PROMISSORY NOTE


Principal Loan Date Maturity Loan No Call Collateral Account Officer $600,000.00
06-11-1998 06-29-2002 700001491

References  in the shaded  area are for  Lender's  use only and do not limit the
applicability of this document to any particular loan or item.


Borrower:  PHOTOMATRIX,  INC.           Lender:  Imperial Bank
           1958 KELLOGG AVENUE                   San Diego Regional Office
           CARLSBAD, CA 92008                    701 B Street, Suite 600
                            San Diego, CA 92112-4168



Principal Amount: $600,000.00                              Initial Rate: 9.250%
Date of Note: June 11, 1998

PROMISE TO PAY. PHOTOMATRIX,  INC. ("Borrower") promises to pay to Imperial Bank
("Lender"),  or order,  in lawful  money of the United  States of  America,  the
principal  amount  of Six  Hundred  Thousand  & 00./100  Dollars  ($600,000,00),
together with interest on the unpaid principal balance from June 11, 1998, until
paid in full.

PAYMENT.  Subject to any payment  changes  resulting  from changes in the Index,
Borrower will pay this loan in 47 principal  payments of $12,500.00 each and one
final principal and interest  payment of $12,599.57.  borrower's first principal
payment is due July 29, 1998, and all subsequent  principal  payments are due on
the same day of each month after that.  In addition,  Borrower  will pay regular
monthly  payments of all accrued  unpaid  interest due as of each payment  date.
Borrower's  first  interest  payment is due July 29,  1998,  and all  subsequent
interest  payments are due on the same day of each month after that.  Borrower's
final payment due June 29, 2002, will be for all principal and accrued  interest
not yet paid.  The annual  interest  rate for this Note is computed on a 365/360
basis; that is, by applying the ratio of the annual interest rate over a year of
360 days,  multiplied by the outstanding  principal  balance,  multiplied by the
actual number of days the principal  balance is  outstanding.  Borrower will pay
Lender at  Lender's  address  shown  above or at such other  place as Lender may
designate in writing.  Unless  otherwise  agreed or required by applicable  law,
payments  will be  applied  first to any  unpaid  collection  costs and any late
charges, then to any unpaid interest, and any remaining amount to principal.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is the Imperial  Bank Prime Rate
(the "Index").  The Prime Rate is the rate announced by Lender as its Prime Rate
of interest from time to time.  Lender will tell Borrower the current Index rate
upon Borrower's request.  Borrower  understands that Lender may make loans based
on other rates as well.  The interest rate change will not occur more often than
each day. The Index currently is 8.500%.  The interest rate to be applied to the
unpaid  principal  balance  of this Note  will be at a rate of 0.750  percentage
points over the Index,  resulting in an initial rate of 9.250%. NOTICE: Under no
circumstances  will the interest rate on this Note be more than the maximum rate
allowed by applicable law.

                                       1
<PAGE>

PREPAYMENT;  MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Note,  Borrower  understands  that Lender is entitled to a minimum interest
charge of $250.000. Other than Borrower's obligation to pay any minimum interest
charge,  Borrower  may pay  without  penalty all or a portion of the amount owed
earlier than it is due. Early  payments will not,  unless agreed to by Lender in
writing,  relieve Borrower of Borrower's obligation to continue to make payments
under the payment schedule.  Rather,  they will reduce the principal balance due
and may result in Borrower making fewer payments.

LATE  CHARGE.  If a payment  is 10 days or more  late,  Borrower  will be charge
5.000% of the unpaid portion of the regularly scheduled payment.

DEFAULT.  Borrower will in default if any of the following happens: (a) Borrower
fails to make any payment when due. (b) Borrower breaks any promise Borrower has
made to Lender,  or  Borrower  fails to comply  with or to perform  when due any
other term,  obligation,  covenant,  or condition  contained in this Note or any
agreement  related to this Note, or in any other  agreement or loan Borrower has
with Lender.  (c) Any representation or statement made or furnished to Lender by
Borrower or on Borrower's  behalf is false or misleading in any material respect
either now or at the time made or furnished.  (d) Borrower becomes insolvent,  a
receiver is appointed for any part of  Borrower's  property,  Borrower  makes an
assignment for the benefit of creditors,  or any proceeding is commenced  either
by Borrower or against Borrower under any bankruptcy or insolvency laws. (e) Any
creditor  tries to take any of  Borrower's  property on or in which Lender has a
lien or security  interest.  This  includes a  garishness  of any of  Borrower's
accounts  with  Lender.  (f)  Any  guarantor  dies  or any of the  other  events
described in this default  section  occurs with respect to any guarantor of this
Note. (g) A material adverse change occurs in Borrower's financial condition, or
Lender  believes the prospect of payment or performance of the  indebtedness  is
impaired. (h) Lender in good faith deems itself insecure.

If any default,  other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same  provision  of this Note  within
the preceding twelve (12) months,  it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender demanding
cure of such default:  (a) cures the default within ten (10) days; or (b) if the
cure requires more than ten (10) days,  immediately initiates steps which Lender
deems in  Lender's  sole  discretion  to be  sufficient  to cure the default and
thereafter continues and completes all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical.

LENDER'S  RIGHTS.  Upon default,  Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest  immediately  due,  without
notice,  and then Borrower will pay that amount.  Upon Borrower's failure to pay
all amounts declared due pursuant to this section, including failure to pay upon
final maturity,  Lender, at its option,  may also, if permitted under applicable
law, do one or both of the following: (a) increase the variable interest rate on
this Note to 5.750  percentage  points  over the  Index,  and (b) add any unpaid
accrued  interest to principal and such sum will bear interest  therefrom  until
paid at the rate provided in this Note  (including any increased  rate).  Lender
may hire or pay someone else to help collect this Note if Borrower doe snot pay.
Borrower also will pay Lender that amount. This includes,  subject to any limits
under  applicable  law,  Lender's  attorneys'  fees and Lender's  legal expenses
whether or not there is a lawsuit,  including attorneys' fees and legal expenses
of bankruptcy  proceedings  (including efforts to modify or vacate any automatic
say or  injunction),  appeals,  and  any  anticipated  post-judgment  collection
services.  Borrower also will pay any court costs, in addition to all other sums
provided by law.  This Note has been  delivered to Lender and accepted by Lender
int eh State of California. If there is a lawsuit, Borrower agrees upon Lender's
request to submit to the  jurisdiction of the courts of Los Angeles county,  the
State of  California.  Lender and  Borrower  hereby waive the rights to any jury
trial in any action,  proceeding,  or  counterclaim  brought by either Lender or
Borrower  against  the  other.  (Initial  Here  _________).  This Note  shall be
governed  by  and  construed  in  accordance  with  the  laws  of the  State  of
California.

                                       2
<PAGE>

DISHONORED  ITEM FEE.  Borrower  will pay a fee to Lender of $25.00 if  Borrower
makes a payment on Borrower's  loan and the check or  preauthorized  charge with
which Borrower pays is later dishonored.

RIGHT OF SETOFF.  Borrower grants to Lender a contractual  security interest in,
and hereby  assigns,  conveys,  delivers,  pledges,  and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's  accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts  held jointly with someone else and all accounts  Borrower may open
in the  future,  excluding  however  all IRA and Keogh  accounts,  and all trust
accounts for which the grant of a security  interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on this Note against any and all such accounts.

REFERENCE PROVISION.

