Document:

2004 Stock Option Plan

    EXHIBIT
      10.1 

    

    IIMPLANT
      SCIENCES CORPORATION 

    2004
      STOCK OPTION PLAN

    

    1. ESTABLISHMENT,
      PURPOSE AND TERM OF PLAN.

    

    1.1
       ESTABLISHMENT.
      The Implant Sciences Corporation 2004 Stock Option Plan (the “Plan”)
      is
      hereby established effective as of December 14, 2004, May 7, 2004, by adoption
      of the Board, and its approval provided it is approved at the 2004 Annual
      Meeting of Stockholders of the Company (as defined in Section 2). Awards may
      be
      granted subject to stockholder approval, but may not be exercised or otherwise
      settled in the event stockholder approval is not obtained.

    

    1.2
       PURPOSE.
      The purpose of the Plan is to advance the interests of the Company and its
      stockholders by encouraging and facilitating the ownership of the Stock (as
      defined in Section 2) of the Company by persons performing services for the
      Company in order to enhance the ability of the Company to attract, retain and
      reward such persons and motivate them to contribute to the growth and
      profitability of the Company.

    

    1.3
       TERM
      OF
      PLAN. The Plan shall be effective from the date that the Plan is adopted by
      the
      Board of Directors of the Company and shall continue in effect thereafter until
      the earlier of (a) its termination by the Board, or (b) the date on which all
      of
      the shares of Common Stock available for issuance under the Plan have been
      issued and all restrictions on such shares under the terms of the Plan and
      the
      agreements evidencing Options granted under the Plan have lapsed, or (c) ten
      (10) years from its effective date. All Options shall be granted, if at all,
      within ten (10) years from the earlier of the date the Plan is adopted by the
      Board or the date the Plan is duly approved by the stockholders of the
      Company.

    

    2.
       DEFINITIONS
      AND CONSTRUCTION.

    

    2.1
       DEFINITIONS.
      Whenever used herein, the following terms shall have their respective meanings
      set forth below:

    

    (a) “Award”
means
      any award or grant of Options under the Plan.

    

    (b) “Beneficiary”
means
      the person, persons, trust, or trusts entitled by will or by the laws of
      descent, to exercise a Participant’s Option or other rights under the Plan after
      the Participant’s death.

    

    (c) “Board”
means
      the Board of Directors of the Company. If one or more Committees have been
      appointed by the Board to administer the Plan, the term “Board” also means such
      Committee(s).

    

    (d) “Change
      in Control”
shall
      mean an Ownership Change Event or a series of related Ownership Change Events
      (collectively, a “Transaction”)
      wherein the stockholders of the Company, immediately before a Transaction,
      do
      not retain immediately after a Transaction, in substantially the same
      proportions as their ownership of shares of the Company’s voting stock
      immediately before a Transaction, direct or indirect beneficial ownership of
      more than fifty percent (50%) of the total combined voting power of the
      outstanding voting securities of the Company or, in the case of a Transaction
      involving the sale, exchange or transfer of all or substantially all of the
      Company’s assets, the corporation or other business entity to which the assets
      of the Company were transferred (the “Transferee”),
      as
      the case may be. For purposes of the preceding sentence, indirect beneficial
      ownership shall include, without limitation, an interest resulting from
      ownership of the voting securities of one or more corporations or other business
      entities which own the Company or the Transferee, as the case may be, either
      directly or through one or more subsidiary corporations or other business
      entities. The Board shall have the right to determine whether multiple sales
      or
      exchanges of the voting securities of the Company or multiple Ownership Change
      Events are related, and its determination shall be final, binding and
      conclusive.

    

    (e) “Code”
means
      the Internal Revenue Code of 1986, as amended, and any applicable regulations
      promulgated thereunder.

    

    (f) “Committee”
means
      the Compensation Committee or other committee of the Board duly appointed to
      administer the Plan and having such powers as shall be specified by the Board.
      Unless the powers of the Committee have been specifically limited, the Committee
      shall have all of the powers of the Board granted herein, including, without
      limitation, the power to amend or terminate the Plan at any time, subject to
      the
      terms of the Plan and any applicable limitations imposed by law.

    

    (g) “Company”
means
      Implant Sciences Corporation, a Massachusetts corporation, or any successor
      corporation thereto.

    

    (h) “Consultant”
means
      a
      person engaged to provide consulting or advisory services (other than as an
      employee or a director) to the Company.

    

    (i) “Director”
means
      a
      member of the Board.

    

    (j) “Disability”
means
      the inability of the Participant to perform the major duties of the
      Participant’s position with the Company because of the sickness or injury of the
      Participant. The determination of whether or not a Participant is disabled
      for
      purposes of this Plan shall be made by, and at the sole discretion of, the
      Committee.

    

    (k) “Employee”
means
      any person treated as an employee (including an officer or a director who is
      also treated as an employee) in the records of the Company and, with respect
      to
      any Option granted to such person, who is an employee for purposes of Section
      422 of the Code; provided,
      however,
      that
      neither service as a director nor payment of a director’s fee shall alone be
      sufficient to constitute employment for purposes of the Plan. The Company shall
      determine in good faith and in the sole exercise of its discretion, whether
      an
      individual has become, or has ceased to be, an Employee and the effective date
      of such individual’s employment or termination of employment, as the case may
      be. For purposes of an individual’s rights, if any, under the Plan as of the
      time of the Company’s determination, all such determinations by the Company
      shall be final, binding and conclusive, notwithstanding that the Company or
      any
      court of law or governmental agency subsequently makes a contrary
      determination.

    

    (l) “Fair
      Market Value”
means,
      as of any date, the value of a share of Stock or other property as determined
      by
      the Board, in its discretion, in good faith without regard to any restriction
      other than a restriction which, by its terms, will never lapse. If the Stock
      is
      not trading over a public exchange, the “fair market value” shall take into
      account the latest private transaction in which the Company sold stock to an
      informed and willing buyer, if any such transaction exists. If the Stock is
      listed for trading over a public market, the “fair market value” of the Stock on
      a given day shall be the closing price of the Stock on the American Stock
      Exchange or the exchange on which the Stock is listed, and if no trading occurs
      on such date, or the stock is traded on NASDAQ then the "fair market value"
      shall be the mean between the highest and lowest prices on the nearest trading
      day before such date.

