<PAGE>

                                                                    Exhibit 10.7


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                               ANGIODYNAMICS, INC.

                                       AND

                          KEYBANK NATIONAL ASSOCIATION

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                           LOAN AND SECURITY AGREEMENT

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                              DATED AUGUST 28, 2002

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          THIS AGREEMENT (A) AFFECTS TANGIBLE AND INTANGIBLE PERSONAL
          PROPERTY, (B) CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS,
          (C) IS INTENDED TO CONSTITUTE A SECURITY AGREEMENT UNDER THE
          UNIFORM COMMERCIAL CODE AND (D) SECURES AN OBLIGATION UNDER
          WHICH THE INTEREST RATE MAY VARY FROM TIME TO TIME.

<PAGE>

                           LOAN AND SECURITY AGREEMENT

     THIS LOAN AND SECURITY AGREEMENT (the "Security Agreement") dated August
___, 2002 by and between ANGIODYNAMICS, INC., a Delaware corporation; with its
principal place of business at 603 Queensbury Avenue,. Queensbury, New York
12804 (the "Borrower"), to KEYBANK NATIONAL ASSOCIATION, a national banking
association, having an office at 66 South Pearl Street, Albany, New York 12207
(the "Holder");

                                   WITNESSETH:

     WHEREAS, the Holder will make the Loan (as herein defined) to the Borrower,
the repayment of which is evidenced the Note (as herein defined) from the
Borrower in favor of the Holder; and

     WHEREAS, the Loan will be made upon the terms, conditions and provisions
hereinafter set forth; and

     WHEREAS, as security for the payment of principal, premium, if any and
interest on the Note, the Borrower intends to grant the Holder a security
interest in certain of the assets of the Borrower as hereinafter set forth;

     NOW, THEREFORE, THIS SECURITY AGREEMENT FURTHER WITNESSETH:

<PAGE>

                                    ARTICLE I

                                   DEFINITIONS

SECTION 1.01. DEFINITIONS OF TERMS. The following words and terms if used in
this document shall have the following meanings unless the context or use
indicates another or different meaning or intent and the singular shall include
the plural and the plural shall include the singular, as the context may
require:

     "AFFILIATE" shall mean, with respect to any Person, any other Person
directly controlling, controlled by or under direct or indirect common control
with such Person. A Person shall be deemed to control a second Person if such
first Person possesses, directly or indirectly, the power to (i) vote 10% or
more of the securities having ordinary voting power for the directors or
managers of such second Person or (ii) direct or cause the direction of the
management and policies of such second Person, whether through the ownership of
voting securities, by contract or otherwise. Notwithstanding the foregoing, (x)
a director, officer, or employee of a Person shall not, solely by reason of such
status, be considered an Affiliate of such Person and (y) the Holder shall not
be considered an Affiliate of the Borrower.

     "AMORTIZATION EXPENSE" shall mean, for any period, all amortization
expenses of the Borrower, calculated in accordance with GAAP.

     "APPRAISAL" means an appraisal of the Collateral in form and substance
satisfactory to the Holder, prepared by an Appraiser, indicating a value with
respect to the Collateral.

     "APPRAISER" means an appraiser satisfactory to the Holder.

     "BONDS" shall have the meaning assigned to such term in the Reimbursement
Agreement.

     "BORROWER" means Angiodynamics, Inc., a Delaware corporation having an
address of 603 Queensbury Avenue, Queensbury, New York 12804 and its successors
and permitted assigns.

     "CASH INTEREST EXPENSE" shall mean for any period, Interest Expense,
reduced by any amount included therein which is "paid-in-kind" through an
increase to principal or the issuance of an additional debt security in a
principal amount equal to such interest.

     "CLOSING" means the closing with respect to the execution and delivery of
the Note by the Borrower to the Holder.

     "CLOSING DATE" means the date of the execution and delivery of the Note by
the Borrower to the Holder.

                                      - 2 -

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     "COLLATERAL" means all property which may from time to time be subject to
the Lien of the Security Agreement.

     "DEFAULT RATE" shall have the meaning assigned to such term in the Note.

     "DEPRECIATION EXPENSE" shall mean, for any period, all depreciation
expenses of the Borrower, calculated in accordance with GAAP.

     "EBIT" shall mean, for any period, Net Income for such period, plus the sum
of the amounts for such period included in determining such Net Income of (i)
Interest Expense and (ii) Income Tax Expense, calculated in accordance with
GAAP.

     "EBITDA" shall mean, for any period, EBIT for such period, plus the sum
(without duplication) of the amounts for such period included in determining
EBIT of (i) Depreciation Expense, and (ii) Amortization Expense, calculated in
accordance with GAAP.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as the
same may from time to time be amended or supplemented, and all regulations
promulgated thereunder.

     "EVENT OF DEFAULT" means any of those events defined as Events of Default
by the terms of any of the Financing Documents.

     "FINANCING DOCUMENTS" means the Note, this Security Agreement, and any
other document now or hereafter executed by the Borrower by or in favor of the
Holder which affects the rights of the Holder in or to the Collateral, in whole
or in part, or which evidences, secures or guarantees any sum due under the Note
or any of the other Financing Documents.

     "FIXED CHARGE COVERAGE RATIO" shall mean the ratio of the Borrower's (i)
EBITDA plus lease expense less other income less Unfunded Capital Expenditures
less cash taxes paid less dividends and distributions to (ii) current maturities
of long term debt plus current portion of long term leases plus Cash Interest
Expense paid on loans and leases plus lease expense, calculated in accordance
with GAAP.

     "GAAP" means generally accepted accounting principles as then in effect,
which shall include the official interpretations thereof by the Financial
Accounting Standards Board, consistently applied.

     "GOVERNMENTAL AUTHORITY" means the United States, the State and any
political subdivision thereof, and any agency, department, commission, court,
board, bureau or instrumentality of any of them.

     "HOLDER" means KeyBank National Association., as the original owner of the
Note, and any subsequent owner at the time in question of the Note.

     "INCOME TAX EXPENSE" shall mean, for any period, all provisions for taxes
based upon Net Income (including, without limitation, any additions to such
taxes, any penalties and interest with respect thereto), calculated in
accordance with GAAP.

                                      - 3 -

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     "INDEBTEDNESS" means, at a particular date, all indebtedness for money
borrowed or for the deferred purchase price of property and lease obligations of
the Borrower which have been, or which in accordance with Statement of Financial
Accounting Standards No. 13, as from time to time amended, should be,
capitalized.

     "INTEREST COVERAGE RATIO" shall mean the ratio of the Borrower's (i) EBIT
to (ii) Cash Interest Expense, calculated in accordance with GAAP.

     "INTEREST EXPENSE" shall mean, for any period, total interest expense
(including that which is capitalized, that which is attributable to capital
leases and the pre-tax equivalent of dividends payable on redeemable stock) with
respect to all outstanding Indebtedness including, without limitation, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and net costs under any hedging agreements.

     "LETTER OF CREDIT FEES" shall have the meaning assigned to such term in the
Reimbursement Agreement.

     "LIEN" means any interest in Property securing an obligation owed to a
Person whether such interest is based on the common law, statute or contract,
and including but not limited to a security interest arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes. The term "Lien" includes reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other similar title exceptions and encumbrances,
including but not limited to mechanics', materialmens', warehousemens' and
carriers' liens and other similar encumbrances, affecting real property. For the
purposes hereof, a Person shall be deemed to be the owner of Property which it
has acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.

     "LOAN" means the loan in the principal amount of $800,000.00 from the Bank
to the Borrower as evidenced by the Note.

     "NET INCOME" shall mean, for any period, the net income (or loss), without
deduction for minority interests, for such period taken as a single accounting
period and calculated in accordance with GAAP.

     "NET PROCEEDS" means so much of the gross proceeds with respect to which
that term is used as remain after payment of all expenses, costs and taxes
(including attorneys' fees) incurred in obtaining such gross proceeds.

     "NOTE" means the promissory note dated the Closing Date in the principal
amount of $800,000.00 from the Borrower in favor of the Holder as said
promissory note may be amended, modified, supplemented, consolidated or extended
from time to time.

     "NOTE PAYMENT DATE" means each date on which interest or both principal and
interest shall be payable on the Note according to its terms so long as such
shall be outstanding.