1.  Other  than (i)  non-judicial  foreclosure  and all  matters  in  connection
therewith regarding security interests in real or personal property; or (ii) the
appointment of a receiver,  or the exercise of other  provisional  remedies (any
and all of which may be initiated pursuant to applicable law), each controversy,
dispute or claim between the parties arising out of or relating to this document
("Agreement"),  which  controversy,  dispute or claim is not  settled in writing
within  thirty (30) days after the "Claim Date"  (defined as the date on which a
party subject to the Agreement  gives written notice to all other parties that a
controversy, dispute or claim exists), will be settled by a reference proceeding
in California in  accordance  with the  provisions of Section 638 et seq. of the
California Code of Civil Procedure,  or their successor  section ("CCP"),  which
shall  constitute the exclusive  remedy for the  settlement of any  controversy,
dispute or claim concerning this Agreement,  including whether such controversy,
dispute or claim is subject to the reference  proceeding and except as set forth
above, the parties waive ?their rights to initiate any legal proceedings against
each other in any court or  jurisdiction  other than the  Superior  Court in the
County where the Real Property,  if any, is located or Los Angels County if none
(the  "Court").  The referee shall be a retired  Judge of the Court  selected by
mutual agreement of the parties,  and if they cannot so agree within  forty-five
(45) days after the Claim Date,  the referee  shall be promptly  selected by the
Presiding  Judge of the  Court (or his  representative).  The  referee  shall be
appointed  to sit as a temporary  judge,  with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California  Rules of Court (or
any subsequently  enacted Rule). Each party shall have one peremptory  challenge
pursuant to CCP 170.6.  The referee shall (a) be requested to set the matter for
hearing  within  sixty  (60) days  after the Claim  Date and (b) try any and all
issues of law or fact and report a statement of decision upon them, if possible,
within ninety (90) days of the Claim Date. Any decision  rendered by the referee
will be final,  binding and conclusive and judgment shall be entered pursuant to
CCP 644 in any court in the State of California having  jurisdiction.  Any party
may  apply  for a  reference  proceeding  at any time  after  thirty  (30)  days
following notice to any other party of the nature of the controversy, dispute or
claim, by filing a petition for a hearing and/or trial. All discovery  permitted
by this Agreement  shall be completed no later than fifteen (15) days before the
first  hearing  date  established  by the  referee.  The referee may extend such
period in the event of a party's refusal to provide requested  discovery for any
reason whatsoever,  including,  without  limitation,  legal objections raised to
such  discovery  or  unavailability  of a witness due to absence or illness.  No
party shall be entitled to "priority" in conducting  discovery.  Depositions may
be taken by either  party upon seven (7) days  written  notice,  and request for
production or inspection of documents shall be responded to within ten (10) days
after service.  All disputes  relating to discovery  which cannot be resolved by
the parties shall be submitted to the referee whose  decision shall be final and
binding upon the parties. Pending appointment of the referee as provided herein,
the Superior Court is empowered to issue temporary and/or provisional  remedies,
as appropriate.

                                       3
<PAGE>

2. Except as expressly set forth in this Agreement,  the referee shall determine
the manner in which the reference proceeding is conducted including the time and
place of all  hearings,  the order of  presentation  of  evidence  and all other
questions that arise with respect to the course of the reference proceeding. all
proceedings and hearings  conducted before the referee,  except for trial, shall
be conducted without a court reporter, except that when any party so requests, a
court  reporter will be used at any hearing  conducted  before the referee.  The
party making such a request shall have the  obligation to arrange for an pay for
the court reporter.  The costs of the court reporter at the trial shall be borne
equally by the parties.

3. The referee  shall be required to  determine  all issues in  accordance  with
existing case law and the statutory laws of the State of  California.  The rules
of evidence  applicable to proceedings at law in the State of California will be
applicable to the reference proceeding.  The referee shall be empowered to enter
equitable as well as legal relief,  to provide all temporary and/or  provisional
remedies  and to enter  equitable  orders that will be binding upon the parties.
The  referee  shall  issue a  single  judgment  at the  close  of the  reference
proceedings which shall dispose of all of the claims of the parties that are the
subject of the  reference.  The parties  hereto  expressly  reserve the right to
contest or appeal from the final judgment or any appealable  order or appealable
judgment entered by the referee.  The parties hereto expressly reserve the right
to findings of fact,  conclusions of law, a written  statement of decision,  and
the right to move for anew trial or a different  judgment,  which new trial,  if
granted, is also to be a reference proceeding under this provisions.

4. In the event that the enabling  legislation which provides for appointment of
a referee is repealed (and no successor statute is enacted), any dispute between
the parties that would otherwise be determined by the reference procedure herein
described will be resolved and determined by arbitration.  The arbitration  will
be conducted by a retired judge of the Court,  in accordance with the California
Arbitration  Act,  1280 through  1294.2 of the CCP as amended from time to time.
The limitations with respect to discovery as set forth  hereinabove  shall apply
to any such arbitration proceeding.

GENERAL  PROVISIONS.  Lender may delay or forgo  enforcing  any of its rights or
remedies under this Note without losing them.  Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive any
applicable statute of limitations,  presentment, demand for payment, protest and
notice  of  dishonor.  Upon any  change in the terms of this  Note,  and  unless
otherwise  expressly stated in writing, no party who signs this Note, whether as
maker,  guarantor,  accommodation  maker or  endorser,  shall be  released  from
liability.  All such parties  agree that Lender may renew or extend  (repeatedly
and for any length of time) this loan,  or  release  any party or  guarantor  or
collateral;  or  impair,  fail to  realize  upon or  perfect  Lender's  security
interest in the collateral; and take any other action deemed necessary by Lender
without the  consent of or notice to anyone.  All such  parties  also agree that
Lender may modify this loan  without  the  consent of or notice to anyone  other
than the party with whom the modification is made.

PRIOR TO SIGNING THIS NOTE,  BORROWER READ AND  UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE,  INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.  BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.

BORROWER:

PHOTOMATRIX, INC.


By:_______________________________________________
   ROY L. GAYHART, CHIEF FINANCIAL OFFICER/SECRETARY


                                       4
<PAGE>


                         CORPORATE RESOLUTION TO BORROW


Principal Loan Date Maturity Loan No Call Collateral Account Officer $600,000.00
06-11-1998 06-29-2002 700001491

References  in the shaded  area are for  Lender's  use only and do not limit the
applicability of this document to any particular loan or item.

Borrower:  PHOTOMATRIX, INC.           Lender:  Imperial Bank
           1958 KELLOGG AVENUE                  San Diego Regional Office
           CARLSBAD, CA 92008                   701 B Street, Suite 600
                            San Diego, CA 92112-4168


I, the undersigned  Secretary of PHOTOMATRIX,  INC. (the "Corporation"),  HEREBY
CERTIFY that the  Corporation  is organized and existing  under and by virtue of
the laws of the  State of  California  as a  corporation  for  profit,  with its
principal  office  at 1958  KELLOGG  AVENUE,  CARLSBAD,  CA  92008,  and is duly
authorized to transact business in the State of California.

I FURTHER  CERTIFY that at a meeting of the Directors of the  Corporation,  duly
called and held on April 20, 1978, at which a quorum was present and voting,  or
by other duly authorized  corporate  action in lieu of a meeting,  the following
resolutions were adopted:

BE IT RESOLVED, that any one (1) of the following named officers,  employees, or
agents of this Corporation, whose actual signatures are shown below:


NAMES               POSITIONS                          ACTUAL SIGNATURES
-----               ---------                          -----------------
ROY L. GAYHART      CHIEF FINANCIAL OFFICER/SECRETARY  x_______________________
PATRICK W. MOORE    CHIEF EXECUTIVE OFFICER            x_______________________
SUREN G. DUTIA      PRESIDENT                          x_______________________
WILLIAM L. GRIVAS   CHAIRMAN OF THE BOARD              x_______________________

acting for and on behalf of the Corporation and as its act and deed be, and they
hereby are, authorized and empowered:

       Borrower   Money.  To  borrow  from  time  to  time  from  Imperial  Bank
       ("Lender"),  on such terms as may be agreed upon between the  Corporation
       and  Lender,  such sum or sums of money as in their  judgment  should  be
       borrowed;  however,  not  exceeding  at any one  time the  amount  of Two
       Million  One  Hundred  Thousand  &  00/100  Dollars  ($2,100,000.00),  in
       addition to such sum or sums of money as may be currently borrowed by the
       Corporation from Lender.

