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Cartoon Acquisition, Inc., Form 8-K Current Report dated September
8, 2006 

Exhibit 10.5

(Reproduction of) Form of Amendment to Hudson
Note

	FIRST AMENDMENT
TO PROMISSORY
  NOTE

     This first amendment (the "First Amendment") made
and entered into this fourth day of August 2006 (the "Amendment Date") between
Randolph S. Hudson, an individual principally residing in the State of New York,
entitled to receive mail at Post Office Box 103, Wyoming, New York 14591-0103
(the "Maker"), and Michael H. Troso, an individual principally residing in the
State of Florida, maintaining a residence at 217 San Dollar Road, Indialantic,
Florida 32903-2111 (the "Holder") , with reference to the following
facts:

	Recitals.

	A.      	On
      or about September 12, 2005 the Maker issued the Holder a promissory note
      in principal the sum of $8,300 (the "Note"). (A non-negotiable form of the
      Note is annexed as Exhibit A hereto and made a part hereof by reference
      thereto.) 
	 
	B.      	The
      Maker used the proceeds from the Note to satisfy certain expense
      obligations and charges of Cartoon Acquisition, Inc., a United States
      corporation ("Cartoon"), which were incurred by the Maker in the conduct
      and employ of Cartoon. 
	 
	C.      	It
      was the original intent of the Parties that the actual extension of credit
      to the Maker by the Holder served as partial consideration for the
      Holder's acquisition of approximately 95% of the total issued and
      outstanding shares of Montana Acquisition Corporation, a Delaware
      corporation, the shares of which are registered under the Securities Act
      of 1933 ("Montana"). However, following the Maker's transfer of his shares
      in Montana to the Holder, certain permissions that were required to have
      been obtained by the Maker and the Holder by relevant third parties, were
      not able to be obtained, and, therefore, the transfer of the Maker's
      shares in Montana to the Holder, subsequently, was deemed to be
      non-effective. Consequently, on or about January 21, 2006, the Maker and
      the Holder verbally agreed to rescind the Montana transaction.
  
	 
	D.      	As
      the direct result of the restructuring of the Montana transaction and
      because Cartoon directly benefited from the Holder's loan to the Maker,
      the Holder and the Maker mutually and respectively agree to amend the
      Maker's Note to the Holder. 
	 

	Amendment.

	1.      	The
      Holder and the Maker jointly agree to amend that certain Note, whereby the
      paragraph first thereunder the Note shall be amended to read as
      follows: 
	 
	 	"1.
      Payment Terms. The Maker shall pay the principal together with all accrued
      interest in one installment of $8,300 or by default until such date as the
      entire principal balance has been fully paid. The payment is due and
      payable to the Holder hereof, in accordance with the further terms and
      provisions hereof) on the occurrence of the date of a change in control of
      Cartoon Acquisition, Inc., a United States corporation ("Cartoon"), or its
      lawful successor; upon and in the event the Maker sells or otherwise
      disposes of greater than five per cent (5%) of his aggregate shares in
      Cartoon. The Maker and the Holder mutually and respectively agree that no
      presumption of imputed interest shall 
	 

First
Amendment to Troso Promissory Note, August 4, 2006, Page 1 of 3

Cartoon Acquisition, Inc., Form 8-K Current Report dated September
8, 2006 

Exhibit 10.5

(Reproduction of) Form of Amendment to Hudson
Note

apply to
this Note in any subsequent interpretation by the Maker or the Holder, either of
whom may suppose to interpret the construction, form, or substance of this
Note."

	2.      	The
      Holder and the Maker jointly agree to further amend that certain Note,
      whereby, each of any references to "Montana Acquisition Corporation, a
      Delaware corporation, or its lawful successor" shall be referred to and
      mean "Cartoon Acquisition, Inc., a United States corporation, or its
      lawful successor", which shall therein be referred to as "Cartoon".
    
	 
	3.      	The
      Holder and the Maker jointly agree to further amend that certain Note,
      whereby, each of any references to "Montana" shall be referred to as
      "Cartoon", and where each such reference "Cartoon" shall mean Cartoon
      Acquisition, Inc., a United States corporation organized under the laws of
      the State of Delaware. 
	 
	4.      	All
      of the existing terms, provisions, and conditions of said Note shall
      remain in full force and effect, unmodified from their respective original
      forms, and the Maker and the Holder do hereby republish each of said
      remaining and unmodified terms, provisions, and conditions, herein.
    
	 
	5.      	Neither this First Amendment nor the negotiation,
      preparation, or submission hereof, shall be, or shall be deemed or
      construed to be (a) an admission of (i) any liability by any of the
      Parties, or (ii) the validity of any claims; or (b) the basis for any
      lawsuit or mediation (or other judicial or non-judicial action) other than
      an action to enforce, or to seek damages, for the breach of the terms of
      this First Amendment. 
	 
	6.      	Any
      notice, statement, demand, or payment required to be given or made in
      accordance with the terms and provisions of this First Amendment shall be
      in writing, sent by certified mail, postage prepaid, return-receipt
      requested, addressed to the respective party from the other party and
      delivered to their address written first in the preamble of this First
      Amendment, or under other terms established in writing and accepted by the
      Parties. 
	 
	7.      	This First Amendment is the result of negotiations between
      the Parties, each of whom is represented by counsel of their own choosing.
      Each of the Maker and the Holder shall be deemed to have drawn this First
      Amendment and no negative inference or interpretation shall be made by a
      court of competent jurisdiction, or by a mediator (or by any other
      non-judicial intermediary), against the party who drafted this First
      Amendment. 
	 
	8.      	This First Amendment shall be governed by the laws of the
      State of New York, except for conflicts of laws rules, applicable to
      contracts made and performed in New York State. 
	 