                                      - 4 -

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     "PERMITTED ENCUMBRANCES" means (i) Liens for taxes, assessments, or
governmental charges or levies the payment of which is not at the time required
by law; (ii) Liens imposed by law, such as Liens of landlords, carriers,
warehousemen, mechanics, and materialmen arising in the ordinary course of
business for sums not yet due or being contested by appropriate proceedings
promptly initiated and diligently conducted, provided other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance, and other types
of social security, or to secure the performance of tenders, statutory
obligations, and surety and appeal bonds, or to secure the performance and
return of money bonds and other similar obligations, excluding obligations for
the payment of borrowed money; (iv) any judgment Lien, unless the judgment it
secures shall, within thirty (30) days after the entry thereof, have been
discharged or execution therefor stayed pending appeal, or shall have been
discharged within thirty (30) days after the expiration of any such stay; (v)
other Liens (other than mechanic's liens relating to the Project) incidental to
the conduct of Borrower's business or ownership of properties and assets, which
are not incurred nor granted in connection with the borrowing of money or the
obtaining of advances or credits, and which do not in the aggregate materially
detract from the value of its property or assets or materially impair the use
thereof in the ordinary course of business; provided the aggregate amount of all
such Liens by Borrower shall not exceed $10,000.00; and (vi) Liens evidenced by
the Security Agreement as well as any other Liens in favor of Bank or any
affiliate of Bank.

     "PERSON" means an individual, partnership, corporation, limited liability
Borrower, trust or unincorporated organization, and a government or agency or
political subdivision thereof.

     "PLAN" means any plan defined in Section 4021(a) of ERISA in respect of
which the Borrower or any Subsidiary thereof is an "employer" or a "substantial
employer" as defined in Sections 3(5) and 4001(a)(2) of ERISA, respectively.

     "PRINCIPAL BALANCE" means the aggregate outstanding principal balance of
the Note from time to time.

     "PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

     "REIMBURSEMENT AGREEMENT" means the reimbursement agreement dated as of
August 1,2002 by and between the Borrower and the Holder, as said reimbursement
agreement may be amended or supplemented from time to time.

     "REPORTABLE EVENT" means any reportable event as defined in ERISA.

     "REQUIREMENT" or "LOCAL REQUIREMENT" means any law, ordinance, order,
judgment, decree, rule, regulation, permit, license, authorization, certificate
or approval of a Governmental Authority or a Local Authority respectively.

     "SECURITY AGREEMENT" means this loan and security agreement dated the
Closing Date from the Borrower in favor of the Holder and securing the Note, as
said loan and security

                                      - 5 -

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agreement may be modified, amended, supplemented, consolidated, spread or
assumed from time to time.

     "STATE" means the State of New York.

     "SUBSIDIARY" shall mean for any Person (i) any for-profit entity more than
fifty percent (50%) of the capital stock of which is owned or controlled,
directly or indirectly, by such Person or any Subsidiary and whose accounts are
required to be consolidated with those of said Person in accordance with GAAP
and (ii) any non-profit entity which is controlled, directly or indirectly, by
such Person.

     "SWAP AGREEMENT" shall have the meaning assigned to such term in the
Reimbursement Agreement.

     "TOTAL DEBT" shall mean the total of all items of Indebtedness or liability
which in accordance with GAAP would be included in determining total liabilities
on the liability side of the balance sheet as of the date of determination.

     "UNFUNDED CAPITAL EXPENDITURES" shall mean total capital expenditures minus
any corresponding increase in long-term debt or leases, calculated in accordance
with GAAP.

                                   ARTICLE II

            MAKING OF THE LOAN: CONDITIONS PRECEDENT TO THE HOLDER'S
                              OBLIGATIONS HEREUNDER

SECTION 201. MAKING OF THE LOAN.

Subject to the provisions of Section 202 hereof, the Holder shall make available
to the Borrower the proceeds of the Loan from time to time in accordance with
the terms, provisions and conditions of the Note. Provided that no Event of
Default has occurred, as the Borrower repays principal under the Note, it shall
be permitted to re-borrow until the Maturity Date provided, however, that at no
time shall the Principal Balance exceed $800,000.00.

SECTION 202. CONDITIONS.

The Holder shall not be obligated hereunder to make the Loan unless the
following conditions shall have been satisfied:

     (A)  The Holder shall have received on or before the Closing Date the
following all, where applicable, in form and substance satisfactory to the
Holder:

          1.   the executed Note,

          2.   an executed counterpart of this Security Agreement,

                                      - 6 -

<PAGE>

          3.   (a) the commitment fees of the Holder, if any and (b) the
Holder's counsel fees,

          4.   an executed debt subordination agreement from E-Z-EM, Inc.;

          5.   the certificates and policies, if available, of insurance
required by the Security Agreement accompanied by evidence of the payment of
the premiums therefor,

          6.   Uniform Commercial Code financing statements or comparable
security instruments to evidence or perfect the security interests created or
purported to be created by the Security Agreement,

          7.   opinion of counsel for the Borrower in form and substance
satisfactory to the Holder and its counsel; and

     (B)  The Holder's counsel shall have received (and approved as appropriate)
on or before the Closing Date copies of:

          (1)  With respect to the Borrower, an executed closing certificate
together with a certified copy of the articles of incorporation as filed with
the New York Secretary of State together with all amendments thereto, a good
standing certificate issued by the New York Secretary of State, a certified copy
of the by-laws of the Borrower and an approval of the board of directors
authorizing the execution and delivery and performance of the Financing
Documents, and

          (2)  Judgment, Bankruptcy, Lien searches and UCC searches with respect
to the Borrower.

                                   ARTICLE III

                       GRANTING CLAUSES; GENERAL COVENANTS

SECTION 3.01. GRANTING CLAUSES. The Borrower, in consideration of the making of
the Loan by the Holder and for other good and valuable consideration, receipt of
which is hereby acknowledged, and in order to secure (1) the payment of the
principal of, premium, if any, and interest on the Note, issued in the original
amount of Eight Hundred and 00/100 Dollars ($800,000.00) according to its tenor
and effect (2) the payment of all other sums required to be paid hereunder and
under the other Financing Documents and (3) the performance and observance by
the Borrower of all of the covenants, agreements, representations and warranties
herein and in the other Financing Documents (collectively, the "Indebtedness");
and in order to secure the Indebtedness; hereby warrant, assign, mortgage,
hypothecate, pledge, and grant a security interest in, set over and confirm unto
the Holder and its respective successors and assigns forever, all of the estate,
right, title and interest of the Borrower in, to and under any and all assets of
the Borrower, including, but not limited to any and all of the following
described property (the "Collateral") whether now owned or held or hereafter
acquired:

                                      - 7 -

<PAGE>

     (A)  All office, trade, manufacturing and all other equipment and all
goods, including, without limitation, machinery, tools, fixtures, computers,
furniture, furnishings, chattels, motor vehicles and other tangible personal
property that is not inventory, and all parts, components, attachments,
accessories, accessions, replacements, substitutions, additions and improvements
to any of the above (all of which is collectively called the "Equipment");

     (B)  All inventory, including, without limitation, goods acquired or held
for sale or lease or furnished or to be furnished under contracts of rental or
service, all new materials, work in process, finished goods, returned goods,
repossessed goods, all livestock and their young after conception, all crops and
timber, and all packaging materials, supplies and containers relating to or used
or consumed in connection with any of the foregoing (all of which is
collectively called the "Inventory");

     (C)  All debts, accounts, claims, demands, moneys and choses in action
which now are, or which may at any time be, due or owing to or owned by the
Borrower and all books, records, documents, papers and electronically recorded
data recording, evidencing or relating to the debts, accounts, claims, demands,
moneys and choses in action (all of which is collectively called the
"Accounts");

     (D)  All documents of title, chattel paper, instruments, securities and
money, and all other personal property, of the Borrower that is not Equipment,
Inventory or Accounts;

     (E)  All patents, trade-marks, copyrights, industrial designs, plant
breeder's rights, integrated circuit topographies, trade-names, goodwill,
confidential information, trade secrets and know-how, including without
limitation, environmental technology and bio-technology, software and any
registrations and applications for registration of the foregoing and all other
intellectual and industrial property of the Borrower (all of which is
collectively called the "Intellectual Property");

     (F)  All the Borrower's contractual rights, licenses and all other choses
in action of every kind which now are, or which may at any time be due or owing
to or owned by the Borrower, and all other intangible property of the Borrower,
that is not Accounts, chattel paper, instruments, documents of title,
Intellectual Property, securities or money;

     (G)  Any and all moneys and securities from time to time held by the Holder
under the terms of this Security Agreement, and any and all other Property of
every name and nature, from time to time hereinafter by delivery or by writing
of any kind conveyed, mortgaged, pledged, assigned or transferred as and for
additional security hereunder by the Borrower or by anyone on its behalf or with
its written consent in favor of the Holder;

     (H)  All proceeds of and any unearned premiums on any insurance policies
covering the foregoing, including, without limitation, the right to receive and
apply the proceeds of any insurance or judgments, or settlements made in lieu
thereof, for damage to any of the foregoing;

                                      - 8 -

<PAGE>

     (I)  The right, in the name and on behalf of the Borrower, to appear in and
defend any action or proceeding brought with respect to the above or any part
thereof and to commence any action or proceeding to protect the interest of the
Holder with respect thereto;

     (J)  All other proceeds of the conversion, whether voluntary or
involuntary, of the above or any other Property or rights encumbered or conveyed
hereby into cash or liquidated claims, including, without limitation, all title
insurance, hazard insurance, Condemnation and other awards; and

     (K)  All extensions, additions, substitutions and accessions with respect
to any of the foregoing.

