Document:

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                                                                    EXHIBIT 10.8

         This LOAN AND SECURITY AGREEMENT is entered into as of June 28, 1999,
by and between SILICON VALLEY BANK ("Bank") and ILX LIGHTWAVE CORPORATION
("Borrower").

                                    RECITALS

         Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower and Borrower will repay the amounts
owing to Bank.

                                    AGREEMENT

         The parties agree as follows:

         1.     DEFINITIONS AND CONSTRUCTION

                1.1    Definitions. As used in this Agreement, the following
terms shall have the following definitions:

                       "Accounts" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books relating
to any of the foregoing.

                       "Advance" or "Advances" means a cash advance under the
Revolving Facility.

                       "Affiliate" means, with respect to any Person, any Person
that owns or controls directly or indirectly such Person, any Person that
controls or is controlled by or is under common control with such Person, and
each of such Person's senior executive officers, directors, and partners.

                       "Bank Expenses" means all reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; reasonable Collateral audit fees; and Bank's reasonable attorneys'
fees and expenses incurred in amending, enforcing or defending the Loan
Documents (including fees and expenses of appeal), incurred before, during and
after an Insolvency Proceeding, whether or not suit is brought.

                       "Borrower's Books" means all of Borrower's books and
records including: ledgers; records concerning Borrower's assets or liabilities,
the Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.

                       "Borrowing Base" means an amount equal to eighty percent
(80%) of Eligible Accounts, as determined by Bank with reference to the most
recent Borrowing Base Certificate delivered by Borrower, provided that,
notwithstanding the foregoing, until such time as an initial audit is completed
by Bank, the results of which are satisfactory to Bank, pursuant to Section 6.3,
"Borrowing Base" shall mean an amount equal to fifty percent (50%) of Eligible
Accounts, as determined by Bank with reference to the most recent Borrowing Base
Certificate delivered by Borrower.

                       "Business Day" means any day that is not a Saturday,
Sunday, or other day on which banks in the State of California or the State of
Colorado are authorized or required to close.

                       "Closing Date" means the date of this Agreement.

                       "Code" means the California Uniform Commercial Code.

                       "Collateral" means the property described on Exhibit A
attached hereto.

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                "Committed Revolving Line" means a credit extension of up to One
Million Five Hundred Thousand Dollars ($1,500,000).

                "Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.

                "Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.

                "Credit Extension" means each Advance or any other extension of
credit by Bank for the benefit of Borrower hereunder.

                "Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Advances
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendible at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination.

                "Daily Balance" means the amount of the Obligations owed at the
end of a given day.

                "Eligible Accounts" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank as a
consequence of any Collateral audits done pursuant to Section 6.3 in Bank's
reasonable judgment and upon notification thereof to Borrower in accordance with
the provisions hereof. Unless otherwise agreed to by Bank, Eligible Accounts
shall not include the following:

                (a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;

                (b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within ninety (90)
days of invoice date;

                (c) Accounts with respect to which the account debtor is an
officer, employee, or agent of Borrower;

                (d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;

                (e) Accounts with respect to which the account debtor is an
Affiliate of Borrower;

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                (f) Accounts with respect to which the account debtor does not
have its principal place of business in the United States, except for Eligible
Foreign Accounts;

                (g) Accounts with respect to which the account debtor is the
United States or any department, agency, or instrumentality of the United
States;

                (h) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;

                (i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed
twenty-five percent (25%) of all Accounts, to the extent such obligations exceed
the aforementioned percentage (the "Concentration Limit"), except as approved in
writing by Bank, provided that the Concentration Limit for each of Lucent
Technologies or Corning shall be thirty-five percent (35%) of all Accounts;

                (j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business; and

                (k) Accounts the collection of which Bank reasonably determines
to be doubtful.

                "Eligible Foreign Accounts" means Accounts with respect to which
the account debtor does not have its principal place of business in the United
States and that (i) are supported by one or more letters of credit in an amount
and of a tenor, and issued by a financial institution, acceptable to Bank, (ii)
that Bank approves on a case-by-case basis, or (iii) Accounts with respect to
which Corning, Marconi Communications, or Siemens are the account debtors
provided that the aggregate value of such accounts shall not exceed Two Hundred
Thousand Dollars ($200,000) at any given time.

                "Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.

                "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.

                "Event of Default" has the meaning assigned in Article 8.

                "GAAP" means generally accepted accounting principles as in
effect from time to time.

                "Indebtedness" means (a) all indebtedness for borrowed money or
the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.

                "Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.

                "Intellectual Property Collateral" means:

                (l) Copyrights, Trademarks and Patents;

                (m) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;

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                (n) Any and all design rights which may be available to Borrower
now or hereafter existing, created, acquired or held;

                (o) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but not
the obligation, to sue for and collect such damages for said use or infringement
of the intellectual property rights identified above;

                (p) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;

                (q) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and

                (r) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.

                "Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.

                "Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.

                "IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder. "Lien" means any mortgage, lien, deed of trust,
charge, pledge, security interest or other encumbrance.

                "Loan Documents" means, collectively, this Agreement, any note
or notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.

                "Material Adverse Effect" means a material adverse effect on (i)
the business operations or condition (financial or otherwise) of Borrower and
its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.

                "Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.

                "Obligations" means all debt, principal, interest, Bank Expenses
and other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now
existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.

                "Patents" means all patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.

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                "Periodic Payments" means all installments or similar recurring
payments that Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.

                "Permitted Indebtedness" means:

                (a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;

                (b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;

                (c) Indebtedness secured by a lien described in clause (c) of
the defined term "Permitted Liens," provided such Indebtedness does not exceed
the lesser of the cost or fair market value of the equipment financed with such
Indebtedness; and

                (d) Subordinated Debt.

                "Permitted Investment" means:

                (a) Investments existing on the Closing Date disclosed in the
Schedule; and

                (b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor's Corporation or Moody's Investors Service, Inc., (iii) certificates of
deposit maturing no more than one (1) year from the date of investment therein
issued by Bank, (iv) Bank's money market accounts, and (v) any Investments
permitted by Borrower's investment policy, provided that such investment policy
has been approved by Borrower's board of directors and by Bank.

                "Permitted Liens" means the following:

                (a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;

                (b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of Bank's
security interests;

                (c) Liens (i) upon or in any equipment, acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment in the ordinary course of business, or (ii)
existing on such equipment at the time of its acquisition in the ordinary course
of business, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment; and

                (d) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.

                "Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.

                "Prime Rate" means the variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.

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                "Quick Assets" means, at any date as of which the amount thereof
shall be determined, the unrestricted cash and cash-equivalents, accounts
receivable and investments with maturities not to exceed twelve months, of
Borrower determined in accordance with GAAP.

                "Responsible Officer" means each of the Chief Executive Officer,
the Chief Operating Officer, the Chief Financial Officer and the Controller of
Borrower.

                "Revolving Facility" means the facility under which Borrower may
request Bank to issue Advances, as specified in Section 2.1 hereof.

                "Revolving Maturity Date" means June 27, 2000.

                "Schedule" means the schedule of exceptions attached hereto, if
any.

                "Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms reasonably
acceptable to Bank (and identified as being such by Borrower and Bank).

                "Subsidiary" means any corporation or partnership in which (i)
any general partnership interest or (ii) more than 50% of the stock of which by
the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity, at the time as of which any determination is
being made, is owned by Borrower, either directly or through an Affiliate.

                "Tangible Net Worth" means at any date as of which the amount
thereof shall be determined, the sum of the capital stock and additional paid-in
capital plus retained earnings (or minus accumulated deficit) of Borrower and
its Subsidiaries minus intangible assets, plus Subordinated Debt, on a
consolidated basis determined in accordance with GAAP.

                "Total Liabilities" means at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
GAAP be classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness.

                "Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected
with and symbolized by such trademarks.

            1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the
terms "financial statements" shall include the notes and schedules thereto.

     2.     LOAN AND TERMS OF PAYMENT

            2.1 Credit Extensions. Borrower promises to pay to the order of
Bank, in lawful money of the United States of America, the aggregate unpaid
principal amount of all Credit Extensions made by Bank to Borrower hereunder.
Borrower shall also pay interest on the unpaid principal amount of such Credit
Extensions at rates in accordance with the terms hereof.

                2.1.1 Revolving Advances.

                (a)   Subject to and upon the terms and conditions of this
Agreement, Borrower may request Advances in an aggregate outstanding amount not
to exceed the lesser of (i) the Committed Revolving Line or (ii) the Borrowing
Base. Subject to the terms and conditions of this Agreement, amounts borrowed
pursuant to this Section 2.1.1 may be repaid and reborrowed at any time prior to
the Revolving Maturity Date, at which time all Advances under this Section 2.1.1
shall be immediately due and payable. Borrower may prepay any Advances without
penalty or premium.