	9.      	Any
      provision herein, to the contrary notwithstanding, shall not be
      enforceable by any party other than a party to this First
      Amendment. 
	 
	10.      	As
      to the First Amendment, except for assignment by operation of law, and as
      to the Note, except for provisions contained therein said Note, this First
      Amendment and that certain Note underlying this First Amendment may not be
      assigned without the express written consent of both Parties of and to
      that certain Note and to this First Amendment. 
	 

First
Amendment to Troso Promissory Note, August 4, 2006, Page 2 of 3

Cartoon Acquisition, Inc., Form 8-K Current Report dated
September 8, 2006 

Exhibit 10.5

(Reproduction of) Form of Amendment to Hudson
Note

     THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT
BETWEEN THE PARTIES. THE PARTIES RESPECTIVELY ACKNOWLEDGE AND AGREE THAT NONE OF
THEM HAVE MADE ANY REPRESENTATION WITH RESPECT TO THE SUBJECT MATTER OF THIS
AGREEMENT OR ANY REPRESENTATIONS INCLUDING ITS EXECUTION AND DELIVERY EXCEPT
THOSE SPECIFICALLY SET FORTH HEREIN. EACH OF THE PARTIES ACKNOWLEDGES THAT EACH
SUCH PARTY HAS RELIED ON ITS OWN JUDGMENT IN ENTERING INTO THIS AGREEMENT. THE
PARTIES HAVE BEEN PROVIDED AN OPPORTUNITY TO REVIEW THIS AGREEMENT WITH AN
ATTORNEY OF THEIR OWN CHOOSING, AND TO SEEK CONSULTATION WITH OTHER
PROFESSIONALS TO DETERMINE THE SUITABILITY OF THE AGREEMENT BEFORE EXECUTING IT.
EACH PARTY ACKNOWLEDGES THAT IT HAS READ THIS AGREEMENT, REFERRED TO HEREINABOVE
AS THE "FIRST AMENDMENT", AND UNDERSTANDS THE MEANING AND EFFECT OF THIS
AGREEMENT. THIS AGREEMENT IS BINDING UPON THE PARTIES AND REPRESENTS THE ENTIRE
AGREEMENT BETWEEN THE PARTIES. THERE IS NO OTHER ORAL OR WRITTEN AGREEMENT OR
UNDERSTANDING BETWEEN THE PARTIES.

     IN WITNESS WHEREOF, the Parties, in their
respective capacities as individuals, have affixed their signatures and
delivered this First Amendment to one another on the date first above
written.

	RANDOLPH
      S. HUDSON
("Maker")

/s/ Randolph
S. Hudson

____________________________________________
Randolph S.
Hudson, as an individual

	MICHAEL
      H. TROSO
("Holder")

____________________________________________
Michael H.
Troso, as an individual

First
Amendment to Troso Promissory Note, August 4, 2006, Page 3 of 3Employment Agreement for Allan L. Schwartz

     

     

    
      

      

    

    

      EXHIBIT
        10.71

      

      EMPLOYMENT
        AGREEMENT

      

      

      THIS
        EMPLOYMENT AGREEMENT
        is dated
        as of September 12, 2006, between Imaging
        Diagnostic Systems, Inc.,
        a
        Florida corporation (the "Company"), and
        Allan L. Schwartz (the
        "Executive").

      

      WITNESSETH:

      

      WHEREAS,
        The
        Company is engaged in the business of developing laser-based medical optical
        imaging devices; and 

      

      WHEREAS,
        the
        Company has the intent to market and sell its products and services to clients
        and potential clients throughout the world; and

      

      WHEREAS,
        the
        Company wishes to continue to employ the Executive as its Executive
        Vice-President and Chief Financial Officer, charged with all the
        responsibilities and duties legally required by the State of Florida and
        to
        oversee various broad and specific aspects of its business; and

      

      WHEREAS,
        in the
        course of the Executive’s employment, the Executive will continue to have access
        to and acquire knowledge of valuable trade secrets, confidential information
        and
        other proprietary information belonging and relating to the Company and its
        business, and which the Company has a legitimate interest in protecting;
        and

      

      WHEREAS,
        the
        Company and Executive are willing to continue the employment, subject to
        the
        terms and conditions contained in this Employment Agreement (the
“Agreement”);

      

      NOW,
        THEREFORE,
        in
        consideration of the premises and the mutual covenants set forth in this
        Agreement, and intending to be legally bound, the Company and the Executive
        agree as follows:

      

      1. EMPLOYMENT.
        The
        Company hereby continues the employment of the Executive and the Executive
        hereby accepts employment upon the terms and condition hereinafter set
        forth.

      

      2. TERM
        & TERMINATION.

      

      (a) Term. 
        The
        Company hereby continues the employment of the Executive, and the Executive
        hereby accepts employment with the Company, for a period commencing on August
        30, 2006, and ending one year from that date (the "Term"). All Company
        obligations under this Agreement shall cease upon its termination, except
        for
        those stock options which have been vested. 

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (b) Termination
        without Cause.
        The
        Company may terminate the Executive’s employment without cause. Such termination
        will become effective upon the date specified in the termination notice,
        provided that such date is at least 60 days from the date of such notice.
        In the
        event of such termination without cause:

      

      (i) For
        the
        remainder of the Term following the effective date of termination, the Company
        will continue to pay the Executive his salary pursuant to Section
        3(a).

      

      (ii) The
        Company will continue to maintain for the remainder of the Term following
        the
        effective date of termination, for the benefit of the Executive, the employee
        benefit programs referred to in Section 3(b) as in effect on the date of
        termination.

