Exhibit 10.4
                      EXTENSION AND MODIFICATION AGREEMENT

     EXTENSION AND MODIFICATION  AGREEMENT made this 12th day of March, 1998 and
between VASOMEDICAL,  INC., a Delaware corporation  (hereinafter the "Company"),
and Joseph A. Giacalone, an individual residing at 30 Midtown Road, Carle Place,
New York 11514 (hereinafter "Employee").

                               W I T N E S S E T H

     WHEREAS,  the Company and  Employee  entered into an  Employment  Agreement
dated November 1, 1996 (hereinafter the "Employment Agreement"); and

     WHEREAS,   the  Company  and  Employee  desire  to  amend  said  Employment
Agreement.

     NOW, THEREFORE, the parties agree as follows:

     1.   Paragraph  3 of the  Employment  Agreement  is hereby  deleted  in its
          entirety, and in its place and stead shall be inserted the following:

"3. Term. Subject to earlier termination on the terms and conditions hereinafter
provided, the term of this Employment Agreement shall end on December 31, 2000."

     2.   Paragraph  6(b)(iii) of the Employment  Agreement is hereby deleted in
          its entirety.

     3.   Paragraph  14 of the  Employment  Agreement  is hereby  deleted in its
          entirety, and in its place and stead shall be inserted the following:

"14. In the event (a) the Company has been  consolidated  or merged into or with
any other  corporation or all or substantially  all of the assets of the Company
have been sold to another corporation,  with or without the consent of Employee,
in his sole  discretion;  or (b) the Company  undergoes a Change of Control,  as
hereinafter defined below, without prior Board approval; then

Employee is entitled to the following settlement benefits:

     (i)  lump-sum  payment  for the  greater of (A) twelve  (12)  months of the
          annual  salary  provided in section  4(a) hereof or (B) the balance of
          compensation for the term of this Employment Agreement; and

     (ii) any and all stock options and warrants  held by Employee  shall become
          immediately vested and
          exercisable; if

          (A)  Employee  voluntarily and unilaterally  resigns his position with
               the Company within 30 days of an event described in Section 14(a)
               or (b) hereof, or

          (B)  Employee is given notice of  termination  directly as a result of
               such  Change  in  Control  within  six  (6)  months  of an  event
               described in Section 14(a) or (b) hereof, or

          (C)  Employee's  place of  employment  is moved beyond a  hundred-mile
               radius, as the crow flies, from 180 Linden Avenue,  Westbury, New
               York 11590 (or the Company's then current business  address) as a
               direct  result  of an event  described  in  Section  14(a) or (b)
               hereof.
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     A  "Change  of  Control"  of the  Company,  or in any  person  directly  or
indirectly controlling the Company, shall mean:
          (i) a  change  of  control  as  such  term  is  presently  defined  in
Regulation  240.12b-2  under the Securities  Exchange Act of 1934 (the "Exchange
Act");
          (ii) if during the Term of  employment,  any "person" (as such term is
used in Section  13(d) and 14(d)of the  Exchange  Act) other than the Company or
any person who on the date of this Employment Agreement is a director or officer
of the Company, becomes the "beneficial owner" (as defined in Rule 13(d)-3 under
the  Exchange  Act),  directly  or  indirectly,  of  securities  of the  Company
representing  20%  of  the  voting  power  of  the  Company's  then  outstanding
securities; or
          (iii) if during the Term of  employment,  the  individuals  who at the
beginning  of such period  constitute  the Board cease for any reason other than
death, disability or retirement to constitute at least a majority thereof."

     4. The  aforesaid  Employment  Agreement  in all other  respects  is hereby
ratified and confirmed.

     IN WITNESS  WHEREOF,  the  undersigned  have  executed  this  Extension and
Modification Agreement as of the day and year first written above.

VASOMEDICAL, INC.

By:  /s/Anthony Viscusi
     ----------------------------------
     Anthony Viscusi, President and CEO


     /s/Joseph A. Giacalone
     ----------------------------------
     Joseph A. Giacalone
     Employee