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                (b) Procedures. Whenever Borrower desires an Advance, Borrower
will notify Bank by facsimile transmission or telephone no later than 4:00 p.m.
Colorado time, on the Business Day that the Advance is to be made. Each such
notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of Exhibit B hereto. Bank is authorized to make Advances
under this Agreement, based upon instructions received from a Responsible
Officer or a designee of a Responsible Officer, or without instructions if in
Bank's discretion such Advances are necessary to meet Obligations which have
become due and remain unpaid. Bank shall be entitled to rely on any telephonic
notice given by a person who Bank reasonably believes to be a Responsible
Officer or a designee thereof, and Borrower shall indemnify and hold Bank
harmless for any damages or loss suffered by Bank as a result of such reliance.
Bank will credit the amount of Advances made under this Section 2.1.1 to
Borrower's deposit account.

            2.2 Overadvances. If at any time the aggregate amount of all
outstanding Advances exceeds the lesser of (i) the Borrowing Base or (ii) the
Committed Revolving Line, Borrower shall immediately pay to Bank, in cash, the
amount of such excess.

            2.3 Interest Rates, Payments, and Calculations.

                (a) Interest Rates.

                    (i)   Advances. Except as set forth in Section 2.3((b)), the
Advances shall bear interest, on the outstanding daily balance thereof, at a
rate equal to the Prime Rate plus one percent (1.0%).

                (b) Late Fee; Default Rate. If any payment is not made within
ten (10) days after the date such payment is due, Borrower shall pay Bank a late
fee equal to the lesser of (i) five percent (5%) of the amount of such unpaid
amount or (ii) the maximum amount permitted to be charged under applicable law.
All Obligations shall bear interest, from and after the occurrence and during
the continuance of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.

                (c) Payments. Interest hereunder shall be due and payable on the
eighteenth (18th) calendar day of each month during the term hereof. Borrower
hereby authorizes Bank to debit any accounts with Bank, including, without
limitation, Account Number 3300128757 for payments of principal and interest due
on the Obligations and any other amounts owing by Borrower to Bank. Bank will
notify Borrower of all debits which Bank has made against Borrower's accounts.
Bank shall, at its option, charge such interest, all Bank Expenses, and all
Periodic Payments against any of Borrower's deposit accounts or against the
Committed Revolving Line, in which case those amounts shall thereafter accrue
interest at the rate then applicable hereunder. Any interest not paid when due
shall be compounded by becoming a part of the Obligations, and such interest
shall thereafter accrue interest at the rate then applicable hereunder. Bank
shall deliver to Borrower statements of account in the ordinary course of
business reflecting charges made hereunder.

                (d) Computation. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.

            2.4 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 1:00 p.m. Colorado time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date

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that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.

            2.5 Fees. Borrower shall pay to Bank the following:

                (a) Facility Fee. A facility fee equal to Seven Thousand Five
Hundred Dollars ($7,500), which fee shall be due on the Closing Date and shall
be fully earned and non-refundable.

                (b) Financial Examination and Appraisal Fees. Bank's customary
fees and out-of-pocket expenses for Bank's audits of Borrower's Accounts, and
for each appraisal of Collateral and financial analysis and examination of
Borrower performed from time to time by Bank or its agents, provided that the
initial audit shall not exceed One Thousand Five Hundred Dollars ($1,500) and
each additional audit shall not exceed Two Thousand Dollars ($2,000);

                (c) Bank Expenses. On the Closing Date, all Bank Expenses
incurred through the Closing Date, including reasonable attorneys' fees and
expenses (such attorneys fees and expenses not to exceed $5,000), and, after the
Closing Date, all Bank Expenses, including reasonable attorneys' fees and
expenses, as and when they become due.

            2.6 Additional Costs. In case any law, regulation, treaty or
official directive or the interpretation or application thereof by any court or
any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law):

                (a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);

                (b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or

                (c) imposes upon Bank any other condition with respect to its
performance under this Agreement,

and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
the Obligations, Bank shall notify Borrower thereof. Borrower agrees to pay to
Bank the amount of such increase in cost, reduction in income or additional
expense as and when such cost, reduction or expense is incurred or determined,
upon presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.

            2.7 Term. This Agreement shall become effective on the Closing Date
and, subject to Section 12.7, shall continue in full force and effect for a term
ending on the Revolving Maturity Date. Notwithstanding the foregoing, Bank shall
have the right to terminate its obligation to make Credit Extensions under this
Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, Bank's Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding. Upon request by Borrower, Bank and Borrower shall terminate this
Agreement and Bank shall have no further obligation to make Credit Extensions to
Borrower, provided that (i) Bank receives three (3) days prior written notice
thereof, and (ii) all Obligations have been repaid in full.

     3.     CONDITIONS OF LOANS.

            3.1 Conditions Precedent to Initial Credit Extension. The obligation
of Bank to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:

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                (a) this Agreement;

                (b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;

                (c) financing statements (Form UCC-1) to be filed in Colorado
and Montana;

                (d) an intellectual property security agreement;

                (e) agreement to provide insurance;

                (f) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof; and

                (g) such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.

            3.2 Conditions Precedent to all Credit Extensions. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:

                (a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1;

                (b) timely receipt by Bank of the invoices or other documents as
provided in Section 4.2; and

                (c) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Credit Extension
(provided, however, that those representations and warranties expressly
referring to another date shall be true, correct and complete in all material
respects as of such date). The making of each Credit Extension shall be deemed
to be a representation and warranty by Borrower on the date of such Credit
Extension as to the accuracy of the facts referred to in this Section 3.2(c).

     4.     CREATION OF SECURITY INTEREST

            4.1 Grant of Security Interest. Borrower grants and pledges to Bank
a continuing security interest in all presently existing and hereafter acquired
or arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.

            4.2 Delivery of Additional Documentation Required. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.

            4.3 Right to Inspect. Bank (through any of its officers, employees,
or agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours but no more than once a year (unless an
Event of Default has occurred and is continuing) to inspect Borrower's Books and
to make copies thereof and to check, test, and appraise the Collateral in order
to verify Borrower's financial condition or the amount, condition of, or any
other matter relating to, the Collateral.

     5.     REPRESENTATIONS AND WARRANTIES

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<PAGE>   10

            Borrower represents and warrants as follows:

            5.1  Due Organization and Qualification. Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws of
its state of incorporation and qualified and licensed to do business in, and is
in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified.

            5.2  Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.

            5.3  No Prior Encumbrances. Borrower has good and indefeasible title
to the Collateral, free and clear of Liens, except for Permitted Liens.

            5.4  Bona Fide Eligible Accounts. The Eligible Accounts are bona
fide existing obligations. The property giving rise to such Eligible Accounts
has been delivered to the account debtor or to the account debtor's agent for
immediate shipment to and unconditional acceptance by the account debtor.
Borrower has not received notice of actual or imminent Insolvency Proceeding of
any account debtor that is included in any Borrowing Base Certificate as an
Eligible Account.

            5.5  Merchantable Inventory. All Inventory is in all material
respects of good and marketable quality, free from all reasonable material
defects.

            5.6  Intellectual Property Collateral. Borrower is the sole owner of
the Intellectual Property Collateral, except for non-exclusive licenses granted
by Borrower to its customers in the ordinary course of business. Each of the
Patents is valid and enforceable, and no part of the Intellectual Property
Collateral has been judged invalid or unenforceable, in whole or in part, and no
claim has been made that any part of the Intellectual Property Collateral
violates the rights of any third party.

            5.7  Name; Location of Chief Executive Office. Except as disclosed
in the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.

            5.8  Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect or a material adverse effect on Borrower or such
Subsidiary or Borrower's interest or Bank's security interest in the Collateral.
Borrower does not have knowledge of any such pending or threatened actions or
proceedings.

            5.9  No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrower or any Subsidiary that are
delivered by Borrower to Bank fairly present in all material respects Borrower's
or such Subsidiary's consolidated financial condition as of the date thereof and
Borrower's or such Subsidiary's consolidated results of operations for the
period then ended. There has not been a material adverse change in the
consolidated financial condition of Borrower or Subsidiary since the date of the
most recent of such financial statements submitted to Bank.

            5.10 Solvency, Payment of Debts. Borrower is solvent and able to pay
its debts (including trade debts) as they mature.

            5.11 Regulatory Compliance. Borrower and each Subsidiary have met
the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA. No event has occurred resulting from Borrower's failure
to comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company

                                       10

<PAGE>   11

"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940. Borrower is not engaged principally, or as one of the
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations T and U
of the Board of Governors of the Federal Reserve System). Borrower has complied
with all the provisions of the Federal Fair Labor Standards Act. Borrower has
not violated any statutes, laws, ordinances or rules applicable to it, violation
of which could have a Material Adverse Effect.