TO HAVE AND TO HOLD the foregoing Collateral unto the Holder and its successors
and assigns forever.

SECTION 3.02. SECURITY AGREEMENT. The Collateral includes all rights and
interest, whether tangible or intangible in nature, of the Borrower in the
Collateral. This Security Agreement shall constitute a security agreement under
the Uniform Commercial Code of the State so that the Holder shall have and may
enforce a security interest in any or all of the Collateral, such security
interest to attach at the earliest moment permitted by law and also to include
and attach to all additions and accessions thereto, all substitutions and
replacements therefor, all proceeds thereof, including insurance and
Condemnation proceeds, and all contract rights, rental or lease payments and
general intangibles of the Borrower obtained in connection with or relating to
the Collateral as well as any and all items of Property in the foregoing
classifications which are hereafter acquired. The Borrower shall, at the request
of the Holder, deliver to the Holder, any and all further instruments which the
Holder shall require in order to further secure and perfect the Lien of the
Security Agreement. Pursuant to the Uniform Commercial Code of the State, the
Borrower hereby authorizes the Holder to execute and file UCC Financing
Statements and continuation statements, at the expense of the Borrower, without
the necessity of the Borrower's signature as debtor if the Holder shall
determine that such are necessary or advisable in order to perfect its security
interest in any of the Collateral covered by this Security Agreement, and shall
pay to the Holder, on demand, any expenses incurred by the Holder in connection
with the preparation, execution and filing of such statements and any
continuation statements that may be filed by the Holder without the necessity of
the Borrower's signature as debtor.

SECTION 3.03. PERFORMANCE OF COVENANTS. The Borrower hereby covenants that it
will faithfully observe and perform, or cause to be observed and performed, at
all times any and all covenants, undertakings, stipulations and provisions on
their respective parts to be observed or performed contained in the Security
Agreement and in the other Financing Documents, including, but not limited to,
the obligation to make all payments due and owing under the Note at the time and
in the manner set forth therein.

SECTION 3.04. PRIORITY OF LIEN OF SECURITY AGREEMENT; DISCHARGE OF LIENS AND
ENCUMBRANCES. (A) The Borrower hereby covenants that the Borrower is lawfully
seized of the estate conveyed hereby and has the right to grant a security
interest in and

                                      - 9 -

<PAGE>

Lien on the Collateral, and Borrower will warrant and defend title to the
Collateral against all claims and demands.

     (B)  The Borrower shall not permit or create or suffer to be permitted or
created any Lien, except for Permitted Encumbrances, upon the Collateral or any
part thereof.

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower
represents and warrants as follows:

     (A)  (1) The Borrower has good, marketable and insurable title to the
Collateral, subject only to Permitted Encumbrances and (2) this Security
Agreement is and will remain a valid and enforceable Lien on the Collateral;

     (B)  It is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, possesses full power and
authority to consummate the transactions contemplated hereby and is authorized
to conduct business in the State of New York and in all other jurisdictions
wherein the nature of its activities requires such;

     (C)  No approval or other action by any Governmental Authority is required
in connection with the execution or performance by the Borrower of the Financing
Documents;

     (D)  The financial statements of the Borrower, if any, heretofore delivered
to the Holder are true and correct in all respects, have been prepared in
accordance with GAAP, and fairly present the respective financial conditions of
the subjects thereof as of the respective dates thereof;

     (E)  The Financing Documents and all other documents to be executed by the
Borrower in connection therewith, when executed and delivered by the respective
parties thereto, will constitute valid and binding obligations of the Borrower.
The execution and delivery by the Borrower of the Financing Documents and the
performance of the Financing Documents by the Borrower (1) have been authorized
by all necessary corporate action and (2) do not and will not conflict with, or
result in any breach of, or constitute a default under the Borrower's articles
of incorporation or by-laws or any indenture, mortgage, deed of trust, bank loan
or credit agreement or any other agreement or instrument to which the Borrower
is a party or by which the Borrower or any of its Property may be bound or
affected for which a valid consent has not been secured, or result in the
creation of any Lien (other than that created by the Financing Documents) upon
or with respect to any Property of the Borrower,

     (F)  There has been no material adverse change in the business, Property or
financial condition, taken as a whole, of the Borrower from that shown on the
financial statements delivered heretofore to the Holder;

                                     - 10 -

<PAGE>

     (G)  There are no actions, suits or proceedings at law or in equity, or
before or by any Governmental Authority, pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or the Collateral or
which may materially adversely affect the financial condition of the Borrower or
involving the validity or enforceability of the Financing Documents or the
priority of the Liens thereof, and to the Borrower's knowledge it is not in
default with respect to any order, writ, judgment, decree or demand of any court
or any Governmental Authority;

     (H)  There is no default under the Financing Documents and no event has
occurred and is continuing which with notice or the passage of time or either
would constitute a default under any thereof;

     (I)  All Federal, state, county, municipal and city income and other tax
returns and other reports and documents required to have been filed by the
Borrower have been filed or alternatively the Borrower has procured lawful
extensions to file such and the Borrower has paid all fees and taxes which have
become due pursuant to such returns, reports and documents or pursuant to any
assessments received by the Borrower, and the Borrower knows of no basis for any
additional assessment in respect of any such taxes; and

     (J)  No Reportable Event or Prohibited Transaction (as defined in Section
4975 of the Internal Revenue Code) has occurred and is continuing with respect
to any Plan and the Borrower has not incurred any "accumulated funding
deficiency" (as such term is defined in Section 302 of ERISA).

                                   ARTICLE IV

                            COVENANTS OF THE BORROWER

SECTION 401. AFFIRMATIVE COVENANTS OF THE BORROWER WITH THE HOLDER.

The Borrower covenants with the Holder as follows:

     (A)  It will pay to the Holder the Holder's commitment fee and its counsel
fees and expenses promptly upon receipt of bills therefor submitted by the
Holder at the Closing and will pay all costs and expenses required to satisfy
the conditions of this Security Agreement; without limiting the generality of
the foregoing, the Borrower will pay (from moneys advanced hereunder or
otherwise):

          (1)  all taxes (other than the Holder's income taxes), filing and
recording expenses, including documentary stamp and intangible taxes, if any;

          (2)  the fees and commissions, if any, lawfully due to brokers in
connection with this transaction; and

          (3)  Appraisal fees, if any;

     (B)  It will cause all conditions to the Closing set forth herein to be
satisfied;

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<PAGE>

     (C)  It will indemnify the Holder from claims of brokers arising by reason
of the Borrower's acts in connection with the execution and delivery hereof and
of the other Financing Documents executed by it or the consummation of the
transactions contemplated hereby or thereby and from expenses incurred by the
Holder in connection with any such claims (including reasonable attorneys' fees)
and each of the Holder and the Borrower represent that it has not dealt with any
broker in connection with the Loan nor is aware of such claims of brokers;

     (D)  It will deliver to the Holder on demand, certified copies of any
contracts, bills of sale, statements, receipted vouchers or agreements, under
which the Borrower claims title to any materials, fixtures or articles subject
to the Lien of the Security Agreement;

     (E)  The Holder may apply amounts due hereunder in accordance with the
terms hereof and amounts so applied shall be deemed part of the Loan and shall
be secured by the Security Agreement;

     (F)  It will transmit to the Holder, immediately upon receipt thereof, any
material communication adversely affecting the Holder's security and will
promptly respond fully to any inquiry of the Holder made with respect thereto;

     (G)  It will promptly respond fully to any inquiry made by the Holder with
respect to the Note or the other Financing Documents or the transactions
contemplated thereby;

     (H)  It will notify the Holder of any material adverse change in the
financial condition or business of the Borrower and furnish such other
information concerning its financial condition and business as may be reasonably
requested by the Holder from time to time;

     (I)  It will inspect the Collateral including the right to conduct field
examinations thereof at such times as the Holder may determine in its
discretion, the cost of which inspections and examinations should be borne by
the Borrower;

     (J)  It will give written notice to the Holder within ten (10) days of
becoming aware of any condition or event which constitutes an event of default
beyond any applicable grace or cure period with respect to other outstanding
debt of the Borrower;

     (K)  It will at all times keep adequate books and records, in accordance
with GAAP so that at any time, and from time to time, its financial condition
may be readily determined in all material respects; and, at Holder's request,
make and take away copies thereof;

     (L)  It will as soon as practicable after the end of each fiscal quarter in
each fiscal year, except the last, commencing with the fiscal quarter ended
August 31, 2002 and in any event within forty five (45) days thereafter, furnish
to the Holder financial statements of the Borrower for such quarter, certified
as complete and correct by the principal financial officer of the Borrower,
subject to changes resulting from year-end adjustments;

