Document:

<PAGE>

                                                                   Exhibit 10.17

                             PARTICIPATION AGREEMENT
                             -----------------------

     This Participation Agreement (the "Agreement") is made and executed this
13th day of April, 2001 by and between PNC BANK, NATIONAL ASSOCIATION ("Lender")
with an office at 1600 Market Street, Philadelphia, Pennsylvania 19103, Attn:
Frank Devine, Assistant Vice President, and FARO TECHNOLOGIES, INC., with an
office at 125 Technology Park, Lake Mary, FL 32746, Attn: Dr. Simon Raab,
President and CEO ("Participant").

                                   BACKGROUND
                                   ----------

                  A. Pursuant to the terms and conditions of a certain Loan
Agreement ("Loan Agreement") dated January 28, 1998 and related agreements,
instruments and documents, all as amended from time to time (collectively called
the "Credit Documents"), Lender has made loans, advances, and extensions of
credit ("Line of Credit") to Spatialmetrix Corporation ("Borrower") up to a
current maximum principal outstanding amount of $2,300,000 at any one time.

                  B. Participant acknowledges receipt of copies of the Credit
Documents. All capitalized terms used herein without definition shall have the
respective meanings ascribed thereto in the Credit Documents.

                  C. Contemporaneously herewith, Lender is increasing the
maximum principal amount of the Line of Credit to Three Million Eight Hundred
Thousand ($3,800,000) Dollars. Participant has agreed to purchase and accept and
Lender is willing to sell and transfer to Participant a participating interest
in the Line of Credit subject to the terms and conditions hereinafter set forth.

                  NOW, THEREFORE, with the foregoing Background deemed
incorporated herein and made a part hereof, for good and valuable consideration
the receipt of which is hereby acknowledged, and intending to be legally bound,
the parties hereby covenant and agree as follows:

                  1. Pursuant and subject to the terms hereof, Lender hereby
sells, extends and transfers to Participant and Participant hereby purchases and
accepts from Lender an undivided participating interest in the Line of Credit
("Participation Share") in an amount equal to the lesser of: (i) thirty-nine and
forty-seven one hundredths percent (39.47%) ("Participation Percentage") of the
principal amount of the Line of Credit outstanding on the books of Lender, or
(ii) $1,500,000. Participant's Participation Share shall be sold on a "last out"
basis, meaning the Participant's Participation Share shall only be paid after
Lender's share of the Line of Credit is paid and satisfied in full.

                  2. INTENTIONALLY DELETED.

                  3. Lender shall pay over to Participant from and promptly
after payment to Lender of, the interest actually received by Lender from
Borrower, a sum equal to interest calculated on Participant's actual outstanding
daily Participation Share of the Line of Credit for the period covered by the
interest payment at one quarter percent (.25%) less than the rate(s) per annum
<PAGE>

set forth in the Credit Documents. Participant shall not share in any prepayment
premiums or fees set forth in the Loan Agreement. If Lender should, for any
reason, receive less than the full amount of interest or other compensation due
under the Credit Documents, Participant's share of such interest or compensation
set forth herein shall abate ratably.

                  4. Except as set forth in Section 3 hereof, all amounts paid
to and credited by Lender to the outstanding balance of the Line of Credit
including, without limitation, principal, interest and expenses and including
the proceeds or collections resulting from the realization from or disposition
of any Collateral Security for the Line of Credit shall be applied first (to be
applied to principal, interest and expenses in such order as Lender may elect)
for the benefit of Lender and then second, to Participant. The term "Collateral
Security" as used herein includes Lender's lien on or security interest in all
of Borrower's Collateral (as defined in the Credit Documents) and the amounts
payable under and the proceeds of all other agreements under which any party
other than Borrower becomes liable in any capacity in connection with the Line
of Credit; balances in any bank account (including proceeds of any setoff), or
loss reserve account or other reserve account of Borrower which Lender or
Participant appropriates and applies to or toward the satisfaction of any
liability of Borrower to Lender; and all other property, real or personal,
tangible or intangible, of Borrower or any third party which secures payment of
the Line of Credit. Lender shall hold title to and possession of all Collateral
Security and Credit Documents in its name. Upon payment in full of Lender's
share of the Line of Credit, Participant shall be the full and sole owner of the
Line of Credit, the Credit Documents and all rights and obligations thereunder
in its sole name.

                  5. Lender shall, at all times, have the sole and exclusive
right to service, administer and monitor the Line of Credit, the Collateral
Security and Credit Documents, including without limitation the rights to: (i)
exercise all rights, privileges and options under the Credit Documents,
including the credit judgment with respect to the making of advances and the
determinations to the basis on which and the extent to which advances may be
made, (ii) amend the Credit Documents, (iii) modify or terminate the Line of
Credit or accelerate the Line of Credit, (iv) release, substitute or exchange
any of the Collateral Security, (v) waive nonperformance by Borrower or other
Events of Default, or enforce or refrain from enforcing its rights or remedies
under the Credit Documents, and (vi) compromise claims by or against Borrower or
with respect to any Collateral Security. Participant shall have no right or vote
in connection with Lender's rights set forth above. Notwithstanding the
foregoing, Lender and Participant agree as follows: (a) Lender shall permit
Borrower to draw upon the Line of Credit after the date hereof for up to a
maximum of $1,500,000 for the purposes set forth in Exhibit "A" hereto and made
a part hereof; (b) Lender shall not make any further increases in the maximum
principal amount of the Line of Credit beyond $3,800,000 without the
Participant's prior written consent; (c) Lender shall not release, substitute or
exchange any of the Collateral Security without the Participant's prior written
consent; and (d) Lender shall not extend the time for repayment of the principal
balance of the Line of Credit beyond August 31, 2001 without the Participant's
prior written consent.