       Execute Notes.  To execute and deliver to Lender the  promissory  note or
       notes, or other evidence of credit accommodations of the Corporation,  on
       Lender's  forms,  at such rates of  interest  and on such terms as may be
       agreed upon, evidencing the sums of money so borrowed or any indebtedness
       of the  Corporation to Lender,  and also to execute and deliver to Lender
       one  or   more   renewals,   extensions,   modifications,   refinancings,
       consolidations,  or  substitutions  for  one or more  of the  notes,  any
       portion of the notes, or any other evidence of credit accommodations.

                                       1
<PAGE>

       Grant Security. To mortgage, pledge, transfer,  endorse,  hypothecate, or
       otherwise  encumber and deliver to Lender, as security for the payment of
       any loans or credit  accommodations so obtained,  any promissory notes so
       executed  (including any amendments to or  modifications,  renewals,  and
       extensions  of  such   promissory   notes),   or  any  other  or  further
       indebtedness of the Corporation to Lender at any time owing,  however the
       same may be  evidenced,  any property  now or hereafter  belonging to the
       Corporation  or in which the  Corporation  now or  hereafter  may have an
       interest, including without limitation all real property and all personal
       property (tangible or intangible) of the Corporation.

       Such  property  may  be  mortgaged,   pledged,   transferred,   endorsed,
       hypothecated,  or  encumbered at the time such loans are obtained or such
       indebtedness  is  incurred,  or at any other  time or  times,  and may be
       either in addition  to or in lieu of any  property  therefore  mortgaged,
       pledged, transferred, endorsed, hypothecated, or encumbered.

       Execute Security Documents. To execute and deliver to Lender the forms of
       mortgage, deed, or trust, pledge agreement,  hypothecation agreement, and
       other security agreements and financing  statements which may be required
       by Lender,  and which shall evidence the terms and  conditions  under and
       pursuant to which such liens and encumbrances, or any of them, are given;
       and also to execute and deliver to Lender any other written  instruments,
       any chattel paper, or any other collateral,  of any kind or nature, which
       Lender,  and which  shall  evidence  the terms and  conditions  under and
       pursuant to which such liens and encumbrances, or any of them, are given;
       and also to execute and deliver to Lender any other written  instruments,
       any chattel paper, or any other collateral,  of any kind or nature, which
       Lender may deem  necessary or proper in connection  with or pertaining to
       the giving of the liens and encumbrances.

       Negotiate Items. To draw,  endorse,  and discount with Lender all drafts,
       trade  acceptances,  promissory notes, or other evidences of indebtedness
       payment to or belonging to the  Corporation in which the  Corporation may
       have an  interest,  and either to  receive  cash for the same or to cause
       such  proceeds  to be credited  to the  account of the  Corporation  with
       Lender,  or to cause  such  other  disposition  of the  proceeds  derived
       therefrom as they may deem advisable.

       Further Acts. In the case of lines of credit, to designate  additional or
       alternate individuals as being authorized to request advances thereunder,
       and in all cases,  to do and perform  such other acts and things,  to pay
       any and all fees  and  costs,  and to  execute  and  deliver  such  other
       documents and  agreements,  including  agreements  waiving the right to a
       trial by jury, as they may in their discretion deem reasonably  necessary
       or  proper  in  order  to  carry  into  effect  the  provisions  of these
       Resolutions.

BE IT  FURTHER  RESOLVED,  that any and all acts  authorized  pursuant  to these
Resolutions and performed  prior to the passage of these  Resolutions are hereby
ratified and  approved,  that these  Resolutions  shall remain in full force and
effect and Lender may rely on these  Resolutions  until written  notice of their
evocation  shall have been delivered to and received by Lender.  Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.

                                       2
<PAGE>

BE IT FURTHER  RESOLVED,  that the Corporation  will notify Lender in writing at
Lender's  address  shown above (or such other  addresses as Lender may designate
from time to time) prior to any (a) change in the name of the  Corporation,  (b)
change in the assumed  business  name(s) of the  Corporation,  (c) change in the
management  of the  Corporation,  (d) change in the  authorized  signer(s),  (e)
conversion of the Corporation to a new or different type of business entity,  or
(f) change in any other aspect of the  Corporation  that  directly or indirectly
relates to any agreements  between the Corporation and Lender.  No change in the
name of the Corporation will take effect until after Lender has been notified.

SIGNATURE  AUTHORIZATION.   An  exhibit,  listed  "SIGNATURE  AUTHORIZATION"  is
attached  to  this  Resolution  and by  this  reference  is  made a part of this
Resolution  just as if all the  provisions,  terms and conditions of the Exhibit
had been fully set forth in this Resolution.

I FURTHER CERTIFY that the officers,  employees, and agents named above are duly
elected,  appointed, or employed by or for the Corporation,  as the case may be,
and occupy the positions set opposite their respective names; that the foregoing
Resolutions  now stand of record on the books of the  Corporation;  and that the
Resolutions  are in full force and effect and have not been  modified or revoked
in any manner whatsoever.  The Corporation has no corporate seal, and therefore,
no seal is affixed to this certificate.

IN TESTIMONY  WHEREOF,  I have  hereunto set my hand on June 11, 1998 and attest
that the  signatures  set  opposite  the names  listed  above are their  genuine
signatures.

                                   CERTIFIED TO AND ATTESTED BY:

                                   X__________________________________________

                                   X__________________________________________

Note:  In case the  Secretary or other  certifying  officer id designated by the
foregoing  resolutions as one of the signing  officers,  it is advisable to have
this certificate signed by a second Officer or Director of the Corporation.


                                       3
<PAGE>

                          COMMERCIAL SECURITY AGREEMENT


Principal Loan Date Maturity Loan No Call Collateral Account Officer $600,000.00
06-11-1998 06-29-2002 700001491

References  in the shaded  area are for  Lender's  use only and do not limit the
applicability of this document to any particular loan or item.

Borrower:   PHOTOMATRIX, INC.           Lender:  Imperial Bank
            1958 KELLOGG AVENUE                  San Diego Regional Office
            CARLSBAD, CA 92008                   701 B Street, Suite 600
                            San Diego, CA 92112-4168


THIS COMMERCIAL  SECURITY  AGREEMENT is entered into between  PHOTOMATRIX,  INC.
(referred  to below as  "Grantor");  and  Imperial  Bank  (referred  to below as
"Lender").  For  valuable  consideration,  Grantor  grants to Lender a  security
interest in the  Collateral  to secure the  indebtedness  and agrees that Lender
shall have the rights stated in this Agreement  with respect to the  Collateral,
in addition to all other rights which Lender may have by law.

DEFINITIONS.  The following words shall have the following meanings when used in
this  Agreement.  Terms not otherwise  defined in this Agreement  shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar  amounts  shall mean amounts in lawful  money of the United  States of
America.

         Agreement.  The word  "Agreement'  means that this Commercial  Security
         Agreement,  as this  Commercial  Security  Agreement  may be amended or
         modified  from time to time,  together  with all exhibits and schedules
         attached to this Commercial Security Agreement from time to time.