     (M)  It will as soon as practicable after the end of each fiscal year,
commencing with the fiscal year ending on or about May 31, 2003 and in any event
within one hundred twenty (120) days thereafter, furnish to the Holder (i)
annual revenue and expense budget for the current fiscal year including the
assumptions underlying the forecasts forming the basis thereof, and

                                     - 12 -

<PAGE>

accounts receivable aging report, each prepared by the Borrower, together with
copies of filed federal income tax returns including all schedules and (ii)
annual statement of condition of the Borrower as of the end of such year, and
statements of cash flows and changes in financial position and/or changes in
fund balances as applicable of the Borrower for such year, setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail and certified as complete and correct by the principal
financial officer of the Borrower, accompanied by a report and an unqualified
opinion of independent certified public accountants of recognized standing,
selected by the Borrower and satisfactory to the Holder, which report and
opinion shall be audited and prepared in accordance with GAAP

     (N)  It will not later than August 15th of each calendar year, furnish to
the Holder a certificate on behalf of the Borrower of the chief financial
officer to the effect that, to the best knowledge of the Borrower, no Default or
Event of Default exists or, if any Default or Event of Default does exist,
specifying the nature and extent thereof and the actions the Borrower proposes
to take with respect thereto, which certificate shall set forth the calculation
of the calculations required to establish compliance with the provisions of
subsection (O) of this Section 401;

     (O)  It will maintain (1) a minimum Fixed Charge Coverage Ratio of 1.25 to
1.00 calculated as of each May 31st and November 30th based upon the most
recently concluded four fiscal quarters of the Borrower and (2) a minimum
Interest Coverage Ratio of 2.00 to 1.00 calculated as of each May 31st and
November 30th based upon the most recently concluded four fiscal quarters of the
Borrower.

In calculating the foregoing ratios for the periods ending November 30th, 2002
and May 31st, 2003, (i) principal shall be determined using the current
maturities of long term debt (in accordance with GAAP) on a pro-forma basis for
the twelve months following the Closing Date, (ii) Cash Interest Expense shall
be calculated as the pro-forma Cash Interest Expense for the twelve months
following the Closing Date (utilizing the appropriate amortization schedules and
interest rates for the Indebtedness, including the fixed rate achieved under the
SWAP Agreement and all Letter of Credit Fees and related fees) and (iii)
thereafter both principal and Cash Interest Expense shall be calculated on the
actual principal and Cash Interest Expense, respectively, for the period in
question.

     (P)  It will promptly inform the Holder of any pending or threatened
litigation against the Borrower or affecting any of the Borrower's property, if
such litigation or potential litigation could reasonably be expected to have a
material adverse effect on the Borrower's financial condition or to cause an
event of default;

     (Q)  It will preserve and maintain its corporate existence, all rights,
licenses, privileges, franchises, certificates and the like necessary for the
operation of its business and the maintenance of its existence where the failure
to maintain the same is reasonably expected to have a material adverse effect
upon the Borrower, and promptly and properly comply with all laws, statutes,
ordinances and governmental regulations applicable to it or to any of its
property, business operations and transactions where the failure to comply with
the same is reasonably expected to have a material adverse effect upon the
Borrower;

                                     - 13 -

<PAGE>

     (R)  It will maintain, with financially sound and reputable insurance
companies or associations, workmen's compensation insurance, liability
insurance, and extended coverage and any other insurance of the kinds usually
carried by companies engaged in business similar to that of the Borrower, in an
amount not less than full replacement cost on its present and future properties
normally covered by insurance (less reasonable deductibles), against such
casualties, risks and contingencies as are customarily insured against, and at
the Holder's request, deliver to the Holder evidence of the maintenance of such
insurance;

     (S)  It will promptly pay when due any and all taxes, lawful claims
(whether for labor, materials or otherwise), assessments and governmental
charges upon the Borrower or against any of the Borrower's property, unless the
same is being contested in good faith by appropriate proceedings and reserves
consistent with GAAP have been established therefore;

     (T)  It will maintain all of its tangible property in good condition and
repair, and make all necessary replacements thereof where the failure to do so
would have a material adverse effect upon the Borrower or upon the value of the
Collateral; and

     (U)  It will maintain with the Holder all of the Borrower's operating and
cash management accounts.

SECTION 402. NEGATIVE COVENANTS OF THE BORROWER WITH THE HOLDER.

The Borrower covenants with the Holder as follows:

     (A)  It shall not mortgage, assign, hypothecate, grant a security interest
in, or encumber any of the Collateral, except for Permitted Encumbrances;

     (B)  It shall not endorse, guarantee, or otherwise become surety for or
contingently liable upon the obligations of any Person (provided, however, that
the foregoing shall not apply to endorsements of negotiable instruments by the
Borrower in the ordinary course of business);

     (C)  It shall not sell, assign, lease, exchange or otherwise dispose of any
of its assets used or useful in its business, except inventory or obsolete or
unused equipment in the ordinary course of business;

     (D)  It shall not sell any of its assets to any other Person with the
understanding or agreement that such assets shall be leased back to the
Borrower;

     (E)  It shall not make any loans or advances except for advances to
employees in the ordinary course of business, or sell any of its accounts
receivables with or without recourse;

     (F)  It shall not change its fiscal year or methods of accounting;

     (G)  It shall not assign or transfer, or attempt to so do, any of its
rights, powers, duties or obligations arising pursuant to this Security
Agreement;

     (H)  It shall not make any distributions or payments of dividends;

                                     - 14 -

<PAGE>

     (I)  It shall not reorganize, merge or consolidate with, or acquire,
directly or indirectly, all or substantially all of the assets, property or
stock of any Borrower, person or other entity, sell all or substantially all of
its assets or approve a sale of all or substantially all of its stock or make
any other substantial change in its capitalization or character of its business,
without the express written consent of the Holder,

     (J)  It shall not directly or indirectly, engage in any business other than
that currently engaged in by the Borrower, discontinue any of its existing lines
of business which materially contribute to the Borrower's operations, or
substantially alter its method of doing business;

     (K)  It shall not suffer any change in the management or ownership of the
Borrower; and

     (L)  It shall not, directly or indirectly, create, incur, or assume
Indebtedness, or otherwise become, be, or remain liable with respect to, any
Indebtedness in excess of $100,000.00 in the aggregate during any fiscal year,
provided that the foregoing restrictions shall not apply to:

          (1)  the Indebtedness evidenced hereunder and any other Indebtedness
now or hereafter payable by the Borrower to the Holder or any affiliate of the
Holder;

          (2)  existing Indebtedness which is reflected on the Borrower's
financial statements referred to in Section 3.01 (F) hereof; or

(3)  Indebtedness of the Borrower evidenced by the Bonds; or

     (M)  It shall not make any payments of any kind to any other Person,
including any Affiliate of the Borrower, except for payments in the ordinary
course of business. Any Indebtedness due and owing E Z-EM, Inc. from the
Borrower (hereinafter the "Subordinated Indebtedness") shall be fully
subordinated to the repayment by the Borrower of all amounts due and owing to
the Holder hereunder and under the other Financing Documents. Provided that no
Event of Default has occurred, the Borrower may make payments of principal and
interest with respect to the Subordinated Indebtedness on a semi-annual basis
provided that after giving effect to such payment on a pro-forma basis, the
Borrower shall be in full compliance with all of the terms, provisions and
conditions set forth herein and in the other Financing Documents.

                                    ARTICLE V

                 MAINTENANCE, MODIFICATION, TAXES AND INSURANCE

SECTION 5.01.  MAINTENANCE AND MODIFICATIONS OF COLLATERAL. The Borrower agrees
that during the period that the Note are outstanding it will (1) keep that
portion of the Collateral constituting tangible property in good condition and
repair and preserve the same against waste, loss, damage and depreciation,
ordinary wear and tear excepted, and (2) make all necessary repairs and
replacements to such portions of the Collateral or any part thereof (whether
ordinary or extraordinary, structural or nonstructural, foreseen or unforeseen).

                                     - 15 -

<PAGE>

SECTION 5.02.  TAXES, ASSESSMENTS AND UTILITY CHARGES. (A) The Borrower shall
pay or cause to be paid, as the same respectively become due, (1) all taxes and
governmental charges of any kind whatsoever which may at any time be lawfully
assessed or levied against or with respect to the Collateral, (2) all utility
and other charges, including "service charges", incurred or imposed for the
operation, maintenance, use, occupancy, upkeep and improvement of the
Collateral, and (3) all assessments and charges of any kind whatsoever lawfully
made by any Governmental Authority for public improvements, provided that, with
respect to special assessments or other governmental charges that may lawfully
be paid in installments over a period of years, the Borrower shall be obligated
hereunder to pay only such installments as are required to be paid during all
periods that sums payable by the Borrower hereunder are due and owing.