                  6. Lender shall have the right to deduct from payments on the
Line of Credit, or collections from or proceeds of Collateral Security, such
funds as may be necessary to pay or reimburse Lender for costs and expenses
incurred by it and not reimbursed by Borrower. All out-of-pocket costs and
out-of-pocket expenses incurred by Lender and not reimbursed by Borrower after
the date hereof in connection with the amendment, administration and enforcement
of the Line
<PAGE>

of Credit and Lender's rights in the Collateral Security (including, without
limitation, reasonable counsel fees and expenditures to preserve and protect the
Collateral Security under, and preserve and defend Lender's rights and interest
under, the Credit Documents) shall be shared by Participant pro rata with Lender
based on Participant's Participation Percentage, however, Participant shall only
be required to reimburse Lender for such out-of-pocket costs and expenses to the
extent Participant has received monies from Lender for application against its
Participation Share. Lender shall not be responsible to Participant for any of
Participant's costs and expenses arising from the interpretation of, amendment
to or enforcement of this Agreement, and neither Participant nor Lender shall be
entitled to share, on a pro rata basis with the other, any costs and expenses
arising from any actions or proceedings brought by Lender or Participant against
the other party.

                  7. Participant has entered into this Agreement solely upon its
own independent investigation and credit analysis and is not relying upon any
information supplied by or any representations made by Lender. Participant shall
continue to make its own analysis and evaluation of Borrower. Lender makes no
representation or warranty and assumes no responsibility with respect to (a) the
financial condition of Borrower, any guarantor or other obligor, or any account
debtor of Borrower; (b) the accuracy, sufficiency or currency of any information
concerning the financial condition, prospects or results of operations of
Borrower; (c) the sufficiency, authenticity, legal effect, validity or
enforceability of the Credit Documents; or (d) the value, condition, location or
quality to the Collateral Security. Lender assumes no responsibility or
liability with respect to the collectibility of the Line of Credit or the
performance by Borrower of any obligation under the Credit Documents.

                  8. During the term of this Agreement, Lender will furnish
Participant with copies of all financial statements and field examination
reports of Borrower and such other financial statements and reports as
Participant may reasonably request. Lender shall promptly provide Participant
with a copy of all correspondence from Lender to Borrower, including without
limitation, demands for payment, notices of default, notices of acceleration,
summons and complaints, and all notices relating to the sale of the Collateral
Security. Lender will promptly notify Participant when it receives notice of or
has actual knowledge of any Event of Default under the Credit Documents.

                  9. (a) Lender shall exercise the same care in accordance with
commercially reasonable practices in administering, servicing and monitoring the
Loan as it exercises with respect to similar transactions involving no
participation. Lender shall exercise its right and options hereunder in a manner
deemed by Lender to be in the best interests of Lender and Participant. Without
limiting the foregoing, Lender may rely on the advice of counsel concerning
legal matters and upon any written statements which it believes to be genuine or
to have been presented by a proper person or entity and shall not be required to
make any inquiry concerning the performance by Borrower of any of its
obligations and liabilities under the Credit Documents or under any other
document or agreement. Lender shall be entitled to rely on any notice, consent,
certificate, affidavit, letter, telegram, teletype message, statement, order or
other document believed by it to be genuine and correct and to have been signed
and sent by the proper person or persons and, in respect of legal matters, upon
an opinion of counsel selected by Lender.
<PAGE>

                           (b) Notwithstanding paragraph 9(a) above, Lender
shall not in any event have any liability whatsoever to Participant except for
Lender's gross negligence, willful misconduct or bad faith.

                  10. (a) In the event that: (a) Lender is required to refund or
repay to Borrower or any other party all or any portion of any principal,
interest or other payment which was paid to Lender after the date of this
Agreement, and (b) Lender remitted all or a portion of such principal, interest
or other payment to Participant pursuant to this Agreement, then Participant
shall remit to Lender, on demand of Lender, such refunded or repaid amounts
actually received by Participant.

                           (b) Participant hereby indemnifies Lender, ratably
according to its Participation Percentage, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever arising after
the date hereof, which may be imposed on, incurred by or asserted against the
Bank in any way relating to or arising out of Lender's execution of, or
compliance with this Agreement or actions taken or omitted by Lender at the
direction of or with the consent of Participant in connection with the terms
hereof, provided that Participant shall not be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the willful misconduct or gross
negligence of Lender. Participant's obligations under this Section shall survive
the termination of the Credit Documents and this Agreement.

                 11. (a) Participant acknowledges and agrees that this Agreement
merely sets forth the terms and conditions under which it is acquiring an
interest in certain loans and extensions of credit made and to be made by Lender
in a commercial loan transaction entered into between Lender and Borrower, and
that this Agreement is therefore not intended to represent and shall not be
deemed to constitute a security. This Agreement and the participation of
Participant in the Line of Credit are not intended to and shall not be deemed to
create or constitute any joint venture or partnership between Participant and
Lender.

                           (b) No amounts paid by Participant hereunder shall be
considered as a loan by Participant to Lender. It is expressly agreed that the
participation herein described is a full-risk, non-recourse participation and
that Participant shall look only to payments received and collected by Lender
from Borrower or from Collateral Security or from any guarantor or other obligor
for repayment of the participation.