      

      (iii) On
        the
        effective date of termination, all options that were scheduled to vest will
        vest
        and will remain exercisable for a period of three years from the date of
        termination.

      

      (c) Termination
        for Cause.
        The
        Company may terminate the Executive’s employment at any time for cause by giving
        written notice of termination setting forth such cause. Such termination
        shall
        become effective upon the giving of such notice, except that, where the basis
        for cause is capable of cure within 30 days, termination based upon cause
        shall
        not become effective unless Executive shall fail to complete such cure within
        30
        days of receipt of written notice of the existence of such cause. Upon such
        termination the Executive shall have no right to compensation, commission,
        bonus, benefits or reimbursement pursuant to this Agreement, for any period
        subsequent to the effective date of termination. Further, upon termination
        for
        cause, all of the Executive’s unvested stock options shall terminate. For
        purposes of this section, “cause” shall mean; (1) the Executive is convicted of
        a felony; (2) the Executive, in carrying out his duties hereunder, commits
        gross
        negligence or willful misconduct resulting, in either case, in material harm
        to
        the Company; (3) the Executive misappropriates Company funds or otherwise
        defrauds the Company; (4) the Executive materially breaches any provision
        of
        this Agreement; or (5) the Executive materially fails to perform his duties
        under section 4.

      

      (d) Death
        or Disability.
        Upon
        the death or disability of the Executive, the Executive shall be entitled
        to and
        the Company will pay the Executive’s salary from the date of death or from the
        date of disability through the end of the Term. (For purposes of this Section,
        “disability” shall mean that for a period of six months in any 12-month period
        the Executive is incapable of substantially fulfilling his duties because
        of
        physical, mental or emotional incapacity arising from injury, sickness or
        disease.) Should the Executive be rendered disabled, the Company will continue
        to maintain for the benefit of the Executive the employee benefit programs
        referred to in Section 3(b) that were in effect on the date of the
        disability.

      

      (e) Special
        Termination.
        In the
        event that (i) the Company materially breaches this Agreement or the performance
        of its duties and obligations hereunder; or (ii) any entity or person not
        now an
        executive officer of the Company becomes either individually or as part of
        a
        group the beneficial owner of 20% or more of the Company’s common stock, the
        Executive, by 

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      written
        notice to the Company, may elect to deem the Executive’s employment hereunder to
        have been terminated by the Company without cause under Section 2(b) hereof,
        in
        which event the Executive shall be entitled to the compensation provided
        for in
        Section 2(b).

      

      (f) Voluntary
        Termination.
        The
        Executive, on 30 days prior written notice to the Company, may terminate
        his
        employment voluntarily. Upon such termination, the Company will pay the
        Executive’s compensation through the date of such termination. After such date,
        the Executive shall no longer be entitled to receive any compensation,
        reimbursement or benefits and all unvested stock options shall terminate
        upon
        termination of the Executive’s employment. 

      

      (g) Continuing
        Effect. Notwithstanding
        any termination of this Agreement at the end of the Term or otherwise, the
        provisions of Sections 6 - 11 shall remain in full force and effect and the
        provisions of these Sections shall be binding upon the legal representatives,
        heirs, successors and assigns of the Executive.

      

      3. COMPENSATION.

      

      (a) The
        Company will continue to pay the Executive an annual base salary of $185,000
        per
        annum in equal semi-monthly installments.

      

      (b) During
        the term of his employment, the Executive shall be entitled to participate
        in
        employee benefits plans or programs of the Company, if any, to the extent
        the
        Executive is eligible to participate thereunder, including the Comprehensive
        Group Insurance Program maintained by the Company, paid by the Company for
        the
        Executive and his spouse, except for the appropriate employee and spouse
        portion.

      

      (c) The
        Company shall provide the Executive with a $500 per month car allowance and
        a
        cellular phone and major credit card for use on Company business.

      

      (d) The
        Executive shall receive an option to purchase up to an aggregate of 250,000
        shares of the Company’s common stock at an exercise price of $.114 per share
        pursuant to the Company’s standard form of stock option agreement. The option
        shall vest one year from the date of this Agreement, provided that the Executive
        remains employed by the Company through that time, except to the extent that
        earlier vesting is provided under specified circumstances as set forth elsewhere
        in this Agreement or in the Company’s applicable form of stock option
        agreement.

      

       

      (e) The
        Executive will be entitled to nine paid holidays and six weeks of vacation
        for
        each 12-month period without loss of compensation or other benefits to which
        he
        is entitled under this Agreement, to be taken at such times as the Executive
        may
        select and the affairs of the Company may permit.

      

      4. DUTIES.

      

      (a) General
        Duties.
        The
        Executive shall be employed as the Executive Vice-President and Chief Financial
        Officer, with duties and responsibilities that are customary for

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      such
        position, subject to the direction of the CEO and as directed by the Company’s
        by-laws. The Executive will use the standard of care befitting of such an
        executive in performing duties and in discharging responsibilities pursuant
        to
        this Agreement, which duties and responsibilities shall be discharged
        competently, carefully, and faithfully.

      

      (b) Corporate
        Code of Conduct.
        The
        Executive agrees to adhere to the Company’s Corporate Code of
        Conduct.

      

      (c) Extent
        of Services.
        The
        Executive will devote all of his time, attention and energies during normal
        business hours (exclusive of periods of sickness and disability and of such
        normal holiday and vacation periods as have been established by the Company)
        to
        the affairs of the Company. The Executive will not enter the employ of, or
        serve
        as a consultant to, or in any way perform any services with or without
        compensation to any person, business or organization without the prior consent
        of the board of directors of the Company; provided, that the Executive shall
        be
        permitted to devote a limited amount of time, without compensation, to
        charitable or similar organizations.