            5.12 Environmental Condition. Except as disclosed in the Schedule,
none of Borrower's or any Subsidiary's properties or assets has ever been used
by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by
previous owners or operators, in the disposal of, or to produce, store, handle,
treat, release, or transport, any hazardous waste or hazardous substance other
than in accordance with applicable law; to the best of Borrower's knowledge,
none of Borrower's properties or assets has ever been designated or identified
in any manner pursuant to any environmental protection statute as a hazardous
waste or hazardous substance disposal site, or a candidate for closure pursuant
to any environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.

            5.13 Taxes. Borrower and each Subsidiary has filed or caused to be
filed all tax returns required to be filed, and has paid, or has made adequate
provision for the payment of, all taxes reflected therein.

            5.14 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.

            5.15 Government Consents. Borrower and each Subsidiary has obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's or such Subsidiary's business as
currently conducted, the failure to obtain which could have a Material Adverse
Effect.

            5.16 Full Disclosure. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.

     6.     AFFIRMATIVE COVENANTS

            Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:

            6.1  Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.

            6.2  Government Compliance. Borrower shall meet, and shall cause
each Subsidiary to meet, the minimum funding requirements of ERISA with respect
to any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.

            6.3  Financial Statements, Reports, Certificates. Borrower shall
deliver to Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each calendar month, a company prepared

                                       11

<PAGE>   12

consolidated balance sheet and income statement covering Borrower's consolidated
operations during such period, in a form acceptable to Bank and certified by a
Responsible Officer; (b) as soon as available, but in any event within one
hundred twenty (120) days after the end of Borrower's fiscal year, audited
consolidated financial statements of Borrower prepared in accordance with GAAP,
consistently applied, together with an unqualified opinion on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank; (c) if applicable, copies of all statements, reports and
notices sent or made available generally by Borrower to its security holders or
to any holders of Subordinated Debt and all reports on Form 10-K and 10-Q filed
with the Securities and Exchange Commission; (d) promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened against Borrower or
any Subsidiary that could result in damages or costs to Borrower or any
Subsidiary of Fifty Thousand Dollars ($50,000) or more; and (e) such budgets,
sales projections, operating plans or other financial information as Bank may
reasonably request from time to time generally prepared by Borrower in the
ordinary course of business.

     Within twenty (20) days after the last day of each month, Borrower shall
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged listings of
accounts receivable and accounts payable, provided that, for any month during
which no Obligations were outstanding at any time under Section 2.1 of this
Agreement, Borrower shall deliver the foregoing within thirty (30) days after
the last day of such month.

     Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.

     Bank shall have a right initially (the "Initial Audit") and from time to
time thereafter to audit Borrower's Accounts and appraise Collateral at
Borrower's expense, provided that such audits will be conducted no more often
than every twelve (12) months unless an Event of Default has occurred and is
continuing. The results of the Initial Audit shall be satisfactory to Bank by
May 30, 1999.

            6.4  Inventory; Returns. Borrower shall keep all Inventory in good
and marketable condition, free from all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on the
same basis and in accordance with the usual customary practices of Borrower, as
they exist at the time of the execution and delivery of this Agreement. Borrower
shall promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than One
Hundred Thousand Dollars ($100,000).

            6.5  Taxes. Borrower shall make, and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.

            6.6  Insurance.

                 (a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.

                 (b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all

                                       12

<PAGE>   13

liability insurance policies shall show the Bank as an additional insured, and
shall specify that the insurer must give at least twenty (20) days notice to
Bank before canceling its policy for any reason. Upon Bank's request, Borrower
shall deliver to Bank certified copies of such policies of insurance and
evidence of the payments of all premiums therefor. All proceeds payable under
any such policy shall, at the option of Bank, be payable to Bank to be applied
on account of the Obligations.

            6.7  Principal Depository. Borrower shall maintain its principal
depository and operating accounts with Bank.

            6.8  Quick Ratio. Borrower shall maintain, as of the last day of
each calendar month, a ratio of Quick Assets to Current Liabilities of at least
1.50 to 1.00.

            6.9  Tangible Net Worth. Borrower shall maintain, as of the last day
of each calendar month, a Tangible Net Worth of not less than Four Million
Dollars ($4,000,000) plus thirty-five percent (35%) of Borrower's quarterly net
income.

            6.10 Profitability. Borrower shall show a profit of at least One
Dollar ($1.00) for each fiscal quarter, except that in one and only one fiscal
quarter during the term of this Agreement, Borrower shall be permitted to fail
to show a profit of at least One Dollar ($1.00), provided that Borrower shall
not lose more than Three Hundred Thousand Dollars ($300,000) for such quarter.
In addition to the foregoing, Borrower shall show a profit of at least One
Dollar ($1.00) for each fiscal year during the term of this Agreement.

            6.11 Registration of Intellectual Property Rights. If an Event of
Default has occurred, upon Bank's reasonable request, Borrower shall do all of
the following:

                 (a) Register or cause to be registered on an expedited basis
(to the extent not already registered and to the extent commercially viable)
with the United States Patent and Trademark Office or the United States
Copyright Office, as applicable, those intellectual property rights listed on
Exhibits A, B and C to the Intellectual Property Security Agreement delivered to
Bank by Borrower in connection with this Agreement within thirty (30) days of
the date of this Agreement. Borrower shall, on an expedited basis, register or
cause to be registered with the United States Patent and Trademark Office or the
United States Copyright Office, as applicable, and notify Bank of, all
registerable intellectual property rights Borrower has developed as of the date
of this Agreement but heretofore failed to register and give Bank notice
thereof. Borrower shall register or cause to be registered with the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, and notify Bank of those additional intellectual property rights
developed or acquired by Borrower from time to time in connection with any
product prior to the sale or licensing of such product to any third party and
prior to Borrower's use of such product (including without limitation major
revisions or additions to the intellectual property rights listed on such
Exhibits A, B and C) and shall give Bank notice thereof;

                 (b) Execute and deliver such additional instruments and
documents from time to time as Bank shall reasonably request to perfect Bank's
security interest in the Intellectual Property Collateral;

                 (c) Borrower shall (i) protect, defend and maintain the
validity and enforceability of the Trademarks, Patents and Copyrights, (ii) use
its best efforts to detect infringements of the Trademarks, Patents and
Copyrights and promptly advise Bank in writing of material infringements
detected and (iii) not allow any material Trademarks, Patents or Copyrights to
be abandoned, forfeited or dedicated to the public without the written consent
of Bank, which shall not be unreasonably withheld.

                 (d) Bank may audit Borrower's Intellectual Property Collateral
to confirm compliance with this Section 6.11, provided such audit may not occur
more often than once per year, unless an Event of Default has occurred and is
continuing. Bank shall have the right, but not the obligation, to take, at
Borrower's sole expense, any actions that Borrower is required under this
Section 6.11 to take but which Borrower fails to take, after fifteen (15) days'
notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section 6.11.

                 (e) Borrower shall within twenty-five (25) days of the last day
of each fiscal quarter, deliver to Bank in form and substance satisfactory to
Bank a report signed by Borrower, in form reasonably

                                       13

<PAGE>   14

acceptable to Bank, listing any applications or registrations that Borrower has
made or filed in respect of any Patents, Copyrights or Trademarks and the status
of any outstanding applications or registrations, as well as any material change
in Borrower's intellectual property, including but not limited to any subsequent
ownership right of Borrower in or to any Trademark, Patent or Copyright not
specified in Exhibits A, B, and C of the Intellectual Property Security
Agreement delivered to Bank by each Borrower in connection with this Agreement

            6.12 Further Assurances. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.

     7.     NEGATIVE COVENANTS

            Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Bank may have any commitment to make any Credit Extensions,
Borrower will not do any of the following:

            7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, including intellectual property,
other than: (i) Transfers of Inventory in the ordinary course of business; (ii)
Transfers of non-exclusive licenses and similar arrangements for the use of the
property of Borrower or its Subsidiaries; or (iii) Transfers of surplus,
worn-out or obsolete Equipment.

            7.2 Change in Business. Engage in any business, or permit any of its
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto). Borrower will not, without thirty (30) days prior
written notification to Bank, relocate its chief executive office.

            7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.

            7.4 Indebtedness. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.

            7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.

            7.6 Distributions. Pay any dividends or make any other distribution
or payment on account of or in redemption, retirement or purchase of any capital
stock. Notwithstanding the foregoing, Borrower may acquire capital stock or
property of another Person and/or repurchase its own capital stock in an
aggregate amount not to exceed twenty-five percent (25%) of Borrower's Tangible
Net Worth, as long as an Event of Default does not exist prior to such
repurchase or acquisition or would not exist after giving effect to such
repurchase or acquisition.

            7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.

            7.8 Transactions with Affiliates. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person.

            7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.

                                       14

<PAGE>   15

            7.10  Inventory. Store the Inventory with a bailee, warehouseman, or
similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.

            7.11  Compliance. Become an "investment company" or be controlled by
an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose. Fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur, fail
to comply with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.