    

    (m) “Incentive
      Stock Option”
means
      an Option intended to be (as set forth in the Option Agreement), and which
      qualifies as, an incentive stock option within the meaning of Section 422(b)
      of
      the Code.

    

    (n) “Nonqualified
      Stock Option”
means
      an Option not intended to be (as set forth in the Option Agreement) or which
      does not qualify as an Incentive Stock Option.

    

    (o) “Officer”
means
      any person designated by the Board as an officer of the Company.

    

    (p) “Option”
means
      a
      right to purchase Stock pursuant to the terms and conditions of the Plan. An
      Option may be either an Incentive Stock Option or a Nonqualified Stock
      Option.

    

    (q) “Option
      Agreement”
means
      a
      written agreement between the Company and an Optionee setting forth the terms,
      conditions and restrictions pertaining to the Option granted to the Optionee
      and
      to any shares of Stock acquired upon the exercise thereof.

    

    (r) “Optionee”
means
      a
      Participant who has been awarded one or more Options.

    

    (s) An
      “Ownership
      Change Event”
shall
      be deemed to have occurred if any of the following occurs with respect to the
      Company: (i) the direct or indirect sale or exchange in a single or series
      of
      related transactions by the stockholders of the Company of more than fifty
      percent (50%) of the voting stock of the Company; (ii) a merger or consolidation
      in which the Company is a party; (iii) the sale, exchange, or transfer of all
      or
      substantially all of the assets of the Company; or (iv) a liquidation or
      dissolution of the Company.

    

    (t) “Parent
      Corporation”
means
      any present or future “parent corporation” of the Company, as defined in Section
      424(e) of the Code.

    

    (u) “Participant”
means
      any employee, consultant or director to whom an Award has been made under the
      Plan.

    

    (v) “Participating
      Company”
means
      the Company or any Parent Corporation or Subsidiary Corporation.

    

    (w) “Service”
means
      a
      Participant’s employment or service with the Company, whether in the capacity of
      an employee, a director or a consultant. A Participant’s Service shall not be
      deemed to have terminated merely because of a change in the capacity in which
      the Participant renders Service to the Company or a change in the Participating
      Company for which the Participant renders such Service, provided that there
      is
      no interruption or termination of the Participant’s Service. Furthermore, a
      Participant’s Service with the Company shall not be deemed to have terminated if
      the Participant takes any military leave, sick leave, or other bona fide leave
      of absence approved by the Company; provided, however, that if any such leave
      exceeds ninety (90) days, on the ninety-first (91st) day of such leave the
      Participant’s Service shall be deemed to have terminated unless the
      Participant’s right to return to Service with the Company is guaranteed by
      statute or contract. Notwithstanding the foregoing, unless otherwise designated
      by the Company or required by law, a leave of absence shall not be treated
      as
      service for purposes of determining vesting under the Participant’s Option. The
      Participant’s Service shall be deemed to have terminated either upon an actual
      termination of service or upon the corporation for which the Participant
      performs services ceasing to be a Participating Company. Subject to the
      foregoing, the Company, in its discretion, shall determine whether the
      Participant’s Service has terminated and the effective date of such
      termination.

    

    (x) “Stock”
means
      the common stock of the Company, as adjusted from time to time in accordance
      with Section 4.2. Such Stock may be unrestricted or, at the sole discretion
      of
      the Board, be made subject to restrictions relating to employment and
      transferability.

    

    (y) “Subsidiary
      Corporation”
means
      any present or future “subsidiary corporation” of the Company, as defined in
      Section 424(f) of the Code.

    

    (z) “Ten
      Percent Owner Optionee”
means
      an Optionee who, at the time an Option is granted to the Optionee, owns stock
      possessing more than ten percent (10%) of the total combined voting power of
      all
      classes of stock of the Company within the meaning of Section 422(b)(6) of
      the
      Code.

    

    (aa) “Vest”
or
      “Vesting”,
      with
      respect to Options, means the date, event, or act prior to which an Award is
      not, in whole or in part, exercisable except at the sole discretion of the
      Board.

    

    2.2 CONSTRUCTION.
      Captions and titles contained herein are for convenience only and shall not
      affect the meaning or interpretation of any provision of the Plan. Except when
      otherwise indicated by the context, the singular shall include the plural and
      the plural shall include the singular. Use of the term “or” is not intended to
      be exclusive, unless the context clearly requires otherwise.

    

    3. ADMINISTRATION.

    

    3.1 ADMINISTRATION
      BY THE BOARD. The Plan shall be administered by the Board. All questions of
      interpretation of the Plan or of any Option or other right awarded hereunder
      shall be determined by the Board, and such determinations shall be final and
      binding upon all persons having an interest in the Plan or in such Option or
      right.

    

    3.2
       AUTHORITY
      OF OFFICERS. Any Officer shall have the authority to act on behalf of the
      Company with respect to any matter, right, obligation, determination or election
      which is the responsibility of, or which is allocated to, the Company herein,
      provided the Officer has apparent authority with respect to such matter, right,
      obligation, determination or election.

    

    3.3 POWERS
      OF
      THE BOARD. In addition to any other powers set forth in the Plan and subject
      to
      the provisions of the Plan, the Board shall have the full and final power and
      authority, in its discretion to:

    

    (a)
       determine
      the persons to whom, and the time or times at which Awards shall be granted,
      the
      types of Awards to be granted, and the number of shares of Stock to be subject
      to each Award;

    

    (b)
       determine
      the terms, conditions and restrictions applicable to Awards; approve one or
      more
      forms of Option Agreement;

    

    (c)
       amend,
      modify, extend, cancel or renew any Option or waive any restrictions or
      conditions applicable to any Option or applicable to any shares of Stock awarded
      or acquired upon the exercise thereof; and

    

    (d)
       correct
      any defect, supply any omission, or reconcile any inconsistency in the and
      take
      such other actions with respect to the Plan as the Board may deem advisable
      to
      the extent not inconsistent with the provisions of the Plan or applicable
      law.

    

    4. SHARES
      SUBJECT TO PLAN.

    

    4.1 MAXIMUM
      NUMBER OF SHARES ISSUABLE. Subject to adjustment as provided in Section 4.2,
      the
      maximum aggregate number of shares of Stock that may be issued under the Plan
      shall be one million (1,000,000) and shall consist of authorized but unissued
      or
      reacquired shares of Stock, treasury shares or any combination thereof. If
      an
      outstanding Option for any reason expires or is terminated or canceled or if
      shares of Stock are acquired upon the exercise or Award of an Option, the shares
      of Stock allocable to the unexercised portion of such Option or such repurchased
      shares of Stock shall again be available for issuance under the
      Plan.