         Collateral.   The  word  "Collateral"  means  the  following  described
         property of Grantor,  whether now owned or hereafter acquired,  whether
         now existing or hereafter arising, and wherever located:

            All  personal  property,  whether  presently  existing or  hereafter
            created or  acquired,  including  but not limited to: All  accounts,
            chattel, paper, documents,  instruments, money, deposit accounts and
            general  intangibles  including  returns,  repossessions,  books and
            records relating  thereto,  and equipment  containing said books and
            record  relating  thereto,  and equipment  containing said books and
            records. All investment property including securities and securities
            entitlements.  All goods  including  equipment  and  inventory.  All
            proceeds  including,  without limitation,  insurance  proceeds.  All
            guarantees and other security therefor.

         In addition, the word "Collateral" includes all the following,  whether
         now owned or  hereafter  acquired,  whether now  existing or  hereafter
         arising, and wherever located:

            (a) All attachments,  accessions accessories, tools, pats, supplies,
            increases,   and   additions   to  and  all   replacements   of  and
            substitutions for any property described above.

            (b) All  products  and produce of any of the  property  described in
            this Collateral section.


                                       1
<PAGE>

            (c) All accounts, general intangibles,  instruments,  rents, monies,
            payments,  and all other rights,  arising out of the sale, lease, or
            other  disposition  of  any  of  the  property   described  in  this
            Collateral section.

            (d) All  proceeds  (including  insurance  proceeds)  from the  sale,
            destruction,  loss,  or  other  disposition  of any of the  property
            described in this Collateral section.

            (e) All records and data  relating to any of the property  described
            in this  Collateral  section,  whether  in the  form  of a  writing,
            photograph,  microfilm,  microfiche,  or electronic media,  together
            with all of  Grantor's  right,  title,  and  interest  in and to all
            computer software required to utilize, create, maintain, and process
            any such records or data on electronic media.

         Event of Default. The words "Event of Default" mean and include without
         limitation  any of the Events of Default set forth below in the section
         titled "Event of Default."

         Grantor. The word "Grantor" means PHOTOMATRIX, INC., its successors and
         assigns.

         Guarantor.  The word "Guarantor" means and includes without  limitation
         each and all of the guarantors,  sureties, and accommodation parties in
         connection with the Indebtedness.

         Indebtedness.  The word "Indebtedness" means the indebtedness evidenced
         by the Note,  including all  principal and interest,  together with all
         other  indebtedness  and  costs  and  expenses  for  which  Grantor  is
         responsible under this Agreement or under any of the Related Documents.
         In addition,  the word  "Indebtedness"  includes all other obligations,
         debts and liabilities,  plus interest thereon, of Grantor, or anyone or
         more of them,  to  Lender,  as well as all  claims  by  Lender  against
         Grantor,  or any one or more of them,  whether  existing  now or later;
         whether they are voluntary or  involuntary,  due or not due,  direct or
         indirect, absolute or contingent,  liquidated or unliquidated;  whether
         Grantor may be liable  individually  or jointly  with  others;  whether
         Grantor  may be liable as  guarantor,  surely,  accommodation  party or
         otherwise;  whether recovery upon such indebtedness may be or hereafter
         may become  barred by any  statute of  limitations;  and  whether  such
         indebtedness may be or hereafter may become otherwise unenforceable.
         (Initial Here _________)

         Lender.  The word "Lender"  means  Imperial  Bank,  its  successors and
         assigns.

         Note. The word "Note" means the note or credit agreement dated June 11,
         1998, in the principal amount of $600,000.00 from PHOTOMATRIX,  INC. to
         Lender, together with all renewals of, extensions of, modifications of,
         refinancing of,  consolidations  of and  substitutions  for the note or
         credit agreement.

         Related  Documents.  The words  "Related  Documents"  mean and  include
         without  limitation  all  promissory  notes,  credit  agreements,  loan
         agreements,  environmental agreements, guaranties, security agreements,
         mortgages,  deeds of trust, and all other  instruments,  agreements and
         documents,  whether nor or hereafter  existing,  executed in connection
         with the Indebtedness.

                                       2
<PAGE>

RIGHT OF SETOFF.  Grantor hereby grants Lender a contractual  security  interest
in, and  hereby  assigns,  conveys,  delivers,  pledges,  and  transfers  all of
Grantor's right,  title and interest in and to,  Grantor's  accounts with Lender
(whether checking, savings, or some other account),  including all accounts held
jointly  with  someone  else and all  accounts  Grantor  may open in the future,
excluding  however all IRA and Keogh accounts,  and all trust accounts for which
the grant of a security interest would be prohibited by law. Grantor  authorizes
Lender,  to the extent  permitted  by  applicable  law,  to charge or setoff all
Indebtedness against any and all such accounts.

OBLIGATIONS OF GRANTOR.  Grantor warrants and covenants to Lender as follows:

         Organization. Grantor is a corporation which is duly organized, validly
         existing,  and  in  good  standing  under  the  laws  of the  State  of
         California.

         Authorization.   The  execution,  delivery,  and  performance  of  this
         Agreement by Grantor have been duly authorized by all necessary  action
         by Grantor  and do not  conflict  with,  result in a  violation  of, or
         constitute  a  default  under  (a) any  provision  of its  articles  of
         incorporation  or  organization,  or bylaws,  or any agreement or other
         instrument   binding  upon   Grantor  or  (b)  any  law,   governmental
         regulation, court decree, or order applicable to Grantor.

         Perfection  of  Security  Interest.  Grantor  agrees  to  execute  such
         financing  statements  and to take whatever other actions are requested
         by Lender to perfect and  continue  Lender's  security  interest in the
         Collateral.  Upon request of Lender, Grantor will deliver to Lender any
         and all of the documents evidencing or constituting the Collateral, and
         Grantor will note  Lender's  Interest upon any and all chattel paper if
         no  delivered  to Lender  for  possession  by  Lender.  Grantor  hereby
         appoints Lender as its Irrevocable  attorney-in-fact for the purpose of
         executing  any  documents  necessary  to  perfect  or to  continue  the
         security  interest  granted in this Agreement.  Lender may at any time,
         and  without  further   authorization  from  Grantor,  file  a  carbon,
         photographic  or other  reproduction  of any financing  statement or of
         this Agreement for use as a financing statement. Grantor will reimburse
         Lender for all expenses for the perfection and the  continuation of the
         perfection of Lender's  security  interest int he  Collateral.  Grantor
         promptly  will  notify  Lender  before  any  change in  Grantor's  name
         including any change to the assumed business names of Grantor.  This is
         a continuing Security Agreement and will continue in effect even though
         all or any part of the  Indebtedness is paid in full or even though for
         a period of time Grantor may not be indebted to Lender.

         No Violation.  The execution  and delivery of this  Agreement  will not
         violate any law or agreement governing Grantor or to which Grantor is a
         party, and its certificate of articles of  incorporation  any bylaws do
         not prohibit any term or condition of this Agreement.

         Enforceability of Collateral.  To the extent the Collateral consists of
         accounts,  chattel  paper,  or general  intangibles,  the Collateral is
         enforceable in accordance with its terms, is genuine, and complies with
         applicable laws concerning form,  content and manner of preparation and
         execution,  and all persons appearing to be obligated on the Collateral
         have  authority  and capacity to contract and are in fact  obligated as
         they appear to be on the Collateral.

                                       3
<PAGE>

         Location  of the  Collateral.  Grantor,  upon  request of Lender,  will
         deliver to Lender in form  satisfactory  to Lender a  schedule  of real
         properties and Collateral  locations relating to Grantor's  operations,
         including without limitation the following: (a) all real property owned
         or being  purchased by Grantor;  (b) all real property  being rented or
         leased by Grantor; (c) all storage facilities owned, rented, leased, or
         being used by Grantor; and (d) all other properties where Collateral is
         or may be  located.  Except in the  ordinary  course  of its  business,
         Grantor  shall not remove the  Collateral  from its existing  locations
         without the prior written consent of Lender.