      

      5. PLACE
        OF PERFORMANCE.
        The
        Executive hereby acknowledges that the Company’s existing and potential clients
        are located throughout the world and that the Company is actively engaged
        in
        marketing and selling its products and services to such clients throughout
        the
        world.

      

      6. NON-DISCLOSURE
        OF CONFIDENTIAL INFORMATION.
        The
        Executive acknowledges that, during his employment, he will learn and will
        have
        access to confidential information regarding the Company and its affiliates,
        including without limitation (i) proprietary or secret plans, designs,
        processes, programs, documents, software, agreements or material relating
        to the
        business, products, services or activities of the Company and its affiliates
        and
        (ii) market reports, customer investigations, clinical data, scientific or
        engineering research, customer lists and/or similar information that is
        proprietary information of the Company or its affiliates (collectively,
“Confidential Business and Technical Information”). The Executive recognizes and
        acknowledges that the Confidential Business and Technical Information, as
        it may
        exist from time to time, represents valuable, special and unique assets of
        the
        Company access to and knowledge of which are essential to the performance
        of the
        Executive’s duties hereunder.

      

      The
        Executive will not, during or after the term of his employment by the Company,
        in whole or in part, disclose any such Confidential Business and Technical
        Information to any person, firm, corporation, association or entity for any
        reason or purpose whatsoever, nor shall the Executive make use of any such
        Confidential Business and Technical Information for his own purposes or for
        the
        benefit of any person, firm, corporation or entity except the Company under
        any
        circumstances during or after the term of his employment, provided that after
        the term of his employment these restrictions shall not apply to such secrets,
        information and processes which are then in the public domain provided that
        the
        Executive was not responsible, directly or indirectly, for such secrets,
        information or processes entering the public domain without the Company’s
        consent.

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      

      In
        the
        event an action is instituted and prior knowledge is an issue, it shall be
        the
        obligation of the Executive to prove by clear and convincing evidence that
        the
        Confidential Business and Technical Information disclosed was in the public
        domain, was already known by the recipient, or was developed independently
        by
        the recipient. The Executive agrees to hold as the Company’s property all
        memoranda, books, papers, letters, formulas and other data, and all copies
        thereof and therefrom, in any way containing Confidential Business and Technical
        Information or otherwise relating to the Company’s business and affairs, whether
        made by him or otherwise coming into his possession, and upon termination
        of his
        employment, or on demand of the Company, at any time, to deliver the same
        to the
        Company.

      

      7. NON-COMPETITION
        AGREEMENT.

      

      (a) The
        Executive acknowledges and agrees that, pursuant to Florida Statutes Section
        542.335, based on having access to and acquiring knowledge of highly sensitive
        and valuable trade secrets, and confidential or proprietary information
        belonging or relating to the Company, the Executive would be in a position
        to
        cause serious and irreparable harm to the Company in the event that, following
        the termination of his employment hereunder, the Executive were to compete
        with
        or be involved in an enterprise which competes with the Company, engages
        in the
        same business as the Company, or performs research and development in the
        field
        of medical optical imaging. 

      

      (b) Until
        termination of his employment and for a period of 24 months commencing on
        the
        date of termination, the Executive, directly or indirectly, in association
        with
        or as a stockholder, director, officer, consultant, executive, partner, joint
        venturer, member or otherwise of or through any person, firm, corporation,
        partnership, association or entity, covenants that the Executive will not
        compete with the Company or any of its affiliates in the design, manufacture,
        construction, offer, sale or marketing of products or services that are
        competitive with the products or services offered by the Company during such
        period, within the United States or anywhere in the world. The Executive
        covenants and agrees that during his employment and for a period of 24 months
        immediately following the termination of such employment, the Executive will
        not, either individually or in partnership or jointly or in conjunction with
        any
        person, firm, business, corporation, partnership, joint venture, entity,
        syndicate or association, as an executive, principal, agent, officer, director,
        consultant, advisor, distributor, dealer, contractor, trustee, lender,
        shareholder or in any manner or capacity whatsoever, directly or indirectly,
        be
        employed by, render services to, carry on or be engaged in, or be concerned
        with
        or be interested in or advise, lend money to, guarantee the debts or obligations
        of, or in any manner participate in the management, operation or control
        of any
        business which is directly competitive with the business of the Company,
        engages
        in the same business as the Company or performs research and development
        in the
        medical optical imaging field with any entity located anywhere in the
        world.

      

      (c) For
        the
        purposes of this paragraph a business shall be deemed to be in “direct
        competition” or “directly competitive” with the Company if such business is
        engaged in developing, manufacturing, marketing, selling, or distributing
        medical optical imaging devices.

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      

      8. NON-SOLICITATION.
        The
        Executive covenants and agrees that while he is employed by the Company and
        for
        a period of 24 months immediately following the termination of such employment,
        he will not, directly or indirectly, in any manner whatsoever, on his own
        behalf, or on behalf of any person, firm, business, corporation, partnership,
        joint venture, entity, syndicate or association solicit, induce or cause,
        or
        attempt to induce or cause, any person who is then an employee of or consultant
        to the Company to cease providing services to the Company.

      

      9. REASONABLENESS
        OF CONFIDENTIALITY, NON-COMPETITION AND NON-SOLICITATION OBLIGATION AND
        COVENANTS.

      

      (a) The
        Executive hereby acknowledges and confirms that the obligations and covenants
        set out in the above paragraphs are reasonable and necessary to protect the
        legitimate interests of the Company. Without limiting the generality of the
        foregoing, the Executive hereby acknowledges and confirms that given, among
        other things, the nature and international scope of the Company’s operations and
        of the employment duties to be performed by the Executive hereunder, the
        geographic scope and duration of the restrictions set forth above are reasonable
        and necessary to protect the legitimate interests of the Company.