    

    4.2 ADJUSTMENTS
      FOR CHANGES IN CAPITAL STRUCTURE. In the event of any stock dividend, stock
      split, reverse stock split, recapitalization, combination, reclassification
      or
      similar change in the capital structure of the Company, appropriate adjustments
      shall be made in the number and class of shares subject to the Plan and to
      any
      outstanding Options, in the exercise price per share of any outstanding
      Options.

    

    5. ELIGIBILITY
      AND LIMITATIONS.

    

    5.1 PERSONS
      ELIGIBLE. Awards may be granted only to Employees, Officers, Consultants and
      Directors of the Participating Company . For purposes of the foregoing sentence,
      “Employees,” “Consultants”, and “Directors” shall include prospective Employees,
      prospective Consultants and prospective Directors to whom Options may be awarded
      in connection with written offers of an employment or other service relationship
      with the Company.

    

    5.2 OPTION
      AWARD RESTRICTIONS. Any person who is not an Employee on the effective date
      of
      the Award of an Option to such person may be awarded only a Nonqualified Stock
      Option. An Incentive Stock Option awarded to a prospective Employee upon the
      condition that such person become an Employee shall be deemed granted effective
      on the date such person commences Service with a Participating
      Company.

    

    5.3 FAIR
      MARKET VALUE LIMITATION. To the extent that Options designated as Incentive
      Stock Options (granted under all stock option plans of the Company, including
      the Plan) become exercisable by an Optionee for the first time during any
      calendar year for Stock having a Fair Market Value greater than One Hundred
      Thousand Dollars ($100,000), the portions of such Options which exceed such
      amount shall be treated as Nonqualified Stock Options. For purposes of this
      Section 5.3, Options designated as Incentive Stock Options shall be taken into
      account in the order in which they were awarded, and the Fair Market Value
      of
      Stock shall be determined as of the time the Option with respect to such Stock
      was awarded. If the Code is amended to provide for a different limitation from
      that set forth in this Section 5.3, such different limitation shall be deemed
      incorporated herein effective as of the date and with respect to such Options
      as
      required or permitted by such amendment to the Code. If an Option is treated
      as
      an Incentive Stock Option in part and as a Nonqualified Stock Option in part
      by
      reason of the limitation set forth in this Section 5.3, the Optionee may
      designate which portion of such Option the Optionee is exercising. In the
      absence of such designation, the Optionee shall be deemed to have exercised
      the
      Incentive Stock Option portion of the Option first. Separate certificates
      representing each such portion shall be issued upon the exercise of the
      Option.

    

    6. TERMS
      AND
      CONDITIONS OF OPTIONS.

    

    6.1 AWARD
      AGREEMENTS. Options shall be evidenced by Option Agreements specifying the
      nature and number of shares of Stock covered thereby, and shall exist in such
      form as the Board shall from time to time establish. Such Option Agreements
      may
      incorporate all or any of the terms of the Plan by reference and shall comply
      with and be subject to the terms and conditions herein.

    

    6.2 OPTION
      VESTING AND EXERCISE PRICE. Each Option Agreement shall include a vesting
      schedule describing the date, event, or act upon which an Option shall vest,
      in
      whole or in part, with respect to all or a specified portion of the shares
      covered by such Option. Each Option Agreement shall also convey the exercise
      price for each Option or the means by which such price shall be established,
      with such exercise price or method of establishment being established in the
      discretion of the Board; provided,
      however,
      that:
      (a) the exercise price per share for an Incentive Stock Option shall be not
      less
      than the Fair Market Value of a share of Stock on the effective date of grant
      of
      the Option, and (b) no Option granted to a Ten Percent Owner Optionee shall
      have
      an exercise price per share less than one hundred ten percent (110%) of the
      Fair
      Market Value of a share of Stock on the effective date of grant of the
      Option.

    

    6.3 EXERCISABILITY
      AND TERM OF OPTIONS. Options shall be exercisable as shall be determined by
      the
      Board and set forth in the Option Agreement evidencing such Option; provided,
      however,
      that:
      (a) no Incentive Stock Option shall be exercisable after the expiration of
      ten
      (10) years after the effective date of grant of such Option, (b) no Incentive
      Stock Option awarded to a Ten Percent Owner Optionee shall be exercisable after
      the expiration of five (5) years after the effective date of grant of such
      Option, or (c) no Option awarded to a prospective Employee, prospective
      Consultant or prospective Director may become exercisable prior to the date
      on
      which such person commences Service with a Participating Company.

    

    6.4 PAYMENT
      OF OPTION EXERCISE PRICE.

    

    (a)
       FORMS
      OF
      CONSIDERATION AUTHORIZED. Payment of the exercise price for the number of shares
      of Stock being purchased pursuant to any Option shall be made in cash, by check
      or cash equivalent or by such other consideration as may be approved by the
      Board from time to time to the extent permitted by applicable law.

    

    (b)
       LIMITATIONS
      ON FORMS OF CONSIDERATION.

    

    (i) CASHLESS
      EXERCISE. The Company reserves, at any and all times, the right, in the Board’s
      sole and absolute discretion, to establish procedures and allow for the exercise
      of Options (both at the time of grant and at the time of exercise) by means
      of a
      cashless exercise.

    

    (ii) PAYMENT
      BY PROMISSORY NOTE. No promissory note shall be permitted if the exercise of
      an
      Option using a promissory note would be a violation of any law. Any permitted
      promissory note shall be on such terms as the Board shall determine. The Board
      shall have the authority to permit or require the Optionee to secure any
      promissory note used to exercise an Option with the shares of Stock acquired
      upon the exercise of the Option or with other collateral acceptable to the
      Company.