                 12. (a) Participant shall not sell, subparticipate, assign,
transfer or pledge all or any portion of its Participation Share in the Line of
Credit, or its rights or obligations hereunder, without the prior written
consent of Lender.

                           (b) Subject to the provisions of Section 13 hereof,
nothing herein contained shall prohibit or restrict Lender from granting other
participations in the Line of Credit to any other party as Lender may, in its
sole discretion, elect. Lender shall provide Participant with prior written
notice of the grant of other participations in the Line of Credit.
<PAGE>

                  13. (a) At any time after the date of this Agreement,
Participant may, but is not obligated to, on ten (10) days' prior written notice
to Lender, terminate this Agreement and tender to Lender, on the effective date
of such termination, an amount of cash or Federal Funds or other funds
immediately available in Philadelphia, Pennsylvania equal to 100% of Lender's
Share in the outstanding balance of the Line of Credit, plus accrued interest as
of the date of such tender. If such tender is duly made, Participant shall
thereupon be deemed to have acquired Lender's entire Share for which such tender
was made and this Agreement shall be terminated, except for obligations existing
under paragraph 10(b) hereof on the date of tender.

                           (b) If Lender has granted a participation in this
Line of Credit to any person other than the Participant (an "Other Participant")
, at any time after the date of this Agreement, Participant may, but is not
obligated to, on ten (10) days' prior written notice to the Other Participant,
terminate this Agreement and tender to the Other Participant, on the effective
date of termination, an amount of cash or Federal Funds or other funds
immediately available in Philadelphia, Pennsylvania, equal to 100% of such Other
Participant's Share in the outstanding balance of the Line of Credit, plus
accrued interest as of the date of such tender. If such tender is duly made,
Participant shall thereupon be deemed to have acquired such Other Participant's
entire Share for which such tender was made and the Participation Agreement
entered into between the Other Participant and Lender shall be terminated. Each
participation agreement entered into by the Lender in which a participation in
the Line of Credit is granted to any Other Participant shall incorporate the
provisions of this Section 13.

                           (c) From and after receipt of written notice from the
Participant of its intention to exercise its option under Section 13(a) hereof,
the Lender shall not take any of the actions described in Section 5(i) through
(vi) without the prior written consent of Participant.

                  14. During the term of this Agreement, Participant shall not
with respect to Borrower, without the prior written consent of Lender, offer,
solicit, negotiate, or otherwise contact Borrower in any manner regarding the
Line of Credit, the Credit Documents, this Agreement or any of the terms of any
of the above, provided however, that Participant is permitted to contact the
Borrower with respect to refinancing of the Line of Credit.

             15.  This Agreement may be executed in counterpart  copies,
each of which shall be deemed a duplicate original hereof.

             16. No modification or waiver of any provision of this Agreement
shall be binding or enforceable unless in writing and signed by the party
against whom enforcement is sought. No rights are intended to be created
hereunder for the benefit of Borrower or any other third party beneficiary.
Notices required or given hereunder shall be sent to the addresses set forth
above either by telecopy, hand delivery against receipt or by a
nationally-recognized overnight courier service on an overnight or next business
day basis and sent to the addresses described on the first page of this
Agreement. Notices shall be effective either immediately upon hand delivery or
one business day after pick-up by express courier.
<PAGE>

             17. This Agreement shall inure to the benefit of Lender and
Participant and their respective successors and assigns. This Agreement shall be
governed by the laws of the Commonwealth of Pennsylvania.

             18. THE PARTICIPANT HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE
RELATING TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE
PARTICIPANT ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.

                  IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed the day and year first above written.

                                              PNC BANK, NATIONAL ASSOCIATION

                                              By:___________________________

                                              Title:________________________

                                              FARO TECHNOLOGIES, INC.

                                              By:___________________________

                                              Title:________________________<PAGE>

                                                                   Exhibit 10.18

                                   AGREEMENT

         THIS AGREEMENT (this "Agreement") is made and effective as of April 13,
2001, by and between SPATIALMETRIX CORPORATION, a Delaware corporation (the
"Borrower") and FARO TECHNOLOGIES, INC., a Florida corporation (the "Lender")

                                 R E C I T A L S
                                 ---------------

         WHEREAS, pursuant to the terms and conditions of a certain Loan
Agreement ("Loan Agreement") dated January 28, 1998 and related agreements,
instruments and documents, all as amended from time to time (collectively called
the "Credit Documents"), PNC Bank, National Association (the "Senior Lender")
has made loans, advances, and extensions of credit ("Line of Credit") to
Borrower up to a current maximum principal outstanding amount of $2,300,000 at
any one time; and

         WHEREAS, contemporaneously herewith, the Lender is entering into a
Participation Agreement (the "Participation Agreement") with the Senior Lender
pursuant to which Lender shall provide $1,500,000 to Senior Lender to increase
the maximum principal amount available under the Line of Credit to Three Million
Eight Hundred Thousand ($3,800,000) Dollars; and

         WHEREAS, Lender is willing to enter into the Participation Agreement in
reliance upon the Borrower's representations, warranties and covenants contained
in this Agreement; and

         WHEREAS, the Borrower has determined that the entry into this Agreement
is in the best interests of the Borrower, and that the additional financing made
available to the Borrower by the Lender's entry into the Participation Agreement
is fair and adequate consideration for this Agreement.