         Removal of  Collateral.  Grantor shall keep the  Collateral  (or to the
         extent the Collateral consists of intangible property such as accounts,
         the records  concerning  the  Collateral)  at Grantor's  address  shown
         above, or at such other  locations as are acceptable to Lender.  Except
         in the  ordinary  course  of  its  business,  including  the  sales  of
         inventory,  Grantor shall not remove the  Collateral  from its existing
         locations  without the prior written  consent of Lender.  To the extent
         that the  Collateral  consists of vehicles,  or other titled  property,
         Grantor  shall  not take or  permit  any  action  which  would  require
         application  for  certificates  of title for the  vehicles  outside the
         State of California , without the prior written consent of Lender.

         Transactions  Involving  Collateral.   Except  for  inventory  sold  or
         accounts  collected  in the  ordinary  course  of  Grantor's  business,
         Grantor shall not sell, offer to sell, or otherwise transfer or dispose
         of  the  Collateral.  While  Grantor  is  not  in  default  under  this
         Agreement,  Grantor may sell inventory, but only in the ordinary course
         of its  business  and  only to  buyers  who  qualify  as a Buyer in the
         ordinary course of business. A sale in the ordinary course of Grantor's
         business  does not include a transfer in partial or total  satisfaction
         of a debt  or any  bulk  sale.  Grantor  shall  not  pledge,  mortgage,
         encumber or otherwise  permit the Collateral to be subject to any lien,
         security  interest,  encumbrance,  or charge,  other than the  security
         interest  provided  for in this  Agreement,  without the prior  written
         consent of Lender.  This includes security  interests even if junior in
         right to the security  interests  granted under this Agreement.  Unless
         waived by Lender,  all proceeds from any  disposition of the Collateral
         (for  whatever  reason) shall be held in trust fro Lender and shall not
         be commingled with any other funds; provided, however, this requirement
         shall  not   constitute   consent  by  Lender  to  any  sale  or  other
         disposition.  Upon receipt,  Grantor shall immediately deliver any such
         proceeds to Lender.

         Title. Grantor represents and warrants to Lender that it holds good and
         marketable  title to the  Collateral,  free and  clear of all liens and
         encumbrances  except  for  the  lien of this  Agreement.  No  financing
         statement  covering  any of the  Collateral  is on file  in any  public
         office other than those which reflect the security  interest created by
         this Agreement or to which Lender has specifically  consented.  Grantor
         shall defend Lender's  rights in the Collateral  against the claims and
         demands of all other persons.

         Collateral Schedules and Locations.  Insofar as the Collateral consists
         of inventory, Grantor shall deliver to Lender, as often as Lender shall
         require, such lists, descriptions,  and designations of such Collateral
         as Lender may require to identify the nature,  extent,  and location of
         such Collateral.  Such  information  shall be submitted for Grantor and
         each  of  its  subsidiaries  or  related  companies.   Maintenance  and
         Inspection  of   Collateral.   Grantor  shall   maintain  all  tangible
         Collateral in good condition and repair.  Grantor will commit or permit
         damage  to or  destruction  of  the  Collateral  or  any  part  of  the
         Collateral.  Lender and its designated representatives and agents shall
         have the right at all reasonable times to examine,  inspect,  and audit
         the  Collateral  wherever  located.  Grantor shall  immediately  notify
         Lender of all cases involving the return, rejection, repossession, loss
         or  damage  of or to any  Collateral;  of any  request  for  credit  or
         adjustment  or of  any  other  dispute  arising  with  respect  to  the
         Collateral;  and generally of all happenings  and events  affecting the
         Collateral or the value or the amount of the Collateral.

                                       4
<PAGE>

         Taxes,  Assessments  and  Liens.  Grantor  will pay when due all taxes,
         assessments and liens upon the Collateral,  its use or operation,  upon
         this  Agreement,  upon  any  promissory  note or notes  evidencing  the
         indebtedness,  or upon any of the other Related Documents.  Grantor may
         withhold  any such  payment or may elect to contest any lien if Grantor
         is in good faith  conducting an  appropriate  proceeding to contest the
         obligation to pay and so long as Lender's interest in the Collateral is
         not  jeopardized  in  Lender's  sole  opinion.  If  the  Collateral  is
         subjected to a lien which is not  discharged  within fifteen (15) days,
         Grantor shall deposit with Lender cash, a sufficient  corporate  surety
         bond or other security  satisfactory to Lender in an amount adequate to
         provide  for the  discharge  of the  lien  plus  any  interest,  costs,
         attorneys'  fees or other  charges  that  could  accrue  as a result of
         foreclosure  or sale of the  Collateral.  In any contest  Grantor shall
         defend itself and Lender and shall  satisfy any final adverse  judgment
         before  enforcement  against the  Collateral.  In any contest,  Grantor
         shall  defend  itself and Lender and shall  satisfy  any final  adverse
         judgment before enforcement against the Collateral.  Grantor shall name
         Lender as an additional  obligee under any surety bond furnished in the
         contest proceedings.

         Compliance  With  Governmental   Requirements.   Grantor  shall  comply
         promptly  with all  laws,  ordinances,  rules  and  regulations  of all
         governmental authorities, now or hereafter in effect, applicable to the
         ownership,  production,  disposition, or use of the Collateral. Grantor
         may contest in good faith any such law,  ordinance  or  regulation  and
         withhold  compliance  during  any  proceeding,   including  appropriate
         appeals,  so long as Lender's  interest in the Collateral,  in Lender's
         opinion, is not jeopardized.

         Hazardous   Substances.   Grantor  represents  and  warrants  that  the
         Collateral  never has been, and never will be so long as this agreement
         remains a lien on the Collateral, used for the generation, manufacture,
         storage,  transportation,  treatment,  disposal,  release or threatened
         release of any hazardous waste or substance, as those terms are defined
         in  the  Comprehensive   Environmental  Response,   Compensation,   and
         Liability  Act of 1980,  as amended,  42 U.S.C.  Section  9601, et seq.
         ("CERCLA"),  the Superfund  Amendments and Reauthorization Act of 1986,
         Pub. L. No. 99-499  ("SARA"),  the Hazardous  Materials  Transportation
         Act, 49 U.S.C.  Section 1801, et seq.,  the Resource  Conservation  and
         Recovery ct, 42 U.S.C.  Section 6901, et seq., Chapters 6.5 through 7.7
         of Division 20 of the California Health and Safety Code, Section 25100,
         et  seq.,  or  other  applicable  state  or  Federal  laws,  rules,  or
         regulations  adopted  pursuant  to  any  of the  foregoing.  The  terms
         "hazardous waste" and "hazardous substance" shall also include, without
         limitation, petroleum and petroleum by-products or any fraction thereof
         and asbestos.  The representations and warranties  contained herein are
         based on Grantor's due diligence in  investigating  the  Collateral for
         hazardous waste and substances.  Grantor hereby (a) releases and waives
         any future claims against Lender for indemnity or  contribution  in the
         event Grantor  becomes liable for cleanup or other costs under any such
         laws, and (b) agrees to indemnify and hold harmless  Lender against any
         and all claims and losses  resulting from a breach of this provision of
         this

                                       5
<PAGE>
         Agreement.  This  obligation to indemnify  shall survive the payment of
         the indebtedness and the satisfaction of this Agreement.