    

    6.5 TAX
      WITHHOLDING. Upon the exercise of an Option, the Company shall have the right,
      but not the obligation, to deduct from the shares of Stock issuable, or to
      accept from the Participant the tender of, a number of whole shares of Stock
      having a Fair Market Value, as determined by the Company, equal to all or any
      part of the federal, state, local and foreign taxes, if any, required by law
      to
      be withheld by the Company with respect to such Option, or the Stock acquired
      upon the exercise thereof. Alternatively or in addition, in its discretion,
      the
      Company shall have the right to require the Participant, through payroll
      withholding, cash payment or otherwise, including by means of a cashless
      exercise, to make adequate provision for any such tax withholding obligations
      of
      the Company arising in connection with the Option, or the shares acquired upon
      the exercise thereof. The Fair Market Value of any shares of Stock withheld
      or
      tendered to satisfy any such tax withholding obligations shall not exceed the
      amount determined by the applicable minimum statutory withholding rates. The
      Company shall have no obligation to deliver shares of Stock or to release shares
      of Stock from an escrow established pursuant to any Agreement entered hereunder
      until the Company’s tax withholding obligations have been satisfied by the
      Participant.

    

    6.6 STOCK
      RESTRICTIONS. Shares issued under the Plan shall be subject such conditions
      and
      restrictions as determined by the Board in its discretion at the time an Award
      is made. The Company shall have the right, at the time of the Award, to place
      restrictions on Awards including upon shares issued upon the exercise of an
      Option.

    

    6.7 EFFECT
      OF
      TERMINATION OF SERVICE.

    

    (a) OPTIONS.
      Subject to earlier termination of the Option as otherwise provided herein,
      and
      unless otherwise provided by the Board in an Award and set forth in the
      Agreement related thereto, an Option shall be exercisable after a Participant’s
      termination of Service only during the applicable time period determined in
      accordance with the following provisions of this Section 6.7(a) and thereafter
      shall terminate:

     

    (i) DISABILITY.
      If the Participant’s Service terminates because of the Disability of the
      Participant, an Option, to the extent unexercised and exercisable on the date
      on
      which the Participant’s Service terminated, may be exercised by the Participant
      (or the Participant’s guardian or legal representative) at any time prior to the
      expiration of twelve (12) months after the date on which the Participant’s
      Service terminated, but in any event no later than the date of expiration of
      the
      Option’s term as set forth in the Agreement evidencing such Option (the
“Expiration
      Date”).

    

    (ii) DEATH.
      If
      the Participant’s Service terminates because of the death of the Participant, an
      Option, to the extent unexercised and exercisable on the date on which the
      Participant’s Service terminated, may be exercised by the Participant’s legal
      representative or other person who acquired the right to exercise the Option
      or
      Right by reason of the Participant’s death at any time prior to the Expiration
      Date. The Participant’s Service shall be deemed to have terminated on account of
      death if the Participant dies within three (3) months after the Participant’s
      termination of Service.

    

    (iii) RETIREMENT
      OF DIRECTORS IN GOOD STANDING. If the Participant is a Director, and such
      Director’s Service terminates because of the retirement of such Director, and
      provided that such Director is at that time in good standing as determined
      by
      the Board, an Option, to the extent unexercised and exercisable on the date
      on
      which the Director’s Service terminated for such reason may be exercised by the
      Director (or the Director’s guardian or legal representative) at any time prior
      to the Expiration Date.

    

    (iv) OTHER
      TERMINATION OF SERVICE. If the Participant’s Service terminates for any reason,
      except Disability or death, an Option, to the extent unexercised and exercisable
      by the Participant on the date on which the Participant’s Service terminated,
      may be exercised by the Participant at any time prior to the expiration of
      three
      (3) months after the date on which the Participant’s Service terminated, but in
      no event any later than the Expiration Date.

    

    (b)
       RESERVATION
      OF RIGHTS. The grant of Awards under the Plan shall in no way affect the right
      of the Company to adjust, reclassify, reorganize or otherwise change its capital
      or business structure or to merge, consolidate, dissolve, liquidate or sell
      or
      transfer all or any part of its business or assets.

    

    6.8
       TRANSFERABILITY
      OF OPTIONS. During the lifetime of the Participant, an Option shall be
      exercisable only by the Participant or by the Participant’s guardian or legal
      representative. No Option shall be assignable or transferable by the
      Participant, except by will or by the laws of descent and distribution.
      Notwithstanding the foregoing, to the extent permitted by the Board, in its
      sole
      discretion, and as set forth in the Option Agreement evidencing such Option,
      a
      Nonqualified Stock Option shall be assignable or transferable.

    

    7. CHANGE
      IN
      CONTROL. 

    

    In
      the
      event of a Change in Control, the surviving, continuing, successor, or
      purchasing corporation or other business entity or parent thereof, as the case
      may be (the “Acquiring
      Corporation”),
      may,
      without the consent of any Participant, either assume the Company’s rights and
      obligations under outstanding Options or substitute for such outstanding Options
      substantially equivalent options for, or in relation to, the Acquiring
      Corporation’s stock.

    

    8. TERMINATION
      OR AMENDMENT OF PLAN.

    

    The
      Plan
      shall terminate ten (10) years from its effective date. The Board may terminate
      or amend the Plan at any time. No termination or amendment of the Plan shall
      affect any then outstanding Award unless expressly provided by the
      Board.

    

    9. MISCELLANEOUS
      PROVISIONS.

    

    9.1 NO
      RIGHTS
      OF STOCKHOLDER. Prior to the date on which an Option is exercised, neither
      the
      Participant, nor a Beneficiary or any other successor in interest will be,
      or
      will have any of the rights and privileges of, a stockholder with respect to
      any
      Stock issuable upon the exercise of such Option.

    

    9.2
       NO
      RIGHT
      TO CONTINUED EMPLOYMENT. Nothing contained herein shall be deemed to give any
      person any right to employment by the Company or by a Participating Company,
      or
      to interfere with the right of the Company or a Participating Company to
      discharge any person at any time without regard to the effect that such
      discharge will have upon such person’s rights or potential rights, if any, under
      the Plan. The provisions of the Plan are in addition to, and not a limitation
      on, any rights a Participant may have against the Company or a Participating
      Company by reason of any employment or other agreement with the Company or
      a
      Participating Company.

    

    9.3 SEVERABILITY.
      If any provision of this Plan is held to be illegal or invalid for any reason,
      the remaining provisions are to remain in full force and effect and are to
      be
      construed and enforced in accordance with the purposes of the Plan as if the
      illegal or invalid provision or provisions did not exist.EXHIBIT 10.1
                                                                    ------------

_______________, Connecticut          Date of this Agreement: __________________

                                NEWALLIANCE BANK
                            COMMERCIAL LINE OF CREDIT
                             NOTE AND LOAN AGREEMENT

I.    WHAT SOME OF THE WORDS MEAN.
      ----------------------------

      "WE," "US", "OUR" and "BANK" mean NewAlliance Bank, 195 Church Street, New
Haven, Connecticut 06510 and what are called its "SUCCESSORS AND ASSIGNS."