     (B)  Notwithstanding the provisions of subsection (A) of this Section 5.02,
the Borrower may in good faith actively contest any such taxes, assessments and
other charges, provided that the Borrower shall have paid such taxes,
assessments and other charges if required by law to do so or provided that (1)
the Borrower first shall have notified the Holder in writing of such contest,
(2) no Event of Default exists hereunder or under the other Financing Documents,
(3) the Borrower shall have set aside adequate reserves for any such taxes,
assessments and other charges and at the option of the Holder shall have pledged
such reserves to the Holder, and (4) the Borrower demonstrates to the reasonable
satisfaction of the Holder that the nonpayment of any such items will not
materially endanger the Lien of the Security Agreement in any part of the
Collateral. Otherwise, such taxes, assessments or other charges shall be paid
promptly by the Borrower or, at the Borrower's option, secured by the Borrower's
posting a bond in form and substance satisfactory to the Holder.

SECTION 5.03.  INSURANCE REQUIRED. At all times that the Note are outstanding,
the Borrower shall maintain insurance with respect to the Collateral against
such risks and for such amounts as are customarily insured against by businesses
of like size and type, paying, as the same become due and payable, all premiums
with respect thereto, including, but not necessarily limited to:

     (A)  Insurance protecting the interests of the Borrower as insured and the
Holder as loss payee, as their interests may appear, against loss or damage to
the Collateral by fire, lightning, vandalism, malicious mischief and other
perils and casualties normally insured against with a uniform extended coverage
endorsement, such insurance at all times to be in an amount not less than the
unpaid principal amount of the Note outstanding; provided, however, that the
Borrower may, with the consent of the Holder (such consent not to be
unreasonably withheld or delayed) insure all or a portion of the Collateral
under a blanket insurance policy or policies covering not only the Collateral or
portions thereof but other Property.

     (B)  To the extent applicable, workers' compensation insurance, disability
benefits insurance and such other forms of insurance which the Borrower is
required by law to provide, covering loss resulting from injury, sickness,
disability or death of employees of the Borrower.

     (C)  Insurance protecting the Borrower and the Holder against loss or
losses from liabilities imposed by law or assumed in any written contract and
arising from personal injury or death or damage to the property of others caused
by any accident or occurrence, with limits of

                                     - 16 -

<PAGE>

not less than $2,000,000 per person per accident or occurrence on account of
personal injury, including death resulting therefrom, and $2,000,000 per
accident or occurrence on account of damage to the property of others, excluding
liability imposed upon the Borrower by any applicable workers' compensation law,
and a separate commercial umbrella liability policy in excess of the basic
coverage stated above protecting the Borrower and the Holder with a limit of not
less than $5,000,000.

     (D)  If requested by the Holder, policies of insurance against loss or
damage to any air conditioning, heating or ventilation system, steam boilers or
other high pressure machinery, if any, as well as such other equipment as the
Holder shall designate, in an amount satisfactory to the Holder.

     (E)  Other insurance coverage required by any Governmental Authority in
connection with any Requirement.

SECTION 5.04.  ADDITIONAL PROVISIONS RESPECTING INSURANCE. All insurance
required by Section 5.03 hereof shall be procured and maintained in financially
sound and generally recognized responsible insurance companies selected by the
Borrower and authorized to write such insurance in the State and satisfactory to
the Holder. The Borrower or companies issuing the policies required by Sections
5.03(A) shall be rated "A" or better by A.M. Best Co., Inc. in the most recent
edition of Best's Key Rating Guide. Such insurance may be written with
deductible amounts comparable to those on similar policies carried by other
companies engaged in businesses similar in size, character and other respects to
those in which the Borrower is engaged. All policies evidencing such insurance
shall name the Borrower as insured and the Holder as mortgagee and loss payee
under a lender's loss payable endorsement, as their interests may appear, and
provide for at least thirty (30) days' written notice to the Borrower and the
Holder prior to cancellation, lapse, reduction in policy limits or material
change in coverage thereof. The insurance required by Sections 5.03(A) and
5.03(D) hereof shall be fully paid for and shall contain a standard
noncontributory mortgagee endorsement in favor of the Holder as mortgagee and
loss payee. All insurance required hereunder shall be in form, content and
coverage satisfactory to the Holder. Certificates satisfactory in form and
substance to the Holder to evidence all insurance required hereby shall be
delivered to the Holder on or before the Closing Date. The Borrower shall
deliver to the Holder on or before the first Business Day of each calendar year
thereafter a certificate dated not earlier than the immediately preceding
December 1 reciting that there is in full force and effect, with a term covering
at least the next succeeding calendar year, insurance in the amounts and of the
types required by Sections 5.03 and 5.04 hereof. At least thirty (30) days prior
to the expiration of any such policy, the Borrower shall furnish to the Holder
evidence that the policy has been renewed or replaced or is no longer required
hereby.

     (B)  All premiums with respect to the insurance required by Section 5.03
hereof shall be paid by the Borrower, provided, however, that if the premiums
are not timely paid, the Holder may pay such premiums and the Borrower shall pay
immediately upon demand all sums so expended by the Holder, together with
interest, to the extent permitted by law, at the Default Rate from the date on
which such payment was due until the date on which the payment is made.

                                     - 17 -

<PAGE>

     (C)  The Borrower shall give the Holder prompt notice of any loss covered
by the insurance required in this Article, and any Net Proceeds of insurance
claims received by the Borrower shall promptly be paid over to the Holder to be
held by the Holder in accordance with the provisions of Section 5.05 hereof.

     (D)  (1)  The Borrower shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under Section 5.03 unless the Holder is included therein as a named insured with
loss payable to Holder under a standard non-contributory mortgage endorsement of
the above described character. The Borrower shall immediately notify the Holder
whenever any such separate insurance is taken out and shall promptly deliver to
the Holder the policy or policies of such insurance.

          (2)  Each of the policies required pursuant to Section 5.03 hereof
shall waive any right of subrogation against any Person insured under such
policy, and shall waive any right of the insurers to any set-off or counterclaim
or any other deduction, whether by attachment or otherwise, in respect of any
liability of any Person insured under such policy.

SECTION 5.05.  APPLICATION OF NET PROCEEDS OF INSURANCE. The Net Proceeds of the
insurance carried pursuant to the provisions of Section 5.03 hereof shall be
applied as follows: (A) the Net Proceeds of the insurance required by Section
5.03(A) and 5.03(D) hereof shall be paid to the Holder and applied toward
payment of Debt Service Payments payable pursuant to the Note and the payment of
the Borrower's obligations hereunder and (B) the Net Proceeds of the insurance
required by Section 5.03(B), 5.03(C) and 5.03(F) hereof shall be applied toward
extinguishment or satisfaction of the liability with respect to which such
insurance proceeds may be paid.

                                   ARTICLE VI

                         EVENTS OF DEFAULT AND REMEDIES

SECTION 6.01.  EVENTS OF DEFAULT DEFINED. The following shall be "Events of
Default" under the Security Agreement and the terms "Event of Default" or
"default" shall mean, whenever they are used in the Security Agreement, anyone
or more of the following events:

     (A)  If the Borrower fails to comply with any of the covenants, conditions
or agreements made, or to be observed, by it in the Security Agreement, other
than a covenant, condition or agreement specified in subsection (B) below, and
such failure shall have continued for a period of thirty (30) days following
written notice thereof;

     (B)  Notwithstanding the foregoing subsection (A) above, the following
shall be immediate Events of Default for which there shall be no cure period
under this Section:

          (1)  if a default by the Borrower occurs in the due and punctual
payment of any amounts specified to be paid herein or under any of the other
Financing Documents (other than any amounts payable on the Maturity Date or any
earlier date on which the entire Principal

                                     - 18 -

<PAGE>

Balance together with all accrued but unpaid interest and all other sums
evidenced or secured by the Financing Documents shall be due and payable in
full);

          (2)  if the Borrower fails to pay any amount due on the Maturity Date
or any earlier date on which the entire Principal Balance together with all
accrued but unpaid interest and all other sums evidenced or secured by the
Financing Documents shall be due and payable in full;

          (3)  if the Borrower fails to comply with any of the covenants made by
it in the Security Agreement for which a specific time period is set forth;

          (4)  if the Borrower should fail to comply with the provisions of
Section 401 (O) or Section 402 hereof;

          (5)  if an Event of Default or a default beyond any applicable grace
or cure period under any of the other Financing Documents shall occur;

          (6)  if at any time any material representation or warranty made by
the Borrower herein or in any other instrument or document delivered by the
Borrower to the Holder in connection with the Note shall be incorrect in a
material manner;

          (7)  if at any time any insurance policy required to be maintained
pursuant to any of the Financing Documents shall be canceled, terminated or
lapse and shall not have been replaced prior to the effective date of such
cancellation, termination or lapse by a policy covering the same matters as the
lapsed policy, which new policy shall comply with all requirements in the
Financing Documents relating to such type of insurance;

