the Executive and third of whom shall be appointed by the first
two arbitrators. If either party fails to select an arbitrator within 30 days
after written notice of demand for arbitration from the other, the other party
may have such arbitrator appointed by the American Arbitration Association. If
the first two arbitrators cannot agree on the appointment of a third arbitrator
within 30 days after their selection, then the third arbitrator shall be
appointed by the American Arbitration Association. The arbitration shall be
conducted in accordance with the rules of the American Arbitration Association.
Judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction hereof. In the event that it shall be necessary or desirable
from the Company and/or the Executive to retain legal counsel and/or incur other
costs and expenses in connection with the enforcement of any or all of either
party's rights under this Agreement, each party shall bear its own costs and
expenses in connection with the enforcement of its rights (including the
enforcement of any arbitration award in court), regardless of the final outcome.

    18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written.

                                       ESCALON MEDICAL CORP.


                                       By: /s/ Ronald L. Hueneke
                                          --------------------------------------
                                          Title: President COO
                                                --------------------------------


                                       /s/ Richard J. DePiano
                                       -----------------------------------------
                                       Richard J. DePiano


                                       Approved:

                                       /s/ Robert J. Kunze
                                       -----------------------------------------
                                       Robert J. Kunze


                                       /s/ Jay L. Federman, M.D.
                                       -----------------------------------------
                                       Jay L. Federman, M.D.




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