         NOW, THEREFORE, for good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged) and intending to be legally bound
hereby, the Borrower and Lender hereby agree as follows:

                  ARTICLE 1 : REPRESENTATIONS AND WARRANTIES

         Borrower hereby represents and warrants to Lender as set forth in this
Article 1.

     1.1. Corporate Organization. Borrower is a corporation duly organized,
          ----------------------
validly existing and in good standing under the laws of the State of Delaware.
Borrower has all requisite corporate power and authority to own, operate and
lease its properties, to carry on its business as and where such is now being
conducted, to enter into this Agreement and the other documents and instruments
to be executed and delivered by Borrower pursuant hereto and to carry out the
transactions contemplated hereby and thereby. Borrower is duly licensed or
qualified to do business as a foreign corporation, and is in good standing, in
each jurisdiction wherein the character of the properties owned or leased by it,
or the nature of its business, makes such licensing or qualification necessary,
except where the failure to be so qualified would not,
<PAGE>

individually or in the aggregate, have a material adverse effect. Borrower does
not own any interest in any corporation, partnership or other entity.

     1.2. Authority. The execution and delivery of this Agreement and the other
          ---------
documents and instruments to be executed and delivered by Borrower pursuant
hereto and the consummation of the transactions contemplated hereby and thereby
have been duly authorized. Except for any necessary third party consents, which
consents have been obtained, no other or further corporate act or proceeding on
the part of Borrower is necessary to authorize this Agreement or the other
documents and instruments to be executed and delivered by Borrower pursuant
hereto or the consummation of the transactions contemplated hereby and thereby.
This Agreement constitutes, and when executed and delivered, the other documents
and instruments to be executed and delivered by Borrower pursuant hereto will
constitute, valid binding agreements of Borrower, enforceable in accordance with
their respective terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights, and (b) general principles of equity
that restrict the availability of equitable remedies.

     1.3. No Violation. Neither the execution and delivery of this Agreement or
          ------------
the other documents and instruments to be executed and delivered by Borrower
pursuant hereto, nor the consummation by Borrower of the transactions
contemplated hereby and thereby (a) to the knowledge of Borrower will violate
any applicable law, statute, regulation or order of any Official Body, (b)
require any authorization, consent, approval, exemption or other action by or
notice to any Official Body, or (c) subject to obtaining the consents referred
to in Schedule 1.3, will violate or conflict with, or constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, or will result in the termination of, or accelerate the
performance required by, or result in the creation of any Lien upon any of the
assets of Borrower under, any term or provision of the Certificate of
Incorporation or Bylaws of Borrower or of any contract, commitment,
understanding, arrangement, agreement or restriction of any kind or character to
which Borrower is a party or by which Borrower or any of its assets or
properties may be bound or affected.

     1.4. Financial Statements. Included as Schedule 1.4 are true and complete
          ---------------------
copies of the financial statements of Borrower consisting of (i) a balance sheet
of Borrower as of December 31, 1999, and the related statements of income and
cash flows for the year then ended (including the notes contained therein or
annexed thereto), which financial statements have been audited by Arthur
Anderson LLP, independent auditors for Borrower for such year, and (ii) an
unaudited balance sheet of Borrower as of December 31, 2000 (the "Recent Balance
Sheet"), and the related unaudited statements of income for the year then ended
and for the corresponding period of the prior year (including the notes and
schedules contained therein or annexed thereto). All of such financial
statements (including all notes and schedules contained therein or annexed
thereto) are true, complete and accurate, have been prepared in accordance with
generally accepted accounting principles (except, in the case of unaudited
statements, for the absence of footnote disclosure) applied on a consistent
basis, have been prepared in accordance with the books and records of Borrower,
and fairly present, in accordance with generally accepted accounting principles,
the assets, liabilities and financial position, the results of operations and
cash flows of Borrower as of the dates and for the years and periods indicated.
Except as and to the extent set forth in Schedule 1.4, since the date of the
                                         -------------
Recent Balance Sheet there has not been
<PAGE>

any material damage, destruction or loss to Borrower's assets, and no event or
condition has occurred or exists, which has resulted or, to Borrower's
knowledge, could reasonably be expected to result in a material adverse change
to the business, assets, operations, financial condition or results of operation
of the Borrower.

     1.5. Tax Matters. Borrower has duly withheld and paid all taxes which it is
          ------------
required to withhold and pay, including all taxes relating to salaries and other
compensation heretofore paid to the employees of Borrower. Borrower has not
received from the Internal Revenue Service or from the tax authorities of any
state, county, local or other jurisdiction any notice of underpayment of taxes
or other deficiency which has not been paid nor any objection to any return or
report filed by Borrower.

     1.6. No Litigation. Except as set forth in Schedule 1.6 there is no
          --------------                       --------------
litigation pending or, to the knowledge of Borrower, threatened against
Borrower, its directors (in such capacity), its business or any of its assets,
nor does Borrower know, or have grounds to know, of any reasonable basis for any
litigation. Schedule 1.6 also identifies all litigation to which Borrower or any
            -------------
of its directors (in such capacity) have been parties since January 1, 1999.
Except as set forth in Schedule 1.6, to the knowledge of Borrower, neither
                       -------------
Borrower nor its business or assets is subject to any order arising of out any
litigation against or involving the Borrower.

     1.7. Credit Documents. The Credit Documents constitute the legal, valid and
          ----------------
binding obligations of the Borrower, enforceable in accordance with their terms,
except (a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights, and (b) general principles of equity that restrict the
availability of equitable remedies. The Borrower represents that it has no
defenses or set-offs or counterclaims against the Senior Lender, its officers,
directors, employees, agents or attorneys with respect to the Credit Documents
or any matters or course of conduct arising thereunder. Borrower ratifies and
confirms its obligations under the Credit Documents.