          (8)  if the Borrower shall assign or conveyor attempt to assign or
convey any of its rights, duties or obligations under the Security Agreement or
the other Financing Documents;

          (9)  if the Borrower shall mortgage, grant a security interest with
respect to, encumber or otherwise transfer or convey all or any portion of the
Collateral or any interest therein, except as permitted under the terms of this
Security Agreement or the other Financing Documents;

          (10) if by order of a court of competent jurisdiction a custodian,
trustee, receiver or liquidator of the Collateral or any part thereof, or of the
Borrower, shall be appointed and such order shall not be discharged or dismissed
within sixty (60) days after such appointment;

          (11) (1) the dissolution or winding-up of the Borrower; (2) the filing
by the Borrower of a voluntary petition under Title 11 of the United States Code
or any other federal or state bankruptcy statute; (3) the failure by the
Borrower within ninety (90) days to lift any execution, garnishment or
attachment of such consequence as will impair the Borrower's ability to carry
out its obligations hereunder; (4) the commencement of a case under Title II of
the United States Code against the Borrower as the debtor or commencement under
any other federal or state bankruptcy statute of a case, action or proceeding
against any of the foregoing and
                                     - 19 -

<PAGE>

continuation of such case, action or proceeding without dismissal for a period
of ninety (90) days; (5) the filing, grant or entry of any order for relief by a
court of competent jurisdiction under Title 11 of the United States Code or any
other federal or state bankruptcy statute with respect to the debts of the
Borrower; or (6) in connection with any insolvency or bankruptcy case, action or
proceeding, appointment by final order, judgment or decree of a court of
competent jurisdiction of a receiver or trustee of the whole or a substantial
portion of the Collateral or of the Borrower unless such order, judgment or
decree is vacated, dismissed or dissolved within ninety (90) days of its
issuance;

          (12) if any final judgment or a series of final judgments for the
payment of money in excess of $10,000 in the aggregate not covered by insurance
shall be rendered against the Borrower and the Borrower shall not discharge the
same or cause it to be discharged within sixty (60) days from the entry thereof,
or shall not appeal therefrom or from the order, decree or process upon which or
pursuant to which said judgment was granted, based or entered, and secure a stay
of execution pending such appeal;

          (13) if a notice of federal or state tax lien which affects title to
the Collateral is filed and not discharged or removed from the record within
sixty (60) days of such filing;

          (14) if the Borrower shall default beyond any applicable grace or cure
period under any other agreement or document now or hereafter in effect with the
Holder; or

          (15) if a material adverse change, in the sole judgment of the Holder
reasonably exercised, in the identity, control, condition or operations,
financial or otherwise, of the Borrower shall occur.

SECTION 6.02.  ACCELERATION; ANNULMENT OF ACCELERATION. (A) Upon the occurrence
of an Event of Default hereunder, the Holder may, by notice in writing delivered
to the Borrower declare the whole of the Indebtedness immediately due and
payable, whereupon the same shall become and be immediately due and payable,
anything in the Security Agreement or any other Financing Documents to the
contrary notwithstanding. In such event, there shall be due and payable the
total amount of Indebtedness plus all accrued but unpaid interest thereon and
all interest which will accrue thereon to the date of payment.

     (B)  At any time after the principal of the Note shall have been so
declared to be due and payable and before the entry of final judgment or decree
in any suit, action or proceeding instituted on account of such default, or
before the completion of the enforcement of any other remedy under the Security
Agreement, the Holder may at its option annul such declaration and its
consequences. No such annulment shall extend to or affect any subsequent Event
of Default or impair any right consequent thereon.

SECTION 6.03.  ENFORCEMENT OF REMEDIES. (A) Upon the occurrence and continuance
of any Event of Default, the Holder may proceed forthwith to protect and enforce
its rights under the Security Agreement, and the other Financing Documents by
such suits, actions or proceedings as it shall deem appropriate, including,
without limitation, an action to foreclose the Lien of the Security Agreement,
in which case the Collateral or any interest therein may be sold for cash or
credit in one or more interests and in any order or manner.

                                     - 20 -

<PAGE>

     (B)  The Holder may sue for, enforce payment of and receive any amounts due
or becoming due from the Borrower for principal, premium, if any, interest or
otherwise under any of the provisions of the Security Agreement or the other
Financing Documents, without prejudice to any other right or remedy of the
Holder.

     (C)  Regardless of the happening of an Event of Default, the Ho1der may
institute and maintain such suits and proceedings as it may be advised shall be
necessary or expedient to prevent any impairment of the security under the
Security Agreement by any acts which may be unlawful or in violation of the
Security Agreement, or to preserve or protect the interests of the Holder.

     (D)  The Holder shall have the right to appear in and defend any action or
proceeding brought with respect to the Collateral and to bring any action or
proceeding, in the name and on behalf of the Borrower, which the Holder, in its
discretion, determines should be brought to protect their interests in the
Collateral.

     (E)  Upon the occurrence and continuance of any Event of Default hereunder,
the Borrower, upon demand of the Holder, shall forthwith surrender the
possession of, and it shall be lawful for the Holder, to take possession of, all
or any part of the Collateral, together with the books, papers and accounts of
the Borrower pertaining thereto, and to hold, operate and manage the same, and
from time to time to make all needed repairs and improvements as the Holder
shall deem wise; and the Holder may sell the Collateral or any part thereof, or
lease the Collateral or any part thereof in the name and for the account of the
Borrower, collect, receive and sequester the rents, revenues, earnings, income,
products and profits therefrom, and pay out of the same all proper costs and
expenses of taking, holding leasing, selling and managing the Collateral,
including reimbursement for expenses reasonably and actually incurred by the
Holder and its agents and counsel, and any charges of the Holder hereunder, and
any taxes and other charges prior to the Lien of the Security Agreement which
the Holder may deem it wise to pay, and any expenses of such repairs and
improvements, and apply the remainder of the moneys so received in accordance
with the provisions of Section 5.05 hereof.

     Whenever all that is due under the Note shall have been paid and all
defaults made good, the Holder shall surrender possession to the Borrower; the
same right of entry, however, to exist upon any subsequent Event of Default.

     (F)  The Holder may exercise any and/or all of the rights and remedies
available to a secured party under the New York Uniform Commercial Code in such
order and in such manner as the Holder, in its sole discretion, may determine;
provided, however, that the expenses of retaking, holding, preparing for sale or
the like as provided thereunder shall include reasonable attorneys' fees and
other actual expenses of the Holder and shall be additionally secured by this
Security Agreement.

     (G)  Notwithstanding anything herein contained to the contrary, the
Borrower or anyone claiming through or under either of them (1) will not (a) at
any time insist upon, or plead, or in any manner whatever claim or take any
benefit or advantage of any stay or extension or moratorium law, any exemption
from execution or sale of the Collateral or any part thereof, wherever enacted,
now or at any time hereafter in force, which may affect the covenants and

                                     - 21 -

<PAGE>

terms of performance of the Security Agreement, (b) claim, take or insist upon
any benefit or advantage of any law now or hereafter in force providing for the
valuation or appraisal of the Collateral, or any part thereof, prior to any sale
or sales thereof which may be made pursuant to any provision hereof, or pursuant
to the decree, judgment or order of any court of competent jurisdiction, or (c)
after any such sale or sales, claim or exercise any right under any statute
heretofore or hereafter enacted to redeem the Property so sold or any part
thereof, (2) hereby expressly waive all benefit or advantage of any such law or
laws, and (3) covenant not to hinder, delay or impede the execution of any power
herein granted or delegated to the Holder, but to suffer and permit the
execution of every power as though no such law or laws had been made or enacted.
The Borrower for itself and all who may claim under it, waives, to the extent
that it lawfully may, all right to have the Collateral marshaled upon any
foreclosure hereof.

SECTION 6.04.  APPOINTMENT OF RECEIVERS. Upon the occurrence of an Event of
Default hereunder and upon the filing of a suit or commencement of other
judicial proceedings to enforce the rights of the Holder under the Security
Agreement, the Holder shall be entitled, as a matter of right, without notice
and without regard to the adequacy of any security for the debt secured hereby,
to the appointment of a receiver or receivers of the Collateral and of the
revenues and receipts thereof, pending the conclusion of such proceedings and
any appeal therefrom, with such powers as the court making such appointment
shall confer. The receiver shall be entitled to occupational rent from an
owner/occupant and may upon nonpayment of said rent evict the owner/occupant.