            7.12  Intellectual Property Agreements. Borrower shall not permit
the inclusion in any material contract to which it becomes a party of any
provisions that could or might in any way prevent the creation of a security
interest in Borrower's rights and interests in any property included within the
definition of the Intellectual Property Collateral acquired under such
contracts.

     8.     EVENTS OF DEFAULT

            Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:

            8.1  Payment Default. If Borrower fails to pay, when due, any of the
Obligations;

            8.2  Covenant Default. If Borrower fails to perform any obligation
under Article 6 or violates any of the covenants contained in Article 7 of this
Agreement, or fails or neglects to perform, keep, or observe any other material
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) days after Borrower receives notice thereof or
any officer of Borrower becomes aware thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrower be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional reasonable period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to have cured such default shall not be deemed an Event
of Default (provided that no Credit Extensions will be required to be made
during such cure period);

            8.3  Material Adverse Change. If there occurs a material adverse
change in Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations or a
material impairment of the value or priority of Bank's security interests in the
Collateral;

            8.4  Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);

                                       15

<PAGE>   16

            8.5  Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within thirty (30) days
(provided that no Credit Extensions will be made prior to the dismissal of such
Insolvency Proceeding);

            8.6  Other Agreements. If there is a default in any agreement to
which Borrower is a party with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of One Hundred Thousand
Dollars ($100,000) or that could have a Material Adverse Effect;

            8.7  Subordinated Debt. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;

            8.8  Judgments. If a judgment or judgments for the payment of money
in an amount, individually or in the aggregate, of at least One Hundred Thousand
Dollars ($100,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of thirty (30) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such
judgment); or

            8.9  Misrepresentations. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.

     9.     BANK'S RIGHTS AND REMEDIES

            9.1  Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:

                 (a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable without any
action by Bank);

                 (b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;

                 (c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;

                 (d) Make such payments and do such acts as Bank considers
necessary or reasonable to protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;

                 (e) Set off and apply to the Obligations any and all (i)
balances and deposits of Borrower held by Bank, or (ii) indebtedness at any time
owing to or for the credit or the account of Borrower held by Bank;

                 (f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right,

                                       16

<PAGE>   17

solely pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;

                 (g) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;

                 (h) Bank may credit bid and purchase at any public sale; and

                 (i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.

            9.2  Power of Attorney. Effective only upon the occurrence and
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrower's name on any invoice or
bill of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all
claims under and decisions with respect to Borrower's policies of insurance; (f)
settle and adjust disputes and claims respecting the accounts directly with
account debtors, for amounts and upon terms which Bank determines to be
reasonable; (g) to modify, in its sole discretion, any intellectual property
security agreement entered into between Borrower and Bank without first
obtaining Borrower's approval of or signature to such modification by amending
Exhibits A, B, and C, thereof, as appropriate, to include reference to any
right, title or interest in any Copyrights, Patents or Trademarks acquired by
Borrower after the execution hereof or to delete any reference to any right,
title or interest in any Copyrights, Patents or Trademarks in which Borrower no
longer has or claims to have any right, title or interest; (h) to file, in its
sole discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of Borrower
where permitted by law; and (i) to transfer the Intellectual Property Collateral
into the name of Bank or a third party to the extent permitted under the
California Uniform Commercial Code; provided Bank may exercise such power of
attorney to sign the name of Borrower on any of the documents described in
Section 4.2 regardless of whether an Event of Default has occurred. The
appointment of Bank as Borrower's attorney in fact, and each and every one of
Bank's rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully repaid and performed and Bank's
obligation to provide advances hereunder is terminated.

            9.3  Accounts Collection. Subject to Section 6.3, upon the
occurrence and during the continuation of an Event of Default, Bank may notify
any Person owing funds to Borrower of Bank's security interest in such funds and
verify the amount of such Account. Upon the occurrence and during the
continuation of an Event of Default, Borrower shall collect all amounts owing to
Borrower for Bank, receive in trust all payments as Bank's trustee, and
immediately deliver such payments to Bank in their original form as received
from the account debtor, with proper endorsements for deposit.

            9.4  Bank Expenses. Effective only upon the occurrence and during
the continuance of an Event of Default, if Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves under the Revolving Facility as Bank deems necessary to protect Bank
from the exposure created by such failure; or (c) obtain and maintain insurance
policies of the type discussed in Section 6.6 of this Agreement, and take any
action with respect to such policies as Bank deems prudent. Any amounts so paid
or deposited by Bank shall constitute Bank Expenses, shall be immediately due
and payable, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the future
or a waiver by Bank of any Event of Default under this Agreement.

                                       17

<PAGE>   18

            9.5  Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.

            9.6  Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.

            9.7  Demand; Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.

     10.    NOTICES

            Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:

     If to Borrower:                ILX Lightwave Corporation
                                    31950 E. Frontage Road
                                    Bozeman, MT 59771
                                    Attn:  Larry Johnson
                                    FAX:  (406) 586-9405

     If to Bank:                    Silicon Valley Bank
                                    4430 Arapahoe Avenue, Suite 225
                                    Boulder, CO  80303
                                    Attn:  Mike Devery / Megan Varveris
                                    Fax:  (303) 938-0486

     The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.

     11.    CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER

            The Loan Documents shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

                                       18

<PAGE>   19

     12.    GENERAL PROVISIONS

            12.1  Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.

            12.2  Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.

            12.3  Time of Essence. Time is of the essence for the performance of
all obligations set forth in this Agreement.

            12.4  Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.

            12.5  Amendments in Writing, Integration. This Agreement cannot be
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.

            12.6  Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.

            12.7  Survival. All covenants, representations and warranties made
in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.

                                       19
<PAGE>   20

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

                                           ILX LIGHTWAVE CORPORATION

                                           By:
                                               ---------------------------------

                                           Title:
                                                  ------------------------------

                                           SILICON VALLEY BANK

                                           By:
                                               ---------------------------------

                                           Title:
                                                  ------------------------------

                                       20
<PAGE>   21

                                    EXHIBIT A

                        COLLATERAL DESCRIPTION ATTACHMENT
                         TO LOAN AND SECURITY AGREEMENT

The Collateral shall consist of all right, title and interest of Borrower in and
to the following:

                  (i)   All goods and equipment now owned or hereafter acquired,
including, without limitation, all machinery, fixtures, vehicles (including
motor vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;

                  (ii)  All inventory, now owned or hereafter acquired,
including, without limitation, all merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products including
such inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;

                  (iii) All contract rights and general intangibles now owned or
hereafter acquired, including, without limitation, goodwill, trademarks,
servicemarks, trade styles, trade names, patents, patent applications, leases,
license agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;

                  (iv)  All now existing and hereafter arising accounts,
contract rights, royalties, license rights and all other forms of obligations
owing to Borrower arising out of the sale or lease of goods, the licensing of
technology or the rendering of services by Borrower, whether or not earned by
performance, and any and all credit insurance, guaranties, and other security
therefor, as well as all merchandise returned to or reclaimed by Borrower and
Borrower's Books relating to any of the foregoing;

                  (v)   All documents, cash, deposit accounts, securities,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrower's Books relating to the foregoing;

                  (vi)  All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and

                  (vii) Any and all claims, rights and interests in any of the
above and all substitutions for, additions and accessions to and proceeds
thereof.

                                       21
<PAGE>   22

                                 FIRST AMENDMENT
                                       TO
                           LOAN AND SECURITY AGREEMENT

         This First Amendment to Loan and Security Agreement is entered into as
of March 23, 2000 (the "Amendment"), by and between SILICON VALLEY BANK ("Bank")
and ILX LIGHTWAVE CORPORATION ("Borrower").

                                    RECITALS

         Borrower and Bank are parties to that certain Loan and Security
Agreement dated as of July 27, 1999, as amended (the "Agreement"). The parties
desire to amend the Agreement in accordance with the terms of this Amendment.

         NOW, THEREFORE, the parties agree as follows:

         1.       Certain defined terms in Section 1.1 of the Agreement are
hereby added or amended to read as follows:

                  "Capitalized Product Development Costs" are all costs
         associated with the development of Borrower's product, including, but
         not limited to software, that are not recorded as an expense and have
         been classified as an asset account.

                  "Committed Revolving Line" means a credit extension of up to
         Two Million Dollars ($2,000,000).

                  "Credit Extension" means each Advance, Term Advance or any
         other extension of credit by Bank for the benefit of Borrower
         hereunder.

                  "Debt Service Coverage" means, as of any date of
         determination, a ratio of earnings after tax less Capitalized Product
         Development Costs plus interest, depreciation and amortization for the
         preceding quarter on an annualized basis to current maturities of long
         term debt and capitalized leases, plus interest expense annualized.

                  "Term Line" means a credit extension of up to One Million Four
         Hundred Thousand Dollars ($1,400,000).

                  "Term Maturity Date" means April 30, 2003.