      

      (b) The
        Executive further acknowledges and agrees that these obligations and covenants
        will not preclude him from becoming gainfully employed following their
        termination of his employment in his profession.

      

      10. INVENTIONS.

      

      (a) The
        Executive hereby sells, transfers and assigns to the Company or to any person
        or
        entity designated by the Company, all of the entire right, title and interest
        of
        the Executive in and to all inventions, ideas, disclosures and improvements,
        whether patented or unpatented, and copyrightable material, made or conceived
        by
        the Executive, solely or jointly, in whole or in part, during the term hereof
        which (i) relate to methods, apparatus, designs, products, processes or devices
        sold, leased, used or under construction or development by the Company or
        any
        subsidiary, or (ii) otherwise relate to or pertain to the business, functions
        or
        operations of the Company or any subsidiary, or (iii) arise wholly or partly
        from the efforts of the Executive during the term hereof. The Executive shall
        communicate promptly and disclose to the Company, in such form as the Company
        requests, all information, details and data pertaining to the aforementioned
        inventions, ideas, disclosures and improvements; and, whether during the
        term
        hereof or thereafter, the Executive shall execute and deliver to the Company
        such formal transfers and assignments and such other papers and documents
        as may
        be required of the Executive at the Company’s expense to permit the Company or
        any person or entity designated by the Company to file and prosecute the
        patent
        applications and, as to copyrightable material, to obtain copyright thereon.
        Any
        invention made by the Executive within one year following the termination
        of
        employment shall be deemed to fall within the provisions of this Section
        unless
        proven by the Executive to have been first conceived and made following such
        termination.

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      

      (b) No
        Payment.
        The
        Executive acknowledges and agrees that no separate or additional payment
        or
        compensation will be required to be made to him in consideration of his
        undertakings in this Section.

      

      11. EQUITABLE
        RELIEF.

      

      (a) The
        Company and the Executive recognize that the services to be rendered under
        this
        Agreement by the Executive are special, unique and of extraordinary character,
        and that in the event of the breach by the Executive of the terms and conditions
        of this Agreement or if the Executive, without the prior consent of the Board
        of
        Directors of the Company, shall leave his employment for any reason and take
        any
        action in violation of Section 6, Section 7 or Section 8, the Company will
        be
        entitled to institute and prosecute proceedings in any court of competent
        jurisdiction referred to in Section 11(b) below, to enjoin the Executive
        from
        breaching the provisions of Section 6, Section 7, or Section 8. In such action,
        the Company will not be required to plead or prove irreparable harm or lack
        of
        an adequate remedy at law. Nothing contained in this Section 11 shall be
        construed to prevent the Company from seeking such other remedy as the Company
        may elect in any arbitration proceeding based on any breach of this Agreement
        by
        the Executive.

      

      (b) Any
        proceeding or action for equitable relief must be commenced in state court
        in
        Broward County, Florida. The Executive and the Company irrevocably and
        unconditionally submit to the jurisdiction of such court and agree to take
        any
        and all future action necessary to submit to the jurisdiction of such court.
        The
        Executive and the Company irrevocably waive any objection that they now have
        or
        hereafter may have to the laying of venue of any suit, action or proceeding
        brought in such court for equitable relief and further irrevocably waive
        any
        claim that any such suit, action or proceeding brought in such court has
        been
        brought in an inconvenient forum.

      

      12. ASSIGNMENT. The
        rights and obligations of the Company under this Agreement shall inure to
        the
        benefit of and be binding upon the successors and assigns of the Company,
        provided that any such successor or assign shall acquire all or substantially
        all of the assets and business of the Company. The Executive's obligations
        hereunder may not be assigned or alienated and any attempt to do so by the
        Executive will be void.

      

      13. SEVERABILITY.

      

      (a) The
        Executive expressly agrees that the character, duration and geographical
        scope
        of the provisions set forth in this Agreement are reasonable in light of
        the
        circumstances, as they exist on the date hereof. Should a decision, however,
        be
        made at a later date by a court of competent jurisdiction that the character,
        duration or geographical scope of such provisions is unreasonable, then it
        is
        the intention and the agreement of the Executive and the Company that this
        Agreement shall be construed by the court in such a manner as to impose only
        those restrictions on the Executive's conduct that are reasonable in the
        light
        of the circumstances and as are necessary to assure to the Company the benefits
        of this Agreement. If, in any judicial proceeding, a court shall refuse to
        enforce all of the separate covenants deemed 

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      included
        herein because taken together they are more extensive than necessary to assure
        to the Company the intended benefits of this Agreement, it is expressly
        understood and agreed by the parties hereto that the provisions of this
        Agreement that, if eliminated, would permit the remaining separate provisions
        to
        be enforced in such proceeding shall be deemed eliminated, for the purposes
        of
        such proceeding, from this Agreement.

      

      (b) If
        any
        provision of this Agreement otherwise is deemed to be invalid or unenforceable
        or is prohibited by the laws of the state or jurisdiction where it is to
        be
        performed, this Agreement shall be considered divisible as to such provision
        and
        such provision shall be inoperative in such state or jurisdiction and shall
        not
        be part of the consideration moving from either of the parties to the other.
        The
        remaining provisions of this Agreement shall be valid and binding and of
        like
        effect as though such provision were not included.

      

      14. NOTICES
        AND ADDRESSES. All
        notices, offers, acceptance and any other acts under this Agreement (except
        payment) shall be in writing, and shall be sufficiently given if delivered
        to
        the addressee in person, by Federal Express or similar receipted delivery,
        by
        facsimile delivery or, if mailed, postage prepaid, by certified mail, return
        receipt requested, as follows:

      

      

        
          	
                  To
                    the Company:

                	
                  Imaging
                    Diagnostic Systems, Inc.