SECTION 6.05.  APPLICATION OF MONEYS. The Net Proceeds received by the Holder or
pursuant to any right given or action taken under the provisions of this Article
VI shall, during the continuance of an Event of Default hereunder, be applied
(A) first, to the payment of the fees, costs and expenses reasonably incurred by
the Holder to operate the Collateral and protect and enforce its rights
hereunder and under the other Financing Documents, including reasonable
attorney's fees; (B) second, to the payment of all installments of interest then
due and payable on the Note; (C) third, to the payment of unpaid principal of
and premium, if any, on the Note, whether or not then due and payable; (D)
fourth, to the payment of any sum or charge (other than principal or interest)
evidenced or secured by the Security Agreement and all interest payable thereon;
(E) fifth, to the payment of interest on principal amounts then due and payable
under any other Financing Document; and (F) sixth, the balance thereof to be
applied in reduction of principal amounts then due and payable under or any
other Financing Document, with any excess remaining to be paid to the Borrower.
The Holder reserves the right to apply such Net Proceeds in any other fashion as
is shall determine.

SECTION 6.06.  REMEDIES CUMULATIVE. No remedy herein conferred upon or reserved
to the Holder is intended to be exclusive of any other available remedy, but
each and every such remedy shall be cumulative and in addition to every other
remedy given under the Security Agreement or under any other Financing Document
now or hereafter existing at law or in equity. No delay or omission to exercise
any right or power accruing upon any default shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right and power
may be exercised from time to time and as often as may be deemed expedient. In
order to entitle the Holder to exercise any remedy reserved to it of them in
this Article VI, it shall not be necessary to give any notice, other than such
notice as may be expressly required in the Security Agreement.

                                     - 22 -

<PAGE>

SECTION 6.07.  TERMINATION OF PROCEEDINGS. In case any proceeding taken by the
Holder on account of any Event of Default shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Holder,
then the Holder and the Borrower shall be restored to their former positions and
rights hereunder, and all rights, remedies and powers of the Holder shall
continue as if no such proceeding had been taken.

SECTION 6.08.  WAIVER AND NON-WAIVER OF EVENT OF DEFAULT. (A) The Holder may, in
its discretion, agree to waive, in writing, any Event of Default hereunder and
its consequences and annul any acceleration in accordance with Section 6.02
hereof. No such waiver shall extend to or affect any other existing or any
subsequent Event of Default.

     (B)  The failure of the Holder to insist upon strict performance of any
term hereof shall not be deemed to be a waiver of any term of the Security
Agreement. The Borrower shall not be relieved of the Borrower's obligations
hereunder by reason of (1) failure of the Holder to comply with any request of
the Borrower to take any action to foreclose the Security Agreement or otherwise
enforce any of the provisions hereof, (2) the release, regardless of
consideration, of the whole or any part of the Collateral, or (3) any agreement
or stipulation by the Holder extending the time of payment or otherwise
modifying or supplementing the terms of the Security Agreement or any of the
other Financing Documents. The Holder may resort for the payment of the
Indebtedness to any other security held by the Holder pursuant to the Financing
Documents in such order and manner as the Holder, in its discretion, may elect.
The Holder may take action to recover the Indebtedness, or any portion thereof,
or to enforce any covenant hereof without prejudice to the right of the Holder
thereafter to foreclose the Security Agreement. The rights of the Holder under
the Security Agreement shall be separate, distinct and cumulative and none shall
be given effect to the exclusion of the others. No act of the Holder shall be
construed as an election to proceed under anyone provision herein to the
exclusion of any other provision. No waiver of any right of the Holder shall be
effective unless it is in a writing signed by an officer of the Holder.

SECTION 6.09.  REPAYMENT AND SECURING OF EXPENSES PAID BY THE HOLDER. In the
event the Holder shall pay any premiums on any policies of insurance required to
be maintained or procured by Section 5.03 hereof, or in the event the Holder
shall expend any funds for the payment of any unpaid taxes or assessments upon
the Collateral, or expend any funds in payment of any unpaid installments under
any applicable agreement for payments in lieu of taxes with any taxing entity or
pay or perform any other obligation of the Borrower under any of the Financing
Documents, then in any such event such payment shall be deemed to be secured by
the Security Agreement and shall be payable to the Holder in the manner provided
and with interest as provided herein, or if not so provided therein, shall be
payable on demand as an additional payment under the other Financing Documents
with interest at the rate of the Default Rate or the minimum amount permitted by
law, whichever is less.

SECTION 6.10.  OTHER ACTIONS BY THE HOLDER. Regardless of the happening of an
Event of Default, the Holder may institute and maintain such suits and
proceedings as it shall deem necessary or expedient to prevent any impairment of
the security under the Security Agreement by any acts which may be unlawful or
in violation of the Security Agreement, or to preserve or protect the interests
of the Holder.

                                     - 23 -

<PAGE>

                                   ARTICLE VII

                                  MISCELLANEOUS

SECTION 7.01.  LIMITATION OF RIGHTS. With the exception of rights herein
expressly conferred, nothing expressed or mentioned in or to be implied from the
Security Agreement or the other Financing Documents is intended or shall be
construed to give to any Person, other than the parties hereto or thereto, and
their successors and assigns, any right, remedy or claim under or with respect
to the Security Agreement or any covenants, conditions and provisions herein
contained. The Security Agreement and all of the covenants, conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
parties hereto and their successors and assigns as herein provided.

SECTION 7.02.  LAWS. If any law or ordinance is enacted or adopted which imposes
a tax, either directly or indirectly, on the Security Agreement, the Borrower
will pay, or cause to be paid, such tax, with interest and penalties thereon, if
any.

SECTION 7.03.  REVENUE STAMPS. If at any time any Governmental Authority shall
require revenue or other stamps to be affixed to the Security Agreement, the
Borrower will pay, or cause to be paid, the same, with interest and penalties
thereon, if any.

SECTION 7.04.  FURTHER ASSURANCE. The Borrower will execute and procure for the
Holder and cause to be done any further conveyances, instruments or acts of
further assurance as the Holder shall reasonably require to perfect the security
of the Holder in the Collateral intended now or hereafter to be covered by the
Security Agreement or otherwise for carrying out the intention of facilitating
the performance of the terms of the Security Agreement.

SECTION 7.05.  SATISFACTION OF SECURITY AGREEMENT. Upon the payment in full of
all of the amounts due under the Note, if the Borrower has performed and
observed all the covenants to be performed and observed hereunder and have
performed all obligations under the other Financing Documents to which they are
parties, the Holder by acceptance of the Security Agreement, agrees to execute
and deliver, any and all instruments necessary and/or appropriate to discharge
the Lien of the Security Agreement of record and to terminate UCC Financing
Statements.

SECTION 7.06.  SEVERABILITY. (A) If any provision of the Security Agreement
shall, for any reason, be held or shall, in fact, be inoperative or
unenforceable in any particular case, such circumstance shall not render the
provision in question inoperative or unenforceable in any other case or
circumstance or render any other provision herein contained inoperative or
unenforceable.

     (B)  The invalidity of anyone or more phrases, sentences, clauses,
paragraphs or sections in the Security Agreement shall not affect the remaining
portions of the Security Agreement or any part thereof.

SECTION 7.07.  NOTICES. An notices, certificates and other communications
hereunder shall be in writing and shall be sufficiently given and shall be
deemed given when (A) sent to the

                                     - 24 -

<PAGE>

applicable address stated below by registered or certified mail, return receipt
requested, postage prepaid, or by such other means (including, without
limitation, overnight delivery) as shall provide the sender with documentary
evidence of such delivery, or (B) delivery is refused by the addressee, as
evidenced by the affidavit of the Person who attempted to effect such delivery
or such other evidence of such attempted delivery. The addresses to which
notices, certificates and other communications hereunder shall be delivered are
as follows:

TO THE BORROWER:

Angiodynamics, Inc.
603 Queensbury Avenue
Queensbury, New York 12804
Fax Number: 518-798-3625
Attention: Eamonn P. Hobbs and Joseph Gerardi

WITH A COPY TO:

Bond Schoeneck & King PLLC
111 Washington Avenue
Albany, New York 12210
Fax Number: (518) 462-7441
Attention: Kevin J. Kelley, Esq.

TO THE HOLDER:

KeyBank National Association
66 South Pearl Street
Albany, New York 12207
Fax Number: (518) 257-8587
Attention: Bryant J. Cassella, Vice President

WITH A COPY TO:

Lemery Greisler LLC
10 Railroad Place
Saratoga Springs, New York 12866
Fax Number: (518) 581-8823
Attention: James A. Canninucci, Esq.

The Borrower and the Holder may, by notice given hereunder, designate any
further or different addresses to which subsequent notices, certificates and
other communications shall be sent.

SECTION 7.08.  COUNTERPARTS. The Security Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.

                                     - 25 -

<PAGE>

SECTION 7.09.  TABLE OF CONTENTS AND SECTION HEADINGS NOT CONTROLLING The table
of contents and the headings of the several articles and sections of the
Security Agreement have been prepared for convenience of reference only and
shall not control, affect the meaning of or be taken as an interpretation of any
provision of the Security Agreement.