                  "Revolving Maturity Date" means March 22, 2001.

         2.       A new Section 2.1.2 is hereby added to the Agreement to read
         as follows:

                           2.1.2    Term Loan.

                           (a) Subject to and upon the terms and conditions of
         this Agreement, at any time from the date hereof through April 30,
         2000, Bank agrees to make an advance (the "Term Advance") to Borrower
         in an amount not in excess of the Term Line.

                           (b) Interest shall accrue from the date of the Term
         Advance at the rate specified in Section 2.3(a). The Term Advance shall
         be payable in thirty-six (36) equal monthly installments of principal,
         plus all accrued interest, beginning on May 31, 2000, and continuing on
         the last day of each month thereafter through the Term Maturity Date,
         at which time all amounts due under this Section 2.1.2 shall be
         immediately due and payable. Once repaid, neither the Term Advance nor
         any portion thereof may be reborrowed. Borrower may prepay the Term
         Advance without penalty or premium.

                                       1
<PAGE>   23

                           (c) When Borrower desires to obtain the Term Advance,
         Borrower shall notify Bank (which notice shall be irrevocable) by
         facsimile transmission to be received no later than 4:00 p.m. Colorado
         time one (1) Business Day before the day on which the Term Advance is
         to be made. Such notice shall be substantially in the form of Exhibit
         B. The notice shall be signed by a Responsible Officer or its designee.

         3.       Section 2.3(a) is hereby amended in its entirety to read as
follows:

                           (a)      Interest Rates.

                                    (i)     Advances.  Except as set forth in
         Section 2.3(b), the Advances shall bear interest, on the outstanding
         daily balance thereof, at a rate equal to three quarters percent
         (0.75%) above the Prime Rate.

                                    (ii)    Term Advance.  Except as set forth
         in Section 2.3(b), the Term Advance shall bear interest, on the
         outstanding daily balance thereof, at a rate equal to one and one half
         percent (1.50%) above the Prime Rate.

         4.       The first sentence of Section 2.3(c) of the Agreement is
hereby amended in its entirety to read as follows: "Interest hereunder shall be
due and payable on the last calendar day of each month during the term hereof."

         5.       The first sentence of Section 2.7 is hereby amended in its
entirety to read as follows: "This Agreement shall become effective on the
Closing Date and, subject to Section 12.7, shall continue in full force and
effect for a term ending on the Term Maturity Date."

         6.       Section 6.8 is hereby amended in its entirety to read as
follows:

                  6.8      Quick Ratio. Borrower shall maintain, as of the last
         day of each calendar month through the month ending on February 28,
         2001, a ratio of Quick Assets to Current Liabilities of at least 1.25
         to 1.00. Borrower shall maintain, as of the last day of each calendar
         month thereafter, a ratio of Quick Assets to Current Liabilities of at
         least 1.50 to 1.00.

         7.       Sections 6.9 and 6.10 are hereby amended in their entirety to
read as follows:

                  6.9      Tangible Net Worth. As of the Closing Date, Borrower
         shall maintain, as of the last day of each calendar month, a Tangible
         Net Worth of not less than Four Million Dollars ($4,000,000) plus
         thirty-five percent (35%) of Borrower's quarterly net income after
         March 23, 2000.

                  6.10     Profitability. Borrower shall show a profit of at
         least One Dollar ($1.00) for each fiscal quarter.

         8.       A new Section 6.13 is hereby added to the Agreement to read as
follows:

                  6.13     Debt Service Coverage. Borrower shall maintain a Debt
         Service Coverage of at least 2.0 to 1.0 as of the last day of each
         quarter.

         9.       Section 7.6 of the Agreement is hereby amended in its entirety
to read as follows:

                  7.6      Distributions. Pay any dividends or make any other
         distribution or payment on account of or in redemption, retirement or
         purchase of any capital stock. Notwithstanding the foregoing, Borrower
         may (i) acquire capital stock or property of another Person in an
         aggregate amount not to exceed ten percent (10%) of Borrower's Tangible
         Net Worth and (ii) repurchase its own capital stock in an aggregate
         amount not to exceed One Million Four Hundred Fifty Thousand Dollars
         ($1,450,000), as long as an Event

                                       2

<PAGE>   24

         of Default does not exist prior to any such repurchase or acquisition
         and would not exist after giving effect to any such repurchase or
         acquisition.

         10. The Compliance Certificate to be delivered after the date of this
Amendment shall be in substantially the form of Exhibit D hereto.

         11. Borrower hereby acknowledges and agrees that the next audit of
Borrower's Accounts pursuant to Section 6.3 will be due in July of 2000.

         12. Unless otherwise defined, all capitalized terms in this Amendment
shall be as defined in the Agreement. Except as amended, the Agreement remains
in full force and effect.

         13. Borrower represents and warrants that the representations and
warranties contained in the Agreement are true and correct as of the date of
this Amendment, and that no Event of Default has occurred and is continuing.

         14. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument.

         15. As a condition to the effectiveness of this Amendment, Bank shall
have received, in form and substance satisfactory to Bank, the following:

             (a) this Amendment, duly executed by Borrower;

             (b) a non-refundable loan fee of Twelve Thousand Six Hundred
Twenty-Five Dollars ($12,625), plus all Bank Expenses incurred through the date
of this Amendment including reasonable attorneys' fees and expenses not to
exceed Two Thousand Dollars ($2,000);

             (c) Corporate Resolutions to Borrow; and

             (d) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.

                                       3
<PAGE>   25

         IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the first date above written.

                                        ILX LIGHTWAVE CORPORATION

                                        By:
                                           -------------------------------------
                                        Title:
                                              ----------------------------------

                                        SILICON VALLEY BANK

                                        By:
                                           -------------------------------------
                                        Title:
                                              ----------------------------------

                                       4Exhibit 10(e)

                              EMPLOYMENT AGREEMENT
                              --------------------

THIS  EMPLOYMENT  AGREEMENT  ("Agreement")  effective as of the 3rd day of April
2000 (the "Effective Date")

BETWEEN                              E-Z-EM, Inc., with its principal office at
                                     717 Main Street
                                     Westbury, N.Y.  11590

                                     (hereinafter referred to as the "Company")

AND                                  Anthony A. Lombardo, having an address at
                                     801 North Ponderosa Drive
                                     Hartland, WI 53029-8640

                                     (hereinafter referred to as the "Employee")

                                   WITNESSETH

     WHEREAS,  the Company is in the business of (i) developing,  manufacturing,
marketing, selling and distributing medical products and medical devices for use
in the imaging  field,  including but not limited to  gastrointestinal  contrast
agents and associated  devices,  and other products for the fields of diagnostic
and  interventional   radiology  and  gastroenterology,   and  (ii)  developing,
manufacturing,  marketing,  selling  and  distributing  H. Pylori  products  and
associated devices for digestive disease diagnosis and treatment,  ((i) and (ii)
collectively  the  "Imaging  Division")  and  (iii)  developing,  manufacturing,
marketing,  selling and distributing therapeutic and diagnostic products for use
in the cardiovascular and peripheral  vascular field and associated devices (the
"Angiographic  Division") and engaging in activities relating thereto ((i), (ii)
and (iii) collectively the "Business");

     WHEREAS,  the Company  recognizes the unique  qualifications  and potential
contributions of the Employee and desires to secure the services of the Employee
on an exclusive basis on the terms and conditions set forth herein; and

     WHEREAS,  the Employee is prepared to commit to such exclusive  services in
return for specific arrangements on compensation and other benefits on the terms
and conditions set forth herein.

     NOW,  THEREFORE,  in consideration of the foregoing premises and the mutual
covenants  and  agreements  herein  contained,  the Company and the  Employee do
hereby agree as follows:

1    SCOPE OF EMPLOYMENT
     -------------------

     1.1 Subject to the terms and conditions  hereof, the Company hereby employs
the Employee to render  services to the Company as President and Chief Executive
Officer,  subject to the direction of the Board of Directors of the Company (the
"Board") or any committee thereof.  Subject to the foregoing, the Employee shall
be responsible, consistent with his position, for all aspects of the management,
business,   personnel,   activities   and   affairs  of  the   Company  as  such
responsibilities reasonably are defined by the Board from time to time.

                                      -68-
<PAGE>

     1.2 The Employee  hereby accepts such  employment and agrees  faithfully to
render the services  described above and to promote the interests of the Company
to the best of his  ability.  The  Employee  further  agrees to devote  his full
working time, attention, skill and best efforts to the performance of his duties
under this  Agreement.  The Employee  shall not engage in any other  business or
occupation  during the term of this Agreement  without the prior written consent
of the Board, which consent the Board may withhold in its sole discretion.

     1.3 The Employee shall have such power and authority,  consistent  with his
position,  as shall  reasonably  be required to enable him to perform his duties
hereunder in an efficient  manner,  provided that in  exercising  such power and
authority and  performing  such duties,  he shall at all times be subject to the
authority  and control of the Board or any  committee  thereof and shall  report
directly to the Board.