      "YOU," "YOUR", "YOURS" and "BORROWER" mean, individually and collectively,
the following persons and/or entities: CAS MEDICAL SYSTEMS, INC.

      "ACCOUNT" means the Commercial Line of Credit Account.

      "CHECKING ACCOUNT" means the deposit account which you establish to
facilitate repayment of amounts due and owing under this Agreement.

      "BILLING CYCLE" means the periodic time intervals for which we analyze
your Account activity. Your Account will generally have monthly Billing Cycle
intervals.

      "GUARANTOR" means, individually and collectively, the persons and/or
entities who are guaranteeing your obligations under this Agreement, and
includes the following: N/A

      "SECURITY AGREEMENT" means, individually and collectively, the separate
agreement(s) which provide collateral security for the obligations of you and/or
a Guarantor, and include the following: UCC-1 FINANCING STATEMENT ON ALL
BUSINESS ASSETS

II.   THE COMMERCIAL LINE OF CREDIT AND INTEREST THEREON.
      ---------------------------------------------------

      (1) LINE OF CREDIT. We are establishing a line of credit, pursuant to
which you may obtain advances ("LOAN ADVANCES") up to the maximum aggregate
principal sum of $5,000,000.00 ("CREDIT LIMIT"). Once borrowed, Loan Advances
may be repaid and reborrowed, so long as the aggregate principal amount
outstanding at any one time does not exceed the Credit Limit.

      You promise to repay to us or to our order all of the Loan Advances, plus
interest, any fees (including Late Charges), and any other amounts you owe us
hereunder, all in accordance with the terms of this Agreement.

      (2) INTEREST CHARGES; VARIABLE RATE. You agree to pay all interest which
accrues on outstanding principal balances. Interest will accrue as follows:

          (a) The interest rate on the Account is variable. Your starting
interest rate as of the date of this Agreement is % per annum. Your interest
rate may change when and as a certain "INDEX" changes. The dates on which the
interest rate may change are sometimes called "CHANGE DATES".

          (b) On each Change Date, your interest rate will be adjusted to equal
the "INDEX" rate plus 2.25 % percentage point(s). The "INDEX" is defined as
follows (applicable box is checked):

          [n/a] The "INDEX" is the Banks "BASE RATE", which is a rate designated
as such by the Bank from time to time. It is not necessarily the best or lowest
interest rate charged by the Bank. If we discontinue the designation of a Base
Rate, for any reason, we can select, in our sole discretion, a reasonably
comparable substitute index.

          [n/a] The "INDEX" is the "PRIME RATE" as published in the WALL STREET
JOURNAL, Eastern Edition (the "JOURNAL") under the designation "MONEY Rates" and
shown as the "PRIME RATE" or "BASE RATE" ON CORPORATE LOANS POSTED BY AT LEAST
75% OF THE NATION'S THIRTY LARGEST BANKS" or similar wording used by the Journal
for that index. If more than one rate is used, the Bank will use the highest. If
this index is no longer available or if the above-described designations are
changed by the Journal, the Bank can use its reasonable discretion to select a
comparable substitute index.

          (c) To calculate the interest charges for each day, we take the
applicable annual interest rate and divide it {360}. This gives us a daily
periodic rate, which we then apply to the outstanding principal balance for each
day. We will continue to charge you interest for as long as principal is
outstanding under this Agreement, whether before or after the Final Maturity
Date, whether before or after an Event of Default, and whether or not judgment
is obtained.

      [X] INTEREST RATE PROVISIONS
          LIBOR BASED LOANS

      VARIABLE RATE
      -------------

      "Applicable Margin" means 2.25% per annum

      "Business Day" means any day, which is neither a Saturday nor Sunday, nor
      a legal holiday on which commercial banks are authorized or required to be
      closed in New Haven, Connecticut.

                                   Page 1 of 5
<PAGE>
      "Interest Period" means initially, the period commencing as of the date of
      this Note and ending on OCTOBER 31, 2006, and thereafter each 30 day month
      period ending on the first day of the month.

      "Payment Date" means initially, NOVEMBER 1, 2006 and the first (1st) day
      of each month thereafter.

      "LIBOR Rate" means relative to any Interest Period, the ONE MONTH (1)
      month LIBOR rate and which appears in the Wall Street Journal, Eastern
      Edition on the day on which the Interest Period commences. If the first
      day of any Interest Period is not a Business Day, the LIBOR Rate shall be
      determined in reference to the prior Business Day.

      Substitute Rate. If for any reason the LIBOR Rate is unavailable and/or
      the Holder is unable to determine the LIBOR Rate for any Interest Period,
      unless Borrower delivers an Election Notice electing the Fixed Rate, the
      interest rate payable hereunder shall be equal to a floating rate as
      determined by Holder in its sole reasonable discretion so as to achieve a
      rate that is reasonably comparable to the LIBOR Rate plus the Applicable
      Margin (any such rate, a "Substitute Rate"). Interest Provisions During
      any period when the LIBOR Rate is in effect, interest on the outstanding
      principal amount of this Note shall accrue during the Interest Period
      applicable thereto at a rate equal to the sum of the LIBOR Rate for such
      Interest Period plus the Applicable Margin and will be payable on each
      Payment Date.

      Increased Costs. During any period when the LIBOR Rate is in effect, if on
      or after the date hereof the adoption of any applicable law, rule or
      regulation or guideline (whether or not having the force of law), or any
      change therein, or change in the interpretation or administration thereof
      by any government authority, central bank or comparable agency charged
      with the interpretation or administration thereof, or compliance by the
      Holder with any request or directive (whether or not having the force of
      law) of any such authority, central bank or comparable agency:

      (a) shall subject the Holder to any tax, duty or other charge with respect
          to its LIBOR Rate loans or its obligation to make LIBOR Rate loans, or
          shall change the basis of taxation of payments to the Holder of the
          principal of or interest on its LIBOR Rate loans or any other amounts
          due under this agreement in respect of its LIBOR Rate loans or its
          obligation to make LIBOR Rate loans (except for the introduction of,
          or change in the rate of, tax on the overall net income of the Holder
          or franchise taxes, imposed by the jurisdiction (or any political
          subdivision or taxing authority thereof) under the laws of which the
          Holder is organized or in which the Holder's principal executive
          office is located); or

      (b) shall impose, modify or deem applicable any reserve, special deposit
          or similar requirement (including, without limitation any such
          requirement imposed by the Board of Governors of the Federal Reserve
          System of the United States) against assets of, deposits with or for
          the account of, or credit extended by, the Holder or shall impose on
          the Holder or on the London interbank market any other condition
          affecting its LIBOR Rate loans or its obligation to make LIBOR Rate
          loans; and the result of any of the foregoing is to increase the cost
          to the Holder of making or maintaining any LIBOR Rate loan, or to
          reduce the amount of any sum received or receivable by the Holder
          under this Note with respect thereto, by an amount deemed by the
          Holder to be material, then, within 15 days after demand by the
          Holder, the Borrower shall pay to the Holder such additional amount or
          amounts as will compensate the Holder for such increased cost or
          reduction.