SECTION 7.10.  AMENDMENT, ETC. Neither the Security Agreement nor any provisions
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.

SECTION 7.11.  WAIVER OF NOTICE. Whenever in the Security Agreement the giving
of notice by mail or otherwise is required, the giving of such notice may be
waived in writing by the Person or Persons entitled to receive such notice.

SECTION 7.12.  INDEMNIFICATION; SUBROGATION; WAIVER OF OFFSET.

     (A)  The Borrower shall indemnify, defend and hold the Holder harmless
against: (i) any and all claims for brokerage, leasing, finders or similar fees
which may be made relating to the Loan claiming to have dealt with the Borrower,
and (ii) against any and all liability, obligations, losses, damages, penalties,
claims, actions, suits, costs, and expenses (including its reasonable attorneys'
fees, together with reasonable appellate counsel fees, if any) of whatever kind
or nature which may be imposed on or incurred by the Holder at any time pursuant
either to a judgment or decree or other order entered into by a court or
administrative agency or to a settlement reasonably approved by the Borrower,
which judgment, decree, order or settlement relates in any way to or arises out
of the offer, sale or lease of the Collateral and/or the ownership, use, or
operation of any portion of the Collateral.

     (B)  If the Holder is made a party defendant to any litigation concerning
the loan which is the subject of the Note, this Security Agreement, the
Collateral, or any part thereof, or any interest therein, or the occupancy
thereof, then the Borrower shall indemnify, defend and hold the Holder harmless
from all liability by reason of said litigation, including reasonable attorneys'
fees (together with reasonable appellate counsel fees, if any) and expenses
incurred by the Holder in any such litigation, whether or not any such
litigation is prosecuted to judgment. If the Holder commences an action against
the Borrower to enforce any of the terms hereof or to prosecute any breach by
the Borrower of any of the terms hereof or to recover any sum secured hereby,
the Borrower shall pay to the Holder such reasonable attorneys' fees (together
with reasonable appellate counsel fees, if any) and expenses. The right to such
attorneys fees (together with reasonable appellate counsel fees, if any) and
expenses shall be deemed to have accrued on the commencement of such action, and
shall be enforceable whether or not such action is prosecuted to judgment. If an
Event of Default occurs hereunder, the Holder may employ an attorney or
attorneys to protect its rights hereunder, and in the event of such employment
following any such Event of Default, the Borrower shall pay the Holder
reasonable attorneys' fees (together with reasonable appellate counsel fees, if
any) and expenses incurred by the Holder, whether or not an action is actually
commenced against the Borrower by reason of such breach.

                                     - 26 -

<PAGE>

     (C)  A waiver of subrogation shall be obtained by the Borrower from its
insurance carrier and, consequently, the Borrower waives any and all right to
claim or recover against the Holder, its officers, employees, agents and
representatives, for loss of or damage to the Borrower, the Collateral, the
Borrower's property or the property of others under the Borrower's control from
any cause insured against or required to be insured against by the provisions of
this Security Agreement

     (D)  All sums payable by the Borrower hereunder shall be paid without
notice (except as may otherwise be provided herein), demand, counterclaim,
set-off, deduction or defense and without abatement, suspension, deferment,
diminution or reduction, and the obligations and liabilities of the Borrower
hereunder shall in no way be released, discharged or otherwise affected by
reason of: (i) any damage to or destruction of or any condemnation or similar
taking of the Collateral or any part thereof; (ii) any restriction or prevention
of or interference with any use of the Collateral or any part thereof; (iii) any
title defect or encumbrance or any eviction from the Collateral or any part
thereof by title superior or otherwise; (iv) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation, or other like
proceeding relating to the Holder, or any action taken with respect to this
Security Agreement by any trustee or receiver of the Holder, or by any court, in
such proceeding; (v) any claim which the Borrower has, or might have, against
the Holder; (vi) any default or failure on the part of the Holder to perform or
comply with any of the terms hereof or of any other agreement with the Borrower;
or (vii) any other occurrence whatsoever, whether similar or dissimilar to the
foregoing, whether or not the Borrower shall have notice or knowledge of any of
the foregoing. The Borrower waives all rights now or hereafter conferred by
statute or otherwise to any abatement, suspension, deferment, diminution, or
reduction of any sum secured hereby and payable by the Borrower.

SECTION 7.13.  JURY TRIAL WAIVER. THE BORROWER AND THE HOLDER (BY ACCEPTANCE OF
THIS SECURITY AGREEMENT) MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS SECURITY AGREEMENT OR
ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING WITHOUT LIMITATION, ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE HOLDER RELATING TO THE
ADMINISTRATION OF THE LOAN OR ENFORCEMENT OF THIS SECURITY AGREEMENT, AND AGREE
THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS
PROHIBITED BY LAW, THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE
BORROWER CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE HOLDER HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE HOLDER WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER CONSTITUTES A

                                     - 27 -

<PAGE>

MATERIAL INDUCEMENT FOR THE HOLDER TO ACCEPT THE NOTE AND MAKE THE LOAN.

SECTION 7.14.  RIGHT OF SET OFF. The Borrower hereby grants to the Holder, a
continuing lien, security interest and right of setoff as security for all
liabilities and obligations to the Holder, whether now existing or hereafter
arising, upon and against all deposits, credits, collateral and property, now or
hereafter in the possession, custody, safekeeping or control of the Holder or
any entity under the control of Charter One Financial Inc. and its successors
and assigns, or in transit to any of them. At any time, without demand or notice
(any such notice being expressly waived by the Borrower), the Holder may set off
the same or any part thereof and apply the same to any liability or obligation
of the Borrower even though unmatured and regardless of the adequacy of any
other collateral securing the Note. ANY AND ALL RIGHTS TO REQUIRE THE HOLDER TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE NOTE, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

SECTION 7.15.  EXPENSES INCURRED IN CONNECTION WITH ENFORCEMENT. The Borrower
shall pay on demand all expenses of the Holder in connection with the
preparation, administration, default, collection, waiver or amendment of loan
terms, or in connection with the Holder's exercise, preservation or enforcement
of any of its rights, remedies or options hereunder, including, without
limitation, fees of outside legal counselor the allocated costs of in-house
legal counsel, accounting, consulting, brokerage or other similar professional
fees or expenses, and any fees or expenses associated with travel or other costs
relating to any appraisals or examinations conducted in connection with the loan
or any collateral therefor, and the amount of all such expenses shall, until
paid, bear interest at the rate applicable to principal hereunder (including any
default rate) and be an obligation secured by any collateral.

SECTION 7.16.  CHOICE OF LAW. This Security Agreement and the rights and
obligations of the parties hereunder shall be construed and interpreted in
accordance with the laws of the State of New York (the "Governing State")
(excluding the laws applicable to conflicts or choice of law).

THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS SECURITY AGREEMENT
MAY BE BROUGHT IN THE COURTS OF THE GOVERNING STATE OR ANY FEDERAL COURT SITTING
THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE
OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS
SET FORTH HEREIN. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT
IS BROUGHT IN AN INCONVENIENT FORUM.

SECTION 7.17.  MERGER. This Security Agreement is intended by the parties as the
final, complete and exclusive statement of the transactions evidenced by this
Security Agreement. All prior contemporaneous promises, agreements and
understandings, whether oral or written, are deemed to be superceded by this
Security Agreement, and no party is relying on any promise,

                                     - 28 -

<PAGE>

agreement or understanding not set forth in this Security Agreement. This
Security Agreement may not be amended or modified except by a written instrument
describing such amendment or modification executed by the Borrower and the
Holder.

IN WITNESS WHEREOF, the parties hereto have duly executed this Security
Agreement as of the day and year first above written.

                                        ANGIODYNAMICS, INC.


                                        By:  /s/ Eamonn P. Hobbs
                                             -----------------------------------
                                             Eamonn P. Hobbs, President and
                                             Chief Executive Officer

                                        KEYBANK NATIONAL ASSOCIATION


                                        By:  /s/ Bryant J. Cassela, V.P.
                                             -----------------------------------
                                             Bryant J. Cassela, Vice President

STATE OF NEW YORK  )

                   ) ss.:

COUNTY OF ALBANY   )

On the 28/th/ day of August in the year 2002 before me, the undersigned, a
Notary Public in and for said State, personally appeared EAMONN P. HOBBS,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.


                                            /s/ Carolyn A. Wildman
                                            ------------------------------------
                                            Notary Public

                                     - 29 -

<PAGE>

STATE OF NEW YORK  )

                   ) ss.:

COUNTY OF ALBANY   )

On the 28/th/ day of August in the year 2002 before me, the undersigned, a
Notary Public in and for said State, personally appeared BRYANT J. CASSELLA,
personally known t() me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.


                                            /s/ Carolyn A. Wildman
                                            ------------------------------------
                                            Notary Public


[NOTARY STAMP]

                                     - 30 -