     1.4 The Employee  shall  perform his duties  hereunder  principally  at the
Company's offices at 717 Main Street, Westbury, N.Y., provided, however, that he
will be required to travel and render services in different locations, from time
to time as appropriate in connection with the performance of such duties.

     1.5  Throughout the term of this  Agreement,  the Company agrees to seek to
cause the  Employee  to be elected to the Board.  Upon the  termination  of this
Agreement  for any reason,  the Employee  shall be deemed to have  automatically
resigned from any position he may then hold on the Board. Such resignation shall
be  deemed  effective   immediately  without  the  requirement  that  a  written
resignation be delivered.

2    TERM OF EMPLOYMENT
     ------------------

     This Agreement shall continue until terminated by either the Company or the
Employee in accordance with the terms and conditions contained herein.

3    COMPENSATION, BENEFITS AND VACATION
     -----------------------------------

     3.1  The  Company  agrees  to pay  the  Employee,  during  the  term of his
employment,  a base salary of Two Hundred Fifty Thousand Dollars  ($250,000) per
year of employment  (the "Base  Salary").  Base Salary shall be payable in equal
installments on a monthly basis,  less such deductions or amounts to be withheld
as shall be required by  applicable  law and  regulations.  The Company shall be
under no obligation to increase the Base Salary,  but may review the  Employee's
Base Salary at its sole discretion.

     3.2 The Employee  shall be eligible for an annual bonus (the "Bonus") of up
to Fifty percent (50%) of the Base Salary during each fiscal year.

          A.   The Bonus,  if any,  shall be calculated  in accordance  with the
               following:

          1.   The Employee shall  participate in the Company's  Executive Bonus
               Cash Compensation Program ("Bonus Compensation  Program") (a copy
               of which is  attached  herewith  as  Exhibit  A)(or as such Bonus
               Compensation   Program  may  be   uniformly   modified   for  all
               participants  from  time  to  time  by  the  Board  in  its  sole
               discretion),  and, except as provided herein,  in accordance with
               the terms and conditions of the Bonus Compensation  Program shall
               be  eligible  to receive an annual cash bonus of up to Thirty Six
               percent   (36%)  of  the  Base  Salary  based  upon  the  Imaging
               Division's  operating  income  results as  compared  to the Board
               approved  budgeted  operating  income  results  for  the  Imaging
               Division in the applicable  fiscal year, such Bonus to be paid on
               a quarterly basis in accordance with the terms and

                                      -69-
<PAGE>

               conditions of the Bonus Compensation  Program. For the first year
               of Employee's  participation in the Bonus  Compensation  Program,
               Employee  shall be  guaranteed  a cash  Bonus  equal  to  fifteen
               percent  (15%) of the Base Salary which amount shall be paid on a
               quarterly   basis.   If  during  the  first  year  of  Employee's
               participation  in the Bonus  Compensation  Program,  the Employee
               earns  any  amount of the  Bonus  under  the  Bonus  Compensation
               Program, such amount shall be first offset against the guaranteed
               fifteen percent (15%).

          2.   The Board, in its sole discretion, may elect to cause the Company
               to award to  Employee  a  discretionary  Bonus for the  preceding
               fiscal year, in the form of stock grants equal in amount to up to
               Fourteen  (14%)  percent  of  the  Base  Salary   ("Discretionary
               Bonus"). The stock grants shall be in the form of Company Class B
               Common  Stock and the value of each share shall be based upon the
               closing price of a share of the Company's Class B Common stock as
               listed  on the  American  Stock  Exchange  (AMEX)  or such  other
               exchange  or market as the  Company may decide on the last day of
               each fiscal  year.  (The  Company's  1983 Stock Option Plan shall
               have no application with respect to any stock granted pursuant to
               the  Discretionary  Bonus).  Any stock  granted  pursuant  to the
               Discretionary  Bonus shall be subject to the  applicable  Federal
               Securities Laws. Such Discretionary  Bonus, if any, to be awarded
               within  one  hundred  and  twenty  (120)  days of the end of each
               fiscal  year.  Such  Discretionary  Bonus  to be  awarded  at the
               determination  of the Board, in its sole and absolute  judgement,
               based  upon  the  Employee's  and the  Company's  achievement  of
               certain pre-determined goals, such goals to be established by the
               Board in concert with the  Employee in writing  within Sixty (60)
               days of the commencement of each fiscal year.

     The  Employee  shall not be  eligible  to  participate  in either the Bonus
Compensation  Program or the  Discretionary  Bonus until the commencement of the
Company's fiscal year 2001 (June 1, 2000-May 31, 2001,  hereinafter "Fiscal Year
2001").

     In the event this Agreement is terminated by the Company for Cause, as such
term is  defined  in  Section 4 of this  Agreement,  the  Employee  shall not be
eligible  for the Bonus or any  escrowed  or  accrued  Bonus.  In the event this
Agreement is  terminated by the Company  without  Cause or by the Employee,  the
Employee  shall only be eligible to receive that  portion of the Bonus,  if any,
that was earned  during the most recent  completed  fiscal  quarter prior to the
date of termination of this Agreement under the Bonus  Compensation  Program and
shall not be eligible  for any other  Bonus,  including,  but not limited to the
Discretionary Bonus.

     3.3 The Company  hereby grants to Employee  non-qualified  stock options to
purchase Three Hundred  Thousand  (300,000) shares of the Company's Class B non-
voting stock subject,  except as provided herein, to the terms and conditions of
the E-Z-EM, Inc. 1983 Stock Option Plan (the "Plan"). The exercise price of such
stock options shall be the closing  market price (as  determined on the American
Stock Exchange) on the Effective Date. The stock options shall vest at a rate of
Seventy Five Thousand  (75,000)  shares per complete year  commencing on the one
(1) year  anniversary  of the Effective Date and continuing for each of the next
three annual anniversary dates thereafter, subject to the forfeiture as provided
in the Plan or in this Agreement.

                                      -70-
<PAGE>

     3.4 The Company  shall pay or reimburse  the  Employee  for all  reasonable
expenses  actually  and  properly  (in  accordance  with the  Company's  policy)
incurred or paid by him in connection with the performance of his services under
this Agreement upon presentation of expense statements or vouchers or such other
supporting  documentation  in such form and containing  such  information as the
Company may from time to time reasonably require.

     3.5 The  Employee  shall be  entitled  to four (4)  weeks of paid  vacation
during each fiscal year of employment with the Company,  provided,  however that
the Employee  shall not be eligible for any vacation until the  commencement  of
Fiscal Year 2001. Vacation time shall not accrue and, may not be carried forward
to future years.

     3.6  The  Company  shall  provide  the  Employee  with  health,   accident,
disability  and life  insurance in  accordance  with its  standard  policies for
Company executives as adopted from time to time by the Board.

     3.7 The  Company  shall enter into a Change in Control  Agreement  with the
Employee, a copy of which is attached herewith as Exhibit B.

     3.8 The Employee  agrees to relocate his residence to a location within the
greater New York metropolitan area,  including  Connecticut and New Jersey ("New
York Area") no later than October 1, 2000.  The Company  agrees to reimburse the
Employee for the expenses  associated with the relocation  from Hartland,  WI to
the New York Area in accordance with the following:

     a.   The  Company  will pay for the  moving of the  Employee's  belongings,
          which includes the packing and unpacking of the Employee's belongings.
          The Employee  shall be required to obtain three (3) bids from national
          moving  companies  for the costs of such move,  and the lowest of such
          bids shall be accepted.

     b.   The  Company  shall  pay  the   reasonable   cost  of  travel,   hotel
          accommodations  and meals for two house hunting trips for the Employee
          and the Employee's spouse.

     c.   The Company shall also pay the Employee an amount of money  equivalent
          to his Base Salary for one (1) month for  miscellaneous and incidental
          items  associated  with  the  move.  This  amount  will be paid to the
          Employee  within  thirty  (30)  days  after  the  closing  of the  new
          residence in the New York Area.

     d.   The Company  agrees to pay the sales  commission or other fee, if any,
          due to a real  estate  agent or broker for the sale of the  Employee's
          home residence  located at 801 North Ponderosa  Drive,  Hartland,  WI,
          such  commission or fee not to exceed the customary  amount charged in
          Hartland,  WI by a real estate agent or broker in connection  with the
          sale of a residence.

     e.   Notwithstanding  anything herein to the contrary, the aggregate amount
          payable by the Company  pursuant  to Sections  3.8 a, b, c and d shall
          not exceed One Hundred Thousand Dollars  ($100,000) and any costs over
          such One Hundred Thousand Dollar  ($100,000)  amount shall be the sole
          obligation of the Employee.