      INTEREST RATE APPLICABLE TO ADDITIONAL ADVANCE
      ----------------------------------------------

      If the Additional Advance is made while the interest rate under this Note
      is a LIBOR Rate, then the interest rate on the Additional Advance shall be
      the LIBOR Rate plus the applicable Margin in effect for the Initial
      Advance until the expiration of the then current Interest Rate Period, at
      which time the interest rate for the entire principal balance of this Note
      shall be determined pursuant to the terms of this Note.

III.  REPAYMENT TERMS.
      ---------------

      (1) ON DEMAND. The outstanding principal balance hereunder together with
interest and other charges and fees shall be payable or before the date payment
is demanded by the Bank. YOU UNDERSTAND AND AGREE THAT PAYMENT CAN BE DEMANDED
AT ANY TIME. IN ADDITION, YOU UNDERSTAND AND AGREE THAT ALL AMOUNTS OWED BY YOU
HEREUNDER, IF NOT SOONER DEMANDED AND/OR PAID, SHALL BE DEEMED TO HAVE BEEN
AUTOMATICALLY DEMANDED AND SHALL BE DUE AND PAYABLE ON MAY 1, 2008. (the "FINAL
MATURITY DATE").

      (2) MINIMUM MONTHLY PAYMENT. Each month, commencing NOVEMBER 1, 2006 you
will pay the interest which has accrued on the unpaid principal balances. When
interest has accrued, payments of interest will be due and payable on the first
day of each Billing Cycle ("MINIMUM PAYMENT").

      (3) LATE CHARGES. If we do not receive the full amount of your Minimum
Payment within fifteen calendar days from and including the date it is due, we
may charge you a late charge ("LATE CHARGE") equal to the greater of $25 or 5%
of the unpaid part of your Minimum Payment(s) (including any unpaid Minimum
Payments from prior Billing Cycles). This Late Charge is due and payable on the
date it is assessed.

                                   Page 2 of 5
<PAGE>
[X]   (4) AUTOMATIC PAYMENT FROM CHECKING ACCOUNT. If the box at the beginning
of this paragraph is checked, you authorize us to take payments due under this
Agreement directly from the deposit account which you establish to facilitate
repayment of amounts due and owing under this Agreement # ###-##-#### (the
"CHECKING ACCOUNT"). This includes the monthly payments, Late Charges, if any,
amounts demanded pursuant to this Agreement, and any fees and expenses otherwise
imposed under this Agreement.

      You agree that you will deposit and maintain sufficient funds on balance
in the Checking Account to ensure that all such payments can be made on the
dates they are due from fully collected and "AVAILABLE" funds. If sufficient
funds are not available to make all or part of the payment when due, we can, at
our option, continue to look to the Checking Account after the due date to see
if adequate funds have become available. If adequate funds have become
available, we can then, at our option, take all or part of the payment from the
Checking Account. If and when we take this action, it will not prejudice our
ability to impose a Late Charge, if applicable, demand repayment hereunder,
declare an Event of Default, and/or pursue other rights and remedies available
to us.

      (5) APPLICATION OF PAYMENTS. Payments received by us with respect to this
Agreement (including any prepayments) shall be applied first to any interest
that is due and payable under this Agreement, then to Late Charges, if any, and
finally to principal. We reserve the right, at our option, to apply a payment to
any other charges or expenses owed by you in connection with Agreement and/or
owed by you or others in connection with any Security Agreement. If we elect to
apply payments to such charges or expenses, we can do so before application to
any other amount that you owe. The delay or failure to apply payments to such
charges or expenses on one or more occasions shall not constitute a waiver of
this right with respect to any charge or expense.

      (6) PREPAYMENT.  You may repay your Account balance in whole or in part at
any time without penalty.

IV.   TERMS AND CONDITIONS OF BORROWING.
      ----------------------------------

      (1) LOAN ADVANCES ARE DISCRETIONARY. You may, from time to time up until
termination of the Account, submit requests to the Bank to obtain Loan Advances
under this Agreement.

      YOUR BORROWING PRIVILEGES UNDER THIS AGREEMENT ARE DISCRETIONARY. THIS
MEANS THAT THE BANK MAY APPROVE OR DENY ANY SUCH REQUEST FOR A LOAN ADVANCE IN
ITS SOLE DISCRETION AND FOR ANY REASON WHATSOEVER. IN ADDITION, THIS MEANS THAT
YOUR ABILITY TO MAKE REQUESTS FOR LOAN ADVANCES HEREUNDER CAN BE TERMINATED BY
THE BANK AT ANY TIME FOR ANY REASON (WITH OR WITHOUT AN EVENT OF DEFAULT) AND
WITHOUT PRIOR NOTICE TO YOU. ACCORDINGLY, YOU AGREE TO MONITOR, ON YOUR OWN, THE
ONGOING STATUS OF YOUR BORROWING PRIVILEGES HEREUNDER, AND YOU UNDERSTAND THAT
WHEN PLANNING AND CONDUCTING YOUR FINANCIAL AFFAIRS, YOU MUST CONSIDER THE
DISCRETIONARY NATURE OF YOUR BORROWING PRIVILEGES. No termination of borrowing
privileges by the Bank shall affect or impair the obligations already incurred
by you hereunder. Under no circumstances shall the aggregate amount of Loan
Advances outstanding hereunder exceed the Credit Limit.