                             ARTICLE 2 : COVENANTS

         Borrower covenants and agrees that Borrower will comply with the
covenants set forth in this Article, unless Lender otherwise consents in
writing.

     2.1. Board Observers. Borrower shall permit 2 representatives of Lender
         ----------------
("Lender's Representatives") to attend all meetings of the Board of Directors of
Borrower. Borrower shall provide to Lender's Representatives copies of all
materials presented to members of the Borrower's Board of Directors
simultaneously with presentation to such directors. Lender's Representatives
shall be permitted to address and to ask questions of the Board of Directors,
but shall not have any voting rights. Lender's Representatives shall comply with
all confidentiality and nondisclosure agreements in effect between Borrower and
Lender. Borrower reserves the right to exclude any such Lender Representative
from access to any material or meeting or portion thereof if Borrower believes
that such exclusion is reasonably necessary to preserve attorney-client
privilege or if the discussions concern negotiations with Lender.

     2.2. Exclusivity. The Borrower acknowledges that the Lender has incurred
          ------------
significant expense in its due diligence of the Borrower and its preparation and
negotiation of the this
<PAGE>

Agreement and the Participation Agreement, and proposes to incur additional
expenses in the negotiation of the extension of further credit and possible
acquisition of the Borrower. The Borrower acknowledges that the Lender is
relying upon the Borrower's compliance with this Section in incurring such
expenditures. Until the earliest of (a) 11:59 P.M., Philadelphia time on June
30, 2001, or (b) receipt of written notice from the Lender stating that the
Lender shall not proceed further with negotiations for the acquisition of the
Borrower, neither Borrower nor its officers, directors, or shareholders, without
the prior written consent of the Lender, shall directly or indirectly solicit or
make or entertain any offer or proposal from or to any third party regarding (i)
the sale or possible sale of the Borrower or its assets or discuss in any manner
any such sale with any third party or provide any information concerning any
such sale to any third party or provide any information concerning any such sale
to any third party and/or (ii) the borrowing or possible borrowing of additional
interest-bearing or secured debt from any third person or provide any
information concerning any such borrowing from any third party. Notwithstanding
the foregoing, the Borrower may conduct discussions with other lenders,
including, without limitation, GE Capital, for the refinancing of the Line of
Credit.

     2.3. Use of Proceeds. The Borrower shall use the advances under the Line of
          ----------------
Credit made available by Borrower's entry into the Participation Agreement (the
"New Availability") for the purposes and in the amounts described in Schedule
2.3. Without limiting the generality of the foregoing, the Borrower shall not
use any of the New Availability for any of the following purposes without the
prior written consent of the Lender:

         a. Direct or indirect payments to any of the Borrower's shareholders,
directors or executive officers (other than regular compensation to salaried
employees for services actually rendered at salary rates prevailing prior to the
date of this Agreement); or

         b. Payments to First Union Capital Partners; or

         c. Distributions to shareholders of the Borrower, whether as dividends
or in redemption of stock of the Borrower.

                        ARTICLE 3 : CONDITIONS PRECEDENT

     3.1. Conditions Precedent to Lender's Entry into Participation Agreement.
          -------------------------------------------------------------------
Each of the following are conditions precedent to the entry into the
Participation Agreement by the Lender:

         a. Credit Agreement. The Borrower shall enter into such amendments to
           ------------------
the Credit Agreement and to the loan documents ancillary thereto as the are
required by the Senior Lender and approved by the Borrower.

         b. Representations and Warranties. The representations and warranties
           -------------------------------
contained in this Agreement shall be true, correct and complete.

         c. Organization Documents. Lender shall have received a copy of the
           ------------------------
Certificate of Incorporation of Borrower, and all amendments thereto, certified
by the Secretary of State of Delaware as of a date not earlier than 10 days
before the date of this Agreement.
<PAGE>

         d. Good Standing Certificates. Lender shall have received good standing
           ---------------------------
certificates for Borrower, issued by the Secretary of State of Delaware and by
the Secretary of State of the Commonwealth of Pennsylvania, certified by the
Secretary of State of the Commonwealth of Pennsylvania as of a date not earlier
than 10 days before the date of this Agreement.

         e. Incumbency Certificate. Lender shall have received a certificate
           -------------------------
executed by the Secretary of the Borrower setting forth the names of the
directors and officers of the Borrower, the names of the officers duly
authorized by the Borrower to execute this Agreement and the Credit Documents,
and including a specimen of signatures of officers authorized by the Borrower to
execute and deliver this Agreement and the Credit Documents, and a certified
copy of the resolutions of the Borrower authorizing the transactions herein
contemplated. In addition, the secretary or other appropriate officer of the
Borrower shall certify that there have been no amendments to the Certificate of
Incorporation of the Borrower since the date of its certification by the
Secretary of State, State of Delaware.

         f. Compliance with Laws and Other Agreements. Lender shall have
            ------------------------------------------
determined or received assurances satisfactory to it that none of this
Agreement, the Credit Documents or any of the transactions contemplated thereby
violate any applicable law, court order or agreement binding upon Borrower.