     3.9 In order to assist the Employee with the purchase of a new residence in
the New York  Area,  the  Company  agrees to  provide a second  mortgage  to the
Employee, subject to the following:

     a.   The Company agrees to provide a second mortgage of up to three hundred
          thousand dollars ($300,000). The interest rate on the

                                      -71-
<PAGE>

          mortgage shall be the applicable  federal rate in effect under Section
          1274 (d) of the Internal Revenue Code of 1986, as amended, in order to
          ensure that the Employee does not incur any imputed  interest  income.
          The  amount  of the  second  mortgage  shall be the  lesser of (i) the
          excess  of the  purchase  price of the new  home in the New York  Area
          ("New Home") as evidenced by the closing documents over the sale price
          of the Employee's residence at 801 North Ponderosa Drive, Hartland, WI
          as evidenced by the closing  documents or (ii) three hundred  thousand
          dollars  ($300,000).  The Company and the Employee  shall enter into a
          mortgage  agreement  ("Mortgage  Agreement")  which shall  include the
          terms and conditions as set forth herein.

     b.   For the  first  five (5) years  following  the  disbursement  of funds
          pursuant to the Mortgage  Agreement (the "Funding Date"), the Employee
          shall only be  obligated  to pay  accrued  and unpaid  interest on the
          outstanding principal balance of the mortgage on an annual basis. Such
          annual  payments shall be due on each  anniversary of the Funding Date
          for the first five years.  Commencing on the sixth  anniversary of the
          Funding Date and continuing on the next three (3) anniversaries of the
          Funding Date  thereafter,  the Employee shall pay the Company  accrued
          and unpaid  interest plus ten percent  (10%) of the initial  principal
          amount of the mortgage.  On the tenth  anniversary of the Funding Date
          the  Employee  shall  repay  the  Company  the  remaining  outstanding
          principal amount of the mortgage plus any accrued and unpaid interest.
          At any time during the term of the  Mortgage  Agreement,  the Employee
          may elect to repay the entire  amount,  or a portion  thereof,  of the
          outstanding  principal amount of the mortgage without penalty.  At any
          time during the term of the Mortgage Agreement,  if the Employee sells
          the New Home,  the  Employee  shall  repay the  outstanding  principal
          amount  of  the  mortgage   plus  all  accrued  and  unpaid   interest
          immediately upon the closing of the sale of the New Home.

     c.   If the  Employee's  employment  with the Company is terminated for any
          reason,  whether by the Company or by the Employee, the Employee shall
          repay  the  outstanding  principal  amount  of the  mortgage  plus all
          accrued and unpaid  interest within eighteen (18) months from the date
          of such termination;  provided, however that if the Employee sells the
          New Home at any time  during  such  eighteen  (18) month  period,  the
          Employee shall repay the outstanding  principal amount of the mortgage
          plus all accrued and unpaid interest  immediately  upon the closing of
          the sale of the New Home.

     3.10 The Company shall provide,  at no cost to the Employee,  housing at 21
Willets Road, Old Westbury, NY from the Effective Date until October 1, 2000.

     3.11 The  Company  shall pay the  reasonable  transportation  costs for the
Employee to travel to and from Hartland, WI each weekend from the Effective Date
until such time as his family  permanently  relocates to the New York Area or by
October  1,  2000,  whichever  is  sooner.  The  Employee  agrees  to  take  the
appropriate  action in order to  obtain,  where  commercially  available  to the
public,   a  discounted   economy   advanced   purchase   ticket  price  on  any
transportation  in connection  with any travel pursuant to this Section 3.11. In
the event that any  payments  made by the Company  pursuant to this Section 3.11
results in any federal,  state or local tax  liabilities  to the  Employee,  the
Company agrees to reimburse the Employee for such tax payments.

     3.12 The Company shall  provide the Employee,  at no cost, an automobile in
accordance with the Company's standard  automobile policy for Company executives
as adopted from time to time by the Board.

                                      -72-
<PAGE>

4    TERMINATION
     -----------

     4.1 Notwithstanding anything contained herein to the contrary, it is agreed
that this  Agreement may be  terminated  without cause upon the giving of thirty
(30) days  written  notice by the Company to the Employee or the Employee to the
Company.

     4.2 This Agreement shall automatically terminate upon the occurrence of the
first to occur of the following events or conditions:

          (a)  the death of the Employee; or

          (b)  the  delivery  by the Company to the  Employee of written  notice
               that his employment is terminated for "disability" (as defined in
               Section 4.3 hereof); or

          (c)  the  delivery  by the Company to the  Employee of written  notice
               that his  employment  is  terminated  for  "cause" (as defined in
               Section 4.4 hereof).

     4.3  "Disability"  shall mean the good faith  determination  by the Company
that by reason of a physical or mental illness the Employee is unable to perform
the essential functions of his position as contemplated by this Agreement,  with
or without reasonable accommodations by the Company, continuing for more than 60
consecutive  business  days or for more than an aggregate of 90 business days in
any  period  of  365  days.  Such  determination   shall  not  be  arbitrary  or
unreasonable,  and the Company  shall take into  consideration  the opinion of a
physician  retained by the  Company,  if  reasonably  available,  as well as the
applicable  provisions,  if any, of the Americans with  Disabilities Act. In the
event this  Agreement  is  terminated  pursuant to Section 4.2 (b),  the Company
shall be obligated to continue to pay the  compensation  provided for in Section
3.1 to the  Employee  until the end of the  Company's  fiscal  year in which the
Company  provides  notice to the Employee  that this  Agreement  is  terminated.
During  the  period  of time that the  Company  agrees  to  continue  to pay the
Employee as set forth in Section 4.3, any disability insurance that the Employee
receives  under  the  Company's  disability  plan  shall be offset  against  any
payments made by the Company pursuant to Section 4.3.

     4.4 As used herein "Cause" shall mean the following:

     (i) the  good  faith  determination  by the  Company  that  there  has been
     continued neglect by the Employee of his duties hereunder;

     (ii) the good  faith  determination  by the  Company  that  there  has been
     willful   misconduct  on  the  Employee's   part  in  connection  with  the
     performance of such duties;

     (iii) any willful  violation of any express direction or rule or regulation
     established by the Board;

     (iv)  Employee's  failure  to  relocate  to the New York Area by October 1,
     2000;

     (v) any commission of any act of fraud,  embezzlement  or dishonesty by the
     Employee;

     (vi) the  commission  by the Employee of a crime or offense  amounting to a
     felony or a crime involving moral turpitude or theft.

     Provided,  however that prior to  terminating  this  Agreement  for "Cause"
pursuant to Section 4.4 (i) and (ii), the Company shall provide the Employee

                                      -73-
<PAGE>

with written notice of the continued neglect or willful misconduct in reasonable
detail and the Employee  shall have ten (10) days from receipt of such notice to
cure such neglect or misconduct to the  reasonable  satisfaction  of the Company
and such termination shall be effective upon the Employee's failure to cure such
neglect or misconduct within such ten (10) days period. Notwithstanding anything
herein to the  contrary,  the Employee  shall only be entitled to one notice and
cure  period  during any  twelve  (12) month  period of  employment  for any act
constituting  continued neglect and one notice and cure period during any twelve
(12) month period of employment for any act constituting willful misconduct.

     4.5 If the  Employee's  employment  hereunder is  terminated by the Company
pursuant to Section 4.1 without  cause,  he shall be entitled to  severance  pay
equal to one (1) years  Base  Salary,  payable  in  twelve  (12)  equal  monthly
installments on the first regular pay day of each fiscal month commencing in the
first fiscal  month  following  termination.  If following  the  termination  of
Employee by the Company pursuant to Section 4.1 of this Agreement,  the Employee
breaches any provisions of Section 5 of this  Agreement,  the obligations of the
Company  to  make  payments  pursuant  to this  Section  4.5  shall  immediately
terminate.  Except as provided in Section 4.5 and 3.2, the Employee shall not be
entitled to any severance pay or to any other compensation,  payments or benefit
(by way of salary,  bonus,  stock  options,  damages or otherwise) of any nature
relating  to this  Agreement  or  otherwise  relating  to or arising  out of his
employment  by the  Company,  for  any  period  subsequent  to the  date of such
termination. Furthermore, upon the termination of this Agreement, the applicable
provisions of the Plan will apply to any stock option, provided, however that in
the event this Agreement is terminated, any and all unvested stock options shall
immediately  expire and the Employee shall return all documents  evidencing such
options to the Company.