                
	 	
                  6531
                    N.W. 18th
                    Court

                
	 	
                  Plantation,
                    Florida 33313

                
	 	 
	
                  To
                    the Executive:

                	
                  Allan
                    L. Schwartz

                
	 	
                  6531
                    N.W. 18th
                    Court

                
	 	
                  Plantation,
                    Florida 33313

                

        

      or
        to
        such other address as either of them, by notice to the other may designate
        from
        time to time. The transmission confirmation receipt from the sender's facsimile
        machine shall be conclusive evidence of successful facsimile delivery. Time
        shall be counted to, or from, as the case may be, the delivery in person
        or by
        mailing.

      

      15. COUNTERPART. This
        Agreement may be executed in one or more counterparts, each of which shall
        be
        deemed an original but all of which together shall constitute one and the
        same
        instrument. The execution of this Agreement may be by actual or facsimile
        signature.

      

      16. ARBITRATION. Except
        for any controversy or claim seeking equitable relief as provided in Section
        11
        of this Agreement, any controversy or claim arising out of or relating to
        this
        Agreement, or to the interpretation, breach or enforcement thereof or any
        other
        dispute between the parties, shall be submitted to one arbitrator and settled
        by
        arbitration in Fort Lauderdale, Florida, in accordance with the commercial
        arbitration rules of the American Arbitration Association in effect at such
        time. Any award made by such arbitrator shall be final, binding and conclusive
        on all parties hereto for all purposes, and judgment may be entered thereon
        in
        any court having jurisdiction thereof.

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      

      17. ATTORNEYS
        FEES.
        In the
        event that there is any controversy or claim arising out of or relating to
        this
        Agreement, or to the interpretation, breach or enforcement thereof, and any
        action or proceeding is commenced to enforce the provisions of this Agreement,
        whether through litigation or arbitration, the prevailing party shall be
        entitled to recover from the non-prevailing party his/its reasonable attorney’s
        fees, costs and expenses incurred at all levels.

      

      18. GOVERNING
        LAW. This
        Agreement and any dispute, disagreement, or issues of construction or
        interpretation arising hereunder whether relating to its execution, its
        validity, the obligations provided therein or performance shall be governed
        or
        interpreted according to the internal laws of the State of Florida without
        regard to choice of law considerations.

      

      19. ENTIRE
        AGREEMENT.
        This
        Agreement constitutes the entire Agreement between the parties and supersedes
        all prior oral and written agreements between the parties with respect to
        the
        subject matter hereof. Neither this Agreement nor any provision hereof may
        be
        changed, waived, discharged or terminated orally, except by a statement in
        writing signed by the party or parties against whom enforcement or the change,
        waiver, discharge or termination is sought.

      

      20. ADDITIONAL
        DOCUMENTS.
        The
        parties hereto shall execute and deliver such additional instruments as may
        be
        reasonably required in order to carry out the purpose and intent of this
        Agreement and to fulfill the obligations of the parties hereunder.

      

      21. SECTION
        AND PARAGRAPH HEADINGS.
        The
        section and paragraph headings in this Agreement are for reference purposes
        only
        and shall not affect the meaning or interpretation of this
        Agreement.

      

      22. WAIVER
        OF BREACH.
        A waiver
        by the Company or the Executive of a breach of any provision of the Agreement
        by
        the other party shall not operate or be construed as a waiver of any subsequent
        breach by the other party.

      

      IN
        WITNESS WHEREOF,
        the
        Company and the Executive have executed this Agreement as of the 12th day
        of
        September, 2006.

      

      
        	
                IMAGING
                  DIAGNOSTIC SYSTEMS, INC.

                 

                 

                 

                By:
                  /s/ 
                  Tim Hansen

                Tim
                  Hansen, Chief Executive Officer

              	
                EXECUTIVE

                 

                 

                 

                /s/ 
                  Allan L. Schwartz

                Allan
                  L. Schwartz

              

      

      

      

      

      

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      

      STOCK
        OPTION AGREEMENT

      (2004
        Non-Statutory Stock Option Plan)

      

      Imaging
        Diagnostic Systems, Inc.
        (the
“Company”), desiring to afford an opportunity to the Grantee named below to
        purchase certain shares of common stock of the Company (the “Common Stock”) to
        provide the Grantee with an added incentive as an employee of the Company,
        hereby grants to Grantee, and the Grantee hereby accepts, an option to purchase
        the number of such shares optioned as specified below, during the term ending
        at
        midnight (prevailing local time at the Company’s principal offices) on the
        expiration date of this Option specified below, at the option exercise price
        specified below, subject to and upon the following terms and
        conditions:

      

      1. Identifying
        Provisions.
        As
        used
        in this Option, the following terms shall have the following respective
        meanings.

      

      (a) Grantee:
        Allan L. Schwartz;

      

      (b) Date
        of
        grant: September 12, 2006;

      

      (c) Number
        of
        shares optioned: 250,000;

      

      (d) Option
        exercise price per share: $.114;

      

      (e) Expiration
        Date: September 12, 2016;

      

      (f) Plan:
        The
        Company’s 2004 Non-Statutory Stock Option Plan; and

       

      (g)
Committee:
        The stock option committee of the Company’s Board of Directors, or if none, the
        Board of Directors.

      

       

      This
        Option is not intended to be an incentive stock option pursuant to Section
        422
        of the Internal Revenue Code. 