                      ARTICLE 4 : RIGHT OF FIRST REFUSAL

     4.1. Commencement Date;  Definitions.
         -------------------------------

         a. Right of First Refusal Commencement Date. The Right of First Refusal
           ------------------------------------------
set forth in this Article 4 shall commence and be exercisable by the Lender in
accordance with the provisions of this Article 4 from and after the earliest of
the following dates (the "Right of First Refusal Commencement Date"):

         1. On 12:00 A.M., Philadelphia time, July 1, 2001 (or such later date
            as the parties may agree in writing), if the parties have failed to
            enter into mutually acceptable definitive agreements concerning the
            acquisition of the Borrower by the Lender, as described in the
            Letter of Intent, by 11:59 P.M. Philadelphia time, on June 30, 2001
            (as such time may be extended by the parties in writing); or

         2. Immediately after Borrower or the Lender breaks off from further
            negotiation of the transactions described in the Letter of Intent;
            or

         3. Immediately upon a breach by the Borrower of its covenants made in
            Section 2.2 hereof.

The provisions of this Article 4 shall not survive the entry of the Borrower and
Lender into definitive agreements for the transactions described in the Letter
of Intent.
<PAGE>

        b. Definitions.  The following terms shall have the following meanings
           ------------
 whenever used in this Article 4:

         1. "Bona Fide Offer" shall mean (i) a written offer to purchase the
             ----------------
            Business, alone or as part of a larger transaction (whether by
            purchase of stock or underlying assets or by merger or other form of
            acquisition), (ii) any offering of securities by the Borrower (other
            than a bona fide offering of securities of the Borrower to current
            shareholders of the Borrower); and (iii) a written offer to enter
            into any form of transaction which would result in the current
            officers, directors and shareholders of five percent (5%) or more of
            any class of equity securities of the Borrower holding securities
            which, in the aggregate, constitute less than 50 per cent (50%) of
            the equity of the Company or having the right to vote for less than
            a majority of the members of the Board of Directors of the Borrower.

         2. "Business" shall mean all or any substantial portion of the
             ----------
            Borrower's business of designing, manufacturing, marketing, and
            servicing high-accuracy dynamic measurement devices, including the
            development, marketing and licensing of associated software, whether
            organized as a separate legal entity, as a division of any direct or
            indirect subsidiary of the Borrower, or otherwise and all of the
            associated operating assets.

         3. "Registered Notice" shall mean notice given in accordance with
            -------------------
            Section 4.2 hereof. Such Registered Notice shall contain a true and
            complete copy of the Bona Fide Offer, setting forth the price and
            all terms and conditions thereof, with the name(s), address(es)
            (both home and office), and business(es) or other occupation(s) of
            all offerors. If the Registered Notice is sent with respect to a
            merger proposal, the Registered Notice shall include both a true and
            complete copy of the written offer to merge with the Borrower, which
            offer shall include the name of the merging party, and its
            shareholders if such merging party is not a public company, and the
            basic structure of the merger, and a statement of the willingness of
            the Borrower to enter into the proposed merger. If the Registered
            Notice is sent with respect to a proposed issuance of securities of
            the Borrower, the Registered Notice shall include a complete
            description of the type, amount and issue price of the securities to
            be offered and the proposed purchaser of such securities. Any notice
            that omits in any material respect any of the requisite information
            shall not be considered a "Registered Notice" for the purposes of
            this Agreement.
<PAGE>

     4.2. Receipt of Bona Fide Offer. From and after the Right of First Refusal
          ---------------------------
Commencement Date until December 31, 2002, in the event that the Borrower shall
receive at any time during the term of this Agreement a Bona Fide Offer and the
Borrower's Board of Directors shall decide to sell the Business or otherwise
accept the Bona Fide Offer, the Borrower shall promptly send a Registered Notice
to Lender offering to sell the Business to Lender, together with such other
assets as are subject to the Bona Fide Offer, at the same price and upon the
same terms and conditions as are contained in the Bona Fide Offer, and Lender
shall have the right of first refusal (the "Right of First Refusal") to purchase
or otherwise acquire the Business, together with such other assets as are
subject to the Bona Fide Offer, on such terms and conditions. Lender shall then
have such rights and privileges, for the prescribed time periods, as are set
forth in Section 4.4 hereof.

     4.3. Excluded Transactions. The Right of First Refusal shall not apply to,
         ------------------------
and shall survive the following transactions:

         a. any transfer of the Business to an entity directly or indirectly
owned and controlled by the Borrower;

         b. any conversion of one class of securities of the Borrower issued and
outstanding as of the date of this Agreement into another class of securities of
the Borrower;

         c. any bona fide offering of securities of the Borrower to current
shareholders of the Borrower.

     4.4. Procedure. Whenever, under Section 4.2 hereof, a Bona Fide Offer has
          ---------
been received, and Registered Notice of the Bona Fide Offer has been sent by the
Company, the procedures specified in this Section 4.4 shall be complied with.
For a period of fifteen (15) days following its receipt of the Registered
Notice, Lender shall have the right, at its sole option, to notify the Borrower
of its election to purchase the Business subject to the Bona Fide Offer.
Acceptance by Lender of the Bona Fide Offer shall be on the same terms and
conditions as set forth in the Bona Fide Offer, subject to the terms and
conditions set forth herein, and shall be made by Lender's delivery to the
Borrower of its notice to purchase the Business on the terms and conditions of
the Bona Fide Offer, subject to the payment of cash in lieu of non-cash
consideration, in an amount computed in accordance with the provisions of
Section 4.5 hereof (the "Acceptance"). If Lender shall not deliver the
Acceptance to the Borrower within the prescribed time period, the Borrower shall
have the right to accept the Bona Fide Offer in whole, but not in part, and to
sell the Business in accordance with the terms thereof, but only in strict
accordance with all of the provisions of the Bona Fide Offer, and only if the
sale is fully consummated within one hundred twenty (120) days following the
receipt of the Registered Notice by the Lender as provided for in Section 4.2
hereof. In the event such sale is not fully consummated within such one hundred
twenty (120) day period, the provisions of this Agreement must again be complied
with by the Borrower before the Borrower may accept a Bona Fide Offer.