         Maintenance of Casualty  Insurance.  Grantor shall procure and maintain
         all risks  insurance,  including  without  limitation  fire,  theft and
         liability  coverage  together  with such other  insurance as Lender may
         require with respect to the Collateral, in form, amounts, coverages and
         basis  reasonably  acceptable  to Lender  and  issued  by a company  or
         companies  reasonably  acceptable to Lender.  Grantor,  upon request of
         Lender,  will  deliver  to  Lender  from time to time the  policies  or
         certificates  of insurance in form  satisfactory  to Lender,  including
         stipulations that coverages will not be cancelled or diminished without
         at least  thirty  (30)  days'  prior  written  notice to Lender and not
         including any disclaimer of the insurer's liability for failure to give
         such a notice.  Each insurance policy also shall include an endorsement
         providing  that coverage in favor of Lender will not be impaired in any
         way by any act,  omission or default of Grantor or any other person. In
         connection  with all policies  covering assets in which Lender holds or
         is offered a security  interest,  Grantor will provide Lender with such
         loss payable or other  endorsements as Lender may require.  In no event
         shall the insurance be in an amount less than the amount agreed upon in
         the  Agreement  to Provide  Insurance.  If Grantor at any time fails to
         obtain or maintain  any  insurance  as required  under this  AGREEMENT,
         Lender may (but shall not be  obligated  to) obtain such  insurance  as
         Lender deems  appropriate,  including if it so chooses "single interest
         insurance," which will cover only Lender's interest in the Collateral.

         Application of Insurance Proceeds. Grantor shall promptly notify Lender
         of any loss or damage to the Collateral.  Lender may make proof of loss
         if Grantor fails to do so within fifteen (15) days of the casualty. All
         proceeds of any insurance on the Collateral, including accrued proceeds
         thereon,  shall be held by lender as part of the Collateral.  If Lender
         consents  to  repair  or   replacement  of  the  damaged  or  destroyed
         Collateral,  Lender shall, upon satisfactory proof of expenditure,  pay
         or  reimburse  Grantor from the  proceeds  for the  reasonable  cost of
         repair  or  restoration.  if  Lender  does not  consent  to  repair  or
         replacement of the Collateral,  lender shall retain a sufficient amount
         of the  proceeds  to pay all of the  indebtedness,  and  shall  pay the
         balance to Grantor. Any proceeds which have not be disbursed within six
         (6) months after their  receipt and which  Grantor has not committed to
         the repair or restoration of the Collateral shall be used to prepay the
         indebtedness.

         Insurance Reserves.  Lender may require Grantor to maintain with Lender
         reserves for payment of insurance  premiums,  which  reserves  shall be
         created by monthly  payments  from Grantor of a sum estimated by lender
         to be  sufficient  to produce,  at least  fifteen  (15) days before the
         premiums due date,  amounts at least equal to the insurance premiums to
         be paid. If fifteen (15) days before  payment is due, the reserve funds
         are  insufficient,  Grantor  shall upon  demand pay any  deficiency  to
         Lender.  The reserve funds shall be held by lender as a general deposit
         and shall  constitute a  non-interest-bearing  account which lender may
         satisfy by payment of the  insurance  premiums  required  to be paid by
         Grantor as they become due.  Lender does not hold the reserve  funds in
         trust for  Grantor,  and Lender is not the agent of Grantor for payment
         of  the  insurance  premiums  required  to  be  paid  by  Grantor.  The
         responsibility  for the payment of premiums shall remain Grantor's sole
         responsibility.

                                       6
<PAGE>

         Insurance Reports.  Grantor,  upon request of Lender,  shall furnish to
         Lender  reports  on each  existing  policy of  insurance  showing  such
         information as Lender may reasonably  request  including the following:
         (a) the name of the insurer;  (b) the risks insured;  (c) the amount of
         the policy; (d) the property insured; (e) the then current value on the
         basis  of  which   insurance  has  been  obtained  and  the  manner  of
         determining that value;  and (f) the expiration date of the policy.  In
         addition,  Grantor shall upon request by Lender (however not more often
         than  annually) have an independent  appraiser  satisfactory  to Lender
         determine,  as applicable,  the cash value or  replacement  cost of the
         Collateral.

EXPENDITURES  BY LENDER.  if not  discharged  or paid when due,  lender may (but
shall  not  be  obligated  to)  discharge  or pay  any  amounts  required  to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes,  liens,  security interests,  encumbrances,  and other claims, at any
time  levied or  placed on the  Collateral.  Lender  also may (but  shall not be
obligated  to) pay all  costs  for  insuring,  maintaining  and  preserving  the
Collateral.  All such expenditures  incurred or paid by Lender for such purposes
will  then  bear  interest  at the rate  charged  under  the Note  from the date
incurred  or paid by  Lender  to the  date of  repayment  by  Grantor.  All such
expenses shall become a part of the indebtedness  and, at Lender's option,  will
(a) be  payable  on  demand,  (b) be  added  to the  balance  of the Note and be
apportioned  among and be payable  with any  installment  payments to become due
during  either  (i) the  term of any  applicable  insurance  policy  or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity.  This Agreement also will secure payment
of these  amounts.  Such  right  shall be in  addition  to all other  rights and
remedies to which  Lender may be  entitled  upon the  occurrence  of an Event of
Default.

EVENTS OF DEFAULT.  Each of the following  shall  constitute an Event of Default
under this Agreement:

         Default on  Indebtedness.  Failure of Grantor to make any payment  when
         due on the Indebtedness.

         Other  Defaults.  Failure of Grantor to comply  with or to perform  any
         other  term,  obligation,  covenant  or  condition  contained  in  this
         Agreement or in any of the Related  Documents or in any other agreement
         between Lender and Grantor.

         False  Statements.  Any warranty,  representation  or statement made or
         furnished  to Lender by or on behalf of Grantor  under this  Agreement,
         the  Note or the  Related  Documents  is  false  or  misleading  in any
         material respect, either now or at the time made or furnished.

         Defective  Collateralization.  This  Agreement  or any  of the  Related
         Documents ceases to be in full force and effect  (including  failure of
         any  collateral  documents  to  create a valid and  perfected  security
         interest or lien) at any time and for any reason.

         Insolvency.  The dissolution or termination of Grantor's existence as a
         going  business,  the  insolvency  of  Grantor,  the  appointment  of a
         receiver for any part of Grantor's  property,  any  assignment  for the
         benefit of creditors, any type of creditor workout, or the commencement
         of any proceeding under any bankruptcy or insolvency laws by or against
         Grantor.

                                       7
<PAGE>

         Creditor or Forfeiture  Proceedings.  Commencement  of  foreclosure  or
         forfeiture  proceedings,  whether by  judicial  proceeding,  self-help,
         repossession or any other method,  by any creditor of Grantor or by any
         governmental  agency  against the  Collateral  or any other  collateral
         securing  the  indebtedness.  This  includes  a  garnishment  of any of
         Grantor's deposit accounts with Lender.  However, this Event of Default
         shall not apply if there is a good  faith  dispute by Grantor as to the
         validity  or  reasonableness  of the  claim  which is the  basis of the
         creditor or forfeiture  proceeding  and if Grantor gives Lender written
         notice of the  creditor or  forfeiture  proceeding  and  deposits  with
         Lender  monies  or  a  surety  bond  for  the  creditor  or  forfeiture
         proceeding,  in an amount determined by Lender, in its sole discretion,
         as being an adequate reserve or bond for the dispute.

         Events  Affecting  Guarantor.  Any of the preceding  events occurs with
         respect to any Guarantor of any of the  indebtedness  or such Guarantor
         dies or becomes  incompetent.  Lender, at is option, may, but shall not
         be required to, permit the Guarantor's estate to assume unconditionally
         the obligations  arising under the guaranty in a manner satisfactory to
         Lender, and, in doing so, cure the Event of Default.