      

      2. Vesting.

      

      This
        Option shall vest and become exercisable on the following date(s) in the
        following amount(s):

      

      
        	
                Vesting
                  Date

                 

              	
                Number
                  of Shares

                 

              
	
                September
                  12, 2007

              	
                250,000

              

      

      

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      

      3. Restrictions
        on Exercise.
        The
        following additional provisions shall apply to the exercise of this
        Option:

      

      (a) Termination
        of Employment.
        If the
        Grantee’s employment by the Company or any of its subsidiaries is terminated for
        any reason other than death, only that portion of this Option exercisable
        at the
        time of such termination of employment may thereafter be exercised, and it
        may
        not be exercised after the earlier of (i) three years after such termination
        or
        (ii) the Expiration Date.

      

      (b) Death
        of Grantee.
        If the
        Grantee shall die during the term of this Option, the Grantee’s legal
        representative or representatives, or the person or persons entitled to do
        so
        under the Grantee’s last will and testament or under applicable intestate laws,
        shall have the right to exercise this Option, but only for the number of
        shares
        as to which the Grantee was entitled to exercise this Option in accordance
        with
        Section 2 hereof on the date of his death, and such right shall expire and
        this
        Option shall terminate three years after the date of the Grantee’s death or on
        the expiration date of this Option, whichever date is sooner.

      

      (c) Continuity
        of Employment.
        This
        Option shall not be exercisable by the Grantee in any part unless at all
        times
        beginning with the date of grant and ending no more than three years prior
        to
        the date of exercise, the Grantee has, except for military service leave,
        sick
        leave or other bona fide leave of absence (such as temporary employment by
        the
        United States Government) been in the continuous employ of the
        Company.

      

      4. Non-Transferable.
        The
        Grantee may not transfer this Option except by will or the laws of descent
        and
        distribution. This Option shall not be otherwise transferred, assigned, pledged,
        hypothecated or disposed of in any way, whether by operation of law or
        otherwise, and shall be exercisable during the Grantee’s lifetime only by the
        Grantee or his guardian or legal representative.

      

      5. Adjustments
        and Corporate Reorganization.
        Subject
        to any required action by the shareholders of the Company, the number of
        shares
        covered by the Option, as well as the exercise price per share of the Option,
        shall be proportionately adjusted for any increase or decrease in the number
        of
        issued shares resulting from a stock split, reverse stock split, stock dividend,
        combination or reclassification of the Common Stock, or any other increase
        or
        decrease in the number of issued shares of Common Stock effected without
        receipt
        of consideration by the Company; provided, however, that conversion of any
        convertible securities of the Company shall not be deemed to have been “effected
        without receipt of consideration.” Such adjustment shall be made by the
        Committee, whose determination in that respect shall be final, binding and
        conclusive. Except as expressly provided herein, no issuance by the Company
        of
        shares of stock of any class, or securities convertible into shares of stock
        of
        any class, shall affect, and no adjustment by reason thereof shall be made
        with
        respect to, the number or price of shares subject to the Option.

      

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      In
        the
        event of the proposed dissolution or liquidation of the Company, the Option
        will
        terminate immediately prior to the consummation of such proposed action,
        unless
        otherwise provided by the Committee. The Committee may, in the exercise of
        its
        sole discretion in any such instance, declare that the Option shall terminate
        as
        of a date fixed by the Committee and give Grantee the right to exercise his
        Option as to all or any part of the Option, including shares as to which
        the
        Option would not otherwise be exercisable. In the event of the proposed sale
        of
        all or substantially all of the assets of the Company, or the merger of the
        Company with or into another corporation in a transaction in which the Company
        is not the survivor, the Option shall be assumed or an equivalent option
        shall
        be substituted by such successor corporation or a parent or subsidiary of
        such
        successor corporation, unless the Committee determines, in the exercise of
        its
        sole discretion and in lieu of such assumption or substitution, that the
        Grantee
        shall have the right to exercise the Option as to all of the optioned stock,
        including shares as to which the Option would not otherwise be exercisable.
        If
        the Committee makes an Option fully exercisable in lieu of assumption or
        substitution in the event of such a merger or sale of assets, the Committee
        shall notify the Grantee that the Option shall be fully exercisable for a
        period
        of 30 days from the date of such notice, and the Option will terminate upon
        the
        expiration of such period.

      

      6. Exercise,
        Payment For and Delivery of Stock.
        This
        Option may be exercised by the Grantee or other person then entitled to exercise
        it by giving four business days’ written notice of exercise to the Company
        specifying the number of shares to be purchased and the total purchase price.
        The exercise price shall become immediately due upon exercise of the Option
        and
        shall be payable in one of the following alternative forms specified
        below:

      

      (a) full
        payment in cash or check drawn to the Company’s order;

      

      (b) full
        payment in shares of Common Stock held for at least six months and valued
        at
        fair market value on the Exercise Date (as such term is defined
        below);

      

      (c) full
        payment through a combination of shares of Common Stock held for at least
        six
        months and valued at fair market value on the Exercise Date and cash or check;
        or

      

      (d) full
        payment through a broker-dealer sale and remittance procedure provided that
        sale
        of the optioned stock is permitted as a result of an effective registration
        statement under the Securities Act of 1933, as amended, and Grantee complies
        with all applicable securities laws, pursuant to which the Grantee (i) shall
        provide irrevocable written instructions to a Company-designated brokerage
        firm
        to effect the immediate sale of the purchased shares and remit to the Company,
        out of the sale proceeds available on the settlement date, sufficient funds
        to
        cover the aggregate exercise price payable for the purchased shares plus
        all
        applicable Federal and State income taxes required to be withheld by the
        Company
        in connection with such purchase and (ii) shall provide written directives
        to
        the Company to deliver the certificates for the purchased shares directly
        to
        such brokerage firm in order to complete the sale transaction.