5    EMPLOYMENT AND POST EMPLOYMENT RESTRICTIONS
     -------------------------------------------

     5.1 Employee acknowledges that the Company's Business is highly specialized
and operates in a competitive  market, and that in rendering his services to the
Company  the  Employee  has had or will  have  access to or will be  exposed  to
valuable trade secrets, and confidential and proprietary  information  belonging
to the  Company.  Because  of the nature of the  Business,  the  Company  may be
unfairly harmed by certain activities of its present and former employees. These
activities may include  disclosure or use of trade secrets or  confidential  and
proprietary information,  entering into or participating in a competing business
of the Company,  appropriating or diverting business or customers of the Company
and inducing  employees of the Company to leave the  employment  of the Company,
all of which are in violation of recognized employee obligations.  Employees may
be able to do these  unfair acts  because of  information  which was learned and
contacts which were made while in the employment of the Company.  Therefore, the
Company  desires to protect itself by requiring that certain persons working for
it  agree  to  reasonable  restrictions  concerning  their  employment  and post
employment  activities.  These restrictions are necessarily  designed to prevent
harm to the Company (as well as to other employees of the Company whose business
or  compensation  depends upon the continuous  success of the business)  through
indirect methods as well as through direct activities.

     5.2 For the reasons set forth above, and in consideration of the salary and
other compensation and benefits received and to be received by the Employee, the
Employee agrees as follows:

     (a) The Employee agrees that during the period of his employment under this
     Agreement and for a period of twelve (12) months  following the termination
     of this Agreement for any reason, he shall not in any state or territory of
     the United  States in which the  Company  conducts  business,  directly  or
     indirectly, own, manage, operate, control, be employed by, be a shareholder
     of, be an officer of, participate in, contract with or be

                                      -74-
<PAGE>

     connected in any capacity or any manner with any business  that directly or
     indirectly  (whether through related companies or otherwise)  manufactures,
     develops,  designs,  distributes,  sells, or markets any product, device or
     equipment  substantially similar to any product,  device or equipment which
     at the time during the term of Employee's employment has been manufactured,
     marketed,  sold, or  distributed  by the Company or any product,  device or
     equipment  which  the  Company  was  developing  or  designing  during  the
     Employee's  employment with the Company for future manufacture,  marketing,
     sale or distribution;  provided, however that nothing herein shall prohibit
     the Employee from owning, directly or indirectly, as a passive investor, in
     the aggregate not more than one percent (1%) of the outstanding  publically
     traded stock of any company that competes with the Company in the Business.

     (b) The Employee agrees that during the period of his employment under this
     Agreement and for a period of twelve (12) months  following the termination
     of this  Agreement  for any reason,  he will not,  directly or  indirectly,
     solicit or hire or attempt to solicit or hire any  employee  of the Company
     or otherwise  induce any employee of the Company to leave the employment of
     the Company.

     (c) The Employee agrees that during the period of his employment under this
     Agreement and for a period of twelve (12) months  following the termination
     of this Agreement for any reason, he will not appropriate, divert or assist
     another to  appropriate  or divert any  business or customer  away from the
     Company or attempt to do any of the foregoing.

     (d) The Employee agrees that during the period of his employment under this
     Agreement and  following the  termination  of this  Agreement,  he will not
     disclose,   cause  to  be  disclosed  or  otherwise   allow  the  following
     information to come into the possession of any person or entity (other than
     those  persons  and  entities  that the  Company  has  determined  as being
     entitled   thereto)  or  use  the  following   information,   whether  such
     information  is on the Company's  forms,  memos,  computer disc or tape, or
     otherwise and whether such  information is in written or verbal form: sales
     information, operations information, financial information,  administrative
     information,  research  information,   technical  information,   scientific
     information,  data, designs, formulas, and any other information concerning
     the Company,  its business,  its properties or its affairs that the Company
     deems to be  confidential  or that is  confidential  according  to industry
     practices.  The Employee  understands  and agrees that his  obligations set
     forth herein shall  continue  for so long as any  information  as set forth
     above is deemed confidential and/or proprietary by the Company or according
     to industry practices. The Employee further agrees that upon termination of
     this Agreement for any reason,  he will promptly  return to the Company all
     information of the type described above within his possession or within his
     power  to  control,  including,  without  limitation  all  copies  of  such
     information,  all abstracts of such  information and any other  information
     containing such information in whole or in part.

     (e) The  Employee  agrees to assign and  transfer to the Company his entire
     right,  title and interest in and to any and all  inventions,  discoveries,
     improvements,   innovations,  know-how,  new  ideas,  formulas,  processes,
     techniques or concepts (collectively  "Inventions")  created,  conceived or
     developed by Employee, either solely or jointly with others, arising out of
     or during  the  course  of  employment  with the  Company  relating  to the
     Business  together  with all rights to letters  patent which may be granted
     thereon and that such Inventions shall inure to and be the sole property of
     the Company.  Immediately  upon the making any  Inventions,  Employee shall
     notify the Company thereof and shall thereafter  execute and deliver to the
     Company without further compensation such documents as may be

                                      -75-
<PAGE>

     necessary to prepare and prosecute applications for letters patent upon any
     such  Inventions,  and to assign and transfer to the Company the Employee's
     entire  right,  title and  interest in and to any and all  Inventions.  The
     Employee  agrees that he will cooperate with the Company in connection with
     the foregoing after termination of this Agreement.

     5.3 In the  event  of a  violation  of  Section  5.2,  if the  Employee  is
prevented  by a court  from  committing  any  further  violation,  whether  by a
temporary restraining order, injunction or otherwise, the time periods set forth
in Section 5.2 shall be computed  by  commencing  the periods on the date of the
applicable  court order and  continuing  them from that date for the full period
provided.

     5.4 In the event of a  violation  of  Section  5.2,  the  Company  shall be
entitled to seek injunctive relief in addition to damages and other remedies for
the  violation,  and  additionally,  the Company shall be entitled to reasonable
attorneys' fees and all costs incurred for the enforcement of this Agreement and
the Company shall be relieved of any further  obligation to pay any compensation
or  severance to Employee  and the  Employee  shall have no further  rights with
respect to  benefits,  including  but not  limited to stock  options not already
vested which shall expire, except as is required by law.

     5.5 The Employee shall have the right to request a waiver of all or part of
the  restrictions  contained  in Section 5.2 by  providing  the  Company  with a
written statement  containing all relevant details. The Company may, in its sole
discretion,  waive all or part of the  restrictions  contained in Section 5.2 on
such terms and conditions,  and to such extent,  as it, in its sole  discretion,
deems appropriate. Such waiver must be in writing.

     5.6  Notwithstanding  the termination of this  Agreement,  Section 5 hereof
shall  continue  in full force and effect for the periods of time  provided  for
therein.

6    MISCELLANEOUS
     -------------

     6.1 This Agreement expresses the entire  understanding and agreement of the
parties and supersedes any and all prior agreements and understandings,  whether
written or oral,  relating in any way to the subject  matter of this  Agreement.
This Agreement cannot be modified,  amended or supplemented  except by a written
instrument or instruments executed by each of the parties hereto.

     6.2 All  notices  concerning  this  Agreement  shall be deemed to have been
received two (2) days after being properly sent by commercial  overnight courier
to the address below:

     If to the Company:

                 E-Z-EM, Inc.
                 717 Main Street
                 Westbury, NY 11590
                 Att: Howard Stern, Chairman of the Board

     If to Employee:

                 Anthony A. Lombardo
                 E-Z-EM, Inc.
                 717 Main Street
                 Westbury, NY 11590

                                      -76-
<PAGE>

     6.2 All rights and remedies  herein granted or referred to are  cumulative,
resort to one shall not preclude resort to another. No waiver by either party of
a breach of this Agreement,  or any part hereof,  shall be deemed to be a waiver
of any other prior,  concurrent  or  subsequent  breach of the same or different
provisions of this Agreement.

     6.3 If an action is  commenced  to enforce the  performance  of any part of
this  Agreement,  including,  without  limitation,  any  order or  release  made
hereunder,  the prevailing  party shall be reimbursed by the other party for all
reasonable attorneys' fees and expenses.

     6.4 This Agreement shall be governed by and construed under the laws of the
State of New York.  If any  provision  of this  Agreement  shall be  invalid  or
unenforceable,  this  Agreement  shall be deemed  amended but only to the extent
required to make it valid and enforceable, and this Agreement as thereby amended
shall remain in full force and effect.

     6.5 Employee  represents  and warrants  that Employee is not subject to any
agreement, whether written or oral, contract, order, judgement, or decree of any
kind that would prevent Employee from entering into this Agreement or performing
his duties and obligations hereunder.

     6.6 The section headings appearing in this Agreement are inserted only as a
matter convenience and in no way define,  limit,  construe or describe the scope
or extent of such section or in any way affect such section.

     IN WITNESS  WHEREOF,  the  Company  and the  Employee  have  executed  this
Agreement as of the day and year set forth below.

    E-Z-EM, Inc.

    /s/ Howard S. Stern                             /s/ Anthony A. Lombardo
    --------------------------------                ---------------------------
    Howard S. Stern, Chairman of the                Anthony A. Lombardo
                   Board

    Date: February 23, 2000                         Date: February 23, 2000
         --------------------                            --------------------

                                      -77-

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