         Adverse Change. A material adverse change occurs in Grantor's financial
         condition, or Lender believes the prospect of payment or performance of
         the indebtedness is impaired.

         Insecurity.  Lender, in good faith, deems itself insecure.

         Right to Cure. If any default, other than a Default on Indebtedness, is
         curable and if Grantor has not been given a prior notice of a breach of
         the same provision of this Agreement,  it may be cured (and no Event of
         Default  will have  occurred) if Grantor,  after  Lender sends  written
         notice demanding cure of such default, (a) cures the default within ten
         (10)  days;  or (b) if the cure  requires  more  than  ten  (10)  days,
         immediately  initiates  steps  which  Lender  deems  in  Lender's  sole
         discretion  to  be  sufficient  to  cure  the  default  and  thereafter
         continues and completes all reasonable and necessary  steps  sufficient
         to produce compliance as soon as reasonably practical.

RIGHTS  AND  REMEDIES  ON  DEFAULT.  If an Event of  Default  occurs  under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the  California  Uniform  Commercial  Code.  In addition and without
limitation,  Lender may  exercise  any one or more of the  following  rights and
remedies:

         Accelerate  Indebtedness.  Lender may declare the entire  Indebtedness,
         including  any  prepayment  penalty  which Grantor would be required to
         pay, immediately due and payable, without notice.

         Assemble  Collateral.  Lender may require  Grantor to deliver to Lender
         all or any portion of the  Collateral and any and all  certificates  of
         title  and other  documents  relating  to the  Collateral.  Lender  may
         require  Grantor to assemble  the  Collateral  and make it available to
         Lender at a place to be  designated  by Lender.  Lender also shall have
         full power to enter upon the property of Grantor to take  possession of
         and remove the  Collateral.  If the Collateral  contains other good not
         covered by this Agreement at the time of  repossession,  Grantor agrees
         Lender may take such other goods, provided that Lender makes reasonable
         efforts to return them to Grantor after repossession.

                                       8
<PAGE>

         Sell the  Collateral.  Lender  shall  have full  power to sell,  lease,
         transfer,  or otherwise deal with the Collateral or proceeds thereof in
         its own name or that of  Grantor.  Lender  may sell the  Collateral  at
         public  auction or private  sale.  Unless the  Collateral  threatens to
         decline  speedily  in  value  or is of a  type  customarily  sold  on a
         recognized  market,  Lender will give Grantor  reasonable notice of the
         time after which any private sale or any other intended  disposition of
         the Collateral is to be made.  The  requirements  of reasonable  notice
         shall be met if such  notice is given at least ten (10)  days,  or such
         lesser time as  required by the state law,  before the time of the sale
         or  disposition.  All  expenses  relating  to  the  disposition  of the
         Collateral,  including  without  limitation  the  expenses of retaking,
         holding, insuring, preparing for sale and selling the Collateral, shall
         become a part of the  Indebtedness  secured by this Agreement and shall
         be  payable  on  demand,  with  interest  at the Note rate from date of
         expenditure until repaid.

         Appoint  Receiver.  To the extent  permitted by applicable  law, Lender
         shall have the following rights and remedies  regarding the appointment
         of a receiver:  (a) Lender may have a receiver appointed as a matter of
         right,  (b) the  receiver  may be an  employee  of Lender and may serve
         without bond,  and (c) all fees of the receiver and his or her attorney
         shall become part of the  Indebtedness  secured by this  Agreement  and
         shall be payable on demand, with interest at the Note rate from date of
         expenditure until repaid.

         Collect Revenues,  Apply Accounts.  Lender,  either itself or through a
         receiver,  may collect the payments,  rents,  income, and revenues from
         the Collateral.  Lender may at any time in its discretion  transfer any
         Collateral  into its own name or that of its  nominee  and  receive the
         payments,  rents,  income,  and revenues therefrom and hold the same as
         security  for  the   Indebtedness   or  apply  it  to  payment  of  the
         Indebtedness  in such  order of  preference  as Lender  may  determine.
         Insofar as the Collateral  consists of accounts,  general  intangibles,
         insurance policies,  instruments,  chattel paper, chooses in action, or
         similar  property,  Lender may demand,  collect,  receipt for,  settle,
         compromise, adjust, sue for, foreclose, or realize on the Collateral as
         Lender may determine, whether or not Indebtedness or Collateral is then
         due.  For these  purposes,  Lender may, on behalf of and in the name of
         Grantor, receive, open and dispose of mail addressed to Grantor; change
         any  address to which mail and  payments  are to be sent;  and  endorse
         notes, checks,  drafts, money orders,  documents of title,  instruments
         and  items  pertaining  to  payment,   shipment,   or  storage  of  any
         Collateral. To facilitate collection, Lender may notify account debtors
         and obligors on any Collateral to make payments directly to Lender.

         Obtain  Deficiency.  If  Lender  chooses  to  sell  any  or  all of the
         Collateral,  Lender  may  obtain a  judgment  against  Grantor  for any
         deficiency   remaining  on  the   Indebtedness   due  to  Lender  after
         application  of all amounts  received  from the  exercise of the rights
         provided in this  Agreement.  Grantor  shall be liable for a deficiency
         even  if the  transaction  described  in this  subsection  is a sale of
         accounts or chattel paper.

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<PAGE>

         Other  Rights  and  Remedies.  Lender  shall  have all the  rights  and
         remedies  of a secured  creditor  under the  provisions  of the Uniform
         Commercial  Code,  as may be amended  from time to time.  In  addition,
         Lender shall have and may exercise any or all other rights and remedies
         it may have available at law, in equity, or otherwise.

         Cumulative  Remedies.  All of  Lender's  rights and  remedies,  whether
         evidenced by this  Agreement  or the Related  Documents or by any other
         writing,  shall  be  cumulative  and  may be  exercised  singularly  or
         concurrently. Election by Lender to pursue any remedy shall not exclude
         pursuit of any other remedy, and an election to make expenditures or to
         take action to perform an obligation  of Grantor under this  Agreement,
         after Grantor's failure to perform,  shall not affect Lender's right to
         declare a default and to exercise its remedies.

MISCELLANEOUS  PROVISIONS.  The following miscellaneous provisions are a part of
this Agreement:

         Amendments.  This  Agreement,  together  with  any  Related  Documents,
         constitutes the entire understanding and agreement of the parties as to
         the matters set forth in this Agreement.  No alteration of or amendment
         to this Agreement shall be effective unless given in writing and signed
         by the party or parties sought to be charged or bound by the alteration
         or amendment.

         Applicable  Law.  This  Agreement  has been  delivered  to  Lender  and
         accepted by Lender in the State of  California.  If there is a lawsuit,
         Grantor agrees upon Lender's  request to submit to the  jurisdiction of
         the courts of Los Angeles County,  the State of California.  Lender and
         Grantor  hereby  waive  the  right  to any jury  trial  in any  action,
         proceeding, or counterclaim brought by either Lender or Grantor against
         the other.  (Initial  Here  ______________).  This  Agreement  shall be
         governed by and construed in  accordance  with the laws of the State of
         California.

         Attorneys'  Fees;  Expenses.  Grantor  agrees to pay upon demand all of
         Lender's  costs and expenses,  including  attorneys'  fees and Lender's
         legal  expenses,  incurred in connection  with the  enforcement of this
         Agreement.  Lender may pay someone else to help enforce this Agreement,
         and Grantor shall pay the costs and expenses of such enforcement. Costs
         and expenses  including  Lender's  attorneys'  fees and legal  expenses
         whether or not there is a lawsuit,  including attorneys' fees and legal
         expenses for bankruptcy proceedings (and including efforts to modify or
         vacate any automatic stay or injunction),  appeals, and any anticipated
         post-judgment  collection  services.  Grantor  also shall pay all court
         costs and such additional fees as may be directed by the court.