     4.5. Valuation of Non-Cash Consideration.
          -----------------------------------
<PAGE>

         a. The fair market value of non-cash consideration in the Bona Fide
Offer consisting of marketable securities shall be paid by Lender based upon the
average closing price for such marketable securities for the twenty (20) trading
days ending on the date immediately prior to the purchase by Lender hereunder.
The Lender, at its option, may pay in cash or in stock of the Lender, based upon
the average closing prices for stock of the Lender for the twenty (20) trading
days ending on the date immediately prior to the purchase by Lender hereunder.

         b. The fair market value of non-cash consideration that does not
consist of marketable securities shall be determined on the basis of an
appraisal conducted by an independent, qualified professional appraiser selected
by the Borrower and having at least five (5) years of experience valuing assets
similar to those proposed to be paid in accordance with the Bona Fide Offer (a
"Qualified Appraiser"). If Lender objects to the valuation determined by the
Borrower's chosen Qualified Appraiser, then Lender shall, within fifteen (15)
days of receipt of such determination, obtain a separate written appraisal of
the disputed fair market value by another Qualified Appraiser and shall deliver
to the Company a copy of such second appraisal. If the fair market value
presented by such second appraiser is not less than ninety percent (90%) nor
more than one hundred ten percent (110%) of the fair market value presented in
the original appraisal, then the fair market value shall equal the average of
the two (2) appraisals. If a greater discrepancy exists between the first and
second appraisals, then the Qualified Appraisers selected by Borrower and the
Lender shall select a third Qualified Appraiser who shall, within thirty (30)
days after selection, deliver to Borrower and the Lender a third written
appraisal of the fair market value of the non-cash consideration and the fair
market value of the non-cash consideration shall equal the average of the two
(2) appraisals which are closest in amount. The cost of the initial appraisal
and, if applicable, the second and third appraisals, shall be paid for one-half
by each of Borrower and the Lender.

                            ARTICLE 5 : DEFINITIONS

     5.1. Certain Terms. The following terms when used in this Agreement
          -------------
(including the preamble and recitals hereof) have the following meanings:

         a. "Lender" means FARO TECHNOLOGIES, INC., a Florida corporation, and
            ---------
any successor, assignee, transferee, or pledgee thereof.

         b. "Borrower" means SPATIALMETRIX CORPORATION, a Delaware corporation.
            -----------

         c. "Affiliate", as it relates to any Person, shall mean: (i) any
            ------------
parent, spouse, brother, sister, or natural or adopted lineal descendant or
spouse of any such parent, brother, sister, or descendant, of such Person (any
such Person hereinafter in this Agreement being referred to as a "Relative") and
(ii) any other Person directly or indirectly controlling, controlled by or under
common control with such Person.
<PAGE>

         d. "Agreement" means this Agreement and all exhibits, schedules and
           -------------
supplemental addenda hereto, all as may be amended and - otherwise modified from
time to time hereafter.

         e. "Credit Documents" is defined in the Recitals.
          --------------------

         f. "Letter of Intent" is defined in Section 6.6
           -------------------

         g. "Official Body" means any federal, state, local, or other government
             --------------
(or any political subdivision, agency, authority, bureau, commission, department
or instrumentality thereof) and any court, tribunal, grand jury or arbitrator,
in each instance whether foreign or domestic.

         h. "Participation Agreement" is defined in the Recitals hereto.
             -----------------------

         i. "Person" means any natural person, corporation, partnership, limited
            --------
liability company, firm, association, trust, government, governmental agency or
any other entity, whether acting in an individual, fiduciary or other capacity.

         j. "Right of First Refusal" is defined in Section 4.2 hereof.
            ------------------------

         k. "Senior Lender" means PNC Bank, National Association
            ---------------

                     ARTICLE 6 : MISCELLANEOUS PROVISIONS

     6.1. Amendments. No amendment to or waiver of any provision of this
          -----------
Agreement, nor consent to any departure by any Borrower herefrom, shall in any
event be effective unless such amendment, waiver or consent is in writing and
signed by Lender and Borrower Any such waiver or consent will be effective only
in the specific instance and for the specific purpose for which given.

     6.2. Addresses for Notices. Any notice, request, consent, waiver or other
          ----------------------
communication required or permitted under or in connection with this Agreement
will be deemed satisfactorily given if it is in writing and is delivered either
personally to the addressee thereof, or by prepaid registered or certified U.S.
mail (return receipt requested), or by a nationally recognized commercial
courier service with next-day delivery charges prepaid, or by telegraph, or by
facsimile (voice confirmed), or by any other reasonable means of personal
                             ---
delivery to the party entitled thereto at its respective address set forth below
its signature to this Agreement. If Borrower fails to insert an address below,
then such failure shall constitute a designation of its last known address as
----
the address for all notices, including notices of default and sale. Any party to
this Security Agreement may change its address or facsimile number for notice
purposes by giving notice thereof to the other parties hereto in accordance with
this Section, provided that such change shall not be effective until 2 calendar
              -------------
days after notice of such change. All such notices and other communications will
be deemed given and effective (a) if by mail, then upon actual receipt or 5
calendar days after mailing as provided above (whichever is earlier), or (b) if
by facsimile, then upon successful transmittal to such party's designated
number, or (c) if by telegraph, then upon actual receipt or 2 Business Days
after delivery to the telegraph company (whichever is earlier), or (d) if by
                                                               ---
nationally recognized
<PAGE>

commercial courier service, then upon actual receipt or 2 Business Days after
delivery to the courier service (whichever is earlier), or (e) if otherwise
delivered, then upon actual receipt.