      (2) PROCEDURES FOR OBTAINING LOAN ADVANCES. You hereby authorize the Bank
to make Loan Advances hereunder by direct deposit to the Checking Account.
Requests for Loan Advances under this Agreement may be made by telephone by you
personally (if you are a natural person) or by one or more of the officer(s) or
other person(s) authorized in the Borrowing Resolution which we received from
you in connection with this Account. You agree that the Bank shall be entitled,
without any independent investigation, to assume that the persons making
telephone requests for Loan Advances hereunder are whom they purport to be. In
connection with any such request, you also agree to provide the Bank with such
financial, credit and operational information that the Bank may, in its sole
discretion, require (this requirement shall in no way be construed as a
limitation on the Bank's ability to request information at other times in
accordance with paragraph VI(1) below).

      (3) EVIDENCE OF DEBT. You hereby authorize and direct us to enter on our
records (including, without limitation, computer records) information pertaining
to the Account, including, without limitation, information pertaining to the
dates and amounts of Loan Advances and payments hereunder, and all such entries
shall, in the absence of manifest error, be conclusive as to your indebtedness
with us under this Agreement.

      (4) CHANGES TO CREDIT LIMIT. We can increase your Credit Limit by giving
you written notice to that effect. We can decrease your Credit Limit with or
without advance notice to you.

V.    EVENTS OF DEFAULT AND REMEDIES.
      -------------------------------

      (1) DEFAULT. An "EVENT OF DEFAULT" will occur if:

          (a) You do not pay the full amount of any payment due and payable
under this Agreement on the date it is due (including the date payment is
demanded); or

          (b) You are in default under any obligation that you have to pay
anyone else; or

          (c) Any proceeding is commenced under any bankruptcy, insolvency or
relief of debtors laws affecting you or any Guarantor; or

          (d) You or any Guarantor shall die or be dissolved, as applicable; or
shall make an assignment for the benefit of creditors; or shall have a receiver,
custodian, trustee or conservator appointed for all or substantially all of your
or such Guarantor's assets; or

          (e) There is a default or breach under any other agreement you have
with us or with respect to any promise you have made in this Agreement
(including, without limitation, any promises to provide financial information);
or

          (f) There is a default or breach of the covenants contained in any
Security Agreement; or

          (g) All or any material part of the legal or equitable ownership
interests of a Guarantor (including, without limitation, shareholder, membership
and partnership interests) in a Borrower held

                                   Page 3 of 5
<PAGE>
as of the date hereof are assigned, transferred, sold or terminated without our
prior written consent; or

          (h) There is a material adverse change in the condition or affairs
(financial or otherwise) of any Borrower or Guarantor, or a material adverse
change (financial or otherwise) in the collateral which secures the obligations
of a Borrower or a Guarantor, and such change causes us, in good faith, to deem
our self insecure with respect to the repayment and performance of this
Agreement; or

      (2) REMEDIES. If an Event of Default has occurred, we may refuse to make
any further loans or advances hereinafter and we may require you to pay
immediately the full amount of unpaid principal, and all interest that you owe
on that amount, plus any Late Charges, together with any other amounts owed to
us under this Agreement or any Security Agreement. This paragraph shall in no
way be construed as a limitation on the Bank's right to demand payment of these
amounts at any time, with or without an Event of Default. We can also exercise
our rights under applicable law, under any Security Agreement, and under any
other agreement available to us. Our rights and remedies are cumulative, and we
may exercise them in any order we choose.

      (3) DEFAULT RATE. If an Event of Default occurs, in addition to any Late
Charge, we may, at our option, increase the interest rate to an annual rate
which is equal to the interest rate described in Section II(2) of this Agreement
plus three percentage points (3%) (the "DEFAULT RATE"). Interest at this Default
Rate shall be payable on the unpaid principal balance hereof from the date we
determine (which may be retroactive to the date the Event of Default occurred)
until the default is finally cured and you request reinstatement of the old rate
in writing (and we have been provided with satisfactory evidence of the cure and
no other Event of Default exists). Interest at the Default Rate will accrue both
before and after demand, and any Final Maturity Date, and whether or not
judgment is obtained. If you request reinstatement in writing (and we have been
provided with satisfactory evidence of the cure and no other Event of Default
exists), the interest rate will revert to the annual rate of interest determined
in accordance with Section II(2) above (unless another Event of Default exists).
The language in this paragraph discussing what happens to the interest rate if a
default is cured, shall in no way limit our right to demand payment or otherwise
exercise rights described in Section V of this Agreement. A cure will not effect
those rights.

      (4) PAYMENT OF EXPENSES. You agree to pay, on demand, all costs of
collection of this Note and Loan Agreement (which term shall include any renewal
or extension hereof) incurred by us, including reasonable attorneys' fees and
court costs.

      (5) SET OFF. In addition to the rights you gave us in Subsection III (4),
you hereby give us a lien on, a security interest in, and after the occurrence
of an Event of Default an option to set off against, all deposits of yours at
any time in any checking, savings or other account with the Bank in any order,
to repay amounts outstanding hereunder, without prior demand or notice,
regardless of the adequacy of any guarantees and/or collateral securing all or
part of that indebtedness, and without resort to legal process or judicial
proceedings, or other authorization.

      (6) NO WAIVER. Neither failure or delay on our part to exercise any right,
power or privilege under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power, or privilege under
this Agreement preclude any other or further exercise thereof or the exercise of
any other right, power or privilege.

VI.   GENERAL.
      -------

      (1) FINANCIAL INFORMATION. You understand and agree that your financial
condition (and the financial condition of any Guarantor) is of material and
continuing importance to us. Accordingly, you hereby agree to PROMPTLY provide
us with such financial information as we may request from time to time
(including, if requested, information pertaining to any Guarantor). All such
information shall be in form, scope and detail acceptable to us, and, if we so
request, will be reviewed, compiled or audited by persons or firms reasonably
acceptable to us (all at your expense).

      (2) GIVING OF NOTICES. Unless the law requires a different method, any
notice that must be given to you under this Agreement will be given by hand
delivery, or by mailing it by first class mail, to the address, as applicable,
stated below. It shall be mailed or delivered to you at a different address if
you give us a notice of that different address.

      Unless the law or this Agreement provides otherwise, all notices that must
be given to the Bank under this Agreement will be given by mailing it by first
class mail to the Bank at the address stated above in Section I (directed to the
attention of the Commercial Loan Administration Department) or to a different
address if Bank gives you notice of that different address.