      

      For
        purposes of this section 6, the Exercise Date shall be the date on which
        written
        notice of the Option exercise is delivered to the Company. Except to the
        extent
        the sale and remittance 

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      procedure
        is utilized in connection with the exercise of the Option, payment of the
        exercise price for the purchased shares must accompany such notice.

      

      The
        fair
        market value per share of Common Stock on any relevant date shall be determined
        in accordance with the following provisions:

      

      (i) If
        the
        Common Stock is not at the time listed or admitted to trading on any national
        stock exchange but is traded on The NASDAQ National Market, the fair market
        value shall be the closing selling price per share of Common Stock on the
        date
        in question, as such price is reported by the National Association of Securities
        Dealers on The NASDAQ National Market or any successor system. If there is
        no
        reported closing selling price for the Common Stock on the date in question,
        then the closing selling price on the last preceding date for which such
        quotation exists shall be determinative of fair market value.

      

      (ii) If
        the
        Common Stock is at the time listed or admitted to trading on any national
        stock
        exchange, then the fair market value shall be the closing selling price per
        share of Common Stock on the date in question on the stock exchange determined
        by the Committee to be the primary market for the Common Stock, as such price
        is
        officially quoted in the composite tape of transactions on such exchange.
        If
        there is no reported sale of Common Stock on such exchange on the date in
        question, then the fair market value shall be the closing selling price on
        the
        exchange on the last preceding date for which such quotation
        exists.

      

      (iii) If
        the
        Common Stock is quoted on The NASDAQ Capital Market or any similar system
        of
        automated dissemination of quotations of securities in common use, the fair
        market value shall be the mean between the closing bid and asked quotations
        for
        the Common Stock on such date.

      

      (iv) If
        neither clause (i), (ii) or (iii) is applicable, then the fair market value
        shall be the mean between the closing bid and asked quotations for the Common
        Stock as reported by the National Quotation Bureau, Inc., if at least two
        securities dealers have inserted both bid and asked quotations for Common
        Stock
        on at least five of the ten preceding business days.

      

      (v) If
        none
        of clauses (i) - (iv) is applicable then the fair market value shall be
        determined by the Committee.

      

      7. Rights
        in Shares Before Issuance and Delivery.
        No
        person shall be entitled to the privileges of stock ownership in respect
        of any
        shares issuable upon exercise of this Option unless and until such shares
        have
        been issued to such person as fully paid shares.

      

      8. Requirements
        of Law and of Stock Exchanges. By
        accepting this Option, the Grantee represents and agrees for himself and
        his
        transferees by will or the laws of descent and distribution that, unless
        a
        registration statement under the Securities Act of 1933 is in effect as to
        shares purchased upon any exercise of this Option, (i) any and all shares
        so
        purchased shall be 

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      acquired
        for his personal account and not with a view to or for sale in connection
        with
        any distribution, and (ii) each notice of the exercise of any portion of
        this
        Option shall be accompanied by a representation and warranty in writing,
        signed
        by the person entitled to exercise the same, that the shares are being so
        acquired in good faith for his personal account and not with a view to or
        for
        sale in connection with any distribution.

      

      No
        certificate or certificates for shares of stock purchased upon exercise of
        this
        Option shall be issued and delivered unless and until, in the opinion of
        counsel
        for the Company, such securities may be issued and delivered without causing
        the
        Company to be in violation of or incur liability under any federal, state
        or
        other securities law, any requirement of any securities exchange listing
        agreement to which the Company may be a party, or any other requirement of
        law
        or of any regulatory body having jurisdiction over the Company.

      

      9. Stock
        Option Plan.
        This
        Option is subject to, and the Company and the Grantee agree to be bound by,
        all
        of the terms and conditions of the Plan, as the same shall have been amended
        from time to time in accordance with the terms thereof, provided that no
        such
        amendment shall deprive the Grantee, without his consent, of this Option
        or any
        of his rights hereunder. Pursuant to the Plan, the Committee is vested with
        final authority to interpret and construe the Plan and this Option and is
        authorized to adopt rules and regulations for carrying out the Plan. A copy
        of
        the Plan in its present form is available for inspection during business
        hours
        by the Grantee or other persons entitled to exercise this Option at the
        Company’s principal office. The Plan, as amended from time to time, is hereby
        incorporated by reference.

      

      10. Notices.
        Any
        notice to be given to the Company shall be addressed to the Company in care
        of
        its Secretary at its principal office, and any notice to be given to the
        Grantee
        shall be addressed to him at the address given beneath his signature hereto
        or
        at such other address as the Grantee may hereafter designate in writing to
        the
        Company. Any such notice shall be deemed duly given when actually delivered
        by
        hand, facsimile, certified or registered mail or recognized overnight
        courier.

      

      11. Conflict
        with Employment Agreement.
        In the
        event that any provision of this Option Agreement is inconsistent with a
        provision of an employment agreement between the Grantee and the Company,
        the
        employment agreement provision shall govern and supersede the inconsistent
        provision of this Agreement.

      

      12. Laws
        Applicable to Construction.
        This
        Agreement has been executed and delivered by the Company in the State of
        Florida, and this Agreement shall be construed and enforced in accordance
        with
        the laws of said State.

      

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF,
        the
        Company has granted this Option on September 12, 2006. 

      

      
        	
                IMAGING
                  DIAGNOSTIC SYSTEMS, INC.

                 

                 

                 

                /s/ 
                  T.B. Hansen

                By:
                  Timothy B. Hansen, Chief Executive Officer

              	
                GRANTEE

                 

                 

                 

                /s/
                  Allan L. Schwartz

                Allan
                  L. Schwartz

              

      

      

      

      

      

      

      

      

      

      15

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