     6.3. Severability. Wherever possible, each provision of this Agreement
          -------------
shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of this Agreement shall be prohibited by or
invalid under such law, then such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.

     6.4. Governing Law. This Agreement shall be governed by and construed in
          --------------
accordance with the internal laws of the Commonwealth of Pennsylvania

     6.5. Entire Agreement. This Agreement and the Credit Documents constitute
          -----------------
the entire understanding among the parties hereto with respect to the subject
matter hereof and supersede any prior agreements (written or oral) with respect
thereto.

     6.6. Refinancing of Line of Credit. The Borrower and the Lender have
          -------------------------------
exchanged a Letter of Intent dated April __, 2001 relating to a proposal from
Lender to acquire Borrower (the "Letter of Intent"). The parties agree that, if
the Line of Credit is refinanced with a lender other than the Senior Lender, and
such refinancing is terminated before maturity as a result of the Lender's
election to acquire the Borrower, all fees for early termination of the
refinancing shall constitute accrued expenses in the computation of Working
Capital for the purposes of determining the acquisition consideration for the
stock of Borrower under the Letter of Intent. Nothing in this section 6.6 shall
be construed to commit either the Borrower or the Lender to consummate the
transactions described in the Letter of Intent.

     6.7. Specific Performance. The Borrower acknowledges that, in view of the
          ---------------------
uniqueness of arrangements contemplated by this Agreement, the Lender would not
have an adequate remedy at law for money damages in the event that this
Agreement were not performed in accordance with its terms. The Borrower
therefore agrees that the Lender shall be entitled to seek specific enforcement
of the terms hereof in addition to any other remedy to which the Lender may be
entitled at law or in equity.

     6.8. Waiver of Notice; Waiver of Bond. Borrower waives the posting of any
          --------------------------------
bond otherwise required of Lender in connection with any judicial process or
proceeding to enforce any judgment or other court order entered in favor of
Lender, or to enforce by specific performance, temporary restraining order or
preliminary or permanent injunction this Agreement.

     6.9. Forum Selection and Consent to Jurisdiction. Any litigation in any way
          --------------------------------------------
related to this Agreement, or any course of conduct, course of dealing,
statements (whether verbal or written), actions or inactions of Lender or
Borrower will be brought and maintained exclusively in the courts of the
Commonwealth of Pennsylvania of the United States District Court for the Eastern
District of Pennsylvania. Borrower and Lender hereby expressly and irrevocably
submit to the jurisdiction of the courts of the Commonwealth of Pennsylvania or
the United States District Court for the Eastern District of Pennsylvania for
the purpose of any such litigation as set forth above and irrevocably agree to
be bound by any final and non-appealable judgment
<PAGE>

rendered thereby in connection with such litigation. Borrower and Lender further
irrevocably consents to the service of process by registered or certified mail,
postage prepaid, or by personal service within or outside the Commonwealth of
Pennsylvania. Borrower and Lender hereby expressly and irrevocably waive (to the
fullest extent permitted by law) any objection which they may have or hereafter
may have to the laying of venue of any such litigation brought in any such court
referred to above and any claim that any such litigation has been brought in an
inconvenient forum.

     6.10. Waiver of Jury Trial. Lender and Borrower each hereby knowingly,
           ---------------------
voluntarily and intentionally waives any rights it may have to a trial by jury
in respect of any litigation (whether as claim, counter-claim, affirmative
defense or otherwise) in any way related to this Agreement or any Credit
Documents, or any course of conduct, course of dealing, statements (whether
verbal or written), actions or inactions of Lender or Borrower. Borrower
acknowledges and agrees (a) that it has received full and sufficient
consideration for this provision (and each other provision of each of this
Agreement and the Credit Document to which it is a party), and (b) that it has
been advised by legal counsel in connection herewith, and (c) that this
provision is a material inducement for Lender entering into this Agreement.

     6.11. Counterparts. This Agreement may be executed in any number of
           -------------
counterparts with the same effect as if all the signatures on such counterparts
appeared on one document. Each counterpart will be deemed to be an original, but
all counterparts together will constitute one and the same instrument.
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
an instrument under seal (whether or not any such seals are physically attached
hereto), through their duly authorized officers, as of the date first written
above.

ATTEST:                              SPATIALMETRIX CORPORATION
                                     (Borrower)

By:______________________            By:______________________________
Name:                                Name:
Title:                               Title:

[CORPORATE SEAL]                     Address:  222 Gale Lane
                                               Kennett Square, PA 19348
                                               Facsimile No:______________
                                               Attn:_____________________

                                     FARO TECHNOLOGIES, INC.
                                     (Lender)

                                     By:______________________________
                                     Name:
                                     Title:

                                     Address:  125 Technology Park Drive
                                               Lake Mary, Florida  32746
                                               Facsimile No:______________
                                               Attn:_____________________

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