      (3) OBLIGATIONS OF BORROWERS UNDER THIS AGREEMENT: You agree that if more
than one Borrower signs this Agreement, each Borrower is fully and individually
obligated to keep all of the promises made in this Agreement, including the
promise to pay the full amount owed. We may enforce our rights under this
Agreement against each Borrower individually or against some or all of the
Borrowers together. This means that any one of the Borrowers may be required to
pay all of the amounts owed under this Agreement. We do not have to notify any
Borrower that the amounts due under this Agreement have not been paid by another
Borrower. The Bank can repeatedly agree to extend this Agreement or release any
collateral or any Guarantor without releasing any Borrower from responsibility
under this Note. The Bank and any one or more Borrowers can agree to the release
of one or more Borrowers without releasing any other Borrower from
responsibility under this Agreement. The obligation of each Borrower is absolute
and unconditional, and it is joint and several.

      (4) CONNECTICUT LAW. This Agreement is being made and funded in the State
of Connecticut and will be governed by the laws of the State of Connecticut.

      (5) SEVERABILITY. If any part of this Agreement is found to be invalid,
illegal or unenforceable by a court, the other parts of this Agreement will stay
valid and enforceable and will be read as if the invalid or unenforceable part
had not been included.

                                   Page 4 of 5
<PAGE>
      (6) CAPTIONS. The headings of the various sections, subsections and
paragraphs of this Agreement are included for convenient reference only, and
shall not be included in the interpretation of this Agreement.

      (7) BINDING EFFECT. This Agreement shall be binding upon you and your
successors and assigns (or, if applicable, executors and heirs). This Subsection
VI (7) shall not, however, be construed as permitting you to assign your rights
and/or responsibilities under this Agreement. You understand and agree that such
an assignment is prohibited. We are permitted to assign our rights and benefits
under this Agreement with or without advance notice to you.

      (8) MODIFICATIONS. Except as otherwise provided herein, this Agreement may
be amended only by a written agreement signed by you and the Bank.

      (9) REPRESENTATIONS AND WARRANTIES. By signing below, you represent and
warrant that as of the Date of this Agreement: (a) all financial information
given to us in connection with this Agreement is accurate; (b) you have filed
all state and federal tax returns required to be filed and paid all taxes
related thereto; (c) you are in material compliance with all applicable laws
(including environmental laws) governing your financial affairs and operations;
(d) except as otherwise disclosed to the Bank in writing, there are no pending
or threatened lawsuits or claims which could have a material adverse impact upon
your financial affairs, assets and/or operations; (e) Borrower agrees to comply
with all of the terms and conditions of a commitment letter to Borrower OCTOBER
16, 2006,the terms of which are incorporated herein and made a part hereof (in
the event of a conflict between the terms and conditions of the commitment
letter and the terms and conditions of this Agreement, the terms and conditions
of this Agreement shall control).

      (10) WAIVER OF NOTICE, HEARING AND BOND FOR PREJUDGMENT REMEDY YOU HEREBY
ACKNOWLEDGE THAT THE TRANSACTION OF WHICH THIS AGREEMENT IS A PART IS A
COMMERCIAL TRANSACTION AND, TO THE EXTENT ALLOWED UNDER CHAPTER 903a OF THE
CONNECTICUT GENERAL STATUTES OR BY OTHER APPLICABLE LAW, HEREBY WAIVE (A) ALL
RIGHTS TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER IN CONNECTION WITH ANY
AND ALL PREJUDGMENT REMEDIES TO WHICH ANY HOLDER OF THIS AGREEMENT MAY BECOME
ENTITLED BY VIRTUE OF ANY DEFAULT UNDER A PROVISION OF THIS AGREEMENT OR UNDER
ANY SECURITY AGREEMENT, AND (B) ALL RIGHTS TO REQUEST THAT THE HOLDER OF THIS
AGREEMENT POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT BORROWER OR ANY OTHER
PERSON OR ENTITY LIABLE UNDER THIS AGREEMENT AGAINST DAMAGES THAT MAY BE CAUSED
BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY THE HOLDER OF THIS AGREEMENT BY
VIRTUE OF ANY DEFAULT UNDER THE PROVISIONS OF THIS AGREEMENT OR UNDER ANY
SECURITY AGREEMENT, AND BORROWER HEREBY CONSENTS TO THE ISSUANCE OF ANY SUCH
PREJUDGMENT REMEDY WITHOUT SUCH A BOND.

      (11) WAIVER OF JURY TRIAL. YOU HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY AND IRREVOCABLY WAIVE ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND OR CLARIFY ANY RIGHT, POWER, REMEDY OR
DEFENSE ARISING OUT OF OR RELATED TO THIS AGREEMENT, OR THE TRANSACTIONS
CONTEMPLATED HEREIN, WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE, OR WITH
RESPECT TO ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL
OR WRITTEN) OR ACTIONS OF ANY PARTY; AND YOU FURTHER AGREE THAT ANY SUCH ACTION
OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A JURY. YOU FURTHER
WAIVE ANY RIGHT TO SEEK TO CONSOLIDATE ANY SUCH LITIGATION IN WHICH A JURY TRIAL
HAS BEEN WAIVED WITH ANY OTHER LITIGATION IN WHICH A JURY TRIAL CANNOT OR HAS
NOT BEEN WAIVED. FURTHER, YOU HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT OF
THE BANK, NOR THE BANK'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
THE BANK WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER
PROVISION. YOU ACKNOWLEDGE THAT THE PROVISIONS OF THIS PARAGRAPH ARE A MATERIAL
INDUCEMENT TO THE BANK'S DECISION TO ENTER INTO THIS AGREEMENT.

      (12) SERVICE OF PROCESS. YOU HEREBY CONSENT TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN THE STATE OF CONNECTICUT AND WAIVE
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON YOU, AND CONSENT THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE APPLICABLE ADDRESS
STATED BELOW AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL
RECEIPT THEREOF.

SIGNATURE OF BORROWER.  BY SIGNING BELOW,
---------------------

YOU AGREE, AS A BORROWER, TO THE TERMS AND CONDITIONS OF THIS AGREEMENT AS OF
THE DATE OF THIS AGREEMENT SHOWN ABOVE.

BORROWER:

CAS MEDICAL SYSTEMS, INC.

BY:   _____________________________
      JEFFERY BAIRD
ITS:  CFO

44 EAST INDUSTRIAL ROAD
BRANFORD, CT  06405

                                   Page 5 of 5

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