         Caption   Headings.   Caption   hearings  in  this  Agreement  are  for
         convenience purposes only and are not to be used to interpret or define
         the provisions of this Agreement.

         Multiple Parties; Corporate Authority. All obligations of Grantor under
         this  Agreement  shall be joint  and  several,  and all  references  to
         Grantor shall mean each other and every  Grantor.  This means that each
         of the persons signing below is responsible for all obligations in this
         Agreement.

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<PAGE>

         Notices. All notices required to be given under this Agreement shall be
         given  in  writing,  may be sent  by  telefacsimile  (unless  otherwise
         required by law),  and shall be effective  when  actually  delivered or
         when  deposited  with a  nationally  recognized  overnight  courier  or
         deposited in the United  States mail,  first  class,  postage  prepaid,
         addressed to the party to whom the notice is to be given at the address
         shown  above.  Any party may change its address for notices  under this
         Agreement  by  giving  formal  written  notice  to the  other  parties,
         specifying  that the  purpose of the  notice is to change  the  party's
         address.  To the extent  permitted by applicable  law, if there is more
         than one Grantor,  notice to any Grantor will constitute  notice to all
         Grantors. For notice purposes, Grantor will keep Lender informed at all
         times of Grantor's current address(es).

         Power of  Attorney.  Grantor  hereby  appoints  Lender  as its true and
         lawful attorney-in-fact,  irrevocably,  with full power of substitution
         to do the following: (a) to demand, collect,  receive, receipt for, sue
         and  recover  all  sums of money or  other  property  which  may now or
         hereafter  become due,  owing or payable  from the  Collateral;  (b) to
         execute,  sign and endorse any and all claims,  instruments,  receipts,
         checks, drafts or warrants issued in payment for the Collateral; (c) to
         settle or compromise any and all claims  arising under the  Collateral,
         and,  in the place and stead of  Grantor,  to execute  and  deliver its
         release  and  settlement  for the  claim;  and (d) to file any claim or
         claims  or to  take  any  action  or  institute  or  take  part  in any
         proceedings,  either  in its own  name or in the  name of  Grantor,  or
         otherwise,  which in the  discretion of Lender may seem to be necessary
         or advisable. This power is given as security for the indebtedness, and
         the authority  hereby  conferred is and shall be irrevocable  and shall
         remain in full force and effect until renounced by Lender.

         Preference  Payments.  Any monies  Lender  pays  because of an asserted
         preference  claim in  Borrower's  bankruptcy  will become a part of the
         indebtedness  and, at Lender's option,  shall be payable by Borrower as
         provided above in the "EXPENDITURES BY LENDER" paragraph.

         Severability.  If a court of competent jurisdiction finds any provision
         of this  Agreement to be invalid or  unenforceable  at to any person or
         circumstance, such finding shall not render that a provision invalid or
         unenforceable  as to any other persons or  circumstances.  If feasible,
         any such  offending  provisions  shall be deemed to be  modified  to be
         within  the  limits of  enforceability  or  validity;  however,  if the
         offending provision cannot be so modified, it shall be stricken and all
         other  provisions of this  Agreement in all other respects shall remain
         valid and enforceable.

         Successor  Interests.  Subject to the  limitations  set forth  above on
         transfer of the  Collateral,  this Agreement  shall be binding upon and
         inure to the benefit of the parties, their successors and assigns.

         Waiver. Lender shall not be deemed to have waived any rights under this
         Agreement  unless such waiver is given in writing and signed by Lender.
         No delay or  omission  on the part of  Lender in  exercising  any right
         shall operate as a waiver of such right or any other right. A waiver by
         Lender  of a  provision  of  this  Agreement  shall  not  prejudice  or
         constitute  a waiver of  Lender's  right  otherwise  to  demand  strict
         compliance   with  that  provision  or  any  other  provision  of  this
         Agreement. No prior waiver by lender, nor any course of dealing between
         Lender and Grantor, shall constitute a wavier of any of Lender's rights
         or of any of  Grantor's  obligations  as to  any  future  transactions.
         Whenever the consent of Lender is required  under this  Agreement,  the
         granting of such consent by lender in any instance shall not constitute
         continuing  consent  to  subsequent  instances  where  such  consent is
         required  and in all cases such  consent  may be granted or withheld in
         the sole discretion of Lender.

                                       11
<PAGE>

         Waiver of Co-obligor's Rights. If more than one person is obligated for
         the   indebtedness,   Borrower   irrevocably   waives,   disclaims  and
         relinquishes all claims against such other person which Borrower has or
         would  otherwise have by virtue of payment of the  indebtedness  or any
         part thereof,  specifically  including but not limited to all rights of
         indemnity, contribution or exoneration.

GRANTOR  ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT,  AND GRANTOR  AGREES TO ITS TERMS.  THIS  AGREEMENT IS DATED JUNE 11,
1998.

GRANTOR:

PHOTOMATRIX, INC.

By:_________________________________________
         ROY L. GAYHART,
         CHIEF FINANCIAL OFFICER/SECRETARY




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<PAGE>

                                   EXHIBIT "A"

                     ADDENDUM TO SECURITY AND LOAN AGREEMENT
                         ("Security and Loan Agreement")
                  BETWEEN PHOTOMATRIX, INC., AND IMPERIAL BANK.
                             (Dated: June 17, 1996)


         This  Addendum is made and entered  into as of July 13,  1998,  between
Photomatrix,  Inc. ("Borrower") and Imperial Bank ("Bank"). This Addendum amends
and  supplements  the  Security  and  Loan  Agreement.   In  the  event  of  any
inconsistency  between the terms  herein and the terms of the  Security and Loan
Agreement,  the  terms  herein  shall  in all  cases  govern  and  control.  All
capitalized  terms  herein,  unless  otherwise  defined  herein,  shall have the
meaning set forth in the Security and Loan Agreement.

1. Any  commitment  of Bank,  pursuant  to the  terms of the  Security  and Loan
Agreement,  to make advances against Eligible  Accounts shall expire on July 13,
1999,  subject to Bank's right to renew said commitment at its sole  discretion.
Any renewal of the commitment shall not be binding upon the Bank unless it is in
writing and signed by an officer of the Bank.

2. Borrower represents and warrants that:

         a. Litigation.  There is no litigation or other  proceeding  pending or
threatened against or affecting  Borrower or its subsidiaries,  and Borrower and
its subsidiaries are not in default with respect to any order, writ, injunction,
decree or demand of any court or other governmental or regulatory authority.

         b. Financial  Condition.  The balance sheet of Borrower as of March 31,
1998,  and the related  profit and loss  statement on that date, a copy of which
has heretofore been delivered to Bank by Borrower,  and all other statements and
data submitted in writing by Borrower and its subsidiaries to Bank in connection
with this  request for credit are true and correct,  and said balance  sheet and
profit and loss statement  truly present the financial  condition of Borrower as
of the date thereof and the results of the operations of Borrower for the period
covered  thereby,  and have been prepared in accordance with generally  accepted
accounting principles on a basis consistently maintained. Since such date, there
have been no materially  adverse changes in the financial  condition or business
of  Borrower.  Borrower  has no  knowledge  of any  liabilities,  contingent  or
otherwise,  at such date not reflected in said balance  sheet,  and Borrower has
not entered into any special commitments or substantial  contracts which are not
reflected in said balance  sheet,  other than in the ordinaary and normal course
of its business,  which may have a materially  adverse effect upon its financial
condition, operaitons or business as now conducted.



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